EN BANC

G.R. No. L-17898            October 31, 1962

PASTOR D. AGO, Petitioner, vs. THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the
Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO and GRACE PARK
ENGINEERING, INC., Respondents.

Jose M. Luison for petitioner.

Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.
The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.

LABRABOR, J.:

Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R. No. 26723-R entitled "Pastor D.
Ago vs. The Provincial Sheriff of Surigao, et al." which in part reads:

In this case for certiorari and prohibition with preliminary injunction, it appears from the records that the
respondent Judge of the Court of First Instance of Agusan rendered judgment (Annex "A") in open court
on January 28, 1959, basing said judgment on a compromise agreement between the
parties.chanroblesvirtualawlibrarychanrobles virtual law library

On August 15, 1959, upon petition, the Court of First Instance issued a writ of
execution.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or his counsel, did not
receive a formal and valid notice of said decision, which motion for reconsideration was denied by the
court below in the order of November 14, 1959.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner now contends that the respondent Judge exceeded in his jurisdiction in rendering the execution
without valid and formal notice of the decision.chanroblesvirtualawlibrarychanrobles virtual law library

A compromise agreement is binding between the parties and becomes the law between them. (Gonzales
vs. Gonzales G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-12439, May 22,
1959) .chanroblesvirtualawlibrarychanrobles virtual law library

It is a general rule in this jurisdiction that a judgment based on a compromise agreement is not appealable
and is immediately executory, unless a motion is filed on the ground fraud, mistake or duress. (De los
Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No. L-10089, July 31, 1957)chanrobles virtual
law library

Petitioner's claim that he was not notified or served notice of the decision is untenable. The judgment on
the compromise agreement rendered by the court below dated January 28, 1959, was given in open court.
This alone is a substantial compliance as to notice. (De los Reyes vs. Ugarte, supra)chanrobles virtual law
library

IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its jurisdiction in ordering
the execution of the judgment. The petition for certiorari is hereby dismissed and the writ of preliminary
injunction heretofore dissolved, with costs against the petitioner.chanroblesvirtualawlibrarychanrobles
virtual law library

IT IS

The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago bought sawmill machineries and
equipments from respondent Grace Park Engineer domineering, Inc., executing a chattel mortgage over said machineries
and equipments to secure the payment of balance of the price remaining unpaid of P32,000.00, which petitioner agreed to
pay on installment basis.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park Engineering, Inc. instituted extra-judicial
foreclosure proceedings of the mortgage. To enjoin said foreclosure, petitioner herein instituted Special Civil Case No. 53
in the Court of First Instance of Agusan. The parties to the case arrived at a compromise agreement and submitted the
same in court in writing, signed by Pastor D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz,
Judge of the Court of First Instance of Agusan, then presiding, dictated a decision in open court on January 28,
1959.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner continued to default in his payments as provided in the judgment by compromise, so Grace Park Engineering,
Inc. filed with the lower court a motion for execution, which was granted by the court on August 15, 1959. A writ of
execution, dated September 23, 1959, later followed.chanroblesvirtualawlibrarychanrobles virtual law library

The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution issued by the lower court, levied
upon and ordered the sale of the sawmill machineries and equipments in question. These machineries and equipments had
been taken to and installed in a sawmill building located in Lianga, Surigao del Sur, and owned by the Golden Pacific
Sawmill, Inc., to whom, petitioner alleges, he had sold them on February 16, 1959 (a date after the decision of the lower
court but before levy by the Sheriff).chanroblesvirtualawlibrarychanrobles virtual law library

Having been advised by the sheriff that the public auction sale was set for December 4, 1959, petitioner, on December 1,
1959, filed the petition for certiorari and prohibition with preliminary injunction with respondent Court of Appeals,
alleging that a copy of the aforementioned judgment given in open court on January 28, 1959 was served upon counsel for
petitioner only on September 25, 1959 (writ of execution is dated September 23, 1959); that the order and writ of
execution having been issued by the lower court before counsel for petitioner received a copy of the judgment, its
resultant last order that the "sheriff may now proceed with the sale of the properties levied constituted a grave abuse of
discretion and was in excess of its jurisdiction; and that the respondent Provincial Sheriff of Surigao was acting illegally
upon the allegedly void writ of execution by levying the same upon the sawmill machineries and equipments which have
become real properties of the Golden Pacific sawmill, Inc., and is about to proceed in selling the same without prior
publication of the notice of sale thereof in some newspaper of general circulation as required by the Rules of
Court.chanroblesvirtualawlibrarychanrobles virtual law library

The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction against the sheriff but it turned out
that the latter had already sold at public auction the machineries in question, on December 4, 1959, as scheduled. The
respondent Grace Park Engineering, Inc. was the only bidder for P15,000.00, although the certificate sale was not yet
executed. The Court of Appeals constructed the sheriff to suspend the issuance of a certificate of sale of the said sawmill
machineries and equipment sold by him on December 4, 1959 until the final decision of the case. On November 9, 1960
the Court of Appeals rendered the aforequoted decision.chanroblesvirtualawlibrarychanrobles virtual law library

Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the rendition of judgment on
compromise in open court on January 1959 was a sufficient notice; and (2) in not resolving the other issues raised before
it, namely, (a) the legality of the public auction sale made by the sheriff, and (b) the nature of the machineries in question,
whether they are movables or immovables.chanroblesvirtualawlibrarychanrobles virtual law library

The Court of Appeals held that as a judgment was entered by the court below in open court upon the submission of the
compromise agreement, the parties may be considered as having been notified of said judgment and this fact constitutes
due notice of said judgment. This raises the following legal question: Is the order dictated in open court of the judgment of
the court, and is the fact the petitioner herein was present in open court was the judgment was dictated, sufficient notice
thereof? The provisions of the Rules of Court decree otherwise. Section 1 of Rule 35 describes the manner in which
judgment shall be rendered, thus:

SECTION 1. How judgment rendered. - All judgments determining the merits of cases shall be in writing
personally and directly prepared by the judge, and signed by him, stating clearly and distinctly the facts
and the law on which it is based, filed with the clerk of the court.

The court of first instance being a court of record, in order that a judgment may be considered as rendered, must not only
be in writing, signed by the judge, but it must also be filed with the clerk of court. The mere pronouncement of the
judgment in open court with the stenographer taking note thereof does not, therefore, constitute a rendition of the
judgment. It is the filing of the signed decision with the clerk of court that constitutes rendition. While it is to be presumed
that the judgment that was dictated in open court will be the judgment of the court, the court may still modify said order as
the same is being put into writing. And even if the order or judgment has already been put into writing and signed, while it
has not yet been delivered to the clerk for filing it is still subject to amendment or change by the judge. It is only when the
judgment signed by the judge is actually filed with the clerk of court that it becomes a valid and binding judgment. Prior
thereto, it could still be subject to amendment and change and may not, therefore, constitute the real judgment of the
court.chanroblesvirtualawlibrarychanrobles virtual law library

Regarding the notice of judgment, the mere fact that a party heard the judge dictating the judgment in open court, is not a
valid notice of said judgment. If rendition thereof is constituted by the filing with the clerk of court of a signed copy (of
the judgment), it is evident that the fact that a party or an attorney heard the order or judgment being dictated in court
cannot be considered as notice of the real judgment. No judgment can be notified to the parties unless it has previously
been rendered. The notice, therefore, that a party has of a judgment that was being dictated is of no effect because at the
time no judgment has as yet been signed by the judge and filed with the clerk.chanroblesvirtualawlibrarychanrobles
virtual law library

Besides, the Rules expressly require that final orders or judgments be served personally or by registered mail. Section 7 of
Rule 27 provides as follows:
 SEC. 7. Service of final orders or judgments. - Final orders or judgments shall be served either personally
or by registered mail.

In accordance with this provision, a party is not considered as having been served with the judgment merely because he
heard the judgment dictating the said judgment in open court; it is necessary that he be served with a copy of the signed
judgment that has been filed with the clerk in order that he may legally be considered as having been served with the
judgment.chanroblesvirtualawlibrarychanrobles virtual law library

For all the foregoing, the fact that the petitioner herein heard the trial judge dictating the judgment in open court, is not
sufficient to constitute the service of judgement as required by the above-quoted section 7 of Rule 2 the signed judgment
not having been served upon the petitioner, said judgment could not be effective upon him (petitioner) who had not
received it. It follows as a consequence that the issuance of the writ of execution null and void, having been issued before
petitioner her was served, personally or by registered mail, a copy of the decision.chanroblesvirtualawlibrarychanrobles
virtual law library

The second question raised in this appeal, which has been passed upon by the Court of Appeals, concerns the validity of
the proceedings of the sheriff in selling the sawmill machineries and equipments at public auction with a notice of the sale
having been previously published.chanroblesvirtualawlibrarychanrobles virtual law library

The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill machineries and equipments he
assigned the same to the Golden Pacific Sawmill, Inc. in payment of his subscription to the shares of stock of said
corporation. Thereafter the sawmill machinery and equipments were installed in a building and permanently attached to
the ground. By reason of such installment in a building, the said sawmill machineries and equipment became real estate
properties in accordance with the provision of Art. 415 (5) of the Civil Code, thus:

ART. 415. The following are immovable property:

xxx           xxx           xxxchanrobles virtual law library

(5) Machinery, receptacles, instruments or implements tended by the owner of the tenement for an
industry or works which may be carried on in a building or on a piece of land, and which tend directly to
meet the needs of the said industry or works;

This Court in interpreting a similar question raised before it in the case of Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil.
683, held that the installation of the machine and equipment in the central of the Mabalacat Sugar Co., Inc. for use in
connection with the industry carried by the company, converted the said machinery and equipment into real estate by
reason of their purpose. Paraphrasing language of said decision we hold that by the installment of the sawmill machineries
in the building of the Gold Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building, the same
became a necessary and permanent part of the building or real estate on which the same was constructed, converting the
said machineries and equipments into real estate within the meaning of Article 415(5) above-quoted of the Civil Code of
the Philippines.chanroblesvirtualawlibrarychanrobles virtual law library

Considering that the machineries and equipments in question valued at more than P15,000.00 appear to have been sold
without the necessary advertisement of sale by publication in a newspaper, as required in Sec. 16 of Rule 39 of the Rules
of Court, which is as follows:

SEC. 16. Notice of sale of property on execution. - Before the sale of property on execution, notice
thereof must be given as follows:

xxx           xxx           xxxchanrobles virtual law library

(c) In case of real property, by posting a similar notice particularly describing the property for twenty
days in three public places in the municipality or city where the property is situated, and also where the
property is to be sold, and, if the assessed value of the property exceeds four hundred pesos, by publishing
a copy of the notice once a week, for the same period, in some newspaper published or having general
circulation in the province, if there be one. If there are newspapers published in the province in both the
English and Spanish languages, then a like publication for a like period shall be made in one newspaper
published in the English language, and in one published in the Spanish language.

the sale made by the sheriff must be declared null and void.chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside and We declare that the
issuance of the writ of execution in this case against the sawmill machineries and equipments purchased by petitioner
Pastor D. Ago from the Grace Park Engineering, Inc., as well as the sale of the same by the Sheriff of Surigao, are null
and void. Costs shall be against the respondent Grace Park Engineering, Inc.chanroblesvirtualawlibrarychanrobles virtual
law library
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Padilla, J., took no part.

EN BANC

[G.R. No. L-17500. May 16, 1967.]

PEOPLE’S BANK AND TRUST CO. and ATLANTIC, GULF AND PACIFIC CO. OF MANILA, plaintiffs and
appellants, v. DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER CORPORATION, and
CONNELL BROS. CO. (PHIL.), defendants and appellants.

Angel S. Gamboa, for Defendants-Appellants.

Laurel Law Offices, for Plaintiffs-Appellants.

SYLLABUS
1. REAL ESTATE MORTGAGE; STIPULATION INCLUDING IN THE LIEN AFTER ACQUIRED PROPERTIES;
VALIDITY THEREOF. — A stipulation including in the mortgage lien after acquired properties is common and logical
in all cases where the properties given as collateral are perishable or subject to inevitable wear and tear or were intended
to be sold, or to be used — thus becoming subject to the inevitable wear and tear — but with the understanding that they
shall be replaced with others to be thereafter acquired by the mortgagor. Such stipulation is neither unlawful nor immoral,
its obvious purpose being to maintain, to the extent allowed by circumstances, the original value of the properties given as
securities.

2. ID.; ID.; ID.; MACHINERIES INTENDED FOR AN INDUSTRY; NATURE THEREOF. — Under Articles 334 and
1877 of the old Civil Code substantially reproduced in Articles 415 and 2127 respectively of the new Civil Code, the
properties in question being machinery, receptacles, instruments or replacements intended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the
needs of the said industry or works, are classified as immovable properties, therefore not covered by the Chattel Mortgage
Law.

3. ID.; ID.; ID.; ID; ID.; SUPPLIERS NOT FINANCIERS CONSIDERED UNPAID SELLERS. — Unpaid sellers who
were the suppliers or vendors of the after acquired properties and not the financiers, like the defendants herein can claim a
right superior to the lien constituted on said properties by virtue of the deeds of mortgage under foreclosure.

4. ID.; ID.; ID.; ID.; ID.; FORECLOSURE PRIOR TO MATURITY OF PROMISSORY NOTE; WHEN PROPER. —
Although an extension of time was given to the debtor, considering that when this complaint was filed the debtor was
insolvent, it follows that the debtor thereby lost the benefit of the period unless he gives a guaranty or security for the debt
(Art. 1198, New Civil Code). Whereas in this case the guaranty given was plainly inadequate, then the foreclosure was
proper because the collection of the notes were not premature.

DECISION

DIZON, J.:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation licensed to do business
in the Philippines, — hereinafter referred to as ATLANTIC — sold and assigned all its right in the Dahican lumber
concession to Dahican Lumber Company — hereinafter referred to as DALCO — for the total sum of P500,000.00 of
which only the amount of $50,000.00 was paid. Thereafter, to develop the concession, DALCO obtained various loans
from the People’s Bank & Trust Company — hereinafter referred to as the Bank — amounting, as of July 13, 1950, to
P200,000.00. In addition, DALCO obtained, through the Bank, a loan of $250,000.00 from the Export-Import Bank of
Washington D.C., evidenced by five promissory notes of $50,000.00 each, maturing on different dates, executed by both
DALCO and the Dahican American Lumber Corporation, a foreign corporation and a stockholder of DALCO, —
hereinafter referred to as DAMCO, all payable to the BANK or its order.

As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in favor of the BANK —
the latter acting for itself and as trustee for the Export, Import Bank of Washington D. C. — a deed of mortgage covering
live parcels of land situated in the province of Camarines Norte, together with all the buildings and other improvements
existing thereon and all the personal properties of the mortgagor located in its place of business in the municipalities of
Mambulao and Capalonga, Camarines Norte (Exhibit D). On the same date, DALCO executed a second mortgage on the
same properties in favor of ATLANTIC to secure payment of the unpaid balance of the sale price of the lumber
concession amounting to the sum of $450,000.00 (Exhibit G). Both deeds contained the following provision extending the
mortgage lien to properties to be subsequently acquired — referred to hereafter as "after acquired properties" — by the
mortgagor:jgc:chanrobles.com.ph

"All property of every nature and description taken in exchange or replacement, and all buildings, machinery, fixtures,
tools, equipment and other property which the Mortgagor may hereafter acquire, construct, install, attach, or use in, to,
upon, or in connection with the premises, shall immediately be and become subject to the lien of this mortgage in the
same manner and to the same extent as if now included therein, and the Mortgagor shall from time to time during the
existence of this mortgage furnish the Mortgagee with an accurate inventory of such substituted and subsequently
acquired property."cralaw virtua1aw library

Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In addition thereto DALCO
and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure the same
obligations.

Upon DALCO’s and DAMCO’s failure to pay the fifth promissory note upon its maturity, the BANK paid the same to the
Export-Import Bank of Washington D.C. and the latter assigned to the former its credit and the first mortgage securing it.
Subsequently, the BANK gave DALCO and DAMCO up to April 1, 1953 to pay the overdue promissory note.

After July 13, 1950 — the date of execution of the mortgages mentioned above — DALCO purchased various
machineries, equipment, spare parts and supplies in addition to, or in replacement of some of those already owned and
used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds quoted heretofore regarding "after
acquired properties", the BANK requested DALCO to submit complete lists of said properties but the latter failed to do
so. In connection with these purchases, there appeared in the books of DALCO as due to Connell Bros. Company
(Philippines) — a domestic corporation who was acting as the general purchasing agent of DALCO — hereinafter called
CONNEL — the sum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.

On December 16, 1952, the Board of Directors of DALCO in a special meeting called for the purpose, passed a resolution
agreeing to rescind the alleged sales of equipment, spare parts and supplies by CONNELL and DAMCO to it. Thereafter,
the corresponding agreements of rescission of sale were executed between DALCO and DAMCO, on the one hand, and
between DALCO and CONNELL, on the other.

On January 23, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements be cancelled
but CONNELL and DAMCO refused to do so. As a result, on February 12, 1953, ATLANTIC and the BANK,
commenced foreclosure proceedings in the Court of First Instance of Camarines Norte against DALCO and DAMCO. On
the same date they filed an ex-parte application for the appointment of a Receiver and/or for the issuance of a writ of
preliminary injunction to restrain DALCO from removing its properties. The court granted both remedies and appointed
George U. Evans as Receiver. Upon defendants’ motion, however, the court, in its order of February 21, 1953, discharged
the Receiver.

On March 2, 1953, defendants filed their answer denying the material allegations of the complaint and alleging several
affirmative defenses and a counterclaim.

On March 4 of the same year, CONNELL filed a motion for intervention alleging that it was the owner and possessor of
some of the equipments, spare parts and supplies which DALCO had acquired subsequent to the execution of the
mortgages sought to be foreclosed and which plaintiffs claimed were covered by their lien. In its order of March 18, 1953
the Court granted the motion, as well as plaintiffs’ motion to set aside the order discharging the Receiver. Consequently,
Evans was reinstated.

On April 1, 1953, CONNELL filed its answer denying the material averments of the complaint, and asserting affirmative
defenses and a counterclaim.

Upon motion of the parties, the Court, on September 30, 1953, issued an order transferring the venue of the action to the
Court of First Instance of Manila where it was docketed as Civil Case No. 20987.

On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries, equipment and
supplies of DALCO, and the same were subsequently sold for a total consideration of P175,000.00 which was deposited
in court pending final determination of the action. By a similar agreement one half (P87,500.00) of this amount was
considered as representing the proceeds obtained from the sale of the "undebated properties" (those not claimed by
DAMCO and CONNELL), and the other half as representing those obtained from the sale of the "after acquired
properties."

After due trial, the Court, on July 15, 1960, rendered Judgment as follows:jgc:chanrobles.com.ph

"IN VIEW WHEREOF, the Court:chanrob1es virtual 1aw library

1. Condemns Dahican Lumber Co. to pay unto People’s Bank the sum of P200,000.00 with 7% interest per annum from
July 13, 1950, plus another sum of P100,000.00 with 5% interest per annum from July 13, 1950; plus 10% on both
principal sums as attorney’s fees;

2. Condemns Dahican Lumber Co. to pay into Atlantic Gulf the sum of P900,000.00 with 4% interest per annum from
July 13, 1950, plus 10% of the principal as attorney’s fees;

3. Condemns Dahican Lumber Co. to pay unto Connel Bros. the sum of P425,860.55, and to pay unto Dahican American
Lumber Co. the sum of P2,151,678.34 both with legal interest from the date of the filing of the respective answers of
those parties, plus 10% of the principals as attorney’s fees;

4. Orders that of the sum realized from the sale of the properties of P175,000.00, after deducting the recognized expenses,
one half thereof be adjudicated unto plaintiffs, the Court no longer specifying the share of each because of their
announced intention under the stipulation of facts to ‘pool their resources’; as to the other one-half, the same should be
adjudicated unto both plaintiffs, and defendant Dahican American and Connell Bros. in the proportion already set forth on
page 9, lines 21, 22 and 23 of the body of this decision; but with the understanding that whatever plaintiffs and Dahican
American and Connell Bros. should receive from the P175,000.00 deposited in the Court shall be applied to the judgments
particularly rendered in favor of each;
5. No other pronouncement as to costs; but the costs of the receivership as to the debated properties shall be borne by
People’s Bank, Atlantic Gulf, Connell Bros. and Dahican American Lumber Co., pro rata."cralaw virtua1aw library

On the following day, the Court issued the following supplementary decision:jgc:chanrobles.com.ph

"IN VIEW WHEREOF, the dispositive part of the decision is hereby amended in order to add the following paragraph
6:chanrob1es virtual 1aw library

6. If the sums mentioned in paragraphs 1 and 2 are not paid within ninety (90) days, the Court orders the sale at public
auction if the lands object of the mortgages to satisfy the said mortgages and costs of foreclosure."cralaw virtua1aw
library

From the above-quoted decision, all the parties appealed.

Main contentions of plaintiffs as appellants are the following: that the "after acquired properties" were subject to the deeds
of mortgage mentioned heretofore; that said properties were acquired from suppliers other than DAMCO and CONNELL;
that even granting that DAMCO and CONNELL were the real suppliers, the rescission of the sales to DALCO could not
prejudice the mortgage lien in favor of plaintiffs; that considering the foregoing, the proceeds obtained from the sale of
the "after acquired properties" as well as those obtained from the sale of the "undebated properties" in the total sum of
P175,000.00 should have been awarded exclusively to plaintiffs by reason of the mortgage lien they had thereon; that
damages should have been awarded to plaintiffs against defendants, all of them being guilty of an attempt to defraud the
former when they sought to rescind the sales already mentioned for the purpose of defeating their mortgage lien, and
finally, that defendants should have been made to bear all the expenses of the Receivership, costs and attorney’s fees.

On the other hand, defendants-appellants contend that the trial court erred: firstly, in not holding that plaintiffs had no
cause of action against them because the promissory note sued upon was not yet due when the action to foreclose the
mortgages was commenced; secondly, in not holding that the mortgages aforesaid were null and void as regards the "after
acquired properties" of DALCO because they were not registered in accordance with the Chattel Mortgage Law, the court
erring, as a consequence, in holding that said properties were subject to the mortgage lien in favor of plaintiffs; thirdly, in
not holding that the provision of the fourth paragraph of each of said mortgages did not automatically make subject to
such mortgages the "after acquired properties", the only meaning thereof being that the mortgagor was willing to
constitute a lien over such properties; fourthly, in not ruling that said stipulation was void as against DAMCO and
CONNELL and in not awarding the proceeds obtained from the sale of the "after acquired properties" to the latter
exclusively; fifthly, in appointing a Receiver and in holding that the damages suffered by DAMCO and CONNELL by
reason of the depreciation or loss in value of the "after acquired properties" placed under receivership was damnum
absque injuria and, consequently, in not awarding to said parties the corresponding damages claimed in their
counterclaim; lastly, in sentencing DALCO and DAMCO to pay the costs of the Receivership, instead of sentencing
plaintiffs to pay attorney’s fees.

Plaintiffs’ brief as appellants submit six assignments of error, while that of defendants also as appellants submit a total of
seventeen. However, the multifarious issues thus before Us may be resolved, directly or indirectly, by deciding the
following issues:chanrob1es virtual 1aw library

Firstly, are the so-called "after acquired properties" covered by and subject to the deeds of mortgage subject of
foreclosure?; secondly, assuming that they are subject thereto, are the mortgages valid and binding on the properties
aforesaid in spite of the fact that they were not registered in accordance with the provisions of the Chattel Mortgage Law?;
thirdly, assuming again that the mortgages are valid and binding upon the "after acquired properties", what is the effect
thereon, if any, of the rescission of sales entered into, on the one hand, between DALCO and DAMCO and between
DALCO and CONNELL, on the other?; and lastly, was the action to foreclose the mortgages premature?

A. Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature and
description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools, equipments, and other
property that the mortgagor may acquire, construct, install, attach, or use in, to, upon, or in connection with the premises
— that is, its lumber concession — "shall immediately be and become subject to the lien" of both mortgages in the same
manner and to the same extent as if already included therein at the time of their execution. As the language thus used
leaves no room for doubt as to the intention of the parties, We see no useful purpose in discussing the matter extensively.
Suffice it to say that the stipulation referred to is common, and We might say logical, in all cases where the properties
given as collateral are perishable or subject to inevitable wear and tear or were intended to be sold, or to be used — thus
becoming subject to the inevitable wear and tear — but with the understanding — express or implied — that they shall be
replaced with others to be thereafter acquired by the mortgagor. Such stipulation is neither unlawful nor immoral, its
obvious purpose being to maintain, to the extent allowed by circumstances, the original value of the properties given as
security. Indeed, if such properties were of the nature already referred to, it would be poor judgment on the part of the
creditor who does not see to it that a similar provision is included in the contract.

B. But defendants contend that, granting without admitting, that the deeds of mortgage in question cover the "after
acquired properties" of DALCO, the same are void and ineffectual because they were not registered in accordance with
the Chattel Mortgage Law. In support of this and of the proposition that, even if said mortgages were valid, they should
not prejudice them, the defendants argue (1) that the deeds do not describe the mortgaged chattels specifically, nor were
they registered in accordance with the Chattel Mortgage Law; (2) that the stipulation contained in the fourth paragraph
thereof constitutes "mere executory agreements to give a lien" over the "after acquired properties" upon their acquisition;
and (3) that any mortgage stipulation concerning "after acquired properties" should not prejudice creditors and other third
persons such as DAMCO and CONNELL.

The stipulation under consideration strongly belies defendants’ contention. As adverted to hereinafter, it states that all
property of every nature, buildings, machinery, etc. taken in exchange or replacement by the mortgagor "shall
immediately be and become subject to the lien of this mortgage in the same manner and to the same extent as if now
included therein." No clearer language could have been chosen.

Conceding, on the other hand, that it is the law in this jurisdiction that, to affect third persons, a chattel mortgage must be
registered and must describe the mortgaged chattels or personal properties sufficiently to enable the parties and any other
person to identify them, We say that such law does not apply to this case.

As the mortgages in question were executed on July 13, 1950 with the old Civil Code still in force, there can be no doubt
that the provisions of said code must govern their interpretation and the question of their validity. It happens, however,
that Articles 334 and 1877 of the old Civil Code are substantially reproduced in Article 415 and 2127, respectively, of the
new Civil Code. It is, therefore, immaterial in this case whether we take the former or the latter as guide in deciding the
point under consideration.

Article 415 does not define real property but enumerates what are considered as such, among them being machinery,
receptacles, instruments or replacements intended by the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works.

On the strength of the above-quoted legal provisions, the lower court held that inasmuch as "the chattels were placed in
the real properties mortgaged to plaintiffs, they came within the operation of Art. 415, paragraph 5 and Art. 2127 of the
new Civil Code."cralaw virtua1aw library

We find the above ruling in agreement with our decisions on the subject:chanrob1es virtual 1aw library

(1) In Berkenkotter v. Cu Unjieng, 61 Phil. 663, We held that Article 334, paragraph 5 of the Civil Code (old) gives the
character of real property to machinery, liquid containers, instruments or replacements intended by the owner of any
building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted
to meet the requirements of such trade or industry.

(2) In Cu Unjieng Hijos v. Mabalacat Sugar Co., 58 Phil. 439, We held that a mortgage constituted on a sugar central
includes not only the land on which it is built but also the buildings, machinery and accessories installed at the time the
mortgage was constituted as well as the buildings, machinery and accessories belonging to the mortgagor, installed after
the constitution thereof.

It is not disputed in the case at bar that the "after acquired properties" were purchased by DALCO in connection with, and
for use in the development of its lumber concession and that they were purchased in addition to, or in replacement of
those already existing in the premises on July 13, 1950. In law, therefore, they must be deemed to have been immobilized,
with the result that the real estate mortgages involved herein — which were registered as such — did not have to be
registered a second time as chattel mortgages in order to bind the "after acquired properties" and affect third parties.

But defendants, invoking the case of Davao Sawmill Company v. Castillo, 61 Phil. 709, claim that the "after acquired
properties" did not become immobilized because DALCO did not own the whole area of its lumber concession all over
which said properties were scattered.

The facts in the Davao Sawmill case, however, are not on all fours with the ones obtaining in the present. In the former,
the Davao Sawmill Company, Inc. had repeatedly treated the machinery therein involved as personal property by
executing chattel mortgages thereon in favor of third parties, while in the present case the parties had treated the "after
acquired properties" as real properties by expressly and unequivocally agreeing that they shall automatically become
subject to the lien of the real estate mortgages executed by them. In the Davao Sawmill decision it was, in fact, stated that
"the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property
the character determined by the parties" (61 Phil. 712, Emphasis supplied). In the present case, the characterization of the
"after acquired properties" as real property was made not only by one but by both interested parties. There is, therefore,
more reason to hold that such consensus impresses upon the properties the character determined by the parties who must
now be held in estoppel to question it.

Moreover, quoted in the Davao Sawmill case was that of Valdez v. Central Altagracia Inc. (225 U.S. 58) where it was
held that while under the general law of Puerto Rico machinery placed on property by a tenant does not become
immobilized, yet, when the tenant places it there pursuant to contract that it shall belong to the owner, it then becomes
immobilized as to that tenant and even as against his assignees and creditors who had sufficient notice of such stipulation.
In the case at bar it is not disputed that DALCO purchased the "after acquired properties" to be placed on, and be used in
the development of its lumber concession, and agreed further that the same shall become immediately subject to the lien
constituted by the questioned mortgages. There is also abundant evidence in the record that DAMCO and CONNELL had
full notice of such stipulation and had never thought of disputing its validity until the present case was filed.
Consequently, all of them must be deemed barred from denying that the properties in question had become immobilized.

What We have said heretofore sufficiently disposes of all the arguments adduced by defendants in support of their
contention that the mortgages under foreclosure are void, and, that, even if valid, are ineffectual as against DAMCO and
CONNELL.

Now to the question of whether or not DAMCO and CONNELL have rights over the "after acquired properties" superior
to the mortgage lien constituted thereon in favor of plaintiffs. It is defendants’ contention that in relation to said properties
they are "unpaid sellers" ; that as such they had not only a superior lien on the "after acquired properties" but also the right
to rescind the sales thereof to DALCO.

This contention — it is obvious — would have validity only if it were true that DAMCO and CONNELL were the
suppliers or vendors of the "after acquired properties." According to the record, plaintiffs did not know their exact identity
and description prior to the filing of the case at bar because DALCO, in violation of its obligation under the mortgages,
had failed and refused therefore to submit a complete list thereof. In the course of the proceedings, however, when
defendants moved to dissolve the order of receivership and the writ of preliminary injunction issued by the lower court,
they attached to their motion the lists marked as Exhibits 1, 2 and 3 describing the properties aforesaid. Later on, the
parties agreed to consider said lists as identifying and describing the "after acquired properties", and engaged the services
of auditors to examine the books of DALCO so as to bring out the details thereof. The report of the auditors and its
annexes (Exhibits V, V-1 — V-4) show that neither DAMCO nor CONNELL had supplied any of the goods of which
they respectively claimed to be the unpaid seller; that all items were supplied by different parties, neither of whom
appeared to be DAMCO or CONNELL; that, in fact, CONNELL collected a 5 per cent service charge on the net value of
all items it claims to have sold to DALCO and which, in truth, it had purchased for DALCO as the latter’s general agent;
that CONNELL had to issue its own invoices in addition to those of the real suppliers in order to collect and justify such
service charge.

Taking into account the above circumstances together with the fact that DAMCO was a stockholder and CONNELL was
not only a stockholder but the general agent of DALCO, their claim to be the suppliers of the "after acquired properties"
would seem to be preposterous. The most that can be claimed on the basis of the evidence is that DAMCO and
CONNELL probably financed some of the purchases. But if DALCO still owes them any amount in this connection, it is
clear that, as financiers, they can not claim any right over the "after acquired properties" superior to the lien constituted
thereon by virtue of the deeds of mortgage under foreclosure. Indeed, the execution of the rescission of sales mentioned
heretofore appears to be but a desperate attempt to better or improve DAMCO and CONNELL’s position by enabling
them to assume the role of "unpaid suppliers" and thus claim a vendor’s lien over the "after acquired properties." The
attempt, of course, is utterly ineffectual, not only because they are not the "unpaid sellers" they claim to be but also
because there is abundant evidence in the record showing that both DAMCO and CONNELL had known and admitted
from the beginning that the "after acquired properties" of DALCO were meant to be included in the first and second
mortgages under foreclosure.

The claim that Belden, of ATLANTIC, had given his consent to the rescission, expressly or otherwise, is of no
consequence and does not make the rescission valid and legally effective. It must be stated clearly, however, in justice to
Belden, that, as a member of the Board of Directors of DALCO, he opposed the resolution of December 16, 1952 passed
by said Board and the subsequent rescission of the sales.

Finally, defendants claim that the action to foreclose the mortgages filed on February 12, 1953 was premature because the
promissory note sued upon did not fall due until April 1 of the same year, concluding from this that, when the action was
commenced, the plaintiffs had no cause of action. Upon this question the lower court says the following in the appealed
judgment:red:chanrobles.com.ph

"The other is the defense of prematurity of the causes of action in that plaintiffs as a matter of grace, conceded an
extension of time to pay up to 1 April, 1953 while the action was filed on 12 February 1953, but as to this, the Court
taking it that there is absolutely no debate that Dahican Lumber Co., was insolvent as of the date of the filing of the
complaint, it should follow that the debtor thereby lost the benefit to the period.

‘. . . unless he gives a guaranty or security for the debt . . .’ (Art. 1198, New Civil Code);

and as the guaranty was plainly inadequate since the claim of plaintiffs reached in the aggregate, P1,200,000 excluding
interest while the aggregate price of the ‘after-acquired’ chattels claimed by Connell under the rescission contracts was
P1,614,675.94, Exh. 1, Exh. V, report of auditors, and as a matter of fact, almost all the properties were sold afterwards
for only P175,000.00, page 47, Vol. IV, and the Court understanding that when the law permits the debtor to enjoy the
benefits of the period notwithstanding that he is insolvent by his giving a guaranty for the debt, that must mean a new and
efficient guaranty, must concede that the causes of action for collection of the notes were not premature."cralaw virtua1aw
library

Very little need be added to the above. Defendants, however, contend that the lower court had no basis for finding that,
when the action was commenced, DALCO was insolvent for purposes related to Article 1198, paragraph 1 of the Civil
Code. We find, however, that the finding of the trial court is sufficiently supported by the evidence particularly the
resolution marked as Exhibit K which shows that on December 16, 1952 — in the words of the Chairman of the Board —
DALCO was "without funds, neither does it expect to have any funds in the foreseeable future" (p. 64, record on appeal).

The remaining issues, namely, whether or not the proceeds obtained from the sale of the "after acquired properties" should
have been awarded exclusively to the plaintiffs or to DAMCO and CONNELL, and if in law they should be distributed
among said parties, whether or not the distribution should be pro-rata or otherwise; whether or not plaintiffs are entitled to
damages; and lastly, whether or not the expenses incidental to the Receivership should be borne by all the parties on a
pro-rata basis or exclusively by one or some of them are of a secondary nature as they are already impliedly resolved by
what has been said heretofore.

As regard the proceeds obtained from the sale of the "after acquired properties" and the "undebated properties", it is clear,
in view of our opinion sustaining the validity of the mortgages in relation thereto, that said proceeds should be awarded
exclusively to the plaintiffs in payment of the money obligations secured by the mortgages under foreclosure.

On the question of plaintiffs’ right to recover damages from the defendants, the law (Articles 1313 and 1314 of the New
Civil Code) provides that creditors are protected in cases of contracts intended to defraud them, and that any third person
who induces another to violate his contract shall be liable for damages to the other contracting party. Similar liability is
demandable under Arts. 20 and 21 — which may be given retroactive effect (Arts. 2252-53) — or under Arts. 1902 and
2176 of the Old Civil Code.

The facts of this case, as stated heretofore, clearly show that DALCO and DAMCO, after failing to pay the fifth
promissory note upon its maturity, conspired jointly with CONNELL to violate the provisions of the fourth paragraph of
the mortgages under foreclosure by attempting to defeat plaintiffs’ mortgage lien on the "after acquired properties." As a
result, the plaintiffs had to go to court to protect their rights thus jeopardized. Defendants’ liability for damages is
therefore clear.

However, the measure of the damages suffered by the plaintiffs is not what the latter claim, namely, the difference
between the alleged total obligation secured by the mortgages amounting to around P1,200,000.00, plus the stipulated
interest and attorney’s fees, on the one hand, and the proceeds obtained from the sale of the "after acquired properties",
and of those that were not claimed neither by DAMCO nor CONNELL, on the other. Considering that the sale of the real
properties subject to the mortgages under foreclosure has not been effected, and considering further the lack of evidence
showing that the true value of all the properties already sold was not realized because their sale was under stress, We feel
that We do not have before Us the true elements or factors that should determine the amount of damages that plaintiffs are
entitled to recover from defendants. It is, however, our considered opinion that, upon the facts established, all the
expenses of the Receivership, which was deemed necessary to safeguard the rights of the plaintiffs, should be borne by all
the defendants, jointly and severally, in the same manner that all of them should pay to the plaintiffs, jointly and severally,
the attorney’s fees awarded in the appealed judgment.

In consonance with the portion of this decision concerning the damages that the plaintiffs are entitled to recover from the
defendants, the record of this case shall be remanded below for the corresponding proceedings.

Modified as above indicated, the appealed judgment is affirmed in all other respects. With costs.

Concepcion, C.J., Reyes, J.B.L., Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

FIRST DIVISION

G.R. No. 166102, August 05, 2015

MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA

CITY, Respondents.
DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Manila Electric
Company (MERALCO), seeking the reversal of the Decision1 dated May 13, 2004 and Resolution2 dated November 18,
2004 of the Court of Appeals in CA-G.R. SP No. 67027. The appellate court affirmed the Decision3 dated May 3, 2001 of
the Central Board of Assessment Appeals (CBAA) in CBAA Case No. L-20-98, which, in turn, affirmed with
modification the Decision4 dated June 17, 19985 of the Local Board of Assessment Appeals (LBAA) of Lucena City,
Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-7394, ruling that MERALCO is liable for real
property tax on its transformers, electric posts (or poles), transmission lines, insulators, and electric meters, beginning
1992.

MERALCO is a private corporation organized and existing under Philippine laws to operate as a public utility engaged in
electric distribution. MERALCO has been successively granted franchises to operate in Lucena City beginning 1922 until
present time, particularly, by: (1) Resolution No. 366 dated May 15, 1922 of the Municipal Council of Lucena; (2)
Resolution No. 1087 dated July 1, 1957 of the Municipal Council of Lucena; (3) Resolution No. 26798 dated June 13, 1972
of the Municipal Board of Lucena City;9 (4) Certificate of Franchise10 dated October 28, 1993 issued by the National
Electrification Commission; and (5) Republic Act No. 920911 approved on June 9, 2003 by Congress.12

On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No. 019-
650013 covering the following electric facilities, classified as capital investment, of the company: (a) transformer and
electric post; (b) transmission line; (c) insulator; and (d) electric meter, located in Quezon Ave. Ext., Brgy. Gulang-
Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric facilities had a market value of P81,811,000.00
and an assessed value of P65,448,800.00, and were subjected to real property tax as of 1985.

MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of Lucena City, which was docketed as LBAA-
89-2. MERALCO claimed that its capital investment consisted only of its substation facilities, the true and correct value
of which was only P9,454,400.00; and that MERALCO was exempted from payment of real property tax on said
substation facilities.

The LBAA rendered a Decision14 in LBAA-89-2 on July 5, 1989, finding that under its franchise, MERALCO was
required to pay the City Government of Lucena a tax equal to 5% of its gross earnings, and "[s]aid tax shall be due and
payable quarterly and shall be in lieu of any and all taxes of any kind, nature, or description levied, established, or
collected x x x, on its poles, wires, insulators, transformers and structures, installations, conductors, and accessories, x x x,
from which taxes the grantee (MERALCO) is hereby expressly exempted."15 As regards the issue of whether or not the
poles, wires, insulators, transformers, and electric meters of MERALCO were real properties, the LBAA cited the 1964
case of Board of Assessment Appeals v. Manila Electric Company16 (1964 MERALCO case) in which the Court held that:
(1) the steel towers fell within the term "poles" expressly exempted from taxes under the franchise of MERALCO; and (2)
the steel towers were personal properties under the provisions of the Civil Code and, hence, not subject to real property
tax. The LBAA lastly ordered that Tax Declaration No. 019-6500 would remain and the poles, wires, insulators,
transformers, and electric meters of MERALCO would be continuously assessed, but the City Assessor would stamp on
the said Tax Declaration the word "exempt." The LBAA decreed in the end:cralawlawlibrary

WHEREFORE, from the evidence adduced by the parties, the Board overrules the claim of the [City
Assessor of Lucena] and sustain the claim of [MERALCO].

Further, the Appellant (Meralco) is hereby ordered to render an accounting to the City Treasurer of
Lucena and to pay the City Government of Lucena the amount corresponding to the Five (5%) per centum
of the gross earnings in compliance with paragraph 13 both Resolutions 108 and 2679, respectively,
retroactive from November 9, 1957 to date, if said tax has not yet been paid.17chanrobleslaw

The City Assessor of Lucena filed an appeal with the CBAA, which was docketed as CBAA Case No. 248. In its
Decision18 dated April 10, 1991, the CBAA affirmed the assailed LBAA judgment. Apparently, the City Assessor of
Lucena no longer appealed said CBAA Decision and it became final and executory.

Six years later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997 from the City Treasurer of
Lucena, which stated that the company was being assessed real property tax delinquency on its machineries beginning
1990, in the total amount of P17,925,117.34, computed as follows:chanRoblesvirtualLawlibrary

TAX ASSESSED COVERED

TAX DUE PENALTY TOTAL
DEC. # VALUE PERIOD

019-6500 P65,448,800.00 1990-94 P3,272,440.00 P2,356,156.80 P5,628,596.80

019-7394 78,538,560.00 1995 785,385.60 534,062.21 1,319,447.81
1996 785,385.60 345,569.66 1,130,955.26
lst-3rd/1997 589,039.20 117,807.84 706,847.04
4th 1997 196,346.40 (19,634.64) 176,711.76
 BASIC---- P8,962,558.67
SEF---- 8,962,558.67
TOTAL TAX DELINQUENCY---- P17,925,117.34

The City Treasurer of Lucena requested that MERALCO settle the payable amount soon to avoid accumulation of
penalties. Attached to the letter were the following documents: (a) Notice of Assessment20 dated October 20, 1997 issued
by the City Assessor of Lucena, pertaining to Tax Declaration No. 019-7394, which increased the market value and
assessed value of the machinery; (b) Property Record Form;21 and (c) Tax Declaration No. 019-6500.22

MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 before the LBAA of Lucena City on December 23,
1997 and posted a surety bond23 dated December 10, 1997 to guarantee payment of its real property tax delinquency.
MERALCO asked the LBAA to cancel and nullify the Notice of Assessment dated October 20, 1997 and declare the
properties covered by Tax Declaration Nos. 019-6500 and 019-7394 exempt from real property tax.

In its Decision dated June 17, 1998 regarding Tax Declaration Nos. 019-6500 and 019-7394, the LBAA declared that
Sections 234 and 534(f) of the Local Government Code repealed the provisions in the franchise of MERALCO and
Presidential Decree No. 55124 pertaining to the exemption of MERALCO from payment of real property tax on its poles,
wires, insulators, transformers, and meters. The LBAA refused to apply as res judicata its earlier judgment in LBAA-89-2,
as affirmed by the CBAA, because it involved collection of taxes from 1985 to 1989, while the present case concerned the
collection of taxes from 1989 to 1997; and LBAA is only an administrative body, not a court or quasi-judicial body. The
LBAA though instructed that the computation of the real property tax for the machineries should be based on the
prevailing 1991 Schedule of Market Values, less the depreciation cost allowed by law. The LBAA ultimately
disposed:cralawlawlibrary

WHEREFORE, in view of the foregoing, it is hereby ordered that:chanRoblesvirtualLawlibrary

1) MERALCO's appeal be dismissed for lack of merit;ChanRoblesVirtualawlibrary

2) MERALCO be required to pay the realty tax on the questioned properties, because they are not exempt
by law, same to be based on the 1991 level of assessment, less depreciation cost allowed by
law.25chanrobleslaw

MERALCO went before the CBAA on appeal, which was docketed as CBAA Case No. L-20-98. The CBAA, in its
Decision dated May 3, 2001, agreed with the LBAA that MERALCO could no longer claim exemption from real property
tax on its machineries with the enactment of Republic Act No. 7160, otherwise known as the Local Government Code of
1991, thus:cralawlawlibrary

Indeed, the Central Board of Assessment Appeals has had the opportunity of ruling in [MERALCO's]
favor in connection with this very same issue. The matter was settled on April 10, 1991 where this
Authority ruled that "wires, insulators, transformers and electric meters which are mounted on poles and
can be separated from the poles and moved from place to place without breaking the material or causing
[the] deterioration of the object, are deemed movable or personal property". The same position of
MERALCO would have been tenable and that decision may have stood firm prior to the enactment of
R.A. 7160 but not anymore in this jurisdiction. The Code provides and now sets a more stringent yet
broadened concept of machinery, x x x:chanRoblesvirtualLawlibrary

xxxx

The pivotal point where the difference lie between the former and the current case is that by the very
wordings of [Section 199(0)], the ground being anchored upon by MERALCO concerning the properties
in question being personal in nature does not hold anymore for the sole reason that these come now
within the purview and new concept of Machineries. The new law has treated these in an unequivocal
manner as machineries in the sense that they are instruments, mechanical contrivances or apparatus
though not attached permanently to the real properties of [MERALCO] are actually, directly and
exclusively used to meet their business of distributing electricity.

xxxx

Clearly, [Section 234 of the Local Government Code] lists down the instances of exemption in real
property taxation and very apparent is the fact that the enumeration is exclusive in character in view of
the wordings in the last paragraph. Applying the maxim "Expressio Unius est Exclusio Alterius", we can
say that "Where the statute enumerates those who can avail of the exemption, it is construed as excluding
all others not mentioned therein". Therefore, the above-named company [had] lost its previous
exemptions under its franchise because of non-inclusion in the enumeration in Section 234. Furthermore,
all tax exemptions being enjoyed by all persons, whether natural or juridical, including all government-
owned or controlled corporations are expressly withdrawn, upon effectivity of R.A. 7160.
 In the given facts, it has been manifested that the Municipal Board of Lucena passed Resolution No. 108
on July 1, 1957 extending the franchise of MERALCO to operate in Lucena city an electric light system
for thirty-five years, which should have expired on November 9, 1992 and under Resolution No. 2679
passed on June 13, 1972 by the City Council of Lucena City awarding [MERALCO] a franchise to
operate for twenty years an electric light, heat and power system in Lucena City, also to expire in the year
1992. Under those franchises, they were only bound to pay franchise taxes and nothing more.

Now, granting arguendo that there is no express revocation of the exemption under the franchise of
[MERALCO] since, unquestionably [MERALCO] is a recipient of another franchise granted this time by
the National Electrification Commission as evidenced by a certificate issued on October 28, 1993, such
conferment does not automatically include and/or award exemption from taxes, nor does it impliedly give
the franchisee the right to continue the privileges like exemption granted under its previous franchise. It is
just a plain and simple franchise. In countless times, the Supreme Court has ruled that exemption must be
clear in the language of the law granting such exemption for it is strictly construed and favored against
the person invoking it. In addition, a franchise though in the form of a contract is also a privilege that
must yield to the sublime yet inherent powers of the state, one of these is the power of taxation.

Looking into the law creating the National Electrification Administration (Commission), P.D. 269 as
amended by P.D. 1645, nowhere in those laws can we find such authority to bestow upon the grantee any
tax exemption of whatever nature except those of cooperatives. This we believe is basically in
consonance with the provisions of the Local Government Code more particularly Section 234.

Furthermore, Section 534(f) of R.A. 7160 which is taken in relation to Section 234 thereof states that "All
general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative
regulations or part or parts thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly". Anent this unambiguous mandate, P.D. 551 is mandatorily
repealed due to its contradictory and irreconcilable provisions with R.A. 7160.26
chanrobleslaw

Yet, the CBAA modified the ruling of the LBAA by excluding from the real property tax deficiency assessment the years
1990 to 1991, considering that:cralawlawlibrary

In the years 1990 and 1991, the exemption granted to MERALCO under its franchise which incidentally
expired upon the effectivity of the Local Government Code of 1991 was very much in effect and the
decision rendered by the Central Board of Assessment Appeals (CBAA) classifying its poles, wires,
insulators, transformers and electric meters as personal property was still controlling as the law of the
case. So, from 1990 to 1991, it would be inappropriate and illegal to make the necessary assessment on
those properties, much more to impose any penalty for nonpayment of such.

But, assessments made beginning 1992 until 1997 by the City Government of Lucena is legal, both
procedurally and substantially. When R.A. 7160, which incorporated amended provisions of the Real
Property Tax Code, took effect on January 1, 1992, as already discussed, the nature of the aforecited
questioned properties considered formerly as personal metamorphosed to machineries and the exemption
being invoked by [MERALCO] was automatically withdrawn pursuant to the letter and spirit of the law. x
x x.27chanrobleslaw

Resultantly, the decretal portion of said CBAA Decision reads:cralawlawlibrary

WHEREFORE, in view of the foregoing, the Decision appealed from is hereby modified. The City
Assessor of Lucena City is hereby directed to make a new assessment on the subject properties to retroact
from the year 1992 and the City Treasurer to collect the tax liabilities in accordance with the provisions of
the cited Section 222 of the Local Government Code.28chanrobleslaw

The CBAA denied the Motion for Reconsideration of MERALCO in a Resolution29 dated August 16, 2001.

Disgruntled, MERALCO sought recourse from the Court of Appeals by filing a Petition for Review under Rule 43 of the
Rules of Court, which was docketed as CA-G.R. SP No. 67027.

The Court of Appeals rendered a Decision on May 13, 2004 rejecting all arguments proffered by MERALCO. The
appellate court found no deficiency in the Notice of Assessment issued by the City Assessor of Lucena:cralawlawlibrary

It was not disputed that [MERALCO] failed to provide the [City Assessor and City Treasurer of Lucena]
with a sworn statement declaring the true value of each of the subject transformer and electric post,
transmission line, insulator and electric meter which should have been made the basis of the fair and
current market value of the aforesaid property and which would enable the assessor to identify the same
for assessment purposes. [MERALCO] merely claims that the assessment made by the [City Assessor and
City Treasurer of Lucena] was incorrect but did not even mention in their pleading the true and correct
assessment of the said properties. Absent any sworn statement given by [MERALCO], [the City Assessor
 and City Treasurer of Lucena] were constrained to make an assessment based on the materials within
[their reach].30chanrobleslaw

The Court of Appeals further ruled that there was no more basis for the real property tax exemption of MERALCO under
the Local Government Code and that the withdrawal of said exemption did not violate the non-impairment clause of the
Constitution, thus:cralawlawlibrary

Although it could not be denied that [MERALCO] was previously granted a Certificate of Franchise by
the National Electrification Commission on October 28, 1993 x x x, such conferment does not
automatically include an exemption from the payment of realty tax, nor does it impliedly give the
franchisee the right to continue the privileges granted under its previous franchise considering that Sec.
534(f) of the Local Government Code of 1991 expressly repealed those provisions which are inconsistent
with the Code.

At the outset, the Supreme Court has held that "Section 193 of the LGC prescribes the general rule, viz.,
tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons are withdrawn
upon the effectivity of the LGC except with respect to those entities expressly enumerated. In the same
vein, We must hold that the express withdrawal upon effectivity of the LGC of all exemptions except
only as provided therein, can no longer be invoked by MERALCO to disclaim liability for the local tax."
(City Government of San Pablo, Laguna vs. Reyes, 305 SCRA 353, 362-363)

In fine, [MERALCO's] invocation of the non-impairment clause of the Constitution is accordingly

unavailing. The LGC was enacted in pursuance of the constitutional policy to ensure autonomy to local
governments and to enable them to attain fullest development as self-reliant communities. The power to
tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised by local legislative
bodies, no longer merely by virtue of a valid delegation as before, but pursuant to [a] direct authority
conferred by Section 5, Article X of the Constitution. The important legal effect of Section 5 is that
henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be resolved in
favor of the municipal corporations. (Ibid. pp. 363-365)31chanrobleslaw

MERALCO similarly failed to persuade the Court of Appeals that the transformers, transmission lines, insulators, and
electric meters mounted on the electric posts of MERALCO were not real properties. The appellate court invoked the
definition of "machinery" under Section 199(o) of the Local Government Code and then wrote that:cralawlawlibrary

We firmly believe and so hold that the wires, insulators, transformers and electric meters mounted on the
poles of [MERALCO] may nevertheless be considered as improvements on the land, enhancing its utility
and rendering it useful in distributing electricity. The said properties are actually, directly and exclusively
used to meet the needs of [MERALCO] in the distribution of electricity.

In addition, "improvements on land are commonly taxed as realty even though for some purposes they
might be considered personalty. It is a familiar personalty phenomenon to see things classed as real
property for purposes of taxation which on general principle might be considered personal property."
(Caltex (Phil) Inc. vs. Central Board of Assessment Appeals, 114 SCRA 296, 301-302)32chanrobleslaw

Lastly, the Court of Appeals agreed with the CBAA that the new assessment of the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO shall retroact to 1992.

Hence, the Court of Appeals adjudged:cralawlawlibrary

WHEREFORE, premises considered, the assailed Decision [dated] May 3, 2001 and Resolution dated
August 16, 2001 are hereby AFFIRMED in toto and the present petition is hereby DENIED DUE
COURSE and accordingly DISMISSED for lack of merit.33
chanrobleslaw

In a Resolution dated November 18, 2004, the Court of Appeals denied the Motion for Reconsideration of MERALCO.

MERALCO is presently before the Court via the instant Petition for Review on Certiorari grounded on the following lone
assignment of error:cralawlawlibrary

THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN AFFIRMING IN

TOTO THE DECISION OF THE CENTRAL BOARD OF ASSESSMENT APPEALS WHICH HELD
THAT THE SUBJECT PROPERTIES ARE REAL PROPERTIES SUBJECT TO REAL PROPERTY
TAX; AND THAT ASSESSMENT ON THE SUBJECT PROPERTIES SHOULD BE MADE TO TAKE
EFFECT RETROACTIVELY FROM 1992 UNTIL 1997, WITH PENALTIES; THE SAME BEING
UNJUST, WHIMSICAL AND NOT IN ACCORD WITH THE LOCAL GOVERNMENT
CODE.34chanrobleslaw

MERALCO argues that its transformers, electric posts, transmission lines, insulators, and electric meters are not subject to
real property tax, given that: (1) the definition of "machinery" under Section 199(o) of the Local Government Code, on
which real property tax is imposed, must still be within the contemplation of real or immovable property under Article
415 of the Civil Code because it is axiomatic that a statute should be construed to harmonize with other laws on the same
subject matter as to form a complete, coherent, and intelligible system; (2) the Decision dated April 10, 1991 of the
CBAA in CBAA Case No. 248, which affirmed the Decision dated July 5, 1989 of the LBAA in LBAA-89-2, ruling that
the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are movable or personal
properties, is conclusive and binding; and (3) the electric poles are not exclusively used to meet the needs of MERALCO
alone since these are also being utilized by other entities such as cable and telephone companies.

MERALCO further asserts that even if it is assumed for the sake of argument that the transformers, electric posts,
transmission lines, insulators, and electric meters are real properties, the assessment of said properties by the City
Assessor in 1997 is a patent nullity. The collection letter dated October 16, 1997 of the City Treasurer of Lucena, Notice
of Assessment dated October 20, 1997 of the City Assessor of Lucena, the Property Record Form dated October 20, 1997,
and Tax Declaration No. 019-6500 simply state a lump sum market value for all the transformers, electric posts,
transmission lines, insulators, and electric meters covered and did not provide an inventory/list showing the actual number
of said properties, or a schedule of values presenting the fair market value of each property or type of property, which
would have enabled MERALCO to verify the correctness and reasonableness of the valuation of its properties.
MERALCO was not furnished at all with a copy of Tax Declaration No. 019-7394, and while it received a copy of Tax
Declaration No. 019-6500, said tax declaration did not contain the requisite information regarding the date of operation of
MERALCO and the original cost, depreciation, and market value for each property covered. For the foregoing reasons,
the assessment of the properties of MERALCO in 1997 was arbitrary, whimsical, and without factual basis - in patent
violation of the right to due process of MERALCO. MERALCO additionally explains that it cannot be expected to make a
declaration of its transformers, electric posts, transmission lines, insulators, and electric meters, because all the while, it
was of the impression that the said properties were personal properties by virtue of the Decision dated July 5, 1989 of the
LBAA in LBAA-89-2 and the Decision dated April 10, 1991 of the CBAA in CBAA Case No. 248.

Granting that the assessment of its transformers, electric posts, transmission lines, insulators, and electric meters by the
City Assessor of Lucena in 1997 is valid, MERALCO alternatively contends that: (1) under Sections 221 35 and 22236 of
the Local Government Code, the assessment should take effect only on January 1, 1998 and not retroact to 1992; (2)
MERALCO should not be held liable for penalties and interests since its nonpayment of real property tax on its properties
was in good faith; and (3) if interest may be legally imposed on MERALCO, it should only begin to run on the date it
received the Notice of Assessment on October 29, 1997 and not all the way back to 1992.

At the end of its Petition, MERALCO prays:cralawlawlibrary

WHEREFORE, it is respectfully prayed of this Honorable Court that the appealed Decision dated May
13, 2004 of the Court of Appeals, together with its Resolution dated November 18, 2004 be reversed and
set aside, and judgment be rendered x x x nullifying and cancel[l]ing the Notice of Assessment, dated
October 20, 1997, issued by respondent City Assessor, and the collection letter dated October 16, 1997 of
respondent City Treasurer.

Petitioner also prays for such other relief as may be deemed just and equitable in the premises.37
chanrobleslaw

The City Assessor and City Treasurer of Lucena counter that: (1) MERALCO was obliged to pay the real property tax
due, instead of posting a surety bond, while its appeal was pending, because Section 231 of the Local Government Code
provides that the appeal of an assessment shall not suspend the collection of the real property taxes; (2) the cases cited by
MERALCO can no longer be applied to the case at bar since they had been decided when Presidential Decree No. 464,
otherwise known as the Real Property Tax Code, was still in effect; (3) under the now prevailing Local Government Code,
which expressly repealed the Real Property Tax Code, the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO fall within the new definition of "machineries," deemed as real properties subject to real
property tax; and (4) the Notice of Assessment dated October 20, 1997 covering the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO only retroacts to 1992, which is less than 10 years prior
to the date of initial assessment, so it is in compliance with Section 222 of the Local Government Code, and since
MERALCO has yet to pay the real property taxes due on said assessment, then it is just right and appropriate that it also
be held liable to pay for penalties and interests from 1992 to present time. Ultimately, the City Assessor and City
Treasurer of Lucena seek judgment denying the instant Petition and ordering MERALCO to pay the real property taxes
due.

The Petition is partly meritorious.

The Court finds that the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are
no longer exempted from real property tax and may qualify as "machinery" subject to real property tax under the Local
Government Code. Nevertheless, the Court declares null and void the appraisal and assessment of said properties of
MERALCO by the City Assessor in 1997 for failure to comply with the requirements of the Local Government Code and,
thus, violating the right of MERALCO to due process.

By posting a surety bond before

filing its appeal of the assessment with
the LBAA, MERALCO substantially complied
with the requirement of payment under
protest in Section 252 of the Local
Government Code.

Section 252 of the Local Government Code mandates that "[n]o protest shall be entertained unless the taxpayer first pays
the tax." It is settled that the requirement of "payment under protest" is a condition sine qua non before an appeal may be
entertained.38 Section 231 of the same Code also dictates that "[a]ppeal on assessments of real property x x x shall, in no
case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or
city assessor, without prejudice to subsequent adjustment depending upon the final outcome of the appeal." Clearly, under
the Local Government Code, even when the assessment of the real property is appealed, the real property tax due on the
basis thereof should be paid to and/or collected by the local government unit concerned.

In the case at bar, the City Treasurer of Lucena, in his letter dated October 16, 1997, sought to collect from MERALCO
the amount of P17,925,l 17.34 as real property taxes on its machineries, plus penalties, for the period of 1990 to 1997,
based on Tax Declaration Nos. 019-6500 and 019-7394 issued by the City Assessor of Lucena. MERALCO appealed Tax
Declaration Nos. 019-6500 and 019-7394 with the LBAA, but instead of paying the real property taxes and penalties due,
it posted a surety bond in the amount of PI 7,925,117.34.

By posting the surety bond, MERALCO may be considered to have substantially complied with Section 252 of the Local
Government Code for the said bond already guarantees the payment to the Office of the City Treasurer of Lucena of the
total amount of real property taxes and penalties due on Tax Declaration Nos. 019-6500 and 019-7394. This is not the first
time that the Court allowed a surety bond as an alternative to cash payment of the real property tax before protest/appeal
as required by Section 252 of the Local Government Code. In Camp John Hay Development Corporation v. Central Board
of Assessment Appeals39 the Court affirmed the ruling of the CBAA and the Court of Tax Appeals en bane applying the
"payment under protest" requirement in Section 252 of the Local Government Code and remanding the case to the LBAA
for "further proceedings subject to a full and up-to-date payment, either in cash or surety, of realty tax on the subject
properties x x x."

Accordingly, the LBAA herein correctly took cognizance of and gave due course to the appeal of Tax Declaration Nos.
019-6500 and 019-7394 filed by MERALCO.

Beginning January 1, 1992,

MERALCO can no longer claim
exemption from real property tax of
its transformers, electric posts,
transmission lines, insulators, and
electric meters based on its
franchise.

MERALCO relies heavily on the Decision dated April 10, 1991 of the CBAA in CBAA Case No. 248, which affirmed the
Decision dated July 5, 1989 of the LBAA in LBAA-89-2. Said decisions of the CBAA and the LBAA, in turn, cited Board
of Assessment Appeals v. Manila Electric Co.,40 which was decided by the Court way back in 1964 (1964 MERALCO
case). The decisions in CBAA Case No. 248 and the 1964 MERALCO case recognizing the exemption from real property
tax of the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are no longer
applicable because of subsequent developments that changed the factual and legal milieu for MERALCO in the present
case.

In the 1964 MERALCO case, the City Assessor of Quezon City considered the steel towers of MERALCO as real
property and required MERALCO to pay real property taxes for the said steel towers for the years 1952 to 1956.
MERALCO was operating pursuant to the franchise granted under Ordinance No. 44 dated March 24, 1903 of the
Municipal Board of Manila, which it acquired from the original grantee, Charles M. Swift. Under its franchise,
MERALCO was expressly granted the following tax exemption privilege:cralawlawlibrary

Par 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including
poles, wires, transformers, and insulators), machinery and personal property as other persons are or may
be hereafter required by law to pay. x x x Said percentage shall be due and payable at the times stated in
paragraph nineteen of Part One hereof, x x x and shall be in lieu of all taxes and assessments of
whatsoever nature, and by whatsoever authority upon the privileges, earnings, income, franchise, and
poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is
hereby expressly exempted, x x x.41chanrobleslaw

Given the express exemption from taxes and assessments of the "poles, wires, transformers, and insulators" of
MERALCO in the aforequoted paragraph, the sole issue in the 1964 MERALCO case was whether or not the steel towers
of MERALCO qualified as "poles" which were exempted from real property tax. The Court ruled in the affirmative,
ratiocinating that:cralawlawlibrary
 Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles, and
poles of the PLDT Co. which are made of two steel bars joined together by an interlacing metal rod. They
are called "poles" notwithstanding the fact that they are not made of wood. It must be noted from
paragraph 9, above quoted, that the concept of the "poles" for which exemption is granted, is not
determined by their place or location, nor by the character of the electric current it carries, nor the
material or form of which it is made, but the use to which they are dedicated. In accordance with the
definitions, a pole is not restricted to a long cylindrical piece of wood or metal, but includes "upright
standards to the top of which something is affixed or by which something is supported." As heretofore
described, respondent's steel supports consist of a framework of four steel bars or strips which are bound
by steel cross-arms atop of which are cross-arms supporting five high voltage transmission wires (See
Annex A) and their sole function is to support or carry such wires.

The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a
novelty. Several courts of last resort in the United States have called these steel supports "steel towers",
and they have denominated these supports or towers, as electric poles. In their decisions the words
"towers" and "poles" were used interchangeably, and it is well understood in that jurisdiction that a
transmission tower or pole means the same thing.

xxxx

It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for
which the franchise was granted. The poles as contemplated thereon, should be understood and taken as a
part of the electric power system of the respondent Meralco, for the conveyance of electric current from
the source thereof to its consumers, x x x.42chanrobleslaw

Similarly, it was clear that under the 20-year franchise granted to MERALCO by the Municipal Board of Lucena City
through Resolution No. 2679 dated June 13, 1972, the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO were exempt from real property tax. Paragraph 13 of Resolution No. 2679 is quoted in full
below:cralawlawlibrary

13. The grantee shall be liable to pay the same taxes upon its real estate, building, machinery, and
personal property (not including poles, wires, transformers, and insulators) as other persons are now
or may hereafter be required by law to pay. In consideration of the franchise and rights hereby granted,
the grantee shall pay into the City Treasury of Lucena a tax equal to FIVE (5%) PER CENTUM of the
gross earnings received from electric current sold or supplied under this franchise. Said tax shall be due
and payable quarterly and shall be in lieu of any and all taxes of any kind, nature or description
levied, established, or collected by any authority whatsoever, municipal, provincial, or national, now or
in the future, on its poles, wires, insulators, switches, transformers and structures, installations,
conductors, and accessories, placed in and over and under all the private and/or public property,
including public streets and highways, provincial roads, bridges, and public squares, and on its franchise
rights, privileges, receipts, revenues and profits, from which taxes the grantee is hereby expressly
exempted. (Emphases supplied.)chanrobleslaw

In CBAA Case No. 248 (and LBAA-89-2), the City Assessor assessed the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO located in Lucena City beginning 1985 under Tax Declaration No. 019-
6500. The CBAA in its Decision dated April 10, 1991 in CBAA Case No. 248 sustained the exemption of the said
properties of MERALCO from real property tax on the basis of paragraph 13 of Resolution No. 2679 and the 1964
MERALCO case.

Just when the franchise of MERALCO in Lucena City was about to expire, the Local Government Code took effect on
January 1, 1992, Sections 193 and 234 of which provide:cralawlawlibrary

Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and nonprofit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.

Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real
property tax:chanRoblesvirtualLawlibrary

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person;ChanRoblesVirtualawlibrary

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or
religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used
 for religious, charitable or educational purposes;ChanRoblesVirtualawlibrary

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts
and government-owned or controlled corporations engaged in the supply and distribution of water and/or
generation and transmission of electric power;ChanRoblesVirtualawlibrary

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or
presently enjoyed by, all persons, whether natural or juridical, including all government-owned or
controlled corporations are hereby withdrawn upon the effectivity of this Code.chanrobleslaw

The Local Government Code, in addition, contains a general repealing clause under Section 534(f) which states that "[a]ll
general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or
part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly."

Taking into account the above-mentioned provisions, the evident intent of the Local Government Code is to
withdraw/repeal all exemptions from local taxes, unless otherwise provided by the Code. The limited and restrictive
nature of the tax exemption privileges under the Local Government Code is consistent with the State policy to ensure
autonomy of local governments and the objective of the Local Government Code to grant genuine and meaningful
autonomy to enable local government units to attain their fullest development as self-reliant communities and make them
effective partners in the attainment of national goals. The obvious intention of the law is to broaden the tax base of local
government units to assure them of substantial sources of revenue.43

Section 234 of the Local Government Code particularly identifies the exemptions from payment of real property tax,
based on the ownership, character, and use of the property, viz.:cralawlawlibrary

(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real
properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and
(vi) registered cooperatives.

(b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i)
charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents
appurtenant thereto, mosques, and (iii) nonprofit or religious cemeteries.

(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive
use to which they are devoted are: (i) all lands, buildings and improvements which are actually directly
and exclusively used for religious, charitable or educational purposes; (ii) all machineries and equipment
actually, directly and exclusively used by local water districts or by government-owned or controlled
corporations engaged in the supply and distribution of water and/or generation and transmission of
electric power; and (iii) all machinery and equipment used for pollution control and environmental
protection.

To help provide a healthy environment in the midst of the modernization of the country, all machinery
and equipment for pollution control and environmental protection may not be taxed by local governments.

2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical persons
including government-owned or controlled corporations are withdrawn upon the effectivity of the
Code.44chanrobleslaw

The last paragraph of Section 234 had unequivocally withdrawn, upon the effectivity of the Local Government Code,
exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or
controlled corporations, except as provided in the same section.

MERALCO, a private corporation engaged in electric distribution, and its transformers, electric posts, transmission lines,
insulators, and electric meters used commercially do not qualify under any of the ownership, character, and usage
exemptions enumerated in Section 234 of the Local Government Code. It is a basic precept of statutory construction that
the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar
maxim expressio unius est exclusio alterius.45 Not being among the recognized exemptions from real property tax in
Section 234 of the Local Government Code, then the exemption of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO from real property tax granted under its franchise was among the
exemptions withdrawn upon the effectivity of the Local Government Code on January 1, 1998.

It is worthy to note that the subsequent franchises for operation granted to MERALCO, i.e., under the Certificate of
Franchise dated October 28, 1993 issued by the National Electrification Commission and Republic Act No. 9209 enacted
on June 9, 2003 by Congress, are completely silent on the matter of exemption from real property tax of MERALCO or
any of its properties.

It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a
specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any
doubt whether a tax exemption exists is resolved against the taxpayer. 46 MERALCO has failed to present herein any
express grant of exemption from real property tax of its transformers, electric posts, transmission lines, insulators, and
electric meters that is valid and binding even under the Local Government Code.

The transformers, electric posts,

transmission lines, insulators, and electric
meters of MERALCO may qualify as
"machinery" under the Local Government
Code subject to real property tax.

Through the years, the relevant laws have consistently considered "machinery" as real property subject to real property
tax. It is the definition of "machinery" that has been changing and expanding, as the following table will
show:chanRoblesvirtualLawlibrary

Real Property
Incidence of Real Property Tax Definition of Machinery47
Tax Law
Section 3. Property exempt from tax. - The
exemptions shall be as follows:
The Assessment Law Section 2. Incidence of real property tax. -
xxxx
(Commonwealth Act Except in chartered cities, there shall be levied,
(f) Machinery, which term shall embrace
No. 470) assessed, and collected, an annual ad valorem
machines, mechanical contrivances,
tax on real property, including land, buildings,
instruments, appliances, and apparatus attached
Effectivity: January 1, machinery, and other improvements not
to the real estate, used for industrial agricultural
1940 hereinafter specifically exempted.
or manufacturing purposes, during the first five
years of the operation of the machinery.
Section 3. Definition of Terms. -
When used in this Code -

xxxx
Section 38. Incidence of Real Property Tax. -
Real Property There shall be levied, assessed and collected in
(m) Machinery - shall embrace machines,
Tax Code all provinces, cities and municipalities an
mechanical contrivances, instruments,
annual ad valorem tax on real property, such as
appliances and apparatus attached to the real
Effectivity: June 1, land, buildings, machinery and other
estate. It includes the physical facilities
1974 improvements affixed or attached to real
available for production, as well as the
property not hereinafter specifically exempted.
installations and appurtenant service facilities,
together with all other equipment designed for
or essential to its manufacturing, industrial or
agricultural purposes.
Section 3. Definition of Terms.
  When used in this Code -
xxxx

(m) Machinery - shall embrace machines,

Real Property
Section 38. Incidence of Real Property Tax. - equipment, mechanical contrivances,
Tax Code, as amended
There shall be levied, assessed and collected in instruments, appliances and apparatus attached
by
all provinces, cities and municipalities an to the real estate. It shall include the physical
Presidential
annual ad valorem tax on real property, such as facilities available for production, as well as the
Decree No. 1383
land, buildings, machinery and other installations and appurtenant service facilities,
improvements affixed or attached to real together with all those not permanently attached
Effectivity: May 25,
property not hereinafter specifically exempted. to the real estate but are actually, directly and
1978
essentially used to meet the needs of the
particular industry, business, or works, which
by their very nature and purpose are designed
for, or essential to manufacturing, commercial,
mining, industrial or agricultural purposes.
Local Section 232. Power to Levy Real Property Section 199. Definitions. - When used in this
Government Tax. — A province or city or a municipality Title:
  Code within the Metropolitan Manila Area may levy x x x x
an annual ad valorem tax on real property such
Effectivity: as land, building, machinery, and other (o) "Machinery" embraces machines,
 equipment, mechanical contrivances,
instruments, appliances or apparatus which
may or may not be attached, permanently or
temporarily, to the real property. It includes
the physical facilities for production, the
installations and appurtenant service
facilities, those which are mobile, self-
improvement not hereinafter specifically powered or self- propelled, and those not
January 1, 1992
exempted. permanently attached to the real property which
are actually, directly, and exclusively used to
meet the needs of the particular industry,
business or activity and which by their very
nature and purpose are designed for, or
necessary to its manufacturing,
mining, logging, commercial, industrial or
agricultural  purposes[.]

MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts, transmission lines,
insulators, and electric meters constitute the physical facilities through which MERALCO delivers electricity to its
consumers. Each may be considered as one or more of the following: a
"machine,"48 "equipment,"49 "contrivance,"50 "instrument,"51 "appliance,"52 "apparatus,"53 or "installation."54

The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be deemed real property
subject to real property tax, need no longer be annexed to the land or building as these "may or may not be attached,
permanently or temporarily to the real property," and in fact, such machinery may even be "mobile."55 The same provision
though requires that to be machinery subject to real property tax, the physical facilities for production, installations, and
appurtenant service facilities, those which are mobile, self-powered or self-propelled, or not permanently attached to the
real property (a) must be actually, directly, and exclusively used to meet the needs of the particular industry, business, or
activity; and (2) by their very nature and purpose, are designed for, or necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes. Thus, Article 290(o) of the Rules and Regulations Implementing the
Local Government Code of 1991 recognizes the following exemption:cralawlawlibrary

Machinery which are of general purpose use including but not limited to office equipment, typewriters,
telephone equipment, breakable or easily damaged containers (glass or cartons), microcomputers,
facsimile machines, telex machines, cash dispensers, furnitures and fixtures, freezers, refrigerators,
display cases or racks, fruit juice or beverage automatic dispensing machines which are not directly and
exclusively used to meet the needs of a particular industry, business or activity shall not be considered
within the definition of machinery under this Rule. (Emphasis supplied.)chanrobleslaw

The 1964 MERALCO case was decided when The Assessment Law was still in effect and Section 3(f) of said law still
required that the machinery be attached to the real property. Moreover, as the Court pointed out earlier, the ruling in
the 1964 MERALCO case - that the electric poles (including the steel towers) of MERALCO are not subject to real
property tax - was primarily based on the express exemption granted to MERALCO under its previous franchise. The
reference in said case to the Civil Code definition of real property was only an alternative argument:cralawlawlibrary

Granting for the purpose of argument that the steel supports or towers in question are not
embraced within the term poles, the logical question posited is whether they constitute real
properties, so that they can be subject to a real property tax. The tax law does not provide for a
definition of real property; but Article 415 of the Civil Code does, by stating the following are
immovable property:cralawlawlibrary

(1) Land, buildings, roads, and constructions of all kinds adhered to the
soil;ChanRoblesVirtualawlibrary

xxxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot
be separated therefrom without breaking the material or deterioration of the
object;ChanRoblesVirtualawlibrary

xxxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried in a building or on a piece of
land, and which tends directly to meet the needs of the said industry or
works;ChanRoblesVirtualawlibrary
 xxxx
The steel towers or supports in question, do not come within the objects mentioned in paragraph 1,
because they do not constitute buildings or constructions adhered to the soil. They are not constructions
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are
removable and merely attached to a square metal frame by means of bolts, which when unscrewed could
easily be dismantled and moved from place to place. They can not be included under paragraph 3, as they
are not attached to an immovable in a fixed manner, and they can be separated without breaking the
material or causing deterioration upon the object to which they are attached. Each of these steel towers or
supports consists of steel bars or metal strips, joined together by means of bolts, which can be
disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or
supports do not also fall under paragraph 5, for they are not machineries or receptacles, instruments or
implements, and even if they were, they are not intended for industry or works on the land. Petitioner is
not engaged in an industry or works on the land in which the steel supports or towers are
constructed.56 (Emphases supplied.)chanrobleslaw

The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore under the Local
Government Code.

While the Local Government Code still does not provide for a specific definition of "real property," Sections 199(o) and
232 of the said Code, respectively, gives an extensive definition of what constitutes "machinery" and unequivocally
subjects such machinery to real property tax. The Court reiterates that the machinery subject to real property tax under the
Local Government Code "may or may not be attached, permanently or temporarily to the real property;" and the physical
facilities for production, installations, and appurtenant service facilities, those which are mobile, self-powered or self-
propelled, or are not permanently attached must (a) be actually, directly, and exclusively used to meet the needs of the
particular industry, business, or activity; and (2) by their very nature and purpose, be designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or agricultural purposes.

Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and, buildings, roads and
constructions of all kinds adhered to the soil." The land, buildings, and roads are immovables by nature "which cannot be
moved from place to place," whereas the constructions adhered to the soil are immovables by incorporation "which are
essentially movables, but are attached to an immovable in such manner as to be an integral part thereof." 57 Article 415,
paragraph (3) of the Civil Code, referring to "[ejverything attached to an immovable in a fixed manner, in such a way that
it cannot be separated therefrom without breaking the material or deterioration of the object," are likewise immovables by
incorporation. In contrast, the Local Government Code considers as real property machinery which "may or may not be
attached, permanently or temporarily to the real property," and even those which are "mobile."

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[machinery, receptacles,
instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a
building or on a piece of land, and which tend directly to meet the needs of the said industry or works." The Civil Code,
however, does not define "machinery."

The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are
essentially movables, but by the purpose for which they have been placed in an immovable, partake of the nature of the
latter because of the added utility derived therefrom."58 These properties, including machinery, become immobilized if the
following requisites concur: (a) they are placed in the tenement by the owner of such tenement; (b) they are destined for
use in the industry or work in the tenement; and (c) they tend to directly meet the needs of said industry or works. 59 The
first two requisites are not found anywhere in the Local Government Code.

MERALCO insists on harmonizing the aforementioned provisions of the Civil Code and the Local Government Code.
The Court disagrees, however, for this would necessarily mean imposing additional requirements for classifying
machinery as real property for real property tax purposes not provided for, or even in direct conflict with, the provisions
of the Local Government Code.

As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a
special law granting local government units the power to impose real property tax, then the latter shall prevail. As the
Court pronounced in Disomangcop v. The Secretary of the Department of Public Works and Highways Simeon A.
Datumanong60:cralawlawlibrary

It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a
general one. Lex specialis derogant generali. As this Court expressed in the case of Leveriza v.
Intermediate Appellate Court, "another basic principle of statutory construction mandates that general
legislation must give way to special legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable, that specific statute prevails over a
general statute and that where two statutes are of equal theoretical application to a particular case, the one
designed therefor specially should prevail." (Citations omitted.)chanrobleslaw

The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation61 that:cralawlawlibrary
 A general law and a special law on the same subject are statutes in pah materia and should, accordingly,
be read together and harmonized, if possible, with a view to giving effect to both. The rule is that where
there are two acts, one of which is special and particular and the other general which, if standing alone,
would include the same matter and thus conflict with the special act, the special law must prevail since it
evinces the legislative intent more clearly than that of a general statute and must not be taken as intended
to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so
to construe it in order to give its words any meaning at all.

The circumstance that the special law is passed before or after the general act does not change the
principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the
prior general act; and where the general act is later, the special statute will be construed as remaining an
exception to its terms, unless repealed expressly or by necessary implication. (Citations
omitted.)chanrobleslaw

Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals,62 the Court acknowledged that "[i]t is
a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be
considered personal property[.]"

Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements
under the Local Government Code are controlling.

MERALCO maintains that its electric posts are not machinery subject to real property tax because said posts are not being
exclusively used by MERALCO; these are also being utilized by cable and telephone companies. This, however, is a
factual issue which the Court cannot take cognizance of in the Petition at bar as it is not a trier of facts. Whether or not the
electric posts of MERALCO are actually being used by other companies or industries is best left to the determination of
the City Assessor or his deputy, who has been granted the authority to take evidence under Article 304 of the Rules and
Regulations Implementing the Local Government Code of 1991.

Nevertheless, the appraisal and

assessment of the transformers, electric
posts, transmission lines, insulators, and
electric meters of MERALCO as machinery
under Tax Declaration Nos. 019-6500 and
019-7394 were not in accordance with the
Local Government Code and in violation of
the right to due process of MERALCO and,
therefore, null and void.

The Local Government Code defines "appraisal" as the "act or process of determining the value of property as of a
specific date for a specific purpose." "Assessment" is "the act or process of determining the value of a property, or
proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of the properties[.]"63 When
it comes to machinery, its appraisal and assessment are particularly governed by Sections 224 and 225 of the Local
Government Code, which read:cralawlawlibrary

Section 224. Appraisal and Assessment of Machinery. - (a) The fair market value of a brand-new
machinery shall be the acquisition cost. In all other cases, the fair market value shall be determined by
dividing the remaining economic life of the machinery by its estimated economic life and multiplied by
the replacement or reproduction cost.

(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and
installation charges at the present site. The cost in foreign currency of imported machinery shall be
converted to peso cost on the basis of foreign currency exchange rates as fixed by the Central Bank.

Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a depreciation

allowance shall be made for machinery at a rate not exceeding five percent (5%) of its original cost or its
replacement or reproduction cost, as the case may be, for each year of use: Provided, however, That the
remaining value for all kinds of machinery shall be fixed at not less than twenty percent (20%) of such
original, replacement, or reproduction cost for so long as the machinery is useful and in
operation.chanrobleslaw

It is apparent from these two provisions that every machinery must be individually appraised and assessed depending on
its acquisition cost, remaining economic life, estimated economic life, replacement or reproduction cost, and depreciation.

Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991 expressly authorizes the
local assessor or his deputy to receive evidence for the proper appraisal and assessment of the real
property:cralawlawlibrary
 Article 304. Authority of Local Assessors to Take Evidence. - For the purpose of obtaining information
on which to base the market value of any real property, the assessor of the province, city, or municipality
or his deputy may summon the owners of the properties to be affected or persons having legal interest
therein and witnesses, administer oaths, and take deposition concerning the property, its ownership,
amount, nature, and value.
chanrobleslaw

The Local Government Code further mandates that the taxpayer be given a notice of the assessment of real property in the
following manner:cralawlawlibrary

Section 223. Notification of New or Revised Assessment. - When real property is assessed for the first
time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor
shall within thirty (30) days give written notice of such new or revised assessment to the person in whose
name the property is declared. The notice may be delivered personally or by registered mail or through
the assistance of the punong barangay to the last known address of the person to served.chanrobleslaw

A notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability,
should be sufficiently informative to apprise the taxpayer the legal basis of the tax. 64 In Manila Electric Company v.
Barlis,65 the Court described the contents of a valid notice of assessment of real property and differentiated the same from
a notice of collection:cralawlawlibrary

A notice of assessment as provided for in the Real Property Tax Code should effectively inform the
taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery,
listing, classification, and appraisal of properties. The September 3, 1986 and October 31, 1989 notices do
not contain the essential information that a notice of assessment must specify, namely, the value of a
specific property or proportion thereof which is being taxed, nor does it state the discovery, listing,
classification and appraisal of the property subject to taxation. In fact, the tenor of the notices bespeaks an
intention to collect unpaid taxes, thus the reminder to the taxpayer that the failure to pay the taxes shall
authorize the government to auction off the properties subject to taxes x x x.chanrobleslaw

Although the ruling quoted above was rendered under the Real Property Tax Code, the requirement of a notice of
assessment has not changed under the Local Government Code.

A perusal of the documents received by MERALCO on October 29, 1997 reveals that none of them constitutes a valid
notice of assessment of the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO.

The letter dated October 16, 1997 of the City Treasurer of Lucena (which interestingly precedes the purported Notice of
Assessment dated October 20, 1997 of the City Assessor of Lucena) is a notice of collection, ending with the request for
MERALCO to settle the payable amount soon in order to avoid accumulation of penalties. It only presented in table form
the tax declarations covering the machinery, assessed values in the tax declarations in lump sums for all the machinery,
the periods covered, and the taxes and penalties due again in lump sums for all the machinery.

The Notice of Assessment dated October 20, 1997 issued by the City Assessor gave a summary of the new/revised
assessment of the "machinery" located in "Quezon Avenue Ext., Brgy. Gulang-Gulang, Lucena City," covered by Tax
Declaration No. 019-7394, with total market value of P98,173,200.00 and total assessed value of P78,538,560.00. The
Property Record Form basically contained the same information. Without specific description or identification of the
machinery covered by said tax declaration, said Notice of Assessment and Property Record Form give the false
impression that there is only one piece of machinery covered.

In Tax Declaration No. 019-6500, the City Assessor reported its findings under "Building and Improvements" and not
"Machinery." Said tax declaration covered "capital investment-commercial," specifically: (a) Transformer and Electric
Post; (b) Transmission Line, (c) Insulator, and (d) Electric Meter, with a total market value of P81,811,000.00, assessment
level of 80%, and assessed value of £65,448,800.00. Conspicuously, the table for "Machinery" - requiring the description,
date of operation, replacement cost, depreciation, and market value of the machinery - is totally blank.

MERALCO avers, and the City Assessor and the City Treasurer of Lucena do not refute at all, that MERALCO has not
been furnished the Owner's Copy of Tax Declaration No. 019-7394, in which the total market value of the machinery of
MERALCO was increased by PI6,632,200.00, compared to that in Tax Declaration No. 019-6500.

The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack of a valid appraisal and
assessment conducted by the City Assessor of Lucena in the first place. It appears that the City Assessor of Lucena simply
lumped together all the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO
located in Lucena City under Tax Declaration Nos. 019-6500 and 019-7394, contrary to the specificity demanded under
Sections 224 and 225 of the Local Government Code for appraisal and assessment of machinery. The City Assessor and
the City Treasurer of Lucena did not even provide the most basic information such as the number of transformers, electric
posts, insulators, and electric meters or the length of the transmission lines appraised and assessed under Tax Declaration
Nos. 019-6500 and 019-7394. There is utter lack of factual basis for the assessment of the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO.
The Court of Appeals laid the blame on MERALCO for the lack of information regarding its transformers, electric posts,
transmission lines, insulators, and electric meters for appraisal and assessment purposes because MERALCO failed to file
a sworn declaration of said properties as required by Section 202 of the Local Government Code. As MERALCO
explained, it cannot be expected to file such a declaration when all the while it believed that said properties were personal
or movable properties not subject to real property tax. More importantly, Section 204 of the Local Government Code
exactly covers such a situation, thus:cralawlawlibrary

Section 204. Declaration of Real Property by the Assessor. -When any person, natural or juridical, by
whom real property is required to be declared under Section 202 hereof, refuses or fails for any reason to
make such declaration within the time prescribed, the provincial, city or municipal assessor shall himself
declare the property in the name of the defaulting owner, if known, or against an unknown owner, as the
case may be, and shall assess the property for taxation in accordance with the provision of this Title. No
oath shall be required of a declaration thus made by the provincial, city or municipal
assessor.chanrobleslaw

Note that the only difference between the declarations of property made by the taxpayer, on one hand, and the
provincial/city/municipal assessor, on the other, is that the former must be made under oath. After making the declaration
of the property himself for the owner, the provincial/city/municipal assessor is still required to assess the property for
taxation in accordance with the provisions of the Local Government Code.

It is true that tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the
burden of proving otherwise.66 In this case, MERALCO was able to overcome the presumption because it has clearly
shown that the assessment of its properties by the City Assessor was baselessly and arbitrarily done, without regard for the
requirements of the Local Government Code.

The exercise of the power of taxation constitutes a deprivation of property under the due process clause, and the taxpayer's
right to due process is violated when arbitrary or oppressive methods are used in assessing and collecting taxes. 67 The
Court applies by analogy its pronouncements in Commissioner of Internal Revenue v. United Salvage and Towage
(Phils.), Inc.,68 concerning an assessment that did not comply with the requirements of the National Internal Revenue
Code:cralawlawlibrary

On the strength of the foregoing observations, we ought to reiterate our earlier teachings that "in
balancing the scales between the power of the State to tax and its inherent right to prosecute perceived
transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and the
equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizen's right
is amply protected by the Bill of Rights under the Constitution." Thus, while "taxes are the lifeblood of
the government," the power to tax has its limits, in spite of all its plenitude. Even as we concede the
inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be
exercised reasonably and in accordance with the prescribed procedure. (Citations omitted.)chanrobleslaw

The appraisal and assessment of the transformers, electric posts, transmission lines, insulators, and electric meters of
MERALCO under Tax Declaration Nos. 019-6500 and 019-7394, not being in compliance with the Local Government
Code, are attempts at deprivation of property without due process of law and, therefore, null and void.

WHEREFORE, premises considered, the Court PARTLY GRANTS the instant Petition and AFFIRMS with
MODIFICATION the Decision dated May 13, 2004 of the Court of Appeals in CA-G.R. SP No. 67027, affirming in toto
the Decision dated May 3, 2001 of the Central Board of Assessment Appeals in CBAA Case No. L-20-98. The
Court DECLARES that the transformers, electric posts, transmission lines, insulators, and electric meters of Manila
Electric Company are NOT EXEMPTED from real property tax under the Local Government Code. However, the Court
also DECLARES the appraisal and assessment of the said properties under Tax Declaration Nos. 019-6500 and 019-7394
as NULL and VOID for not complying with the requirements of the Local Government Code and violating the right to
due process of Manila Electric Company, and ORDERS the CANCELLATION of the collection letter dated October 16,
1997 of the City Treasurer of Lucena and the Notice of Assessment dated October 20, 1997 of the City Assessor of
Lucena, but WITHOUT PREJUDICE to the conduct of a new appraisal and assessment of the same properties by the
City Assessor of Lucena in accord with the provisions of the Local Government Code and guidelines issued by the Bureau
of Local Government Financing.

SO ORDERED.chanroblesvirtuallawlibrary

Sereno, CJ., (Chairperson), Bersamin, Perez, and Perlas-Bernabe, JJ., concur.

Endnotes:

1
Rollo, pp. 27-34; penned by Associate Justice B. A. Adefuin-De La Cruz with Associate Justices Perlita
J. Tria Tirana and Arturo D. Brion (now a member of this Court), concurring.
2
 Id. at 36-37; penned by Associate Justice Perlita J. Tria Tirana with Associate Justices Arturo D. Brion
and Fernanda Lampas Peralta, concurring.

 Id. at 59-69; signed by Chairman Cesar S. Gutierrez and Members Angel P. Palomares and Benjamin M.
3

Kasala.

 Id. at 52-56; signed by Chairman Alberto P. Marquez and Members Romeo Dato and Alfonso A.
4

Custodio.
5
 Erroneously dated June 17, 1997.

 CA rollo, p. 69. As stated in Resolution No. 108 dated July 1, 1957 of the Municipal Council of Lucena,
6

Quezon.
7
 Id. at 69-73.
8
 CA rollo, pp. 74-77.
9
 Lucena became a city by virtue of Republic Act No. 3271, enacted on June 17, 1961.
10
 CA rollo, p. 80.

An Act Granting the Manila Electric Company a Franchise to Construct, Operate and Maintain a
11

Distribution System for the Conveyance of Electric Power to the End-Users in the Cities/Municipalities
of Metro Manila, Bulacan, Cavite and Rizal, and Certain Cities/Municipalities/Barangays in Batangas,
Laguna, Quezon and Pampanga.

 In compliance with Sections 22 and 27 of Republic Act No. 9136, otherwise known as the Electric
12

Power Industry Reform Act of 2001, which state, respectively, that "[t]he distribution of electricity to
end-users shall be a regulated common carrier business requiring a national franchise" and "[t]he power to
grant franchises to persons engaged in the transmission and distribution of electricity shall be vested
exclusively in the Congress of the Philippines."
13
Rollo, p. 50.

 CA rollo, pp. 52-57. Signed by Chairman Elpidio G. Jorvina and Members Patricio C. Haway and Jose
14

E. Lao.
15
 Id. at 55.
16
 119 Phil. 328(1964).
17
 CA rollo, p. 57.

 Id. at 59-68. Signed by Chairman Jesus F. Estanislao (Secretary of Finance) and Members Franklin M.
18

Drilon (Secretary of Justice) and Luis T. Santos (Secretary of Interior and Local Government).
19
Rollo, p. 47.
20
 Id. at 48.
21
 Id. at 49.
22
 Id. at 50.
23
 CA rollo, pp. 43-47. Issued  by The Mercantile Insurance Co., Inc. in the amount of P17,925,117.34.

 Lowering the Cost to Consumers of Electricity by Reducing the Franchise Tax Payable by Electric
24

Franchise Holders and the Tariff on Fuel Oils for the Generation of Electric Power by Public Utilities.
25
Rollo, p. 56.
26
 Id. at 62-65.
27
 Id. at 65-66.
28
 Id. at 69.
  Id. at 57. Signed by Chairman Cesar S. Gutierrez and Members Angel P. Palomares and Benjamin M.
29

Kasala.
30
 Id. at 29-30.
31
 Id. at 31.
32
 Id. at 32.
33
 Id. at 34.
34
 Id. at 12.

 Section 221. Date of Effectivity of Assessment or Reassessment. ~~ All assessments or reassessments

35

made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the
succeeding year: Provided, however, That the reassessment of real property due to its partial or total
destruction, or to a major change in its actual use, or to any great and sudden inflation or deflation of real
property values, or to the gross illegality of the assessment when made or to any other abnormal cause,
shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take
effect at the beginning of the quarter next following the reassessment.
36
 Section 222. Assessment of Property Subject to Back Taxes. - Real property declared for the first time
shall be assessed for taxes for the period during which it would have been liable but in no case for more
than ten (10) years prior to the date of initial assessment: Provided, however, That such taxes shall be
computed on the basis of the applicable schedule of values in force during the corresponding period.

If such taxes are paid on or before the end of the quarter following the date the notice of assessment was
received by the owner or his representative, no interest for delinquency shall be imposed thereon;
otherwise such taxes shall be subject to an interest at the rate of two percent (2%) per month or a fraction
thereof from the date of the receipt of the assessment until such taxes are fully paid.
37
Rollo, p. 22.

Camp John Hay Development Corporation v. Central Board of Assessment Appeals, G.R. No. 169234,
38

October 2, 2013, 706 SCRA 547, 563.

39
 Id. at 570.
40
 Supra note 16.
41
 Id. at 331.
42
 Id. at 331-333.

Philippine Rural Electric Cooperatives Association, Inc. v. The Secretary, Department of Interior and
43

Local Government, 451 Phil. 683, 698 (2003), citing Mactan Cebu International Airport Authority v.
Marcos, 330 Phil. 392, 417 (1996).

 Mactan Cebu International Airport Authority v. Marcos, id. at 410-411, citing Pimentel, Aquilino Jr.,
44

THE LOCAL GOVERNMENT CODE of 1991 — The Key to National Development [1933], 329.
45
National Power Corporation v. City of Cabanatuan, 449 Phil. 233, 259 (2003).
46
Digital Telecommunications Philippines, Inc. v. City Government ofBatangas, 594 Phil. 269 299 (2008).
47
 Emphases on the substantial changes introduced by the succeeding law.
48
"Machine" is a piece of equipment with moving parts that does work when it is given power from
electricity, gasoline, etc.; an assemblage of parts that transmit forces, motion, and energy one to another
in a predetermined manner; an instrument (as a lever) designed to transmit or modify the application of
power, force, or motion; or a mechanically, electrically, or electronically operated device for performing a
task, (http://www.men-iam-webster.com/dictionary/machine, last visited on July 15,2015)
 
49
"Equipment" is the set of articles or physical resources serving to equip a person or thing; apparatus; the
implements used in an operation or activity; or all the fixed assets other than land and buildings of a
business enterprise; or a piece of such equipment. (http://www.merriam-
webster.com/dictionary/equipment, last visited on July 15, 2015)
  "Contrivance" is a machine or piece of equipment made with skill and cleverness; or a thing contrived,
50

especially, a mechanical device, (http://www.merriam-webster.com/ dictionary/ contrivance, last visited

on July 15, 2015)

 "Instrument" is a tool or device used for a particular purpose, especially, a tool or device designed to do
51

careful and exact work; implement, especially, one designed for precision work; a relatively simple
device for performing work, (http://www.merriam-webster.com/dictionary/instrument, last visited July
15,2015)

 "Appliance" is a piece of equipment for adapting a tool or machine to a special purpose; an instrument
52

or device designed for a particular use or function (an orthodontic appliance); specifically, a household or
office device (as a stove, fan, or refrigerator) operated by gas or electric current; or a tool or instrument
utilising a power source and suggests portability or temporary attachment (household appliances).
(http://www.merriam- webster.com/dictionary/appliance, last visited on July 15, 2015)

 "Apparatus" is a tool or piece of equipment used for specific activities; or an instrument or appliance
53

designed for a specific operation, (http://www.merriam-webster.com/dictionary/ apparatus, last visited

July 15, 2015)

 "Installation" is something (such as a piece of equipment) that is put together and made ready for use.
54

(http://www.merriam-webster.com/dictionary/installation, last visited on July 15, 2015)

 "Mobile" means capable of moving or being moved; or movable (a mobile missile launcher).
55

(http://www.inerriam-webster.com/dictionary/mobile, last visited July 15, 2015)

56
Board of Assessment Appeals v. Manila Electric Company, supra note 16 at334-335.
57
 Tolentino, CIVIL CODE OF THE PHILIPPINES, Vol. II (1992 ed) p. 13.
58
 Id.
59
 Id. at 18-20.
60
 486 Phil. 398, 448 (2004).
61
 552 Phil. 101, 111 (2007).
62
 199 Phil. 487, 492 (1982).
63
 Section 199(e-f).
64
Yamane v. BA Lepanto Condominium Corporation, 510 Phil. 750, 770 (2005).
65
 426 Phil. 280, 284 (2002).
66
Cagayan Robina Sugar Milling Company v. Court of Appeals, 396 Phil. 830, 839 (2000).
67
Yarnane v. BA Lepanlo Condominium Corporation, supra note 64 at 776.
68
 G.R. No. 197515, July 2, 2014, 729 SCRA 113, 136.
EN BANC

[G.R. NO. 179987 : April 29, 2009]

HEIRS OF MARIO MALABANAN, Petitioner, v. REPUBLIC OF THE PHILIPPINES, Respondent.

DECISION

TINGA, J.:

One main reason why the informal sector has not become formal is that from Indonesia to Brazil, 90 percent of the
informal lands are not titled and registered. This is a generalized phenomenon in the so-called Third World. And it has
many consequences.

xxx

The question is: How is it that so many governments, from Suharto's in Indonesia to Fujimori's in Peru, have wanted to
title these people and have not been able to do so effectively? One reason is that none of the state systems in Asia or Latin
America can gather proof of informal titles. In Peru, the informals have means of proving property ownership to each
other which are not the same means developed by the Spanish legal system. The informals have their own papers, their
own forms of agreements, and their own systems of registration, all of which are very clearly stated in the maps which
they use for their own informal business transactions.

If you take a walk through the countryside, from Indonesia to Peru, and you walk by field after field - -in each field a
different dog is going to bark at you. Even dogs know what private property is all about. The only one who does not know
it is the government. The issue is that there exists a "common law" and an "informal law" which the Latin American
formal legal system does not know how to recognize.

- Hernando De Soto1

This decision inevitably affects all untitled lands currently in possession of persons and entities other than the Philippine
government. The petition, while unremarkable as to the facts, was accepted by the Court en banc in order to provide
definitive clarity to the applicability and scope of original registration proceedings under Sections 14(1) and 14(2) of the
Property Registration Decree. In doing so, the Court confronts not only the relevant provisions of the Public Land Act and
the Civil Code, but also the reality on the ground. The countrywide phenomenon of untitled lands, as well as the problem
of informal settlement it has spawned, has unfortunately been treated with benign neglect. Yet our current laws are
hemmed in by their own circumscriptions in addressing the phenomenon. Still, the duty on our part is primarily to decide
cases before us in accord with the Constitution and the legal principles that have developed our public land law, though
our social obligations dissuade us from casting a blind eye on the endemic problems.

I.

On 20 February 1998, Mario Malabanan filed an application for land registration covering a parcel of land identified as
Lot 9864-A, Cad-452-D, Silang Cadastre,2 situated in Barangay Tibig, Silang Cavite, and consisting of 71,324 square
meters. Malabanan claimed that he had purchased the property from Eduardo Velazco,3 and that he and his predecessors-
in-interest had been in open, notorious, and continuous adverse and peaceful possession of the land for more than thirty
(30) years.

The application was raffled to the Regional Trial Court of (RTC) Cavite-Tagaytay City, Branch 18. The Office of the
Solicitor General (OSG) duly designated the Assistant Provincial Prosecutor of Cavite, Jose Velazco, Jr., to appear on
behalf of the State.4 Apart from presenting documentary evidence, Malabanan himself and his witness, Aristedes Velazco,
testified at the hearing. Velazco testified that the property was originally belonged to a twenty-two hectare property
owned by his great-grandfather, Lino Velazco. Lino had four sons' Benedicto, Gregorio, Eduardo and Esteban the fourth
being Aristedes's grandfather. Upon Lino's death, his four sons inherited the property and divided it among themselves.
But by 1966, Esteban's wife, Magdalena, had become the administrator of all the properties inherited by the Velazco sons
from their father, Lino. After the death of Esteban and Magdalena, their son Virgilio succeeded them in administering the
properties, including Lot 9864-A, which originally belonged to his uncle, Eduardo Velazco. It was this property that was
sold by Eduardo Velazco to Malabanan.5

Assistant Provincial Prosecutor Jose Velazco, Jr. did not cross-examine Aristedes Velazco. He further manifested that he
"also [knew] the property and I affirm the truth of the testimony given by Mr. Velazco." 6 The Republic of the Philippines
likewise did not present any evidence to controvert the application.

Among the evidence presented by Malabanan during trial was a Certification dated 11 June 2001, issued by the
Community Environment & Natural Resources Office, Department of Environment and Natural Resources (CENRO-
DENR), which stated that the subject property was "verified to be within the Alienable or Disposable land per Land
Classification Map No. 3013 established under Project No. 20-A and approved as such under FAO 4-1656 on March 15,
1982."7

On 3 December 2002, the RTC rendered judgment in favor of Malabanan, the dispositive portion of which reads:

WHEREFORE, this Court hereby approves this application for registration and thus places under the operation of Act
141, Act 496 and/or P.D. 1529, otherwise known as Property Registration Law, the lands described in Plan Csd-04-
0173123-D, Lot 9864-A and containing an area of Seventy One Thousand Three Hundred Twenty Four (71,324) Square
Meters, as supported by its technical description now forming part of the record of this case, in addition to other proofs
adduced in the name of MARIO MALABANAN, who is of legal age, Filipino, widower, and with residence at Munting
Ilog, Silang, Cavite.

Once this Decision becomes final and executory, the corresponding decree of registration shall forthwith issue.

SO ORDERED.

The Republic interposed an appeal to the Court of Appeals, arguing that Malabanan had failed to prove that the property
belonged to the alienable and disposable land of the public domain, and that the RTC had erred in finding that he had been
in possession of the property in the manner and for the length of time required by law for confirmation of imperfect title.

On 23 February 2007, the Court of Appeals rendered a Decision 8 reversing the RTC and dismissing the application of
Malabanan. The appellate court held that under Section 14(1) of the Property Registration Decree any period of
possession prior to the classification of the lots as alienable and disposable was inconsequential and should be excluded
from the computation of the period of possession. Thus, the appellate court noted that since the CENRO-DENR
certification had verified that the property was declared alienable and disposable only on 15 March 1982, the Velazcos'
possession prior to that date could not be factored in the computation of the period of possession. This interpretation of the
Court of Appeals of Section 14(1) of the Property Registration Decree was based on the Court's ruling in Republic v.
Herbieto.9

Malabanan died while the case was pending with the Court of Appeals;10 hence, it was his heirs who appealed the decision
of the appellate court. Petitioners, before this Court, rely on our ruling in Republic v. Naguit,11 which was handed down
just four months prior to Herbieto. Petitioners suggest that the discussion in Herbieto cited by the Court of Appeals is
actually obiter dictum since the Metropolitan Trial Court therein which had directed the registration of the property had no
jurisdiction in the first place since the requisite notice of hearing was published only after the hearing had already begun.
Naguit, petitioners argue, remains the controlling doctrine, especially when the property in question is agricultural land.
Therefore, with respect to agricultural lands, any possession prior to the declaration of the alienable property as disposable
may be counted in reckoning the period of possession to perfect title under the Public Land Act and the Property
Registration Decree.

The petition was referred to the Court en banc,12 and on 11 November 2008, the case was heard on oral arguments. The
Court formulated the principal issues for the oral arguments, to wit:

1. In order that an alienable and disposable land of the public domain may be registered under Section
14(1) of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, should the
land be classified as alienable and disposable as of June 12, 1945 or is it sufficient that such classification
occur at any time prior to the filing of the applicant for registration provided that it is established that the
applicant has been in open, continuous, exclusive and notorious possession of the land under a bona fide
claim of ownership since June 12, 1945 or earlier?cralawred

2. For purposes of Section 14(2) of the Property Registration Decree may a parcel of land classified as
alienable and disposable be deemed private land and therefore susceptible to acquisition by prescription
in accordance with the Civil Code?cralawred
 3. May a parcel of land established as agricultural in character either because of its use or because its
slope is below that of forest lands be registrable under Section 14(2) of the Property Registration Decree
in relation to the provisions of the Civil Code on acquisitive prescription?cralawred

4. Are petitioners entitled to the registration of the subject land in their names under Section 14(1) or
Section 14(2) of the Property Registration Decree or both?13

Based on these issues, the parties formulated their respective positions.

With respect to Section 14(1), petitioners reiterate that the analysis of the Court in Naguit is the correct interpretation of
the provision. The seemingly contradictory pronouncement in Herbieto, it is submitted, should be considered obiter
dictum, since the land registration proceedings therein was void ab initio due to lack of publication of the notice of initial
hearing. Petitioners further point out that in Republic v. Bibonia, 14 promulgated in June of 2007, the Court applied Naguit
and adopted the same observation that the preferred interpretation by the OSG of Section 14(1) was patently absurd. For
its part, the OSG remains insistent that for Section 14(1) to apply, the land should have been classified as alienable and
disposable as of 12 June 1945. Apart from Herbieto, the OSG also cites the subsequent rulings in Buenaventura v.
Republic,15 Fieldman Agricultural Trading v. Republic16 and Republic v. Imperial Credit Corporation,17 as well as the
earlier case of Director of Lands v. Court of Appeals.18

With respect to Section 14(2), petitioners submit that open, continuous, exclusive and notorious possession of an alienable
land of the public domain for more than 30 years ipso jure converts the land into private property, thus placing it under the
coverage of Section 14(2). According to them, it would not matter whether the land sought to be registered was previously
classified as agricultural land of the public domain so long as, at the time of the application, the property had already been
"converted" into private property through prescription. To bolster their argument, petitioners cite extensively from our
2008 ruling in Republic v. T.A.N. Properties.19

The arguments submitted by the OSG with respect to Section 14(2) are more extensive. The OSG notes that under Article
1113 of the Civil Code, the acquisitive prescription of properties of the State refers to "patrimonial property," while
Section 14(2) speaks of "private lands." It observes that the Court has yet to decide a case that presented Section 14(2) as
a ground for application for registration, and that the 30-year possession period refers to the period of possession under
Section 48(b) of the Public Land Act, and not the concept of prescription under the Civil Code. The OSG further submits
that, assuming that the 30-year prescriptive period can run against public lands, said period should be reckoned from the
time the public land was declared alienable and disposable.

Both sides likewise offer special arguments with respect to the particular factual circumstances surrounding the subject
property and the ownership thereof.

II.

First, we discuss Section 14(1) of the Property Registration Decree. For a full understanding of the provision, reference
has to be made to the Public Land Act.

A.

Commonwealth Act No. 141, also known as the Public Land Act, has, since its enactment, governed the classification and
disposition of lands of the public domain. The President is authorized, from time to time, to classify the lands of the public
domain into alienable and disposable, timber, or mineral lands.20 Alienable and disposable lands of the public domain are
further classified according to their uses into (a) agricultural; (b) residential, commercial, industrial, or for similar
productive purposes; (c) educational, charitable, or other similar purposes; or (d) reservations for town sites and for public
and quasi-public uses.21

May a private person validly seek the registration in his/her name of alienable and disposable lands of the public domain?
Section 11 of the Public Land Act acknowledges that public lands suitable for agricultural purposes may be disposed of
"by confirmation of imperfect or incomplete titles" through "judicial legalization."22 Section 48(b) of the Public Land Act,
as amended by P.D. No. 1073, supplies the details and unmistakably grants that right, subject to the requisites stated
therein:

Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any
such land or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First
Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title
therefor, under the Land Registration Act, to wit:

xxx

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive, and
notorious possession and occupation of alienable and disposable lands of the public domain, under a bona fide claim of
acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for
confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the
provisions of this chapter.

Section 48(b) of Com. Act No. 141 received its present wording in 1977 when the law was amended by P.D. No. 1073.
Two significant amendments were introduced by P.D. No. 1073. First, the term "agricultural lands" was changed to
"alienable and disposable lands of the public domain." The OSG submits that this amendment restricted the scope of the
lands that may be registered.23 This is not actually the case. Under Section 9 of the Public Land Act, "agricultural lands"
are a mere subset of "lands of the public domain alienable or open to disposition." Evidently, alienable and disposable
lands of the public domain are a larger class than only "agricultural lands."

Second, the length of the requisite possession was changed from possession for "thirty (30) years immediately preceding
the filing of the application" to possession "since June 12, 1945 or earlier." The Court in Naguit explained:

When the Public Land Act was first promulgated in 1936, the period of possession deemed necessary to vest the right to
register their title to agricultural lands of the public domain commenced from July 26, 1894. However, this period was
amended by R.A. No. 1942, which provided that the bona fide claim of ownership must have been for at least thirty (30)
years. Then in 1977, Section 48(b) of the Public Land Act was again amended, this time by P.D. No. 1073, which pegged
the reckoning date at June 12, 1945. xxx

It bears further observation that Section 48(b) of Com. Act No, 141 is virtually the same as Section 14(1) of the Property
Registration Decree. Said Decree codified the various laws relative to the registration of property, including lands of the
public domain. It is Section 14(1) that operationalizes the registration of such lands of the public domain. The provision
reads:

SECTION 14. Who may apply.' The following persons may file in the proper Court of First Instance an application for
registration of title to land, whether personally or through their duly authorized representatives:

(1) those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of
ownership since June 12, 1945, or earlier.

Notwithstanding the passage of the Property Registration Decree and the inclusion of Section 14(1) therein, the Public
Land Act has remained in effect. Both laws commonly refer to persons or their predecessors-in-interest who "have been in
open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public
domain under a bona fide claim of ownership since June 12, 1945, or earlier." That circumstance may have led to the
impression that one or the other is a redundancy, or that Section 48(b) of the Public Land Act has somehow been repealed
or mooted. That is not the case.

The opening clauses of Section 48 of the Public Land Act and Section 14 of the Property Registration Decree warrant
comparison:

Sec. 48 [of the Public Land Act]. The following described citizens of the Philippines, occupying lands of the public
domain or claiming to own any such land or an interest therein, but whose titles have not been perfected or completed,
may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the
issuance of a certificate of title therefor, under the Land Registration Act, to wit:

xxx

Sec. 14 [of the Property Registration Decree]. Who may apply.' The following persons may file in the proper Court of
First Instance an application for registration of title to land, whether personally or through their duly authorized
representatives:

xxx

It is clear that Section 48 of the Public Land Act is more descriptive of the nature of the right enjoyed by the possessor
than Section 14 of the Property Registration Decree, which seems to presume the pre-existence of the right, rather than
establishing the right itself for the first time. It is proper to assert that it is the Public Land Act, as amended by P.D. No.
1073 effective 25 January 1977, that has primarily established the right of a Filipino citizen who has been "in open,
continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of the public domain,
under a bona fide claim of acquisition of ownership, since June 12, 1945" to perfect or complete his title by applying with
the proper court for the confirmation of his ownership claim and the issuance of the corresponding certificate of title.

Section 48 can be viewed in conjunction with the afore-quoted Section 11 of the Public Land Act, which provides that
public lands suitable for agricultural purposes may be disposed of by confirmation of imperfect or incomplete titles, and
given the notion that both provisions declare that it is indeed the Public Land Act that primarily establishes the substantive
ownership of the possessor who has been in possession of the property since 12 June 1945. In turn, Section 14(a) of the
Property Registration Decree recognizes the substantive right granted under Section 48(b) of the Public Land Act, as well
provides the corresponding original registration procedure for the judicial confirmation of an imperfect or incomplete title.

There is another limitation to the right granted under Section 48(b). Section 47 of the Public Land Act limits the period
within which one may exercise the right to seek registration under Section 48. The provision has been amended several
times, most recently by Rep. Act No. 9176 in 2002. It currently reads thus:

Section 47. The persons specified in the next following section are hereby granted time, not to extend beyond December
31, 2020 within which to avail of the benefits of this Chapter: Provided, That this period shall apply only where the area
applied for does not exceed twelve (12) hectares: Provided, further, That the several periods of time designated by the
President in accordance with Section Forty-Five of this Act shall apply also to the lands comprised in the provisions of
this Chapter, but this Section shall not be construed as prohibiting any said persons from acting under this Chapter at any
time prior to the period fixed by the President.24

Accordingly under the current state of the law, the substantive right granted under Section 48(b) may be availed of only
until 31 December 2020.

B.

Despite the clear text of Section 48(b) of the Public Land Act, as amended and Section 14(a) of the Property Registration
Decree, the OSG has adopted the position that for one to acquire the right to seek registration of an alienable and
disposable land of the public domain, it is not enough that the applicant and his/her predecessors-in-interest be in
possession under a bona fide claim of ownership since 12 June 1945; the alienable and disposable character of the
property must have been declared also as of 12 June 1945. Following the OSG's approach, all lands certified as alienable
and disposable after 12 June 1945 cannot be registered either under Section 14(1) of the Property Registration Decree or
Section 48(b) of the Public Land Act as amended. The absurdity of such an implication was discussed in Naguit.

Petitioner suggests an interpretation that the alienable and disposable character of the land should have already been
established since June 12, 1945 or earlier. This is not borne out by the plain meaning of Section 14(1). "Since June 12,
1945," as used in the provision, qualifies its antecedent phrase "under a bonafide claim of ownership." Generally
speaking, qualifying words restrict or modify only the words or phrases to which they are immediately associated, and not
those distantly or remotely located.25 Ad proximum antecedents fiat relation nisi impediatur sentencia.

Besides, we are mindful of the absurdity that would result if we adopt petitioner's position. Absent a legislative
amendment, the rule would be, adopting the OSG's view, that all lands of the public domain which were not declared
alienable or disposable before June 12, 1945 would not be susceptible to original registration, no matter the length of
unchallenged possession by the occupant. Such interpretation renders paragraph (1) of Section 14 virtually inoperative
and even precludes the government from giving it effect even as it decides to reclassify public agricultural lands as
alienable and disposable. The unreasonableness of the situation would even be aggravated considering that before June
12, 1945, the Philippines was not yet even considered an independent state.

Accordingly, the Court in Naguit explained:

[T]he more reasonable interpretation of Section 14(1) is that it merely requires the property sought to be registered as
already alienable and disposable at the time the application for registration of title is filed. If the State, at the time the
application is made, has not yet deemed it proper to release the property for alienation or disposition, the presumption is
that the government is still reserving the right to utilize the property; hence, the need to preserve its ownership in the State
irrespective of the length of adverse possession even if in good faith. However, if the property has already been classified
as alienable and disposable, as it is in this case, then there is already an intention on the part of the State to abdicate its
exclusive prerogative over the property.

The Court declares that the correct interpretation of Section 14(1) is that which was adopted in Naguit. The contrary
pronouncement in Herbieto, as pointed out in Naguit, absurdly limits the application of the provision to the point of virtual
inutility since it would only cover lands actually declared alienable and disposable prior to 12 June 1945, even if the
current possessor is able to establish open, continuous, exclusive and notorious possession under a bona fide claim of
ownership long before that date.

Moreover, the Naguit interpretation allows more possessors under a bona fide claim of ownership to avail of judicial
confirmation of their imperfect titles than what would be feasible under Herbieto. This balancing fact is significant,
especially considering our forthcoming discussion on the scope and reach of Section 14(2) of the Property Registration
Decree.

Petitioners make the salient observation that the contradictory passages from Herbieto are obiter dicta since the land
registration proceedings therein is void ab initio in the first place due to lack of the requisite publication of the notice of
initial hearing. There is no need to explicitly overturn Herbieto, as it suffices that the Court's acknowledgment that the
particular line of argument used therein concerning Section 14(1) is indeed obiter.

It may be noted that in the subsequent case of Buenaventura,26 the Court, citing Herbieto, again stated that "[a]ny period of
possession prior to the date when the [s]ubject [property was] classified as alienable and disposable is inconsequential and
should be excluded from the computation of the period of possession' " That statement, in the context of Section 14(1), is
certainly erroneous. Nonetheless, the passage as cited in Buenaventura should again be considered as obiter. The
application therein was ultimately granted, citing Section 14(2). The evidence submitted by petitioners therein did not
establish any mode of possession on their part prior to 1948, thereby precluding the application of Section 14(1). It is not
even apparent from the decision whether petitioners therein had claimed entitlement to original registration following
Section 14(1), their position being that they had been in exclusive possession under a bona fide claim of ownership for
over fifty (50) years, but not before 12 June 1945.

Thus, neither Herbieto nor its principal discipular ruling Buenaventura has any precedental value with respect to Section
14(1). On the other hand, the ratio of Naguit is embedded in Section 14(1), since it precisely involved situation wherein
the applicant had been in exclusive possession under a bona fide claim of ownership prior to 12 June 1945. The Court's
interpretation of Section 14(1) therein was decisive to the resolution of the case. Any doubt as to which between Naguit or
Herbieto provides the final word of the Court on Section 14(1) is now settled in favor of Naguit.

We noted in Naguit that it should be distinguished from Bracewell v. Court of Appeals 27 since in the latter, the application
for registration had been filed before the land was declared alienable or disposable. The dissent though pronounces
Bracewell as the better rule between the two. Yet two years after Bracewell, its ponente, the esteemed Justice Consuelo
Ynares-Santiago, penned the ruling in Republic v. Ceniza,28 which involved a claim of possession that extended back to
1927 over a public domain land that was declared alienable and disposable only in 1980. Ceniza cited Bracewell, quoted
extensively from it, and following the mindset of the dissent, the attempt at registration in Ceniza should have failed. Not
so.

To prove that the land subject of an application for registration is alienable, an applicant must establish the existence of a
positive act of the government such as a presidential proclamation or an executive order; an administrative action;
investigation reports of Bureau of Lands investigators; and a legislative act or a statute.

In this case, private respondents presented a certification dated November 25, 1994, issued by Eduardo M. Inting, the
Community Environment and Natural Resources Officer in the Department of Environment and Natural Resources Office
in Cebu City, stating that the lots involved were "found to be within the alienable and disposable (sic) Block-I, Land
Classification Project No. 32-A, per map 2962 4-I555 dated December 9, 1980." This is sufficient evidence to show the
real character of the land subject of private respondents' application. Further, the certification enjoys a presumption of
regularity in the absence of contradictory evidence, which is true in this case. Worth noting also was the observation of
the Court of Appeals stating that:

[n]o opposition was filed by the Bureaus of Lands and Forestry to contest the application of appellees on the ground that
the property still forms part of the public domain. Nor is there any showing that the lots in question are forestal land....

Thus, while the Court of Appeals erred in ruling that mere possession of public land for the period required by law would
entitle its occupant to a confirmation of imperfect title, it did not err in ruling in favor of private respondents as far as the
first requirement in Section 48(b) of the Public Land Act is concerned, for they were able to overcome the burden of
proving the alienability of the land subject of their application.

As correctly found by the Court of Appeals, private respondents were able to prove their open, continuous, exclusive and
notorious possession of the subject land even before the year 1927. As a rule, we are bound by the factual findings of the
Court of Appeals. Although there are exceptions, petitioner did not show that this is one of them.29

Why did the Court in Ceniza, through the same eminent member who authored Bracewell, sanction the registration under
Section 48(b) of public domain lands declared alienable or disposable thirty-five (35) years and 180 days after 12 June
1945? The telling difference is that in Ceniza, the application for registration was filed nearly six (6) years after the land
had been declared alienable or disposable, while in Bracewell, the application was filed nine (9) years before the land was
declared alienable or disposable. That crucial difference was also stressed in Naguit to contradistinguish it from
Bracewell, a difference which the dissent seeks to belittle.

III.

We next ascertain the correct framework of analysis with respect to Section 14(2). The provision reads:

SECTION 14. Who may apply. - The following persons may file in the proper Court of First Instance an application for
registration of title to land, whether personally or through their duly authorized representatives:

xxx
(2) Those who have acquired ownership over private lands by prescription under the provisions of existing laws.

The Court in Naguit offered the following discussion concerning Section 14(2), which we did even then recognize, and
still do, to be an obiter dictum, but we nonetheless refer to it as material for further discussion, thus:

Did the enactment of the Property Registration Decree and the amendatory P.D. No. 1073 preclude the application for
registration of alienable lands of the public domain, possession over which commenced only after June 12, 1945? It did
not, considering Section 14(2) of the Property Registration Decree, which governs and authorizes the application of "those
who have acquired ownership of private lands by prescription under the provisions of existing laws."

Prescription is one of the modes of acquiring ownership under the Civil Code.[30] There is a consistent jurisprudential rule
that properties classified as alienable public land may be converted into private property by reason of open, continuous
and exclusive possession of at least thirty (30) years.[ 31] With such conversion, such property may now fall within the
contemplation of "private lands" under Section 14(2), and thus susceptible to registration by those who have acquired
ownership through prescription. Thus, even if possession of the alienable public land commenced on a date later than June
12, 1945, and such possession being been open, continuous and exclusive, then the possessor may have the right to
register the land by virtue of Section 14(2) of the Property Registration Decree.

Naguit did not involve the application of Section 14(2), unlike in this case where petitioners have based their registration
bid primarily on that provision, and where the evidence definitively establishes their claim of possession only as far back
as 1948. It is in this case that we can properly appreciate the nuances of the provision.

A.

The obiter in Naguit cited the Civil Code provisions on prescription as the possible basis for application for original
registration under Section 14(2). Specifically, it is Article 1113 which provides legal foundation for the application. It
reads:

All things which are within the commerce of men are susceptible of prescription, unless otherwise provided. Property of
the State or any of its subdivisions not patrimonial in character shall not be the object of prescription.

It is clear under the Civil Code that where lands of the public domain are patrimonial in character, they are susceptible to
acquisitive prescription. On the other hand, among the public domain lands that are not susceptible to acquisitive
prescription are timber lands and mineral lands. The Constitution itself proscribes private ownership of timber or mineral
lands.

There are in fact several provisions in the Civil Code concerning the acquisition of real property through prescription.
Ownership of real property may be acquired by ordinary prescription of ten (10) years, 32 or through extraordinary
prescription of thirty (30) years.33 Ordinary acquisitive prescription requires possession in good faith, 34 as well as just
title.35

When Section 14(2) of the Property Registration Decree explicitly provides that persons "who have acquired ownership
over private lands by prescription under the provisions of existing laws," it unmistakably refers to the Civil Code as a
valid basis for the registration of lands. The Civil Code is the only existing law that specifically allows the acquisition by
prescription of private lands, including patrimonial property belonging to the State. Thus, the critical question that needs
affirmation is whether Section 14(2) does encompass original registration proceedings over patrimonial property of the
State, which a private person has acquired through prescription.

The Naguit obiter had adverted to a frequently reiterated jurisprudence holding that properties classified as alienable
public land may be converted into private property by reason of open, continuous and exclusive possession of at least
thirty (30) years.36 Yet if we ascertain the source of the "thirty-year" period, additional complexities relating to Section
14(2) and to how exactly it operates would emerge. For there are in fact two distinct origins of the thirty (30)-year rule.

The first source is Rep. Act No. 1942, enacted in 1957, which amended Section 48(b) of the Public Land Act by granting
the right to seek original registration of alienable public lands through possession in the concept of an owner for at least
thirty years.

The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such
lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First
Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title
therefor, under the Land Registration Act, to wit:

xxx

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive and
notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of
ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title, except
when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of title under the provisions of this Chapter. (emphasis
supplied)37

This provision was repealed in 1977 with the enactment of P.D. 1073, which made the date 12 June 1945 the reckoning
point for the first time. Nonetheless, applications for registration filed prior to 1977 could have invoked the 30-year rule
introduced by Rep. Act No. 1942.

The second source is Section 14(2) of P.D. 1529 itself, at least by implication, as it applies the rules on prescription under
the Civil Code, particularly Article 1113 in relation to Article 1137. Note that there are two kinds of prescription under the
Civil Code ordinary acquisitive prescription and extraordinary acquisitive prescription, which, under Article 1137, is
completed "through uninterrupted adverse possession' for thirty years, without need of title or of good faith."

Obviously, the first source of the thirty (30)-year period rule, Rep. Act No. 1942, became unavailable after 1977. At
present, the only legal basis for the thirty (30)-year period is the law on prescription under the Civil Code, as mandated
under Section 14(2). However, there is a material difference between how the thirty (30)-year rule operated under Rep.
Act No. 1942 and how it did under the Civil Code.

Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1942, did not refer to or call into application the Civil
Code provisions on prescription. It merely set forth a requisite thirty-year possession period immediately preceding the
application for confirmation of title, without any qualification as to whether the property should be declared alienable at
the beginning of, and continue as such, throughout the entire thirty - (30) years. There is neither statutory nor
jurisprudential basis to assert Rep. Act No. 1942 had mandated such a requirement,38 similar to our earlier finding with
respect to the present language of Section 48(b), which now sets 12 June 1945 as the point of reference.

Then, with the repeal of Rep. Act No. 1942, the thirty-year possession period as basis for original registration became
Section 14(2) of the Property Registration Decree, which entitled those "who have acquired ownership over private lands
by prescription under the provisions of existing laws" to apply for original registration. Again, the thirty-year period is
derived from the rule on extraordinary prescription under Article 1137 of the Civil Code. At the same time, Section 14(2)
puts into operation the entire regime of prescription under the Civil Code, a fact which does not hold true with respect to
Section 14(1).

B.

Unlike Section 14(1), Section 14(2) explicitly refers to the principles on prescription under existing laws. Accordingly, we
are impelled to apply the civil law concept of prescription, as set forth in the Civil Code, in our interpretation of Section
14(2). There is no similar demand on our part in the case of Section 14(1).

The critical qualification under Article 1113 of the Civil Code is thus: "[p]roperty of the State or any of its subdivisions
not patrimonial in character shall not be the object of prescription." The identification what consists of patrimonial
property is provided by Articles 420 and 421, which we quote in full:

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

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

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

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

It is clear that property of public dominion, which generally includes property belonging to the State, cannot be the object
of prescription or, indeed, be subject of the commerce of man. 39 Lands of the public domain, whether declared alienable
and disposable or not, are property of public dominion and thus insusceptible to acquisition by prescription.

Let us now explore the effects under the Civil Code of a declaration by the President or any duly authorized government
officer of alienability and disposability of lands of the public domain. Would such lands so declared alienable and
disposable be converted, under the Civil Code, from property of the public dominion into patrimonial property? After all,
by connotative definition, alienable and disposable lands may be the object of the commerce of man; Article 1113
provides that all things within the commerce of man are susceptible to prescription; and the same provision further
provides that patrimonial property of the State may be acquired by prescription.
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public dominion, when no longer intended for public
use or for public service, shall form part of the patrimonial property of the State." It is this provision that controls how
public dominion property may be converted into patrimonial property susceptible to acquisition by prescription. After all,
Article 420 (2) makes clear that those property "which belong to the State, without being for public use, and are intended
for some public service or for the development of the national wealth" are public dominion property. For as long as the
property belongs to the State, although already classified as alienable or disposable, it remains property of the public
dominion if when it is "intended for some public service or for the development of the national wealth".

Accordingly, there must be an express declaration by the State that the public dominion property is no longer intended for
public service or the development of the national wealth or that the property has been converted into patrimonial. Without
such express declaration, the property, even if classified as alienable or disposable, remains property of the public
dominion, pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such alienable and
disposable lands are expressly declared by the State to be no longer intended for public service or for the development of
the national wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of a
law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by law.

It is comprehensible with ease that this reading of Section 14(2) of the Property Registration Decree limits its scope and
reach and thus affects the registrability even of lands already declared alienable and disposable to the detriment of the
bona fide possessors or occupants claiming title to the lands. Yet this interpretation is in accord with the Regalian doctrine
and its concomitant assumption that all lands owned by the State, although declared alienable or disposable, remain as
such and ought to be used only by the Government.

Recourse does not lie with this Court in the matter. The duty of the Court is to apply the Constitution and the laws in
accordance with their language and intent. The remedy is to change the law, which is the province of the legislative
branch. Congress can very well be entreated to amend Section 14(2) of the Property Registration Decree and pertinent
provisions of the Civil Code to liberalize the requirements for judicial confirmation of imperfect or incomplete titles.

The operation of the foregoing interpretation can be illustrated by an actual example. Republic Act No. 7227, entitled "An
Act Accelerating The Conversion Of Military Reservations Into Other Productive Uses, etc.," is more commonly known
as the BCDA law. Section 2 of the law authorizes the sale of certain military reservations and portions of military camps
in Metro Manila, including Fort Bonifacio and Villamor Air Base. For purposes of effecting the sale of the military
camps, the law mandates the President to transfer such military lands to the Bases Conversion Development Authority
(BCDA)40 which in turn is authorized to own, hold and/or administer them.41 The President is authorized to sell portions of
the military camps, in whole or in part.42 Accordingly, the BCDA law itself declares that the military lands subject thereof
are "alienable and disposable pursuant to the provisions of existing laws and regulations governing sales of government
properties."43

From the moment the BCDA law was enacted the subject military lands have become alienable and disposable. However,
said lands did not become patrimonial, as the BCDA law itself expressly makes the reservation that these lands are to be
sold in order to raise funds for the conversion of the former American bases at Clark and Subic.44 Such purpose can be
tied to either "public service" or "the development of national wealth" under Article 420(2). Thus, at that time, the lands
remained property of the public dominion under Article 420(2), notwithstanding their status as alienable and disposable. It
is upon their sale as authorized under the BCDA law to a private person or entity that such lands become private property
and cease to be property of the public dominion.

C.

Should public domain lands become patrimonial because they are declared as such in a duly enacted law or duly
promulgated proclamation that they are no longer intended for public service or for the development of the national
wealth, would the period of possession prior to the conversion of such public dominion into patrimonial be reckoned in
counting the prescriptive period in favor of the possessors? We rule in the negative.

The limitation imposed by Article 1113 dissuades us from ruling that the period of possession before the public domain
land becomes patrimonial may be counted for the purpose of completing the prescriptive period. Possession of public
dominion property before it becomes patrimonial cannot be the object of prescription according to the Civil Code. As the
application for registration under Section 14(2) falls wholly within the framework of prescription under the Civil Code,
there is no way that possession during the time that the land was still classified as public dominion property can be
counted to meet the requisites of acquisitive prescription and justify registration.

Are we being inconsistent in applying divergent rules for Section 14(1) and Section 14(2)? There is no inconsistency.
Section 14(1) mandates registration on the basis of possession, while Section 14(2) entitles registration on the basis
of prescription. Registration under Section 14(1) is extended under the aegis of the Property Registration Decree and the
Public Land Act while registration under Section 14(2) is made available both by the Property Registration Decree and the
Civil Code.

In the same manner, we can distinguish between the thirty-year period under Section 48(b) of the Public Land Act, as
amended by Rep. Act No. 1472, and the thirty-year period available through Section 14(2) of the Property Registration
Decree in relation to Article 1137 of the Civil Code. The period under the former speaks of a thirty-year period of
possession, while the period under the latter concerns a thirty-year period of extraordinary prescription. Registration under
Section 48(b) of the Public Land Act as amended by Rep. Act No. 1472 is based on thirty years of possession alone
without regard to the Civil Code, while the registration under Section 14(2) of the Property Registration Decree is founded
on extraordinary prescription under the Civil Code.

It may be asked why the principles of prescription under the Civil Code should not apply as well to Section 14(1).
Notwithstanding the vaunted status of the Civil Code, it ultimately is just one of numerous statutes, neither superior nor
inferior to other statutes such as the Property Registration Decree. The legislative branch is not bound to adhere to the
framework set forth by the Civil Code when it enacts subsequent legislation. Section 14(2) manifests a clear intent to
interrelate the registration allowed under that provision with the Civil Code, but no such intent exists with respect to
Section 14(1).

IV.

One of the keys to understanding the framework we set forth today is seeing how our land registration procedures
correlate with our law on prescription, which, under the Civil Code, is one of the modes for acquiring ownership over
property.

The Civil Code makes it clear that patrimonial property of the State may be acquired by private persons through
prescription. This is brought about by Article 1113, which states that "[a]ll things which are within the commerce of man
are susceptible to prescription," and that [p]roperty of the State or any of its subdivisions not patrimonial in character shall
not be the object of prescription."

There are two modes of prescription through which immovables may be acquired under the Civil Code. The first is
ordinary acquisitive prescription, which, under Article 1117, requires possession in good faith and with just title; and,
under Article 1134, is completed through possession of ten (10) years. There is nothing in the Civil Code that bars a
person from acquiring patrimonial property of the State through ordinary acquisitive prescription, nor is there any
apparent reason to impose such a rule. At the same time, there are indispensable requisites'good faith and just title. The
ascertainment of good faith involves the application of Articles 526, 527, and 528, as well as Article 1127 of the Civil
Code,45 provisions that more or less speak for themselves.

On the other hand, the concept of just title requires some clarification. Under Article 1129, there is just title for the
purposes of prescription "when the adverse claimant came into possession of the property through one of the modes
recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not
transmit any right." Dr. Tolentino explains:

Just title is an act which has for its purpose the transmission of ownership, and which would have actually transferred
ownership if the grantor had been the owner. This vice or defect is the one cured by prescription. Examples: sale with
delivery, exchange, donation, succession, and dacion in payment.46

The OSG submits that the requirement of just title necessarily precludes the applicability of ordinary acquisitive
prescription to patrimonial property. The major premise for the argument is that "the State, as the owner and grantor,
could not transmit ownership to the possessor before the completion of the required period of possession."47 It is evident
that the OSG erred when it assumed that the grantor referred to in Article 1129 is the State. The grantor is the one from
whom the person invoking ordinary acquisitive prescription derived the title, whether by sale, exchange, donation,
succession or any other mode of the acquisition of ownership or other real rights.

Earlier, we made it clear that, whether under ordinary prescription or extraordinary prescription, the period of possession
preceding the classification of public dominion lands as patrimonial cannot be counted for the purpose of computing
prescription. But after the property has been become patrimonial, the period of prescription begins to run in favor of the
possessor. Once the requisite period has been completed, two legal events ensue: (1) the patrimonial property is ipso jure
converted into private land; and (2) the person in possession for the periods prescribed under the Civil Code acquires
ownership of the property by operation of the Civil Code.

It is evident that once the possessor automatically becomes the owner of the converted patrimonial property, the ideal next
step is the registration of the property under the Torrens system. It should be remembered that registration of property is
not a mode of acquisition of ownership, but merely a mode of confirmation of ownership.48

Looking back at the registration regime prior to the adoption of the Property Registration Decree in 1977, it is apparent
that the registration system then did not fully accommodate the acquisition of ownership of patrimonial property under the
Civil Code. What the system accommodated was the confirmation of imperfect title brought about by the completion of a
period of possession ordained under the Public Land Act (either 30 years following Rep. Act No. 1942, or since 12 June
1945 following P.D. No. 1073).

The Land Registration Act49 was noticeably silent on the requisites for alienable public lands acquired through ordinary
prescription under the Civil Code, though it arguably did not preclude such registration.50 Still, the gap was lamentable,
considering that the Civil Code, by itself, establishes ownership over the patrimonial property of persons who have
completed the prescriptive periods ordained therein. The gap was finally closed with the adoption of the Property
Registration Decree in 1977, with Section 14(2) thereof expressly authorizing original registration in favor of persons who
have acquired ownership over private lands by prescription under the provisions of existing laws, that is, the Civil Code as
of now.

V.

We synthesize the doctrines laid down in this case, as follows:

(1) In connection with Section 14(1) of the Property Registration Decree, Section 48(b) of the Public
Land Act recognizes and confirms that "those who by themselves or through their predecessors in interest
have been in open, continuous, exclusive, and notorious possession and occupation of alienable and
disposable lands of the public domain, under a bona fide claim of acquisition of ownership, since June 12,
1945" have acquired ownership of, and registrable title to, such lands based on the length and quality of
their possession.

(a) Since Section 48(b) merely requires possession since 12 June 1945 and does not
require that the lands should have been alienable and disposable during the entire period
of possession, the possessor is entitled to secure judicial confirmation of his title thereto
as soon as it is declared alienable and disposable, subject to the timeframe imposed by
Section 47 of the Public Land Act.51

(b) The right to register granted under Section 48(b) of the Public Land Act is further
confirmed by Section 14(1) of the Property Registration Decree.

(2) In complying with Section 14(2) of the Property Registration Decree, consider that under the Civil
Code, prescription is recognized as a mode of acquiring ownership of patrimonial property. However,
public domain lands become only patrimonial property not only with a declaration that these are alienable
or disposable. There must also be an express government manifestation that the property is already
patrimonial or no longer retained for public service or the development of national wealth, under Article
422 of the Civil Code. And only when the property has become patrimonial can the prescriptive period
for the acquisition of property of the public dominion begin to run.

(a) Patrimonial property is private property of the government. The person acquires
ownership of patrimonial property by prescription under the Civil Code is entitled to
secure registration thereof under Section 14(2) of the Property Registration Decree.

(b) There are two kinds of prescription by which patrimonial property may be acquired,
one ordinary and other extraordinary. Under ordinary acquisitive prescription, a person
acquires ownership of a patrimonial property through possession for at least ten (10)
years, in good faith and with just title. Under extraordinary acquisitive prescription, a
person's uninterrupted adverse possession of patrimonial property for at least thirty (30)
years, regardless of good faith or just title, ripens into ownership.

B.

We now apply the above-stated doctrines to the case at bar.

It is clear that the evidence of petitioners is insufficient to establish that Malabanan has acquired ownership over the
subject property under Section 48(b) of the Public Land Act. There is no substantive evidence to establish that Malabanan
or petitioners as his predecessors-in-interest have been in possession of the property since 12 June 1945 or earlier. The
earliest that petitioners can date back their possession, according to their own evidence the Tax Declarations they
presented in particular is to the year 1948. Thus, they cannot avail themselves of registration under Section 14(1) of the
Property Registration Decree.

Neither can petitioners properly invoke Section 14(2) as basis for registration. While the subject property was declared as
alienable or disposable in 1982, there is no competent evidence that is no longer intended for public use service or for the
development of the national evidence, conformably with Article 422 of the Civil Code. The classification of the subject
property as alienable and disposable land of the public domain does not change its status as property of the public
dominion under Article 420(2) of the Civil Code. Thus, it is insusceptible to acquisition by prescription.

VI.

A final word. The Court is comfortable with the correctness of the legal doctrines established in this decision.
Nonetheless, discomfiture over the implications of today's ruling cannot be discounted. For, every untitled property that is
occupied in the country will be affected by this ruling. The social implications cannot be dismissed lightly, and the Court
would be abdicating its social responsibility to the Filipino people if we simply levied the law without comment.

The informal settlement of public lands, whether declared alienable or not, is a phenomenon tied to long-standing habit
and cultural acquiescence, and is common among the so-called "Third World" countries. This paradigm powerfully
evokes the disconnect between a legal system and the reality on the ground. The law so far has been unable to bridge that
gap. Alternative means of acquisition of these public domain lands, such as through homestead or free patent, have

proven unattractive due to limitations imposed on the grantee in the encumbrance or alienation of said
properties.52 Judicial confirmation of imperfect title has emerged as the most viable, if not the most attractive means to
regularize the informal settlement of alienable or disposable lands of the public domain, yet even that system, as revealed
in this decision, has considerable limits.

There are millions upon millions of Filipinos who have individually or exclusively held residential lands on which they
have lived and raised their families. Many more have tilled and made productive idle lands of the State with their hands.
They have been regarded for generation by their families and their communities as common law owners. There is much to
be said about the virtues of according them legitimate states. Yet such virtues are not for the Court to translate into
positive law, as the law itself considered such lands as property of the public dominion. It could only be up to Congress to
set forth a new phase of land reform to sensibly regularize and formalize the settlement of such lands which in legal
theory are lands of the public domain before the problem becomes insoluble. This could be accomplished, to cite two
examples, by liberalizing the standards for judicial confirmation of imperfect title, or amending the Civil Code itself to
ease the requisites for the conversion of public dominion property into patrimonial.

One's sense of security over land rights infuses into every aspect of well-being not only of that individual, but also to the
person's family. Once that sense of security is deprived, life and livelihood are put on stasis. It is for the political branches
to bring welcome closure to the long pestering problem.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals dated 23 February 2007 and Resolution
dated 2 October 2007 are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Endnotes:

1
 "Hernando de Soto Interview" by Reason Magazine dated 30 November 1999,
at http://www.reason.com/news/show/32213.html (Last visited, 21 April 2009).

2
 More particularly described and delineated in Plan CSD-04-017123. Records, p. 161.

3
 But see note 5.

4
 Id.

5
 The trial court decision identified Eduardo Velazco as the vendor of the property, notwithstanding the
original allegation in the application that Malabanan purchased the same from Virgilio Velazco. See note
3. In his subsequent pleadings, including those before this Court, Malabanan or his heirs stated that the
property was purchased from Eduardo Velazco, and not Virgilio. On this point, the appellate court made
this observation:

"More importantly, Malabanan failed to prove his ownership over Lot 9864-A. In his
application for land registration, Malabanan alleged that he purchased the subject lot
from Virgilio Velazco. During the trial of the case, however, Malabanan testified that he
purchased the subject lot from Eduardo Velazco, which was corroborated by his witness,
Aristedes Velazco, a son of Virgilio Velazco, who stated that Eduardo was a brother of
his grandfather. As aptly observed by the Republic, no copy of the deed of sale covering
Lot 9864-A, executed either by Virgilio or Eduardo Velazco, in favor of Malabanan was
marked and offered in evidence. In the appealed Decision, the court a quo mentioned of a
deed of sale executed in 1995 by Eduardo Velazco in favor of Malabanan which was
allegedly marked as Exhibit "I." It appears, however, that what was provisionally marked
as Exhibit "I" was a photocopy of the deed of sale executed by Virgilio Velazco in favor
of Leila Benitez and Benjamin Reyes. Section 34, Rule 132 of the Rules of Court
provides that the court shall consider no evidence which has not been formally offered.
 The offer is necessary because it is the duty of a judge to rest his findings of facts and his
judgment only and strictly upon the evidence offered by the parties at the trial. Thus,
Malabanan has not proved that Virgilio or Eduardo Velazco was his predecessor-in-
interest." Rollo, pp. 39-40.

6
 Rollo, p. 74.

7
 Id. at 38. Emphasis supplied.

 Penned by Associate Justice Marina Buzon of the Court of Appeals Fifth Division, and concurred in by
8

Associate Justices Edgardo Sundiam and Monina Arevalo-Zenarosa.

9
 G.R. No. 156117, 26 May 2005, 459 SCRA 183.

10
 See rollo, p. 11.

11
 G.R. No. 144507, 17 January 2005, 448 SCRA 442.

12
 Through a Resolution dated 5 December 2007. See rollo, p. 141.

13
 Id. at 186-187.

14
 G.R. No. 157466, 21 June 2007, 525 SCRA 268.

15
 G.R. No. 166865, 2 March 2007, 459 SCRA 271.

16
 G.R. No. 147359, 28 March 2008, 550 SCRA 92.

17
 G.R. No. 173088, 25 June 2008, 555 SCRA 314.

18
 G.R. No. 85322, 30 April 1991, 178 SCRA 708.

19
 G.R. No. 154953, 16 June 2008.

20
 Section 6, Com. Act No. 141, as amended.

21
 Section 9, Com. Act No. 141, as amended.

22
 Section 11, Com. Act No. 141, as amended.

23
 OSG Memorandum, p. 13.

24
 Section 47, Public Land Act, as amended by Rep. Act No. 9176.

25
 R. Agpalo, Statutory Construction (3rd ed., 1995) at 182.

26
 See note 3.

27
 380 Phil. 156 (2000).

28
 Also known as Republic v. Court of Appeals, 440 Phil. 697 (2002).

29
 Id. at 710-712.

30
 See Civil Code, Art. 1113.

 See e.g., Director of Lands v. IAC, G.R. No. 65663, 16 October 1992, 214 SCRA 604, 611; Republic v.
31

Court of Appeals, G.R. No. 108998, 24 August 1994, 235 SCRA 567, 576; Group Commander,
Intelligence and Security Group v. Dr. Malvar, 438 Phil. 252, 275 (2002).

32
 See Article 1134, Civil Code.

33
 See Article 1137, Civil Code.
  See Article 1117 in relation to Article 1128, Civil Code. See also Articles 526, 527, 528 & 529, Civil
34

Code on the conditions of good faith required.

35
 See Article 1117, in relation to Article 1129, Civil Code.

 Citing Director of Lands v. IAC, G.R. No. 65663, 16 October 1992, 214 SCRA 604, 611; Republic v.
36

Court of Appeals, G.R. No. 108998, 24 August 1994, 235 SCRA 567, 576; Group Commander,
Intelligence and Security Group v. Dr. Malvar, 438 Phil. 252, 275 (2002).

 Section 48(b) of the Public Land Act, immediately before its amendment by Rep. Act No. 1942, reads
37

as follows:

"Those who by themselves or through their predecessors in interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of
the public domain, under a bona fide claim of acquisition of ownership, except as against
the Government, since July twenty-sixth, eighteen hundred and ninety-four, except when
prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this Chapter."ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

 Again, Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1942, was superseded by
38

P.D. No. 1073, which imposed the 12 June 1945 reckoning point, and which was then incorporated in
Section 14(1) of the Property Registration Decree.

39
 See Vllarico v. Sarmiento, G.R. No. 136438, 11 November 2004, 442 SCRA 110.

40
 Rep. Act No. 7227, Sec.7.

41
 Rep. Act No. 7227, Sec. 4(a).

42
 Rep. Act No. 7227, Sec. 7.

43
 Id.

44
 Section 2, Rep. Act No. 7227.

45
 See Civil Code, Art. 1128.

46
 A. Tolentino, IV Civil Code of the Philippines (1991 ed.) at 26; citing 2 Castan 175.

47
 Memorandum of the OSG, p. 21.

48
 See Angeles v. Samia, 66 Phil. 44 (1938).

49
 Act No. 496.

 See Section 19, Land Registration Act, which allowed application for registration of title by "person or
50

persons claiming, singly or collectively, to own the legal estate in fee simple."

51
 See note 24.

52
 See Section 118, Com. Act No. 141, as amended.

"Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free
patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the
approval of the application and for a term of five years from and after the date of issuance of the patent or
grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said
period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons,
associations, or corporations.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years
after issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce,
which approval shall not be denied except on constitutional and legal grounds."
CONCURRING AND DISSENTING OPINION

CHICO-NAZARIO, J.:

I concur in the majority opinion in dismissing the application for registration of a piece of land originally filed by the late
Mario Malabanan (Malabanan), petitioners' predecessor-in-interest. The land subject of the instant Petition, being
alienable and disposable land of the public domain, may not be acquired by prescription under the provisions of the Civil
Code, nor registered pursuant to Section 14(2) of the Property Registration Decree.

At the outset, it must be made clear that the Property Registration Decree governs registration of land under the Torrens
system. It can only identify which titles, already existing or vested, may be registered under the Torrens system; but it
cannot be the source of any title to land. It merely confirms, but does not confer ownership.1

Section 14(2) of the Property Registration Decree allows "those who have acquired ownership of private lands by
prescription under the provisions of existing laws," to apply for registration of their title to the lands.

Petitioners do not fall under such provision, taking into account that the land they are seeking to register is alienable and
disposable land of the public domain, a fact which would have several substantial implications.

First, Section 14(2) of the Property Registration Decree clearly and explicitly refers to "private lands," without mention at
all of public lands. There is no other way to understand the plain language of Section 14(2) of the Property Registration
Decree except that the land was already private when the applicant for registration acquired ownership thereof by
prescription. The prescription therein was not the means by which the public land was converted to private land; rather, it
was the way the applicant acquired title to what is already private land, from another person previously holding title to the
same.2 The provision in question is very clear and unambiguous. Well-settled is the rule that when the law speaks in clear
and categorical language, there is no reason for interpretation or construction, but only for application.3

With the understanding that Section 14(2) of the Property Registration Decree applies only to what are already private
lands, then, there is no question that the same can be acquired by prescription under the provisions of the Civil Code,
because, precisely, it is the Civil Code which governs rights to private lands.

Second, Section 11 of Commonwealth Act No. 141, otherwise known as the Public Land Act, as amended, reads:

Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows:

(1) For homestead settlement;

(2) By sale;

(3) By lease; and

(4) By confirmation of imperfect or incomplete titles;

(a) By judicial legalization; or

(b) By administrative legalization (free patent). (Emphasis ours.)

The afore-quoted provision recognizes that agricultural public lands may be disposed of by the State, and at the same
time, mandates that the latter can only do so by the modes identified in the same provision. Thus, the intent of the
legislature to make exclusive the enumeration of the modes by which agricultural public land may be disposed of by the
State in Section 11 of the Public Land Act, as amended, is not only readily apparent, but explicit. And, undeniably, the
enumeration of the modes for acquiring agricultural public land in the said provision does not include prescription, in the
concepts described and periods prescribed by the Civil Code.

Neither the Civil Code nor the Property Registration Decree can overcome the express restriction placed by the Public
Land Act, as amended, on the modes by which the State may dispose of agricultural public land.

The Public Land Act, as amended, is a special law specifically applying to lands of the public domain, except timber and
mineral lands. The Public Land Act, as amended, being a special law, necessarily prevails over the Civil Code, a general
law. Basic is the rule in statutory construction that "where two statutes are of equal theoretical application to a particular
case, the one designed therefor specially should prevail." Generalia specialibus non derogant.4
As for the Property Registration Decree, it must be stressed that the same cannot confer title to land and can only confirm
title that already exists or has vested. As has already been previously discussed herein, title to agricultural public land
vests or is acquired only by any of the modes enumerated in Section 11 of the Public Land Act, as amended.

And, third, Section 48(b) of the Public Land Act was amended several times, changing the period of possession required
for acquiring an imperfect title to agricultural public land:

Under the public land act, judicial confirmation of imperfect title required possession en concepto de dueño since time
immemorial, or since July 26, 1894. Under C.A. No. 141, this requirement was retained. However, on June 22, 1957,
Republic Act No. 1942 was enacted amending C.A. No. 141. This later enactment required adverse possession for a
period of only thirty (30) years. On January 25, 1977, the President enacted P. D. No. 1073, further amending C.A. No.
141, extending the period for filing applications for judicial confirmation of imperfect or incomplete titles to December
31, 1987. Under this decree, "the provisions of Section 48 (b) and Section 48 (c), Chapter VIII, of the Public Land Act are
hereby amended in the sense that these provisions shall apply only to alienable and disposable land of the public domain
which have been in open, continuous, exclusive and notorious possession and occupation by the applicant himself or thru
his predecessor-in-interest under a bona fide claim of acquisition of ownership, since June 12, 1945."5 (Emphasis ours.)

Prior to Presidential Decree No. 1073, imperfect title to agricultural land of the public domain could be acquired by
adverse possession of 30 years. Presidential Decree No. 1073, issued on 25 January 1977, amended Section 48(b) of the
Public Land Act by requiring possession and occupation of alienable and disposable land of the public domain since 12
June 1945 or earlier for an imperfect title. Hence, by virtue of Presidential Decree No. 1073, the requisite period of
possession for acquiring imperfect title to alienable and disposable land of the public domain is no longer determined
according to a fixed term (i.e., 30 years); instead, it shall be reckoned from a fixed date (i.e., 12 June 1945 or earlier) from
which the possession should have commenced.

If the Court allows the acquisition of alienable and disposable land of the public domain by prescription under the Civil
Code, and registration of title to land thus acquired under Section 14(2) of the Property Registration Decree, it would be
sanctioning what is effectively a circumvention of the amendment introduced by Presidential Decree No. 1073 to Section
48(b) of the Public Land Act. Acquisition of alienable and disposable land of the public domain by possession would
again be made to depend on a fixed term (i.e., 10 years for ordinary prescription and 30 years for extraordinary
prescription), rather than being reckoned from the fixed date presently stipulated by Section 48(b) of the Public Land Act,
as amended.

There being no basis for petitioners' application for registration of the public agricultural land in question, accordingly, the
same must be dismissed.

I, however, must express my dissent to the discussion in the majority opinion concerning the contradictory
pronouncements of the Court in Republic v. Naguit6 and Republic v. Herbieto,7 on imperfect titles to alienable and
disposable lands of the public domain, acquired in accordance with Section 48(b) of the Public Land Act, as amended, and
registered pursuant to Section 14(1) of the Property Registration Decree.

According to Naguit, a person seeking judicial confirmation of an imperfect title under Section 48(b) of the Public Land
Act, as amended, need only prove that he and his predecessors-in-interest have been in possession and occupation of the
subject land since 12 June 1945 or earlier, and that the subject land is alienable and disposable at the time of filing of the
application for judicial confirmation and/or registration of title. On the other hand, it was held in Herbieto that such a
person must establish that he and his predecessors-in-interest have been in possession and occupation of the subject land
since 12 June 1945 or earlier, and that the subject land was likewise already declared alienable and disposable since 12
June 1945 or earlier. The majority opinion upholds the ruling in Naguit, and declares the pronouncements on the matter in
Herbieto as mere obiter dictum.

As the ponente of Herbieto, I take exception to the dismissive treatment of my elucidation in said case on the acquisition
of imperfect title to alienable and disposable land of the public domain, as mere obiter dictum.

An obiter dictum has been defined as an opinion expressed by a court upon some question of law which is not necessary
to the decision of the case before it. It is a remark made, or opinion expressed, by a judge, in his decision upon a cause,
"by the way," that is, incidentally or collaterally, and not directly upon the question before him, or upon a point not
necessarily involved in the determination of the cause, or introduced by way of illustration, or analogy or argument. Such
are not binding as precedent.8

To recall, the Republic of the Philippines opposed in Herbieto the registration of certain parcels of land of the public
domain in the names of Jeremias and David Herbieto, based on two grounds, one substantive and the other procedural,
i.e., (1) the applicants for registration failed to prove that they possessed the subject parcels of land for the period required
by law; and (2) the application for registration suffers from fatal infirmity as the subject of the application consisted of
two parcels of land individually and separately owned by two applicants.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

The Court, in Herbieto, addressed the procedural issue first, and held that the alleged infirmity in the application
constituted a misjoinder of causes of action which did not warrant a dismissal of the case, only the severance of the
misjoined causes of action so that they could be heard by the court separately. The Court though took note of the belated
publication of the notice of hearing on the application for registration of Jeremias and David Herbieto, the hearing was
already held before the notice of the same was published. Such error was not only procedural, but jurisdictional, and was
fatal to the application for registration of Jeremias and David Herbieto.

The Court then proceeded to a determination of the substantive issue in Herbieto, particularly, whether Jeremias and
David Herbieto possessed the parcels of land they wish to register in their names for the period required by law. The
Court ruled in the negative. Section 48(b) of the Public Land Act, as amended, on judicial confirmation of imperfect title,
requires possession of alienable and disposable land of the public domain since 12 June 1945 or earlier. Given that the
land sought to be registered was declared alienable and disposable only on 25 June 1963, and the period of possession
prior to such declaration should not be counted in favor of the applicants for registration, then Jeremias and David
Herbieto could not be deemed to have possessed the parcels of land in question for the requisite period as to acquire
imperfect title to the same.

The discussion in Herbieto on the acquisition of an imperfect title to alienable and disposable land of the public domain,
which could be the subject of judicial confirmation, was not unnecessary to the decision of said case. It was not a mere
remark made or opinion expressed upon a cause, "by the way," or only incidentally or collaterally, and not directly upon a
question before the Court; or upon a point not necessarily involved in the determination of the cause; or introduced by
way of illustration, or analogy or argument, as to constitute obiter dictum.

It must be emphasized that the acquisition of an imperfect title to alienable and disposable land of the public domain
under Section 48(b) of the Public Land Act, as amended, was directly raised as an issue in the Petition in Herbieto and
discussed extensively by the parties in their pleadings. That the application of Jeremias and David Herbieto could already
be dismissed on the ground of lack of proper publication of the notice of hearing thereof, did not necessarily preclude the
Court from resolving the other issues squarely raised in the Petition before it. Thus, the Court dismissed the application
for registration of Jeremias and David Herbieto on two grounds: (1) the lack of jurisdiction of the land registration court
over the application, in light of the absence of proper publication of the notice of hearing; and (2) the evident lack of merit
of the application given that the applicants failed to comply with the requirements for judicial confirmation of an
imperfect title under Section 48(b) of the Public Land Act, as amended. This is only in keeping with the duty of the Court
to expeditiously and completely resolve the cases before it and, once and for all, settle the dispute and issues between the
parties. Without expressly discussing and categorically ruling on the second ground, Jeremias and David Herbieto could
have easily believed that they could re-file their respective applications for registration, just taking care to comply with the
publication-of-notice requirement.

Of particular relevance herein is the following discourse in Villanueva v. Court of Appeals9 on what constitutes, or more
appropriately, what does not constitute obiter dictum:

It has been held that an adjudication on any point within the issues presented by the case cannot be considered as obiter
dictum, and this rule applies to all pertinent questions, although only incidentally involved, which are presented and
decided in the regular course of the consideration of the case, and led up to the final conclusion, and to any statement as to
matter on which the decision is predicated. Accordingly, a point expressly decided does not lose its value as a precedent
because the disposition of the case is, or might have been, made on some other ground, or even though, by reason of other
points in the case, the result reached might have been the same if the court had held, on the particular point, otherwise
than it did. A decision which the case could have turned on is not regarded as obiter dictum merely because, owing to the
disposal of the contention, it was necessary to consider another question, nor can an additional reason in a decision,
brought forward after the case has been disposed of on one ground, be regarded as dicta. So, also, where a case presents
two (2) or more points, any one of which is sufficient to determine the ultimate issue, but the court actually decides all
such points, the case as an authoritative precedent as to every point decided, and none of such points can be regarded as
having the status of a dictum, and one point should not be denied authority merely because another point was more dwelt
on and more fully argued and considered, nor does a decision on one proposition make statements of the court regarding
other propositions dicta.

An adjudication on any point within the issues presented by the case cannot be considered a dictum; and this rule applies
as to all pertinent questions, although only incidentally involved, which are presented and decided in the regular course of
the consideration of the case, and lead up to the final conclusion, and to any statement in the opinion as to a matter on
which the decision is predicated. Accordingly, a point expressly decided does not lose its value as a precedent because the
disposition of the case is or might have been made on some other ground, or even though, by reason of other points in the
case, the result reached might have been the same if the court had held, on the particular point, otherwise than it did.10

I submit that Herbieto only applied the clear provisions of the law and established jurisprudence on the matter, and is
binding as a precedent.

Section 14(b) of the Public Land Act, as amended, explicitly requires for the acquisition of an imperfect title to alienable
and disposable land of the public domain, possession by a Filipino citizen of the said parcel of land since 12 June 1945 or
earlier, to wit:
Section. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of
First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of
title thereafter, under the Land Registration Act, to wit:

xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and
notorious possession and occupation of alienable and disposable lands of the public domain, under a bona fide claim of
acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the filing of the applications for
confirmation of title, except when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the
provisions of this chapter. (Emphasis ours.)

Section 14(1) of the Property Registration Decree, by substantially reiterating Section 48(b) of the Public Land Act, as
amended, recognizes the imperfect title thus acquired and allows the registration of the same, viz:

Section 14. Who may apply. - The following persons may file in the proper Court of First Instance an application for
registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of
ownership since June 12, 1945, or earlier. (Emphasis ours.)

Meanwhile, jurisprudence has long settled that possession of the land by the applicant for registration prior to the
reclassification of the land as alienable and disposable cannot be credited to the applicant's favor.11

Given the foregoing, judicial confirmation and registration of an imperfect title, under Section 48(b) of the Public Land
Act, as amended, and Section 14(1) of the Property Registration Decree, respectively, should only be granted when: (1) a
Filipino citizen, by himself or through his predecessors-in-interest, have been in open, continuous, exclusive, and
notorious possession and occupation of agricultural land of the public domain, under a bona fide claim of acquisition of
ownership, since 12 June 1945, or earlier; and (2) the land in question, necessarily, was already declared alienable and
disposable also by 12 June 1945 or earlier.

There can be no other interpretation of Section 48(b) of the Public Land Act, as amended, and Section 14(1) of the
Property Registration Decree, which would not run afoul of either the clear and unambiguous provisions of said laws or
binding judicial precedents.

I do not agree in the observation of the majority opinion that the interpretation of Section 48(b) of the Public Land Act, as
amended, adopted in Herbieto, would result in absurdity. Indeed, such interpretation forecloses a person from acquiring an
imperfect title to a parcel of land declared alienable and disposable only after 12 June 1945, which could be judicially
confirmed. Nonetheless, it must be borne in mind that the intention of the law is to dispose of agricultural public land to
qualified individuals and not simply to dispose of the same. It may be deemed a strict interpretation and application of
both law and jurisprudence on the matter, but it certainly is not an absurdity.

Stringency and prudence in interpreting and applying Section 48(b) of the Public Land Act, as amended, is well justified
by the significant consequences arising from a finding that a person has an imperfect title to agricultural land of the public
domain. Not just any lengthy occupation of an agricultural public land could ripen into an imperfect title. An imperfect
title can only be acquired by occupation and possession of the land by a person and his predecessors-in-interest for the
period required and considered by law sufficient as to have segregated the land from the mass of public land. When a
person is said to have acquired an imperfect title, by operation of law, he acquires a right to a grant, a government grant to
the land, without the necessity of a certificate of title being issued. As such, the land ceased to be part of the public
domain and goes beyond the authority of the State to dispose of. An application for confirmation of title, therefore, is but
a mere formality.12

In addition, as was emphasized in Herbieto, Section 11 of the Public Land Act, as amended, has identified several ways
by which agricultural lands of the public domain may be disposed of. Each mode of disposing of agricultural public land
has its own specific requirements which must be complied with. If a person is not qualified for a judicial confirmation of
an imperfect title, because the land in question was declared alienable and disposable only after 12 June 1945, he is not
totally without recourse for he could still acquire the same by any of the other modes enumerated in the afore-quoted
provision.

Regardless of my dissent to the affirmation by the majority of the ruling in Naguit on Section 48(b) of the Public Land
Act, as amended, and Section 14(1) of the Property Registration Decree, I cast my vote with the majority, to DENY the
Petition at bar and AFFIRM the Decision dated 23 February 2007 and Resolution dated 2 October 2000 of the Court of
Appeals dismissing, for absolute lack of basis, petitioners' application for registration of alienable and disposable land of
the public domain.
Endnotes:

1
 Republic v. Court of Appeals, G.R. No. 108998, 21 August 1994.

2
 As in the case where the land was already the subject of a grant by the State to a private person, but the
latter failed to immediately register his title, thus, allowing another person to acquire title to the land by
prescription under the provisions of the Civil Code.

3
 Department of Agrarian Reform v. Court of Appeals, G.R. No. 118745, 5 July 1996.

4
 See De Guzman v. Court of Appeals, G.R. No. 132257, 12 October 1998.

5
 Public Estates Authority v. Court of Appeals, G.R. No. 112172, 20 November 2000.

6
 G.R. No. 144057, 17 January 2005.

7
 G.R. No. 156117, 26 May 2005.

8
 Delta Motors Corporation v. Court of Appeals, G.R. No. 121075, 24 July 1997.

9
 G.R. No. 142947, 19 March 2002.

 1 C. J. S. 314-315, as quoted in the dissenting opinion of Tuason, J., in Primicias v. Fugoso, G.R. No.
10

L-1800, 27 January 1948.

 See Almeda v. Court of Appeals, G.R. No. 85322, 30 April 1991, 196 SCRA 476; Vallarta v.
11

Intermediate Appellate Court, G.R. No. L-74957, 30 June 1987, 151 SCRA 679; and Republic v. Court of
Appeals, G.R. No. L-40402, 16 March 1987, 148 SCRA 480, cited in Republic v. Herbieto (supra note 2).
See also Republic v. Court of Appeals, G.R. No. L-56948, 30 September 1987; Republic v. Bacus, G.R.
No. 73061, 11 August 1989; Republic v. Court of Appeals, G.R. No.38810, 7 May 1992; De la Cruz v.
Court of Appeals, G.R. No. 120652, 11 February 1998, Republic v. De Guzman, G.R. No. 137887, 28
February 2000.

12
 See National Power Corporation v. Court of Appeals, G.R. No. 4566, 29 January 1993.

CONCURRING AND DISSENTING OPINION

BRION, J.:

I concur with the ponencia's modified positions on the application of prescription under Section 14(2) of the Property
Registration Decree (PRD), and on the denial of the petition of the Heirs of Mario Malabanan.

I dissent in the strongest terms from the ruling that the classification of a public land as alienable and disposable can be
made after June 12, 1945, in accordance with this Court's ruling in Republic v. Court of Appeals and Naguit
(Naguit).1 Effectively, what results from this decision is a new law, crafted by this Court, going beyond what the
Constitution ordains and beyond the law that the Legislature passed. Because the majority has not used the standards set
by the Constitution and the Public Land Act (PLA),2 its conclusions are based on a determination on what the law ought to
be - an exercise in policy formulation that is beyond the Court's authority to make.

The discussions of these grounds for dissent follow, not necessarily in the order these grounds are posed above.

Prefatory Statement

Critical to the position taken in this Dissent is the reading of the hierarchy of laws that govern public lands to fully
understand and appreciate the grounds for dissent.

In the area of public law, foremost in this hierarchy is the Philippine Constitution, whose Article XII (entitled National
Economy and Patrimony) establishes and fully embraces the regalian doctrine as a first and overriding principle.3 This
doctrine postulates that all lands belong to the State, 4 and that no public land can be acquired by private persons without
any grant, express or implied, from the State.5
In the statutory realm, the PLA governs the classification, grant, and disposition of alienable and disposable lands of the
public domain and, other than the Constitution, is the country's primary law on the matter. Section 7 of the PLA delegates
to the President the authority to administer and dispose of alienable public lands. Section 8 sets out the public lands open
to disposition or concession, and the requirement that they should be officially delimited and classified and, when
practicable, surveyed. Section 11, a very significant section, states that -

Public lands suitable for agricultural purposes can be disposed of only as follows and not otherwise:

(1) For homestead settlement;

(2) By sale;

(3) By lease;

(4) By confirmation of imperfect or incomplete title;

(5) By judicial legalization;

(6) By administrative legalization (free patent)

Section 48 covers confirmation of imperfect title, and embodies a grant of title to the qualified occupant or possessor of an
alienable public land. This section provides:

SECTION 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to
own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court
of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate
of title therefor, under the Land Registration Act, to wit:

(a) Those who prior to the transfer of sovereignty from Spain to the United States have applied for the
purchase, composition or other form of grant of lands of the public domain under the laws and royal
decrees then in force and have instituted and prosecuted the proceedings in connection therewith, but
have, with or without default upon their part, or for any other cause, not received title therefor, if such
applicants or grantees and their heirs have occupied and cultivated said lands continuously since the filing
of their applications.

(b) Those who by themselves or through their predecessors in interest have been in the open, continuous,
exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a
bona fide claim of acquisition or ownership, except as against the Government, since July twenty-sixth,
eighteen hundred and ninety-four, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall be
entitled to a certificate of title under the provisions of this chapter.

Significantly, subsection (a) has now been deleted, while subsection (b) has been amended by PD 1073 as follows:

SECTION 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public Land Act are hereby amended
in the sense that these provisions shall apply only to alienable and disposable lands of the public domain which have been
in open, continuous, exclusive and notorious possession and occupation by the applicant himself or thru his predecessor-
in-interest, under a bona fide claim of acquisition of ownership, since June 12, 1945.

Complementing the PLA is the PRD.6 It was enacted to codify the various laws relating to property registration. It governs
the registration of lands under the Torrens System, as well as unregistered lands, including chattel mortgages. Section 14
of the PRD provides:

SECTION 14. Who May Apply. - The following persons may file in the proper Court of First Instance an application for
registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open,

continuous, exclusive and notorious possession and occupation of alienable and disposable lands of
the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the provisions of
existing laws.

(3) Those who have acquired ownership of private lands or abandoned river beds by right of accession or
accretion under the existing laws.
 (4) Those who have acquired ownership of land in any other manner provided for by law.

Subsection (1) of Section 14 is a copy of, and appears to have been lifted from, Section 48(b) of the PLA. The two
provisions, however, differ in intent and legal effect based on the purpose of the law that contains them. The PLA is a
substantive law that classifies and provides for the disposition of alienable lands of the public domain. The PRD, on
the other hand, specifically refers to the manner of bringing registerable lands, among them alienable public lands,
within the coverage of the Torrens system. Thus, the first is a substantive law, while the other is essentially procedural,
so that in terms of substantive content, the PLA should prevail.7

Significantly bearing on the matter of lands in general is the Civil Code and its provisions on Property8 and
Prescription.9 The law on property assumes importance because land, whether public or private, is property. Prescription,
on the other hand, is a mode of acquiring ownership of land, although it is not one of the modes of disposition mentioned
in the PLA.

Chapter 3, Title I of Book II of the Civil Code is entitled "Property in Relation to the Person to Whom it Belongs." On this
basis, Article 419 classifies property to be property of public dominion or of private ownership. Article 420 proceeds to
further classify property of public dominion into those intended for public use, for public service, and for the development
of the national wealth. Article 421 states that all other properties of the State not falling under Article 420 are patrimonial
property of the State, and Article 422 adds that property of public dominion, no longer intended for public use or for
public service, shall form part of the patrimonial property of the State. Under Article 425, property of private ownership,
besides patrimonial property of the State, provinces, cities and municipalities, consists of all property belonging to private
persons, either individually or collectively.

Prescription is essentially a civil law term and is not mentioned as one of the modes of acquiring alienable public land
under the PLA, (Significantly, the PLA - under its Section 48 - provides for its system of how possession can ripen into
ownership; the PLA does not refer to this as acquisitive prescription but as basis for confirmation of title.) Section 14(2)
of the PRD, however, specifies that "[t]hose who have acquired ownership of private lands by prescription under the
provisions of existing laws" as among those who may apply for land registration. Thus, prescription was introduced into
the land registration scheme (the PRD), but not into the special law governing lands of the public domain (the PLA).

A starting point in considering prescription in relation with public lands is Article 1108 of the Civil Code, which states
that prescription does not run against the State and its subdivisions. At the same time, Article 1113 provides that "all
things which are within the commerce of men are susceptible of prescription, unless otherwise provided; property of the
State or any of its subdivisions not patrimonial in character shall not be the object of prescription." The provisions of
Articles 1128 to 1131 may also come into play in the application of prescription to real properties.

In light of our established hierarchy of laws, particularly the supremacy of the Philippine Constitution, any consideration
of lands of the public domain should start with the Constitution and its Regalian doctrine; all lands belong to the State,
and he who claims ownership carries the burden of proving his claim. 10 Next in the hierarchy is the PLA for purposes of
the terms of the grant, alienation and disposition of the lands of the public domain, and the PRD for the registration of
lands. The PLA and the PRD are special laws supreme in their respective spheres, subject only to the Constitution. The
Civil Code, for its part, is the general law on property and prescription and should be accorded respect as such. In more
concrete terms, where alienable and disposable lands of the public domain are involved, the PLA is the primary law that
should govern, and the Civil Code provisions on property and prescription must yield in case of conflict.11

The Public Land Act

At the risk of repetition, I start the discussion of the PLA with

a reiteration of the first principle that under the regalian doctrine, all lands of the public domain belong to the State, and
the State is the source of any asserted right to ownership in land and charged with the conservation of such patrimony.
Otherwise expressed, all lands not otherwise appearing to be clearly within private ownership are presumed to belong to
the State.12 Thus, all lands that have not been acquired from the government, either by purchase or by grant, belong to the
State as part of the inalienable public domain.13 We should never lose sight of the impact of this first principle where a
private ownership claim is being asserted against the State.

The PLA has undergone many revisions and changes over time, starting from the first PLA, Act No. 926; the second
public land law that followed, Act No. 2874; and the present CA 141 and its amendments. Act No. 926 was described in
the following terms:

The law governed the disposition of lands of the public domain. It prescribed rules and regulations for the homesteading,
selling and leasing of portions of the public domain of the Philippine Islands, and prescribed the terms and conditions to
enable persons to perfect their titles to public lands in the Islands. It also provided for the "issuance of patents to certain
native settlers upon public lands," for the establishment of town sites and sale of lots therein, for the completion of
imperfect titles, and for the cancellation or confirmation of Spanish concessions and grants in the Islands." In short, the
Public Land Act operated on the assumption that title to public lands in the Philippine Islands remained in the
government; and that the government's title to public land sprung from the Treaty of Paris and other subsequent treaties
between Spain and the United States. The term "public land" referred to all lands of the public domain whose title still
remained in the government and are thrown open to private appropriation and settlement, and excluded the patrimonial
property of the government and the friar lands.14

This basic essence of the law has not changed and has been carried over to the present PLA and its amendments. Another
basic feature, the requirement for open, continuous, exclusive, and notorious possession and occupation of the alienable
and disposable public land under a bona fide claim of ownership also never changed. Still another consistent public land
feature is the concept that once a person has complied with the requisite possession and occupation in the manner
provided by law, he is automatically given a State grant that may be asserted against State ownership; the land, in other
words, ipso jure becomes private land.15 The application for judicial confirmation of imperfect title shall then follow,
based on the procedure for land registration.16 It is in this manner that the PLA ties up with the PRD.

A feature that has changed over time has been the period for reckoning the required occupation or possession. In the first
PLA, the required occupation/possession to qualify for judicial confirmation of imperfect title was 10 years preceding the
effectivity of Act No. 926 - July 26, 1904 (or since July 26, 1894 or earlier). This was retained up to CA 141, until this
law was amended by Republic Act (RA) No. 1942 (enacted on June 22, 1957),17 which provided for a simple 30-year
prescriptive period for judicial confirmation of imperfect title. This period did not last; on January 25, 1977, Presidential
Decree No. 1073 (PD 1073) 18 changed the required 30-year possession and occupation period provision, to possession
and occupation of the land applied for since June 12, 1945, or earlier. PD 1073 likewise changed the lands subject of
imperfect title, from agricultural lands of the public domain to alienable and disposable lands of the public domain. PD
1073 also extended the period for applications for free patents and judicial confirmation of imperfect titles to December
31, 1987.

The significance of the date "June 12, 1945" appears to have been lost to history. A major concern raised against this date
is that the country was at this time under Japanese occupation, and for some years after, was suffering from the
uncertainties and instabilities that World War II brought. Questions were raised on how one could possibly comply with
the June 12, 1945 or earlier occupation/possession requirement of PD 1073 when the then prevailing situation did not
legally or physically permit it.

Without the benefit of congressional records, as the enactment of the law (a Presidential Decree) was solely through the
President's lawmaking powers under a regime that permitted it, the most logical reason or explanation for the date is the
possible impact of the interplay between the old law and the amendatory law. When PD 1073 was enacted, the utmost
concern, in all probability, was how the law would affect the application of the old law which provided for a thirty-year
possession period. Counting 30 years backwards from the enactment of PD 1073 on January 25, 1977, PD 1073 should
have provided for a January 24, 1947 cut-off date, but it did not. Instead, it provided, for unknown reasons, the date June
12, 1945.

The June 12, 1945 cut-off date raised legal concerns; vested rights acquired under the old law (CA 141, as amended by
RA 1942) providing for a 30-year possession period could not be impaired by the PD 1073 amendment. We recognized
this legal dilemna in Abejaron v. Nabasa,19 when we said:

However, as petitioner Abejaron's 30-year period of possession and occupation required by the Public Land Act, as
amended by R.A. 1942 ran from 1945 to 1975, prior to the effectivity of P.D. No. 1073 in 1977, the requirement of said
P.D. that occupation and possession should have started on June 12, 1945 or earlier, does not apply to him. As
the Susi doctrine holds that the grant of title by virtue of Sec. 48(b) takes place by operation of law, then upon Abejaron's
satisfaction of the requirements of this law, he would have already gained title over the disputed land in 1975. This
follows the doctrine laid down in Director of Lands v. Intermediate Appellate Court, et al., that the law cannot impair
vested rights such as a land grant. More clearly stated, "Filipino citizens who by themselves or their predecessors-in-
interest have been, prior to the effectivity of P.D. 1073 on January 25, 1977, in open, continuous, exclusive and notorious
possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership,
for at least 30 years, or at least since January 24, 1947" may apply for judicial confirmation of their imperfect or
incomplete title under Sec. 48(b) of the Public Land Act.

From this perspective, PD 1073 should have thus provided January 24, 1947 and not June 12, 1945 as its cut-off date, yet
the latter date is the express legal reality. The reconciliation, as properly defined by jurisprudence, is that where an
applicant has satisfied the requirements of Section 48 (b) of CA 141, as amended by RA 1942, prior to the effectivity of
PD 1073, the applicant is entitled to perfect his or her title, even if possession and occupation does not date back to June
12, 1945. For purposes of the present case, a discussion of the cut-off date has been fully made to highlight that it is a date
whose significance and import cannot be minimized nor glossed over by mere judicial interpretation or by judicial social
policy concerns; the full legislative intent must be respected.

In considering the PLA, it should be noted that its amendments were not confined to RA 1942 and PD 1073. These
decrees were complemented by Presidential Decree No. 892 (PD 892)20 - issued on February 16, 1976 - which limited to
six months the use of Spanish titles as evidence in land registration proceedings. 21 Thereafter, the recording of all
unregistered lands shall be governed by Section 194 of the Revised Administrative Code, as amended by Act No. 3344.
Section 3 of PD 1073 totally disallowed the judicial confirmation of incomplete titles to public land based on unperfected
Spanish grants.
Subsequently, RA 694022 extended the period for filing applications for free patent and judicial confirmation of imperfect
title to December 31, 2000. The law now also allows the issuance of free patents for lands not in excess of 12 hectares to
any natural-born citizen of the Philippines who is not the owner of more than 12 hectares and who, for at least 30 years
prior to the effectivity of the amendatory Act, has continuously occupied and cultivated, either by himself or through his
predecessors-in-interest, a tract or tracts of agricultural public lands subject to disposition.

Congress recently extended the period for filing applications for judicial confirmation of imperfect and incomplete titles
to alienable and disposable lands of the public domain under RA 9176 from December 31, 2000 under RA 6940 to
December 31, 2020.23

Read together with Section 11 of the PLA (which defines the administrative grant of title to alienable and
disposable lands of the public domain through homestead settlement and sale, among others), RA 6940 and RA
9176 signify that despite the cut-off date of June 12, 1945 that the Legislature has provided, ample opportunities
exist under the law for the grant of alienable lands of the public domain to deserving beneficiaries.

Presidential Decree No. 1529 or the Property Registration Decree

As heretofore mentioned, PD 1529 amended Act No. 496 on June 11, 1978 to codify the various laws relative to
registration of property. Its Section 14 describes the applicants who may avail of registration under the Decree, among
them -

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of alienable and disposable lands of the public domain
under a bona fide claim of ownership since June 12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the provision of existing
laws

These subsections and their impact on the present case are separately discussed below.

Section 14(1)

Section 14(1) merely repeated PD 1073 which sets a cut-off date of June 12, 1945 and which, under the conditions
discussed above, may be read to be January 24, 1947.

The ponencia discussed Section 48(b) of the PLA in relation with Section 14(1) of the PRD and, noted among others, that
"under the current state of the law, the substantive right granted under Section 48(b) may be availed of only until
December 31, 2020." This is in light of RA 9176, passed in 2002, 24 limiting the filing of an application for judicial
confirmation of imperfect title to December 31, 2020. The amendatory law apparently refers only to the use of Section
14(1) of the PRD as a mode of registration. Where ownership right or title has already vested in the possessor-occupant of
the land that Section 48(b) of the PLA grants by operation of law, Section 14(2) of the PRD continuous to be open for
purposes of registration of a "private land" since compliance with Section 48(b) of the PLA vests title to the
occupant/possessor and renders the land private in character.

The ponencia likewise rules against the position of the Office of the Solicitor General that the public land to be registered
must have been classified as alienable and disposable as of the cut-off date for possession stated in Section 48(b) - June
12, 1945. In doing this, it cites and reiterates its continuing support for the ruling in Republic v. Court of Appeals and
Naguit that held:25

Petitioner suggests an interpretation that the alienable and disposable character of the land should have already been
established since June 12, 1945 or earlier. This is not borne out by the plain meaning of Section 14(1). "Since June 12,
1945," as used in the provision, qualifies its antecedent phrase "under a bonafide claim of ownership." Generally
speaking, qualifying words restrict or modify only the words or phrases to which they are immediately associated, and not
those distantly or remotely located. Ad proximum antecedents fiat relation nisi impediatur sentencia.

Besides, we are mindful of the absurdity that would result if we adopt petitioner's position. Absent a legislative
amendment, the rule would be, adopting the OSG's view, that all lands of the public domain which were not declared
alienable or disposable before June 12, 1945 would not be susceptible to original registration, no matter the length of
unchallenged possession by the occupant. Such interpretation renders paragraph (1) of Section 14 virtually inoperative
and even precludes the government from giving it effect even as it decides to reclassify public agricultural lands as
alienable and disposable. The unreasonableness of the situation would even be aggravated considering that before June
12, 1945, the Philippines was not yet even considered an independent state.

Instead, the more reasonable interpretation of Section 14(1) is that it merely requires the property sought to be registered
as already alienable and disposable at the time the application for registration of title is filed. If the State, at the time the
application is made, has not yet deemed it proper to release the property for alienation or disposition, the presumption is
that the government is still reserving the right to utilize the property; hence, the need to preserve its ownership in the State
irrespective of the length of adverse possession even if in good faith. However, if the property has already been classified
as alienable and disposable, as it is in this case, then there is already an intention on the part of the State to abdicate its
exclusive prerogative over the property.

xxx

This case is distinguishable from Bracewell v. Court of Appeals, wherein the Court noted that while the claimant had been
in possession since 1908, it was only in 1972 that the lands in question were classified as alienable and disposable. Thus,
the bid at registration therein did not succeed. In Bracewell, the claimant had filed his application in 1963, or nine (9)
years before the property was declared alienable and disposable. Thus, in this case, where the application was made years
after the property had been certified as alienable and disposable, the Bracewell ruling does not apply.

As it did in Naguit, the present ponencia as well discredits Bracewell. It does the same with Republic v. Herbieto 26 that
came after Naguit and should have therefore overtaken the Naguit ruling. In the process, the ponencia cites with approval
the ruling in Republic v. Ceniza,27 penned by the same ponente who wrote Bracewell.

While the ponencia takes pains to compare these cases, it however completely misses the point from the perspective of
whether possession of public lands classified as alienable and disposable after June 12, 1945 should be credited for
purposes of a grant under Section 48(b) of the PLA, and of registration under Section 14(1) of the PRD. These cases, as
analyzed by the ponencia, merely granted or denied registration on the basis of whether the public land has been classified
as alienable and disposable at the time the petition for registration was filed. Thus, except for Naguit, these cases can be
cited only as instances when registration was denied or granted despite the classification of the land as alienable after June
12, 1945.

The ruling in Naguit is excepted because, as shown in the quotation above, this is one case that explained why possession
prior to the classification of public land as alienable should be credited in favor of the possessor who filed his or her
application for registration after the classification of the land as alienable and disposable, but where such classification
occurred after June 12, 1945.

Closely analyzed, the rulings in Naguit that the ponencia relied upon are its statutory construction interpretation of Section
48(b) of the PLA and the observed ABSURDITY of using June 12, 1945 as the cut-off point for the classification.

Five very basic reasons compel me to strongly disagree with Naguit and its reasons.

First. The constitutional and statutory reasons. The Constitution classifies public lands into agricultural, mineral, and
timber. Of these, only agricultural lands can be alienated.28 Without the requisite classification, there can be no basis to
determine which lands of the public domain are alienable and which are not; hence, classification is a constitutionally-
required step whose importance should be given full legal recognition and effect. Otherwise stated, without classification
into disposable agricultural land, the land forms part of the mass of the public domain that, not being agricultural, must be
mineral or timber land that are completely inalienable and as such cannot be possessed with legal effects. To allow
effective possession is to do violence to the regalian doctrine; the ownership and control that the doctrine denotes will be
less than full if the possession that should be with the State as owner, but is elsewhere without any authority, can anyway
be recognized.

From the perspective of the PLA under which grant can be claimed under its Section 48(b), it is very important to note
that this law does not apply until a classification into alienable and disposable land of the public domain is made. If the
PLA does not apply prior to a public land's classification as alienable and disposable, how can possession under its
Section 48(b) be claimed prior such classification? There can simply be no imperfect title to be confirmed over lands not
yet classified as disposable or alienable because, in the absence of such classification, the land remains unclassified public
land that fully belongs to the State. This is fully supported by Sections 6, 7, 8, 9, and 10 of CA 141. 29 If the land is either
mineral or timber and can never be the subject of administration and disposition, it defies legal logic to allow the
possession of these unclassified lands to produce legal effect. Thus, the classification of public land as alienable and
disposable is inextricably linked to effective possession that can ripen into a claim under Section 48(b) of the PLA.

Second. The Civil Code reason. Possession is essentially a civil law term that can best be understood in terms of the Civil
Code in the absence of any specific definition in the PLA other than in terms of time of possession. 30 Article 530 of the
Civil Code provides that "[O]nly things and rights which are susceptible of being appropriated may be the object of
possession." Prior to the declaration of alienability, a land of the public domain cannot be appropriated; hence, any
claimed possession cannot have legal effects. This perspective fully complements what has been said above under the
constitutional and PLA reasons. It confirms, too, that the critical difference the ponencia saw in the Bracewell and Naguit
situations does not really exist. Whether an application for registration is filed before or after the declaration of
alienability becomes immaterial if, in one as in the other, no effective possession can be recognized prior to the
declaration of alienability.

Third. Statutory construction and the cut-off date - June 12, 1945. The ponencia assumes, based on its statutory
construction reasoning and its reading of Section 48(b) of the PLA, that all that the law requires is possession from June
12, 1945 and that it suffices if the land has been classified as alienable at the time of application for registration. As
heretofore discussed, this cut-off date was painstakingly set by law and should be given full significance. Its full import
appears from PD 1073 that amended Section 48(b), whose exact wordings state:

SECTION 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public Land Act are hereby amended
in the sense that these provisions shall apply only to alienable and disposable lands of the public domain which have been
in open, continuous, exclusive and notorious possession and occupation by the applicant himself or thru his predecessor-
in-interest, under a bona fide claim of acquisition of ownership, since June 12, 1945.

Under this formulation, it appears clear that PD 1073 did not expressly state what Section 48(b) should provide under the
amendment PD 1073 introduced in terms of the exact wording of the amended Section 48(b). But under the PD 1073
formulation, the intent to count the alienability to June 12, 1945 appears very clear. The provision applies only to
alienable and disposable lands of the public domain that is described in terms of the character of the possession required
since June 12, 1945. This intent - seen in the direct, continuous and seamless linking of the alienable and disposable lands
of the public domain to June 12, 1945 under the wording of the Decree - is clear and should be respected.

Fourth. Other Modes of Acquisition of lands under the PLA. Naguit's absurdity argument that the ponencia effectively
adopted is more apparent than real, since the use of June 12, 1945 as cut-off date for the declaration of alienability will not
render the grant of alienable public lands out of reach. The acquisition of ownership and title may still be obtained by
other modes under the PLA. Among other laws, RA 6940, mentioned above, now allows the use of free patents.31 It was
approved on March 28, 1990; hence, counting 30 years backwards, possession since April 1960 or thereabouts may
qualify a possessor to apply for a free patent. The administrative modes provided under Section 11 of the PLA are also
open, particularly, homestead settlement and sales.

Fifth. Addressing the wisdom - the absurdity - of the law. This Court acts beyond the limits of the constitutionally-
mandated separation of powers in giving Section 48(b), as amended by PD 1073, an interpretation beyond its plain
wording. Even this Court cannot read into the law an intent that is not there even your purpose is to avoid an absurd
situation. If we feel that a law already has absurd effects because of the passage of time, our role under the principle of
separation of powers is not to give the law an interpretation that is not there in order to avoid the perceived absurdity. We
thereby dip into the realm of policy - a role delegated by the Constitution to the Legislature. If only for this reason, we
should avoid expanding - through Naguit and the present ponencia - the plain meaning of Section 48(b) of the PLA, as
amended by PD 1073.

In standing by Naguit, the ponencia pointedly discredits the ruling in Herbieto; it is, allegedly, either an incorrect ruling or
an obiter dictum. As to legal correctness, Herbieto is in full accord with what we have stated above; hence, it cannot be
dismissed off-hand as an incorrect ruling. Likewise, its ruling on the lack of effective legal possession prior to the
classification of a public land as alienable and disposable cannot strictly be obiter because it responded to an issue directly
raised by the parties. Admittedly, its ruling on jurisdictional grounds could have fully resolved the case, but it cannot be
faulted if it went beyond this threshold issue into the merits of the claim of effective possession prior to the classification
of the land as alienable and disposable.

To be sure, Herbieto has more to it than the Naguit ruling that the ponencia passes off as the established and definitive
rule on possession under Section 14(1) of the PRD. There, too, is the undeniable reason that no definitive ruling touching
on Section 14(1) can be deemed to have been established in the present case since the applicant Heirs could only prove
possession up to 1948. For this reason, the ponencia falls back on and examines Section 14(2) of the PRD. In short, if
there is a perfect example of a ruling that is not necessary for the resolution of a case, that unnecessary ruling is
the ponencia's ruling that Naguit is now the established rule.

Section 14(2)

Section 14(2), by its express terms, applies only to private lands. Thus, on plain reading, it does not apply to alienable and
disposable lands of the public domain that Section 14(1) covers. This is the difference between Sections 14(1) and 14(2).

The ponencia, as originally formulated, saw a way of expanding the coverage of Section 14(2) via the Civil Code by
directly applying civil law provisions on prescription on alienable and disposable lands of the public domain. To quote the
obiter dictum in Naguit that the ponencia wishes to enshrine as the definitive rule and leading case on Sections 14(1) and
14(2):32

Prescription is one of the modes of acquiring ownership under the Civil Code. There is a consistent jurisprudential rule
that properties classified as alienable public land may be converted into private property by reason of open, continuous
and exclusive possession of at least thirty (30) years. With such conversion, such property may now fall within the
contemplation of "private lands" under Section 14(2), and thus susceptible to registration by those who have acquired
ownership through prescription. Thus, even if possession of the alienable public land commenced on a date later than June
12, 1945, and such possession being open, continuous and exclusive, then the possessor may have the right to register the
land by virtue of Section 14(2) of the Property Registration Decree.
The ponencia then posits that Article 1113 of the Civil Code should be considered in the interpretation of Section 14(2).
Article 1113 of the Civil Code provides:

All things which are within the commerce of men are susceptible of prescription, unless otherwise provided. Property of
the State or any of its subdivisions not patrimonial in character shall not be the object of prescription.

The application of Article 1113 assumes, of course, that (1) the Civil Code fully applies to alienable and disposable lands
of the public domain; (2) assuming that the Civil Code fully applies, these properties are patrimonial and are therefore
"private property"; and (3) assuming that the Civil Code fully applies, that these properties are within the commerce of
men and can be acquired through prescription.

I find the Naguit obiter to be questionable because of the above assumptions and its direct application of prescription
under Section 14(2) to alienable or disposable lands of the public domain. This Section becomes relevant only once the
ownership of an alienable and disposable land of the public domain vests in the occupant or possessor pursuant to the
terms of Section 48(b) of the PLA, with or without judicial confirmation of title, so that the land has become a private
land. At that point, Section 14(2) becomes fully operational on what had once been an alienable and disposable land of the
public domain.

Hierarchy of Law in Reading PRD's Section 14(2)

The hierarchy of laws governing the lands of the public domain is clear from Article XII, Section 3 of the Constitution.
There are matters that the Constitution itself provides for, and some that are left for Congress to deal with. Thus, under
Section 3, the Constitution took it upon itself to classify lands of the public domain, and to state that only agricultural
lands may be alienable lands of the public domain. It also laid down the terms under which lands of the public domain
may be leased by corporations and individuals. At the same time, it delegated to Congress the authority to classify
agricultural lands of the public domain according to the uses to which they may be devoted. Congress likewise
determines, by law, the size of the lands of the public domain that may be acquired, developed, held or leased, and the
conditions therefor.

In acting on the delegation, Congress is given the choice on how it will act, specifically, whether it will pass a general or a
special law. On alienable and disposable lands of the public domain, Congress has, from the very beginning, acted
through the medium of a special law, specifically, through the Public Land Act that by its terms "shall apply to the lands
of the public domain; but timber and mineral lands shall be governed by special laws." Notably, the Act goes on to
provide that nothing in it "shall be understood or construed to change or modify the administration and disposition of the
lands commonly called 'friar lands' and those which, being privately owned, have reverted to or become property of the
Commonwealth of the Philippines, which administration and disposition shall be governed by laws at present in force or
which may hereafter be enacted."33 Under these terms, the PLA can be seen to be a very specific act whose coverage
extends only to lands of the public domain; in this sense, it is a special law on that subject.

In contrast, the Civil Code is a general law that covers general rules on the effect and application of laws and human
relations; persons and family relations; property and property relations; the different modes of acquiring ownership; and
obligations and contracts.34 Its general nature is best appreciated when in its Article 18, it provides that: "In matters which
are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this
Code."

The Civil Code has the same relationship with the PRD with respect to the latter's special focus - land registration - and
fully applies civil law provisions in so far only as they are allowed by the PRD. One such case where the Civil Code is
expressly allowed to apply is in the case of Section 14(2) of the PRD which calls for the application of prescription under
existing laws.

As already explained above, the PLA and the PRD have their own specific purposes and are supreme within their own
spheres, subject only to what the higher Constitution provides. Thus, the PRD must defer to what the PLA provides when
the matter to be registered is an alienable and disposable land of the public domain.

Application of the Civil Code

In its Book II, the Civil Code has very clear rules on property, including State property. It classifies property as either of
public dominion or of private ownership,35 and property for public use, public service and those for the development of
the national wealth as property of the public dominion. 36 All property not so characterized are patrimonial property of the
State37 which are susceptible to private ownership,38 against which prescription will run.39

In reading all these provisions, it should not be overlooked that they refer to the properties of the State in general, i.e., to
both movable and immovable properties.40 Thus, the Civil Code provisions on property do not refer to land alone, much
less do they refer solely to alienable and disposable lands of the public domain. For this specie of land, the PLA is the
special governing law and, under the Civil Code itself, the Civil Code provisions shall apply only in case of deficiency.41
This conclusion gives rise to the question - can alienable and disposable lands of the public domain at the same time be
patrimonial property of the State because they are not for public use, public purpose, and for the development of national
wealth?cralawred

The answer to this question can be found, among others, in the interaction discussed above between the PLA and PRD, on
the one hand, and the Civil Code, on the other, and will depend on the purpose for which an answer is necessary.

If, as in the present case, the purpose is to determine whether a grant or disposition of an alienable and disposable land of
the public domain has been made, then the PLA primarily applies and the Civil Code applies only suppletorily. The
possession and occupation that the PLA recognizes is based on its Section 48(b) and, until the requirements of this Section
are satisfied, the alienable and disposable land of the public domain remains a State property that can be disposed only
under the terms of Section 11 of the PLA. In the face of this legal reality, the question of whether - for purposes of
prescription - an alienable and disposable land of the public domain is patrimonial or not becomes immaterial; a public
land, even if alienable and disposable, is State property and prescription does not run against the State.42 In other words,
there is no room for any hairsplitting that would allow the inapplicable concept of prescription under the Civil Code to be
directly applied to an alienable and disposable land of the public domain before this land satisfies the terms of a grant
under Section 48(b) of the PLA.

Given this conclusion, any further discussion of the patrimonial character of alienable and disposable public lands under
the norms of the Civil Code is rendered moot and academic.

From the prism of the overriding regalian doctrine that all lands of the public domain are owned by the State, an applicant
for land registration invoking Section 14(2) of the PRD to support his claim must first clearly show that the land has been
withdrawn from the public domain through an express and positive act of the government.43

A clear express governmental grant or act withdrawing a particular land from the mass of the public domain is provided
both in the old and the prevailing Public Land Acts. These laws invariably provide that compliance with the required
possession of agricultural public land (under the first and second PLAs) or alienable and disposable land of the public
domain (under the prevailing PLA) in the manner and duration provided by law is equivalent to a government grant. Thus,
the land ipso jure becomes private land. It is only at that point that the "private land" requirement of Section 14(2)
materializes.44

Prescription

In my original Dissent (in response to the original ponencia), I discussed ordinary acquisitive prescription as an academic
exercise to leave no stone unturned in rejecting the ponencia's original conclusion that prescription directly applies to
alienable and disposable lands of the public domain under Section 14(2) of the PRD. I am happy to note that the present
ponencia has adopted, albeit without any attribution, part of my original academic discussion on the application of the
Civil Code, particularly on the subjects of patrimonial property of the State and prescription.

Specifically, I posited - assuming arguendo that the Civil Code applies - that the classification of a public land as alienable
and disposable does not per se signify that the land is patrimonial under the Civil Code since property, to be patrimonial,
must not be for public use, for public purpose or for the development of national wealth. Something more must be done or
shown beyond the fact of classification. The ponencia now concedes that "[T]here must also be an express government
manifestation that the property is already patrimonial or no longer retained for public use or the development of the
national wealth, under Article 422 of the Civil Code. And only when the property has become patrimonial can the
prescriptive period for the acquisition of property of the public domain begin to run."

I agree with this statement as it describes a clear case when the property has become private by the government's own
declaration so that prescription under the Civil Code can run. Note in this regard that there is no inconsistency between
this conclusion and the hierarchy of laws on lands of the public domain that I expounded on. To reiterate, the PLA applies
as a special and primary law when a public land is classified as alienable and disposable, and remains fully and
exclusively applicable until the State itself expressly declares that the land now qualifies as a patrimonial property. At that
point, the application of the Civil Code and its law on prescription are triggered. The application of Section 14(2) of the
PRD follows.

To summarize, I submit in this Concurring and Dissenting Opinion that:

1. The hierarchy of laws on public domain must be given full application in considering lands of the
public domain. Top consideration should be accorded to the Philippine Constitution, particularly its
Article XII, followed by the consideration of applicable special laws - the PLA and the PRD, insofar as
this Decree applies to lands of the public domain. The Civil Code and other general laws apply to the
extent expressly called for by the primary laws or to supply any of the latter's deficiencies.

2. The ruling in this ponencia and in Naguit that the classification of public lands as alienable and
disposable does not need to date back to June 12, 1945 at the latest, is wrong because:
 A. Under the Constitution's regalian doctrine, classification is a required step whose full
import should be given full effect and recognition; giving legal effect to possession prior
to classification runs counter to the regalian doctrine.

b. The Public Land Act applies only from the time a public land is classified as alienable
and disposable; thus, Section 48(b) of this law and the possession it requires cannot be
recognized prior to any classification.

c. Under the Civil Code, "[O]nly things and rights which are susceptible of being
appropriated may be the object of possession." Prior to the classification of a public land
as alienable and disposable, a land of the public domain cannot be appropriated; hence,
any claimed possession cannot have legal effects.

d. There are other modes of acquiring alienable and disposable lands of the public
domain under the Public Land Act; this legal reality renders the ponencia's absurdity
argument misplaced.

e. The alleged absurdity of the law addresses the wisdom of the law and is a matter for
the Legislature, not for this Court, to address.

Consequently, Naguit must be abandoned and rejected for being based on legally-flawed premises and for being an
aberration in land registration jurisprudence. At the very least, the present ponencia cannot be viewed as an authority on
the effective possession prior to classification since this ruling, by the ponencia's own admission, is not necessary for the
resolution of the present case.

ARTURO D. BRION

Endnotes:

1
 G.R. No. 144507, January 17, 2005, 442 SCRA 445.

2
 Commonwealth Act No. 141, as amended (CA 141).

3
 See Collado v. Court of Appeals, G. R. No. 107764, October 4, 2002, 390 SCRA 343.

4
 CONSTITUTION, Article XII, Section 2.

5
 See Republic v. Herbieto, G. R. No. 156117, May 26, 2005, 459 SCRA 182.

6
 Presidential Decree (PD) No. 1529, amending Act No. 496 that originally brought the Torrens system
into the Philippines in 1903.

7
 Substantive law is that which creates, defines and regulates rights, or which regulates the rights and
duties which give rise to a cause of action, that part of the law which courts are established to administer,
as opposed to adjective or remedial law, which prescribes the method of enforcing rights or obtain redress
for their invasion (Primicias v. Ocampo, 93 Phil. 446.) It is the nature and the purpose of the law which
determines whether it is substantive or procedural, and not its place in the statute, or its inclusion in a
code (Regalado, Remedial Law Compendium, Volume I [Ninth Revised Edition], p. 19). Note that
Section 55 of the PLA refers to the Land Registration Act (the predecessor law of the PRD) on how the
Torrens title may be obtained.

8
 CIVIL CODE, Book II (Property, Ownership and its Modifications), Articles 415-711.

9
 CIVIL CODE, Book III (Different Modes of Acquiring Ownership), Articles 1106-1155.

 See the consolidated cases of The Secretary of the Department of Environment and Natural Resources
10

v. Yap, G.R. No. 167707 and Sacay v. The Secretary of the Department of Environment and Natural
Resources, G.R. No. 173775, jointly decided on October 8, 2008 (the Boracay cases).

11
 CIVIL CODE, Article 18.

 Director of Lands and Director of Forest Development v. Intermediate Appellate Court and J. Antonio
12

Araneta, G.R. No. 73246, March 2, 1993, 219 SCRA 339.

13
 See the Boracay cases, supra note 8.

 See the opinion of Justice Reynato S. Puno (now Chief Justice) in Cruz v. Secretary of the Department
14

of Environment and Natural Resources (G.R. No. 135385, December 6, 2000, 347 SCRA 128) quoted in
Collado (supra note 2).

 Enunciated in the old case of Susi v. Razon and Director of Lands, 48 Phil. 424 (1925); See Abejaron v.
15

Nabasa, cited on p. 10 of this Dissent.

 PLA, Sections 49-56; the reference to the Land Registration Act (Act No. 496) should now be
16

understood to mean the PRD which repealed Act 496.

 An Act to Amend Subsection (b) of Section Forty Eight of Commonwealth Act Numbered One
17

Hundred Forty One, otherwise known as the The Public Land Act.

 Extending the Period of Filing Applications for Administrative Legislation (Free Patent) and Judicial
18

Confirmation of Imperfect and Incomplete Titles to Alienable and Disposable Lands in the Public
Domain Under Chapter VII and Chapter VIII of Commonwealth Act No. 141, As Amended, For Eleven
(11) Years Commencing January 1, 1977.

19
 G.R. No. 84831, June 20, 2001, 359 SCRA 47.

 Discontinuance of the Spanish Mortgage System of Registration and of the Use of Spanish Titles as
20

Evidence in Land Registration Proceedings.

21
 Section 1of PD 892 states:

SECTION 1. The system of registration under the Spanish Mortgage Law is

discontinued, and all lands recorded under said system which are not yet covered by
Torrens title shall be considered as unregistered lands.

All holders of Spanish titles or grants should apply for registration of their lands under
Act No. 496, otherwise known as the Land Registration Act, within six (6) months from
the effectivity of this decree. Thereafter, Spanish titles cannot be used as evidence of land
ownership in any registration proceedings under the Torrens system.

Hereafter, all instruments affecting lands originally registered under the Spanish
Mortgage Law may be recorded under Section 194 of the Revised Administrative Code,
as amended by Act. 3344.

 An Act Granting a Period ending on December 31, 2000 for Filing Applications for Free Patent and
22

Judicial Confirmation of Imperfect Title to Alienable and Disposable Lands of the Public Domain under
Chapters VII and VIII of the Public Land Act (CA 141, as amended).

23
 R.A. No. 9176, Section 2.

24
 See pp. 14-15 of the ponencia.

25
 Supra note 1.

26
 G.R. No. 156117, May 26, 2005, 459 SCRA 183, 201-202.

27
 440 Phil. 697 (2002); penned by Mme. Justice Consuelo Ynares-Santiago.

28
 CONSTITUTION, Article XII, Section 2.

 SECTION 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce,
29

shall from time to time classify the lands of the public domain into '

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

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

SECTION 7. For the purposes of the administration and disposition of alienable or

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

SECTION 8. Only those lands shall be declared open to disposition or concession which
have been officially delimited and classified and, when practicable, surveyed, and which
have not been reserved for public or quasi-public uses, nor appropriated by the
Government, nor in any manner become private property, nor those on which a private
right authorized and recognized by this Act or any other valid law may be claimed, or
which, having been reserved or appropriated, have ceased to be so. However, the
President may, for reasons of public interest, declare lands of the public domain open to
disposition before the same have had their boundaries established or been surveyed, or
may, for the same reason, suspend their concession or disposition until they are again
declared open to concession or disposition by proclamation duly published or by Act of
the National Assembly.

SECTION 9. For the purpose of their administration and disposition, the lands of the
public domain alienable or open to disposition shall be classified, according to the use or
purposes to which such lands are destined, as follows:

(a) Agricultural;

(b) Residential, commercial, industrial, or for similar productive

purposes;

(c) Educational, charitable, or other similar purposes;

(d) Reservations for town sites and for public and quasi-public uses.

The President, upon recommendation by the Secretary of Agriculture and Commerce,

shall from time to time make the classifications provided for in this section, and may, at
any time and in a similar manner, transfer lands from one class to another.

SECTION 10. The words "alienation," "disposition," or "concession" as used in this Act,

shall mean any of the methods authorized by this Act for the acquisition, lease, use, or
benefit of the lands of the public domain other than timber or mineral lands.

30
 See: Article 18, Civil Code.

31
 See: pp. 10-11 of this Dissent.

32
 See p. 20 of the ponencia.

33
 CA 141, Section 2.

34
 These are the Introductory Chapters and Books I to IV of the Civil Code.

35
 CIVIL CODE, Article 419.

36
 Id.., Article 420.

37
 Id.., Article 421.

38
 Id.., Article 425.

39
 Id.., Article 1108.

40
 Article 415 of the Civil Code defines immovable property, while Article 416 defines movable property.

41
 CIVIL CODE, Article 18.
 42
 Id.., Article 1108.

43
 Supra note 10, Director of Lands v. Intermediate Appellate Court.

44
 At this point, prescription can be invoked, not by the occupant/possessor who now owns the land in his
private capacity, but against the new owner by whomsoever shall then occupy the land and comply with
the ordinary or extraordinary prescription that the Civil Code ordains. This assumes that the new owner
has not placed the land under the Torrens system; otherwise, indefeasibility and imprescriptibility would
set in.

THIRD DIVISION

G.R. No. 170316, September 18, 2017

REPUBLIC OF THE PHILIPPINES, Petitioner, v. SPOUSES JOEL AND ANDREA NOVAL, ELLEN N. DELOS

REYES, DALE Y. NOVAL, WINNIE T. REFI, ZENAIDA LAO, AND DAISY N. MORALES, Respondents.

DECISION

LEONEN, J.:

When an applicant in the registration of property proves his or her open, continuous, exclusive, and notorious possession
of a land for the period required by law, he or she has acquired an imperfect title that may be confirmed by the State. The
State may not, in the absence of controverting evidence and in a pro forma opposition, indiscriminately take a property
without violating due process.

This Petition tor Review on Certiorari1 seeks to reverse and set aside the August 5, 2005 Decision2 and the October 28,
200 Resolution3 of the Court of Appeals in CA-G.R. CV No. 76912. The Court of Appeals sustained the Municipal Trial
Court April 19, 2002 Judgment in a land registration case granting the application for registration of title filed by Spouses
Joel and Andrea Noval (the Spouses Naval), Ellen N. delos Reyes (delos Reyes), Zenaida Lao (Lao), Winnie T. Refi
(Refi), Dale Y. Naval (Dale), and Daisy N. Morales (Morales) (collectively, applicants).

On September 8, 1999, the applicants sought the registration of their titles over the subdivided portions of a land in
Barangay Casili, Consolacion, Cebu, designated as Lot 4287 of Consolacion Cadastre. They alleged to have acquired their
respective portions of this land by "purchase, coupled with continuous, public, notorious, exclusive and peaceful
possession in the concept of an owner for more than 30 years including [the possession] of their predecessors-in-interest."
They also alleged that they were in actual possession of their respective portions of the property.4

The Republic through the Office of the Solicitor General, filed its Opposition on the ground that the applicants failed to
prove open, continuous, exclusive, and notorious possession of the property since June 12, 1945.5 It also argued that the
property sought to be registered was part of the public domain.6 It alleged that the tax declarations and tax payment
receipts attached to the application were not competent to show bona fide acquisition or open and continuous possession
of the land.7

The applicants' immediate predecessor-in-interest was Cecilia Alilin Quindao (Cecilia), who was already 73 years old
when she testified before the trial court. She said that she was familiar with Lot 4287 since she was 15 years old. Her
grandmother, Flaviana Seno Alilin (Flaviana), had already possessed and owned this property and enjoyed the fruits of 15
coconut trees already growing there. Her grandmother's possession was "peaceful exclusive, adverse, public and in the
concept of [an] owner."8

Cecilia's father, Miguel Alilin (Miguel), inherited the property when Flaviana died. 9 Cecilia was then 20 years
old.10 Miguel tilled and cultivated the land and planted root crops, corn and other plants.11 Their family enjoyed the fruits
of his cultivation of the land.12 When he died, Cecilia inherited the property.13 She also tilled the land and declared it in her
name for taxation.14 She even shared the produce of the land with her tenant. 15 Later, she sold the property to Joel Noval
(Joel) and Elizabeth Messerli (Messerli).16 Messerli sold her property to the Spouses Noval and Refi. 17 Soon the property
was partitioned as follows: Lot 1 to the Spouses Noval; Lot 2 to Gertrudes Noval, who later donated hiS, share to delos
Reyes; Lot 3 to Lao; Lot 4 to Refi; Lot 5 to Dale; and Lot 7 to Dale and Morales. 18 All of them later on took possession of
their respective portions and declared them in their respective names.19

The Municipal Trial Court granted their application for registration of title. It declared the applicants to be the absolute
owners and possessors of their respective lots, having established conclusively that they are the exclusive owners and
peaceful possessors of the properties. The trial court ordered the issuance of decrees of registration upon finality of its
judgment.20

The Republic appealed the Decision of the trial court, 21 arguing that the applicants failed to show open, continuous,
exclusive and notorious possession of alienable and disposable lands for 30 years. 22 It reiterated that tax declarations may
not be used as bases for the grant of the application.23 It added that there was no Department of Environment and Natural
Resources report submitted to show when the properties were declared alienable and disposable, for the purpose of
computin2 the 30-year period of possession required by law.24

The Court of Appeals, however, affirmed25 the Decision of the Municipal Trial Court.26

The Court of Appeals found that the required period of possession in land registration cases was satisfied. It noted that
Cecilia was already 73 years old when she testified in 2000 that the property had already been owned and possessed by
Cecilia's grandmother since Cecilia was 15 years old. It held that at 15 years of age, she was already competent to
perceive that her grandmother's possession was in the concept of an owner.27

The Court of Appeals also found that while the applicants did not submit a Department of Environment and Natural
Resources report showing that the property had been declared alienable and disposable, the Republic was not relieved of
the duty to present evidence that the land belongs to the public domain. It ruled that the burden is upon the State to prove
that land is public domain when it has been possessed and cultivated by an applicant and his or her predecessors-in-
interest for a considerable number of years without action from the State. The Court of Appeals added that the open,
continuous, adverse, and public possession of land from time immemorial confers an effective title to the possessor.28

The Court of Appeals likewise recognized that while tax declarations are not conclusive evidence of ownership, they may
give weight to a claim of ownership when coupled with open, adverse, and continuous possession.29

The Republic sought the reconsideration of the Court of Appeals Decision, but this was denied in a Resolution30 dated
October 28, 2005.31

Hence, this Petition32 was filed.

Petitioner argues that respondents failed to show that they or their predecessor-in-interest have been in open, continuous,
exclusive, and notorious possession and occupation of the land for the period required by law.33 It also contends that the
tax declarations presented by respondents are not conclusive evidence of ownership and possession for at least 30
years.34 It likewise asserts that the property may not be registered without a certification from the Department of
Environment and Natural Resources that it has been declared alienable and disposable.35 Failure to show such certification
means that the land belongs to the State.36 It submits that the burden of proof is upon respondents to show that Lot 4287
had already been declared alienable and disposable at the time of their application.37

Respondents, on the other hand, counter that Cecilia's testimony was sufficient to establish the nature of her possession
and that of her predecessors-in-interest. 38 Thy submit that the property has been declared for tax purposes since 1945 39 and
that while the Department of Environment and Natural Resources did not issue a certification, it did approve their survey
plan when the property was partitioned.40

For this Court's resolution is the sole issue of whether or not the Court of Appeals erred in affirming the trial court
decision to allow the Spouses Joel and Andrea Noval, Ellen N. delos Reyes, Dale Y. Noval, Winnie T. Refi, Zenaida Lao,
and Daisy N. Morales to register their respective portions of Lot 4287.
I

Any person seeking relief under Commonwealth Act No. 141, or the Public Land Act, admits that the property being
applied for is public land.

Under the Public Land Act, public lands may be disposed of through confirmation of imperfect or incomplete
titles.41 Confirmation of title may be done judicially or through the issuance of a free patent.42 The process for judicial
confirmation of title is outlined in Section 48 of the Public Land Act, as amended by Presidential Decree No. 1073:43
Section 48. The following described citizens of the Philippines, occupying lands of the public domain or
claiming to own any s ch lands or an interest therein. but whose titles have not been perfected or
completed, may apply to the Court of First Instance of the province where the land is located for
confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration
Act, to wit:

....

(b) Those who by themselves or through their predecessors in interest have been in the open, continuous,
exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a
bona fide claim of acquisition or ownership, except as against the government, since July twenty-sixth,
eighteen hundred and ninety-four, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall be
entitled to a certificate of title under the provisions of this chapter.
When a person applies for judicial confirmation of title, he or she already holds an incomplete or imperfect title over the
property being applied for, after having been in open, continuous, exclusive, and notorious possession and occupation
from June 12, 1945 or earlier. The date "June 12, 1945" is the reckoning date of the applicant's possession and occupation,
and not the reckoning date of when the property was classified as alienable and disposable. 44 In Heirs of Malabanan v.
Republic:45
[T]he choice of June 12, 1945 as the reckoning point of the requisite possession and occupation was the
sole prerogative of Congress, the determination of which should best be left to the wisdom of the
lawmakers. Except that said date qualified the period of possession and occupation, no other legislative
intent appears to be associated with the fixing of the date of June 12, 1945. Accordingly, the Court should
interpret only the plain and literal meaning of the law as written by the legislators.

Moreover, an examination of Section 48 (b) of the Public Land Act indicates that Congress prescribed no
requirement that the land subject of the registration should have been classified as agricultural since June
12, 1945, or earlier. As such, the applicant's imperfect or incomplete title is derived only from possession
and occupation sine June 12, 1945, or earlier. This means that the character of the property subject of the
application as alienable and disposable agricultural land of the public domain determines its eligibility for
land registration, not the ownership or title over it.46
Thus, a property applied for judicial confirmation of title may be classified as alienable and disposable at any time. For
the purposes of judicial confirmation of title, only possession and occupation must be reckoned from June 12, 1945.

II

The Public Land Act is a special law that applies only to alienable agricultural lands of the public domain, and not to
forests, mineral lands, and national parks.47Heirs of Malabanan v. Republic48 categorized alienable and disposable lands
into: "(a) patrimonial lands of the State, or those classified as lands of private ownership under Article 425 of the Civil
Code, without limitation; and (b) lands of the public domain, or the public lands as provided by the Constitution, but with
the limitation that the lands must only be agricultural." 49 Thus, for Section 48(b) of the Public Land Act to apply, the
property first, must be agricultural land of the public domain, and second, must have been declared as alienable and
disposable.50

Parenthetically, not all lands and natural resources, by default, belong to the State.

The theory that all lands belong to the State was introduced in this jurisdiction. during the Spanish colonization. When
Spain transferred sovereignty of the Philippines to the United States in 1898 through the Treaty of Paris, the United States
opted not to adopt this concept. Instead, it created new presumptions with respect to land ownership. This was thoroughly
explained in Carino v. Insular Government:51
It is true that Spain, in its earlier decrees, embodied the universal feudal theory that all lands were held
from the Crown, ... It is true also that, in legal theory, sovereignty is absolute, and that, as against foreign
nations, the United States may assert, as Spain asserted, absolute power. But it does not follow that, as
against the inhabitants of the Philippines, the United States asserts that Spain had such power. When,
theory is left on one side, sovereignty is a question of strength, and may vary in degree. How far a new
sovereign shall insist upon the theoretical relation of the subjects to the head in the pas{, and how far it
shall recognize actual facts, are matters for it to decide.

The Province of Benguet was inhabited by a tribe that the Solicitor General, in his argument,
characterized as a savage tribe that never was brought under the civil or military government of the
 Spanish Crown. It seems probable, if not certain, that the Spanish officials would not have granted to
anyone in that province the registration to which formerly the plaintiff was entitled by the Spanish laws,
and which would have made his title beyond question good. Whatever may have been the technical
position of Spain, it does not follow that, in the view of the United States, he had lost all rights and was a
mere trespasser when the present government seized his land. The argument to that effect seems to
amount to a denial of native titles throughout an important part of the island of Luzon, at least, for the
want of ceremonies which the Spaniards would not have permitted and had not the power to enforce.

The acquisition of the Philippines was not like the settlement of the white race in the United, States.
Whatever consideration may have been shown to the North American Indians, the dominant purpose of
the whites in America was to occupy the land. It is obvious that, however stated, the reason for our taking
over the Philippines was different. No one, we suppose, would deny that, so far as consistent with
paramount necessities, our first object in the internal administration of the islands is to do justice to the
natives, not to exploit their country for private gain. By the Organic Act of July 1, 1902, c. 1369, § 12, 32
Stat. 691, all the property and rights acquired there by the United States are to be administered "for the
benefit of the inhabitants thereof." It is reasonable to suppose that the attitude thus assumed by the United
States with regard to what was unquestionably its own is also its attitude in deciding what it will claim for
its own. The same statute made a bill of rights, embodying the safeguards of the Constitution, and, like
the Constitution, extends those safeguards to all. It provides that "no law shall be enacted in said islands
which shall deprive any person of life, liberty, or property without due process of law, or deny to any
person therein the equal protection of the laws." § 5. In the light of the declaration that we have quoted
from § 12, it is hard to believe that the United States was ready to declare in the next breath that "any
person" did not embrace the inhabitants of Benguet or that it meant by "property" only that which had
become such by ceremonies of which presumably a large part of the inhabitants never had heard, and that
it proposed to treat as public land what they, by native custom and by long association - one of the
profoundest factors in human thought - regarded as their own.52 (Emphasis supplied)
The United States chose to limit its sovereign exercise to the fiduciary administration of the Philippines. Instead of
exercising absolute power with respect to property rights, it chose to adopt due process as embodied in the Bill of Rights.
This due process clause is already found in our present Constitution. Thus, Article III, Section 1 of the Constitution states:
Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.
Most notably, however, Carino created a presumption against State ownership and recognized private property rights
independent of State grant. Thus:
[E]very presumption is and ought to be against the government in a case like the present. It might,
perhaps, be proper and sufficient to say that when, as far back testimony or memory goes, the land has
been held by individuals under a claim of private ownership, it will be presumed to have been held in the
same way from before the Spanish conquest, and never to have been public land.53
Carino did not qualify that the existence of property rights independent of State grant and the presumptions on land
registration apply only to the indigenous cultural communities, These principles can be seen in the present land
registration laws.

Under the Public Land Act, ownership is recognized if possession dates back since June 12, 1945 or earlier.54 The law
refers to this as "judicial legalization," which allows for agricultural public lands to be disposed of by the, State and
acquired by Filipino citizens.55

Presidential Decree No. 1529, or the Property Registration Decree, has a similar provision, but also recognizes ownership
through prescription.56 Section 14(1) of the Property Registration Decree provides:
Section 14. Who may apply. - The following persons may file in the proper Court of First Instance an
application for registration of title to land, whether personally or through their duly authorized
representatives: 
 
Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and
(1) notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim
of ownership since June 12, 1945, or earlier.
Section 14(1) does not vest or create a title to public land. 57 The procedure of registering one's title "simply recognizes and
documents ownership and provides for the consequences of issuing paper titles."58

These provisions are the latest versions of a catena of provisions on judicial confirmation of imperfect or incomplete
titles.59 All these laws recognize ownership acquired through possession and occupation in the concept of an owner.

That the law provides for confirmation of titles based on possession and occupation is an acknowledgment of the
existence of property rights independent of State grants. It is ail. acknowledgment $at registration is a means only to
document ownership already acquired.

Be that as it may, applicants for judicial confirmation of title must still comply with the requisites stated in Section 48(b)
of the Public Land Act and Section 14(1) of the Property Registration Decree:
 1. The applicant, by himself or through his predecessor-in-interest, has been in possession and
occupation of the property subject of the application;
2. The possession and occupation must be open, continuous, exclusive, and notorious;
3. The possession and occupation must be under a bona fide claim of acquisition of ownership;
4. The possession and occupation must have taken place since June 12, 1945, or earlier; and
5. The property subject of the application must be an agricultural land of the public domain.60

III

Petitioner argues that respondents were unable to prove that they and their predecessor-in-interest were able to prove their
open and continuous possession and occupation of the property for the period required by law. It describes respondents'
and their predecessor-in-interest's possession as mere casual cultivation, which is not the possession contemplated by land
registration laws.

Both the Municipal Trial Court and the Court of Appeals established that respondents and their predecessor-in-interest
were the exclusive owners and possessors of the land. Both courts affirmed that respondents have met the required period
of possession for land registration cases.61 They acknowledged the credibility of the testimony of respondents'
predecessor-in-interest, which established possession of Lot 4287 in the concept of an owner since 1942 or earlier.62 This
means that respondents and their predecessor-in-interest have already been in occupation and possession of the land for
more than 50 years at the time of their application for registration.

Only questions of law may be raised in a petition for review on certiorari.63 This Court has repeatedly said that findings of
facts of the lower courts deserve high respect since they are in the best position to pass judgment on the credibility of the
witnesses and their statements. This Court rarely questions facts as determined by the lower court, especially when they
are affirmed by the Court of Appeals. The findings of facts are often conclusive upon this Court, subject only to a few
exceptions:
(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures . . .; (2)
When the inference made is manifestly mistaken, absurd or impossible . . .; (3) Where there is a grave
abuse of discretion . . .; (4) When the judgment is based on a misapprehension of facts . . .; (5) When the
findings of fact are conflicting . . .; (6) When the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the admissions of both appellant and appellee . . .; (7)
The findings of the Court of Appeals are contrary to those of the trial court . . .; (8) When the findings of
fact are conclusions without citation of specific evidence on which they are based; (9) When the facts set
forth in the petition well as in the petitioners' main and reply briefs are not disputed by the respondents;
and (10) The finding of fact of the Court of Appeals is premised on the supposed absence of evidence and
is contradicted by the evidence on record . . .64
This case does not fall under any of the exceptions. Since the Court of Appeals affirmed the findings of the trial court, and
there is no showing that the conclusions made by both courts are either made with grave abuse of discretion or contrary to
the evidence presented and the law, this Court will not disturb these findings.

Respondents' predecessor-in-interest recalled her grandmother to have already cultivated fruit-bearing trees on Lot 4287
when she was 15 years old. Possession prior to that "can hardly be estimated . . . the period of time being so long that it is
beyond the reach of memory."65

Hence, respondents' and their predecessor-in-interest's possession is, with little doubt, more than 50 years at the time of
respondents' application for registration in 1999. This is more than enough to satisfy the period of possession required by
law for acquisition of ownership.

IV

The burden of proving that the property is an alienable and disposable agricultural land of the public domain falls on the
applicant, not the State.66 The Office of the Solicitor General, however, has the correlative burden to present effective
evidence of the public character of the land.67

In order to establish that an agricultural land of the public domain has become alienable and disposable, "an applicant
must establish the existence of a positive act of the government such as a presidential proclamation or an executive order;
an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a statute." 68 It is
settled that the declaration of alienability must be through executive fiat, as exercised by the Secretary of the Department
of Environment and Natural Resources.69Republic v. T.A.N. Properties70 provided further:
The applicant for land registration must prove that the [Department of Environment and Natural
Resources] Secretary had approved the land classification and released the land of the public domain as
alienable and disposable, and that the land subject of the application for registration falls within the
approved area per verification through survey by the [Provincial Environment and Natural Resources
Officer] or [City Environment and Natural Resources Officer]. In addition, the applicant for land
registration must present a copy of the original classification approved by the [Department of
Environment and Natural Resources] Secretary and certified as a true copy by the legal custodian of the
official records.71
Admittedly, respondents have failed to present any document from the Secretary of the Department of Environment and
Natural Resources certifying that the property is part of the alienable and disposable land of the public domain. On the
other hand, the Court of Appeals observed, as this Court has, that the Office of the Solicitor General has failed to "present
any evidence, testimonial or documentary evidence to support its opposition."72

When the State has no effective opposition, except for a pro forma opposition, to controvert an applicant's convincing
evidence of possession and occupation, presumptions are tilted to this applicant's favor.73 In Republic v. Barandiaran:74
"[W]here it appears that the evidence of ownership and possession are so significant and convincing, the
government is not necessarily relieved of its duty from presenting proofs to show that the parcel of land
sought to be registered is part of the public domain to enable [the courts] to evaluate the evidence of both
sides." . . . [W]hen the records shows that a certain property, the registration of title to which is applied
for has been possessed and cultivated by the applicant and his predecessors in interest for a long number
of years without the government taking any action to dislodge the occupants from their holdings, and
when the land has passed from one hand to another by inheritance or by purchase, the government is duty
bound to prove that the land which it avers to be of public domain is really of such nature. 75 (Citations
omitted)
Indeed, the Public Land Act itself establishes a conclusive presumption in favor of the possessor that all conditions
essential to a State grant, including the conversion of a land in the public domain to a private property, have been
performed, entitling him or her to a certificate of title.76

Therefore, when an applicant is shown to have been in open, continuous, exclusive, and notorious possession of a land for
the period required by law, he or she has acquired an imperfect title that may be confirmed by the State. The State may
not, for the simple reason that an applicant failed to show documents which the State is in the best position to acquire,
indiscriminately take an occupied property and unjustly and self-servingly refuse to acknowledge legally recognized
rights evidenced by possession, without violating due process.77

The burden of evidence lies on the party who asserts an affirmative allegation.78 Therefore, if the State alleges that lands
belong to it, it is not excused from providing evidence to support this allegation.79 This specially applies when the land in
question has no indication of being incapable of registration80 and has been exclusively occupied by an applicant or his or
her predecessor-in-interest without opposition-not even from the State.

Hence, when a land has been in the possession of the applicants and their predecessor-in-interest since time immemorial
and there is no manifest indication that it is unregistrable, it is upon the State to demonstrate that the land is not alienable
and disposable. "[A] mere formal opposition on the part of the [Solicitor General] . . ., unsupported by satisfactory
evidence, will not stop the courts from giving title to the claimant."81

This Court's previous rulings imposing the burden of overcoming the presumption that a land is public should only be
strictly applied when a manifestly unregistrable land is in danger of fraudulent titling-not when it will promote unfairness
and violation of due process rights.

Respondents' and their predecessor-in-interest's possession was never opposed, even at the time of application, by the
government agencies tasked to ensure that public lands remain public. There was neither indication nor mention that Lot
4287 was forest, timber land, or belonging to a reservation.

The State also kept silent on respondents' and their predecessor-in interest's continuously paid taxes. The burden to prove
the public character of Lot 4287 becomes more pronounced when the State continuously accepts payment of real property
taxes. This Court acknowledges its previous rulings that payment of taxes is not conclusive evidence of
ownership.82 However, it is good indicia of possession in the concept of an owner, and when coupled with continuous
possession, it constitutes strong evidence of title.

No person in the right mind would pay taxes on real property over which he or she does not claim any title. 83 Its
declaration not only manifests a sincere desire to obtain title to a property; it may be considered as an announcement of an
adverse claim against State ownership.84 It would be unjust for the State to take properties which have been continuously
and exclusively held since time immemorial without showing any basis for the taking, especially when it has accepted tax
payments without question.

However, despite these circumstances, petitioner failed to show any evidence that Lot 4287 remained public land. Instead,
it conveniently relied on the absence of a Department of Environment and Natural Resources certification.

Therefore, this Court is constrained to hold that respondents' evidence, coupled with the absence of contradictory evidence
from petitioner, substantially establishes that respondents have complied with the requisites of Section 48(b) of the Public
Land Act and Section 14(1) of the Property Registration Decree. The Municipal Trial Court and the Court of Appeals did
not err in approving the registration of the property.

WHEREFORE, the Petition is DENIED. The Decision dated August 5, 2005 of the Court of Appeals in CA-G.R. CV
No. 76912 is AFFIRMED.

SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

Endnotes:

1
Rollo, pp, 22-77.

 Id. at 79-87. The Decision was penned by Associate Justice Arsenio J. Magpale and concurred in by
2

Associate Justices Sesinando E. Villon and Enrico A. Lanzanas of the Nineteenth Division, Court of
Appeals, Cebu City.

 Id. at 89-90. The Resolution was penned by Associate Justice Arsenio J. Magpale and concurred in by
3

Associate Justices Vicente L. Yap and Enrico A. Lanzanas of the Special Former Nineteenth Division,
Court of Appeals, Cebu City.
4
 Id. at 11-12.
5
 Id. at 12, 32-33.
6
 Id. at 12 and 33.
7
 Id.
8
 Id. at 13 and 36.
9
 Id. at 13.
10
 Id.
11
 Id. at 13 and 36.
12
 Id. at 13.
13
 Id. at 13 and 36.
14
 Id. at 13.
15
 Id.
16
 Id. at 13 and 37-38.
17
 Id. at 13.
18
 Lot 6 remained in Cecilia's ownership and possession. (Rollo, pp. 38-39)
19
Rollo, p. 13.
20
 Id. at 13-14 and 38-40.
21
 Id. at 40.
22
 Id. at 15.
23
 Id.
24
 Id.
25
 Id. at 79-87.
26
 Id. at 87.
27
 Id. at 16.
28
 Id. at 18.
29
 Id. at 17-18.
30
 Id. at 89-90.
31
 Id. at 24 and 40.
32
 Id. at 22-77.
33
 Id. at 43-62.
34
 Id. at 62-65
35
 Id. at 65-72.
36
 Id.
37
 Id. at 71.
38
 Id. at 223.
39
 Id. at 224.
40
 Id. at 225.
41
 Com. Act No. 141 (1936), Sec. 11 (4).
42
 Com. Act No. 141 (1936), Sec. 11 (4)(a) and (b).
43
 Pres. Decree No. 1073, sec. 4 provides:

Section 4. The provisions of Section 46(b) aod Section 48(c), Chapter VIII of the Public Land Act are
hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of
the public domain which have been in open, continuous, exclusive and notorious possession and
occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of
acquisition of ownership, since June 12, 1945.
44
Heirs of Malabanan v. Republic, 717 Phil. 141, 165 (2013) [Per J. Bersamin, En Banc].
45
 717 Phil. 141 (2013) [Per J. Bersamin, En Banc].
46
 Id. at 165.
47
 Id. at 164.
48
 717 Phil. 141 (2013) [Per J. Bersamin, En Banc].
49
 Id. at 164.
50
 Id.
51
 212 US 449 (1909).
52
 Id. at 457-458.
53
 Id. at 460.
54
 Com. Act, Sec. 48(b).
55
 Com. Act No. 141, sec. 11 provides:

Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows, and not
otherwise:

(1) For homestead settlement;

(2) By sale;

(3) By lease; and

(4) By confirmation of imperfect or incomplete titles:

 (a) By judicial legalization; or

(b) By administrative legalization (free patent).

56
 Presidential Decree No. 1529, sec. 14(2).
57
See Concurring and Dissenting Opinion of J. Leonen in Heirs of Malabanan v. Republic, 717 Phil. 141,
207 (2013) [Per J. Bersamin, En Banc] and Republic v. Bautista, Jr., G.R. No. 66890, June 28, 2016
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2016/june2016/166890.pdf> 5 [Per
J. Bersamin, First Division].

 Concurring and Dissenting Opinion of J. Leonen in Heirs of Malabanan v. Republic, 717 Phil. 141, 207
58

(2013) [Per J. Bersamin, En Banc].

See also Act. Nos. 926, 2874, 3164, 3219, 3346 and 3517; Com. Act No. 141 (1936); Rep. Act No. 1942
59

(1957); Pres. Decree No. 1073 (1977).

La Tondeña. Inc. v. Republic, 765 Phil. 795, 811 (2015) [Per J. Leonen, Second Division] citing Heirs
60

of Mario Malabanan v. Republic, 717 Phil. 141 (2013) [Per J. Bersamin, En Banc].
61
Rollo, pp. 16-17.
62
 Respondents' predecessor-in-interest is Cecilia Alilin, whose first recollection of her grandmother's
ownership and possession of Lot 4287 was when she was 15 years old. If she was 73 years old in 2000,
the first recollection of her grandmother's possession was in 1942.
63
 RULES OF COURT, Rule 45, Sec. 1.
64
Medina v. Mayor Asistio, Jr., 269 Phil. 225, 232 (1990) [Per J. Bidin, Third Division].
65
Susi v. Razon, 48 Phil. 424, 427 (1925) [Per J. Villareal, En Banc].

See Republic v. T.A.N. Properties, Inc., 578 Phil. 441 (2908) [Per J. Carpio, First Division]; Republic v.
66

Naguiat, 515 Phil. 560 (2006) [Per J. Garcia, Second Division].

67
See Republic v. Barandiaran, 563 Phil. 1030 (2007) [Per J. Carpio Morales, Second Division].

Republic v. Court of Appeals, 440 Phil. 697, 710 (2002) [Per J. Ynares-Santiago, First Division] citing
68

Republic v. Bacus, 257 Phil. 387 (1989) [Per J. Cruz, First Division]; Republic v. De Porkan, 235 Phil. 93
(1987) [Per J. Fernan, Second Division]; and International Hardwood and Veneer Co. of the Philippines
v. University of the Philippines, 277 Phil. 636 (1991) [Per J. Davide, Jr., Third Division].
69
See Republic v. T.A.N. Properties, Inc., 578 Phil. 441 (2008) [Per J. Carpio, First Division], Republic v.
Hanover Worldwide Trading Corp., 636 Phil. 739 (2010) [Per J. Peralta, Second Division], Republic v.
Sese, G.R. No. 185092, June 4, 2014 [Per J. Mendoza, Third Division], Republic v. Vda. de Joson, 728
Phil. 550 (2014) [Per J. Bersamin, First Division], Republic v. Lualhati, 757 Phil. 119 (2015) [Per J.
Peralta, Third Division], Republic v. Local Superior of the Institute of the Sisters of the Sacred Heart of
Jesus of Ragusa, G.R. No. 185603, February 10, 2016, <http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/february2016/185603.pdf> [Per J. Reyes, Third Division]; Republic v. Vega,
654 Phil. 511 (2011) [Per J. Sereno, Third Division].
70
 578 Phil. 441 (2008) [Per J. Carpio, First Division].
71
 Id. at 452-453,
72
Rollo, p. 87.
73
See Republic v. Vega, 654 Phil. 511 (2011) [Per J. Sereno, Third Division].
74
 563 Phil. 1030 (2007) [Per J. Carpio Morales, Second Division].

 Id. at 1036 citing Guido Sinsuat v. Director of Lands, et al., 56 O.G. No. 42, 6487, 6489-6490, October
75

17, 1960 and Raymundo v. Bureau of Forestry and Diaz, 58 O.G. No. 37, 6019, 6021.

 Com. Act No. 141 (1936), Sec. 48 (b); See also Susi v, Razon, G.R. No. 24066, 48 Phil. 424, 427
76

(1925) [Per J. Villareal, En Banc].

77
 CONST., art. III, sec. 1.
78
See Clado-Reyes v. Limpe, 579 Phil. 669 (2008) [Per J. Quisumbing, Second Division].
79
See Republic v. Barandiaran, 563 Phil. 1030 (2007) [Per J. Carpio Morales, Second Division].

Rollo, pp. 169 and 193. On cross-examination, respondent-applicants testified that they bought the
80

property for residential purposes, and that Barangay Casili is already populated with so many
houses. See Memorandum of petitioner.

Republic v. Court of Appeals and Arquillo, 261 Phil. 393, 408 (1990) [Per J. Medialdea, First
81

Division] citing Ramos v. Director of Lands, 39 Phil. 175, 186 (1918) [Per J. Malcolm, En Banc]
and Republic v. Court of Appeals, 250 Phil. 82 (1988) [Per J. Regalado, Second Division].

See Republic v. Court of Appeals, 328 Phil. 238 (1996) [Per J. Torres, Jr., Second Division]; Clado-
82

Reyes v. Limpe, 579 Phil, 669 (2008) [Per J. Quisumbing, Second Division].
83
See Clado-Reyes v. Limpe, 479 Phil. 669 (2008) [Per J. Quisumbing, Second Division].
84
Republic v. Court of Appeals, 328 Phil. 238 (1996) [Per J. Torres, Jr., Second Division].
 SECOND DIVISION

G.R. No. 217336, October 17, 2018

REPUBLIC OF THE PHILIPPINES, Petitioner, v. SPS. ILDEFONSO ALEJANDRE AND ZENAIDA FERRER

ALEJANDRE, Respondents.

DECISION

CAGUIOA, J.:

Before the Court is a petition for review on certiorari1 (Petition) under Rule 45 of the Rules of Court (Rules) assailing the
Decision2 dated February 27, 2015 (Decision) of the Court of Appeals 3 (CA) in CA-G.R. CV No. 101259, which sustained
the Amended Decision4 dated June 12, 2008 of the Regional Trial Court of Bangued, Abra, Branch 2 (RTC) in LRC Case
No. N-20, which granted the respondents' application for registration of Lot 6487, Cad. 536, Ap-CAR-000007, with an
area of 256 square meters located at Barrio Poblacion, Municipality of Bangued, Province of Abra.

The Facts

The CA Decision narrates the antecedents as follows:

On July 18, 1991, Spouses Alejandre (applicants-spouses, for brevity) filed an application for the
registration of Lot No. 6487 under P.D. No. 1529, described in plan Ap-CAR-000007, Cad-536, with an
area of 256 square meters. They alleged that they are the owners of the subject property by virtue of a
deed of sale or conveyance; that the subject property was sold to them by its former owner Angustia
Lizardo Taleon by way of a Deed of Absolute Sale executed on June 20, 1990; that the said land is
presently occupied by the applicants-spouses.

On September 16, 1991, the Office of the Solicitor General, as counsel for the Republic, entered its
appearance.

On November 12, 1991, the Land Registration Authority (LRA, for brevity) submitted a Report noting
that there were discrepancies in the plan submitted by the applicant spouses, which discrepancies were
referred to the Lands Management Sector for verification and correction.

On January 30, 1992, the trial court issued an order of general default and allowed the applicants-spouses
to present their evidence.

On July 20, 1992, the trial court granted the applicant spouses' motion to submit original tracing cloth
plan and technical description for purposes of facilitating the approval of the re-surveyed plans as well as
the submission of the new plan for the scrutiny and approval of the LRA.

On August 10, 1992, the applicants-spouses filed their Formal Offer of Evidence. On April 26, 1993, they
submitted the corrected advance plan and technical description to the trial court.

On August 20, 1993, the LRA submitted its Supplementary Report stating that the "polygon does not
close" even after the corrections effected on the bearings and distances of the technical description were
made. Hence, the LRA requested for reverification and correction.

In an Order dated December 10, 1997, the trial court deemed the case submitted for decision.

Subsequently, or on April 15, 1998, the LRA submitted its Final Report stating that it applied the
corrected technical description of the subject lot and no more discrepancy exists, however, the area was
increased by six (6) meters. As such, on August 24, 1998, the trial court ordered the submission of
publication of the amended or new technical description. On May 6, 2000, the trial court issued another
Notice setting the case for Initial Hearing on July 25, 2000.

On June 1, 2000, the Republic filed its Opposition to the application based on the following grounds: (1)
that neither the applicants nor their predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation of the land in question since June 12, 1945 or earlier as required by
Section 48 (b) of Commonwealth Act No. 141 (CA 141), x x x as amended by Presidential Decree No.
1073 (PD 1073); (2) that applicants failed to adduce any muniment of title and/or the tax declarations
with the petition to evidence bona fide acquisition of the land applied for or of its open, continuous,
exclusive and notorious possession and occupation thereof in the concept of an owner since 12 June 1945
or earlier; that the tax declaration adverted to in the petition does not appear to be genuine and the tax
declaration indicates pretended possession of applicants to be of recent vintage[;] and (3) that the subject
property applied for is a portion of the public domain belonging to the Republic of the Philippines which
is not subject to private appropriation.
 After trial, the trial court rendered its Decision dated March 31, 2006 granting the application for
registration of title, the dispositive portion of which reads:
"WHEREFORE, premises considered, the Court finds the application to be well-taken
and the same is hereby granted.

Let a copy of this decision be furnished the Land Registration Authority, Office of the
Solicitor General and Bureau of Lands.

SO ORDERED."
On June 12, 2008, the trial court issued the Amended Decision which increased the area subject for land
registration to two hundred sixty-two square meters (262 sqm) from two hundred fifty-six square meters
(256 sqm) from the original decision.

Disagreeing with the trial court's grant of the application for land registration, the Republic interposed
[an] appeal [to the CA].5
Ruling of the CA

The CA in its Decision6 dated February 27, 2015 denied the appeal of the Republic. The dispositive portion thereof states:
WHEREFORE, premises considered, the present appeal is DENIED. Accordingly, the Amended
Decision of the Regional Trial Court of Bangued, Abra, Branch 2, is SUSTAINED.

SO ORDERED.7
The CA justified that based on the allegations of the applicants spouses Ildefonso Alejandre and Zenaida Ferrer Alejandre
(respondents) in their application for land registration and subsequent pleadings, they come under paragraph 4 of Section
14, Presidential Decree No. (PD) 15298 - those who have acquired ownership of lands in any manner provided for by law
- because they acquired the land in question by virtue of a Deed of Absolute Sale executed on June 20, 19909 from
Angustia Alejandre Taleon who acquired the land from her mother by inheritance.10

The Republic filed the instant Petition without filing a motion for reconsideration with the CA on the ground that the CA
decided the Republic's appeal in gross disregard of the law and in a manner not in accordance with the applicable
decisions of the Court.11

Respondents filed their "Comment and Compliance"12 dated July 18, 2016. The Republic filed a Reply13 dated March 3,
2017.

The Issue

The Petition raises this sole issue: whether the CA seriously misappreciated the facts as well as made findings which are
inconsistent with, or not supported by, the evidence on record; and gravely misapplied the applicable laws and
jurisprudence.14

The Court's Ruling

The Petition is impressed with merit.

The RTC Amended Decision justified the granting of the application for land registration under the Property Registration
Decree (PD 1529) on these factual findings:
It appears from the evidence presented that the applicants acquired the property sought to be registered by
means of a Deed of Absolute Sale [dated June 20, 1990 (Exh. "K" to "K5")] executed by Angustia
Alejandre Taleon as vendor in favor of the petitioners spouses Ildefonso Alejandre and Zenaida F.
Alejandre as vendees. Said property was previously inherited by the vendor from her late mother
Angustia Alejandre who inherited the same property from Don Santiago Alejandre, the grandfather of the
applicant Dr. Ildefonso Alejandre.15
The CA sustained the RTC Amended Decision in this wise:
Under Section 14 of PD No. 1529, there are four (4) types of applicants who may apply for registration of
title to land[,] viz[.]:
Section 14. Who may apply. The following persons may file in the proper Court of First
Instance an application for registration of title to land, whether personally or through their
duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open,

continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June
12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the
provision of existing laws.
 (3) Those who have acquired ownership of private lands or abandoned river beds by right
of accession or accretion under the existing laws.

(4) Those who have acquired ownership of land in any other manner provided for by
law. (Italics and Emphasis Ours)
In the case at bar, basing from the allegations of the applicants spouses in their application for land
registration and subsequent pleadings, clearly, they come under Paragraph 4 of the quoted section and not
under Paragraph 1 of the same section. It is undisputed that they acquired the land in question by virtue of
a Deed of Absolute Sale executed on June 20, 1990 from Angustia Alejandre Taleon who acquired the
land from her mother by inheritance. In other words, the applicant spouses acquired ownership over Lot
6487 through a contract of sale, which is well within the purview of Paragraph 4 of Section 14 of P.D.
No. 1529.

As a consequence, the requirement of open, continuous, exclusive and notorious possession and/or
occupation in the concept of an owner has no application in the case at bar. Not even the requirement that
the land applied for should have been declared disposable and alienable applies considering that this is
just one of the requisites to be proven when applicants for land registration fall under Paragraph 1 of
Section 14 of P.D. No. 1529, which is not the case at bar.16
The Republic argues that under the law, citing Section 24 of PD 1529 and Section 48(b) of Commonwealth Act No.
141,17 as amended by Section 4 of PD 1073,18 before an applicant can register his title over a particular parcel of land, he
must show that: (a) he, by himself or through his predecessors-in-interest, has been in open, continuous, exclusive and
notorious possession and occupation of the subject land under a bona fide claim of ownership since June 12, 1945, or
earlier; and (b) the subject land falls within the alienable and disposable portion of the public domain.19

The Republic also argues, citing Republic v. Sayo,20Director of Lands v. IAC21 and Director of Lands v. Aquino,22 that in
land registration proceedings, the applicant has the burden of overcoming the presumption that the land sought to be
registered belongs to the public domain or the presumption of State ownership of the lands of the public domain.23

Citing Bracewell v. Court of Appeals,24 the Republic further posits that to prove that the subject land is alienable, the
applicant must establish the existence of a positive act of the government, such as a presidential proclamation or an
executive order, an administrative action, investigation reports of Bureau of Land investigators, and a legislative act or a
statute, declaring the land as already alienable and disposable.25

Pursuant to Article 419 of the Civil Code, property, in relation to the person to whom it belongs, is either of public
dominion or of private ownership. As such, properties are owned either in a public capacity (dominio publico) or in a
private capacity (propiedad privado).26

There are three kinds of property of public dominion: (1) those intended for public use; (2) those intended for some public
service; and (3) those intended for the development of national wealth. This is provided in Article 420 of the Civil Code,
to wit:
ART. 420. The following things are property of public dominion:

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

(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
With respect to provinces, cities and municipalities or local government units (LGUs), property for public use "consist of
the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works
for public service paid for by said provinces, cities, or municipalities."27

In turn, the Civil Code classifies property of private ownership into three categories: (1) patrimonial property of the State
under Articles 421 and 422; (2) patrimonial property of LGUs under Article 424; and (3) property belonging to private
individuals under Article 425, hence:
ART. 421. All other property of the State, which is not of the character stated in the preceding article, is
patrimonial property.

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

xxxx

ART. 424. Property for public use, in the provinces, cities, and municipalities, consist of the provincial
roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works
for public service paid for by said provinces, cities, or municipalities.

All other property possessed by any of them is patrimonial and shall be governed by this Code, without
 prejudice to the provisions of special laws.

ART. 425. Property of private ownership, besides the patrimonial property of the State, provinces, cities,
and municipalities, consists of all property belonging to private persons, either individually or
collectively.
From the foregoing, property of private ownership or patrimonial property of the State may be sub-classified into:

(1) "By nature or use" or those covered by Article 421, which are not property of public dominion or imbued with public
purpose based on the State's current or intended use; and

(2) "By conversion" or those covered by Article 422, which previously assumed the nature of property of public dominion
by virtue of the State's use, but which are no longer being used or intended for said purpose. Since those properties
could only come from property of public dominion as defined under Article 420, "converted" patrimonial property of the
State are separate from and not a subset of patrimonial property "by nature or use" under Article 421.

With respect to lands, which are immovable property pursuant to Article 415(1) of the Civil Code, they can either be lands
of public dominion or of private ownership following the general classification of property under Article 419.

Section 3, Article XII of the 1987 Constitution, which embodies the Regalian doctrine, classifies lands of the public
domain into five categories - agricultural lands, forest lands, timber lands, mineral lands, and national parks. The
provision states:
SEC. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and
national parks. Agricultural lands of the public domain may be further classified by law according to the
uses to which they may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. x x x (Emphasis supplied)
Section 3 mandates that only lands classified as agricultural may be declared alienable, and thus susceptible of private
ownership. As the connotative term suggests, the conversion of land of the public domain into alienable and disposable
opens the latter to private ownership.28 At that point (i.e., upon the declaration of alienability and disposability), the land
ceases to possess the characteristics inherent in properties of public dominion that they are outside the commerce of man,
cannot be acquired by prescription, and cannot be registered under the land registration law,29 and accordingly assume the
nature of patrimonial property of the State that is property owned by the State in its private capacity.

As noted by Justice Edgardo L. Paras:

It is believed that forest and mining lands are properties of public dominion of the third class, i.e.,
properties for the development of the national wealth. Upon the other hand, the public agricultural lands
before being made available to the general public should also be properties of public dominion for the
development of the national wealth (and as such may not be acquired by prescription); but after being
made so available, they become patrimonial property of the State, and therefore subject to
prescription. Moreover, once already acquired by private individuals, they become private
property. x x x30 (Emphasis and underscoring supplied)
Thus, it can be gathered from the foregoing that the subject of the land registration application under Section 14 of PD
1529 is either alienable and disposable land of public domain or private land. While Section 14(4) does not describe or
identify the kind of land unlike in (1), which refer to "alienable and disposable lands of the public domain;" (2), which
refer to "private lands"; and (3) "private lands or abandoned river beds," the land covered by (4) cannot be other than
alienable and disposable land of public domain, i.e., public agricultural lands31 and private lands or lands of private
ownership in the context of Article 435.

This premise proceeds from the well-entrenched rule that all lands not appearing to be clearly of private dominion or
ownership presumptively belong to the State.32Accordingly, public lands not shown to have been classified,
reclassified or released as alienable agricultural land or alienated to a private person by the State remain part of
the inalienable lands of public domain.33 Therefore, the onus to overturn, by incontrovertible evidence, the
presumption that the land subject of an application for registration is alienable and disposable rests with the
applicant.34

Respondents, based on the evidence that they adduced, are apparently claiming ownership over the land subject of their
application for registration by virtue of tradition, as a consequence of the contract of sale, and by succession in so far as
their predecessors-in-interest are concerned. Both modes are derivative modes of acquiring ownership. Yet, they failed to
prove the nature or classification of the land. The fact that they acquired the same by sale and their transferor by
succession is not incontrovertible proof that it is of private dominion or ownership. In the absence of such incontrovertible
proof of private ownership, the well-entrenched presumption arising from the Regalian doctrine that the subject land is of
public domain or dominion must be overcome. Respondents failed to do this.

The real property tax declarations (Exhibits "L" and "M"), the Deed of Absolute Sale dated June 20, 1990 (Exhibit "K" to
"K5"), and the technical descriptions of the subject property (Exhibit "J") are insufficient evidence to overcome the
presumption that the land subject of the registration is inalienable land of public domain or dominion. Thus, respondents'
application for land registration should not have been granted.

WHEREFORE, the Petition is hereby GRANTED. The Decision dated February 27, 2015 of the Court of Appeals in
CA-G.R. CV No. 101259 and the Amended Decision dated June 12, 2008 of the Regional Trial Court of Bangued, Abra,
Branch 2 in LRC Case No. N-20 are REVERSED and SET ASIDE. Respondents' application for registration in LRC
Case No. N-20 is DISMISSED without prejudice.

SO ORDERED.

Carpio, Senior Associate Justice, (Chairperson), Perlas-Bernabe, A. Reyes, Jr., and J. Reyes, Jr.,*JJ., concur.

Endnotes:

*
 Designated additional Member per Special Order No. 2587 dated August 28, 2018.
1
Rollo, pp. 18-50, excluding Annexes.

 Id. at 52-60. Penned by Associate Justice Socorro B. Inting, with Associate Justices Hakim S.
2

Abdulwahid and Priscilla J. Baltazar-Padilla concurring.

3
 Fourth Division.
4
Rollo, pp. 61-63. Penned by Judge Corpus B. Alzate.
5
 Id. at 52-54.
6
 Id. at 52-60.
7
 Id. at 59.

 AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY

8

AND FOR OTHER PURPOSES, otherwise known as the "PROPERTY REGISTRATION DECREE".
9
 Also appears as June 28, 1990 in the RTC Decision and Amended Decision; see rollo, pp. 62 & 109.
10
Rollo, p. 56.
11
 Id. at 19.
12
 Id. at 158-168.
13
 Id. at 181-188.
14
 Id. at 26.
15
 Id. at 62.
16
 Id. at 56-57.

 AN ACT TO AMEND AND COMPILE THE LAWS RELATIVE TO LANDS OF THE PUBLIC
17

DOMAIN, otherwise known as the "PUBLIC LAND ACT".

 EXTENDING THE PERIOD OF FILING APPLICATIONS FOR ADMINISTRATIVE

18

LEGALIZATION (FREE PATENT) AND JUDICIAL CONFIRMATION OF IMPERFECT AND

INCOMPLETE TITLES TO ALIENABLE AND DISPOSABLE LANDS OF THE PUBLIC DOMAIN
UNDER CHAPTER VII AND CHAPTER VIII OF COMMONWEALTH ACT NO. 141, AS
AMENDED, FOR ELEVEN (11) YEARS COMMENCING JANUARY 1, 1977.
19
Rollo, p. 27.
20
 269 Phil. 74 (1990).
21
 292 Phil. 341 (1993).
22
 270 Phil. 392 (1990).
23
Rollo, p. 28.
24
 380 Phil. 156 (2000).
25
Rollo, p. 28.
26
 II Edgardo L. Paras, CIVIL CODE OF THE PHILIPPINES ANNOTATED, p. 40 (17th ed. 2013).
27
 CIVIL CODE, Art. 424, first par.
28
 Such as a patent, the latter being a contract between the State and the grantee.
29
 II Edgardo L. Paras, supra note 26, at 47-48.
30
 Id. at 55; citation omitted.
31
 Defined as those alienable portions of the public domain which are neither timber nor mineral lands.
Id., citing Alba Vda. De Raz v. CA, 372 Phil. 710, 736 (1999).

Republic v. T.A.N. Properties, Inc., 578 Phil. 441, 450 (2008), citing Republic v. Naguiat, 515 Phil. 560,
32

565 (2006).
33
Republic v. Naguiat, id. at 565, citing Menguito v. Republic, 401 Phil. 274, 277 & 287 (2000).
34
Republic v. T.A.N. Properties, Inc. supra note 32, at 450, citing Republic v. Naguiat, id.
 SECOND DIVISION
[ G.R. No. 208480, September 25, 2019 ]
REPUBLIC OF THE PHILIPPINES, PETITIONER, VS. NATIONAL COMMISSION ON INDIGENOUS
PEOPLES, REGISTER OF DEEDS OF BAGUIO CITY, LAND REGISTRATION AUTHORITY, HEIRS OF COSEN
PIRASO, REPRESENTED BY RICHARD A. ACOP, HEIRS OF JOSEPHINE MOLINTAS ABANAG,
REPRESENTED BY ISAIAS M. ABANAG, MARION T. POOL, JOAN L. GORIO, AND VIRGINIA C. GAO-AN,
RESPONDENTS.

DECISION
CARPIO, ACTING C.J.:

The Case

Before this Court is a Petition for Review[1] under Rule 45 of the Rules of Court assailing the Decision [2] and
Resolution[3] of the Court of Appeals in CA-G.R. SP No. 126498 dated 15 January 2013 and 22 July 2013, respectively.
The Decision dismissed the Petition for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction filed by petitioner Republic of the Philippines
(Republic) against public respondent National Commission on Indigenous Peoples (NCIP). The NCIP issued Certificates
of Ancestral Land Title (CALTs) in favor of private respondents, the heirs of Cosen Piraso (Pirasos) and private
respondents, the heirs of Josephine Molintas Abanag (Abanags) through Resolution Nos. 107-2010-AL[4] and 108-2010-
AL,[5] both dated 10 November 2010. Subsequently, public respondent Land Registration Auhority (LRA) issued the
corresponding Transfer Certificates of Title (TCTs) covering the said properties.[6]
The Antecedent Facts

Below are the facts of the case according to the Decision[7] of the Court of Appeals:
In Resolution No. 107-2010-AL, the petitioners are the heirs of Co[s]en "Sarah" Piraso, the daughter of
Piraso, otherwise known as Kapitan Piraso, an Ibaloi, who occupied an ancestral land located at what is
known as Session Road, Baguio City. Aside from having five (5) children, Kapitan Piraso also adopted,
in accordance with the Ibaloi tradition, a son in the name of Nimer. Nimer and his family, in turn, [have]
been planting and harvesting vegetables and fruit-bearing trees on several portions of the ancestral land.

Thereafter, the petitioners as represented by Richard A. Acop filed an application for the identification,
delineation and recognition of the ancestral land initially before Baguio NCIP City Office pursuant to the
provisions of R.A. 8371, otherwise known as the Indigenous Peoples' Rights Act of 1997 (IPRA). The
petitioners alleged that the subject ancestral land has been occupied, possessed, and utilized by them and
their [predecessors]-in-interest for so many years. Subsequently, the NCIP recognized the petitioners'
rights over the subject parcels of ancestral land after finding that the genealogy of the petitioners shows
an unbroken line of generations starting from Piraso who have never left the subject ancestral land for the
last 120 years.

In view of said findings, the NCIP ordered the issuance of eight (8) Certificates of Ancestral Land Titles
(CALTs) under the petitioners' names as well as that of Nimer.

With respect to Resolution No. 108-2010-AL, the petitioners are the heirs of Josephine Molintas Abanag,
who in turn was a descendant of an Ibaloi native named Menchi. Menchi originally owned several parcels
of ancestral land located in various parts of what is now known as Baguio City and these parcels were
subsequently inherited by his descendants.

Consequently, the petitioners as represented by Isaias M. Abanag and Marion T. Pool filed a petition for
 the identification, delineation and recognition of their ancestral lands in Baguio City pursuant to R.A.
8371. Thereafter, an ocular inspection was conducted which revealed the coverage of the ancestral lands
of the Molintas. In addition, the petitioners therein also submitted numerous pieces of documentary
evidence such as the narrative of customs and traditions of the Ibaloi community in Baguio City,
Assessment of Real Property, Tax receipts, photographs of improvements, rituals, and members of the
Molintas family led by Josephine Molintas Abanag. In the end, the NCIP granted the petition and ordered
the issuance of twenty-eight (28) CALTs covering the same number of parcels of ancestral land in the
name of the petitioners and Joan L. Gorio, a transferee of ten (10) parcels of land from the heirs of
Josephine Molintas Abanag.

Almost two (2) years after, here now comes the Republic of the Philippines as represented by the Office
of the Solicitor General (OSG) seeking to annul, reverse and set aside the assailed Resolutions of the
NCIP through this instant petition x x x.[8]

The Resolutions of the NCIP

In its Resolution No. 107-2010-AL[9] and Resolution No. 108-2010-AL[10] dated 10 November 2010, the NCIP held that
private respondents Pirasos and Abanags have vested rights over their ancestral lands on the basis of a native title and as
mandated by Article XII, Section 5 of the 1987 Constitution and Republic Act No. 8371 (RA 8371), otherwise known as
"The Indigenous Peoples' Rights Act of 1997."

The NCIP described native title as "the interests and rights of indigenous inhabitants in land, whether communal, group or
individual, possessed under the traditional laws acknowledged by, and the traditional customs observed by, the indigenous
inhabitants."[11] It "has its origin in and is given its content by the traditional laws acknowledged by and the traditional
customs observed by the indigenous inhabitants of a territory. The nature and incidents of native title must be ascertained
as a matter of fact by reference to those laws and customs."[12] The NCIP held that the Pirasos and Abanags' entitlement to
the land is mandated by Article XII, Section 5 of the 1987 Constitution which provides that "[t]he State, subject to the
provisions of this Constitution and national development policies and programs, shall protect the rights of indigenous
cultural communities to their ancestral lands to ensure their economic, social, and cultural well-being."

The said Resolutions granted both Petitions and directed the Ancestral Domains Office, through the Director, to prepare
the necessary CALTs for each respective parcel of land described. The NCIP ruled in both Resolutions that the Pirasos
and the Abanags are guaranteed the right to their ancestral lands provided for under Section 8,[13] RA 8371, and such other
rights granted by law.

The dispositive portion of Resolution No. 107-2010-AL provides:

WHEREFORE, premises considered, Petition is hereby GRANTED and the Ancestral Domains Office,
through the Director is directed to prepare eight (8) Certificate of Ancestral Land Titles (CALTs) for each
of the respective parcel of land described in the technical descriptions hereto attached, bearing CALT
number as follows:
    

1. CALT NO. CAR-BAG-1110-000268 for Parcel Lot 1

2. CALT NO. CAR-BAG-1110-000269 for Parcel Lot 2
3. CALT NO. CAR-BAG-1110-000270 for Parcel Lot 3
4. CALT NO. CAR-BAG-1110-000271 for Parcel Lot 4
5. CALT NO. CAR-BAG-1110-000272 for Parcel Lot 5
6. CALT NO. CAR-BAG-1110-000273 for Parcel Lot 6
7. CALT NO. CAR-BAG-1110-000274 for Parcel Lot 7 and
8. CALT NO. CAR-BAG-1110-000275 for Parcel Lot 8
Lot No. 1 shall be in the name of Manuel Nimer, of legal age, married, Filipino citizen, and with
residence and postal address at Upper Session Road, Baguio City while Lot Nos. 2, 3 and 4 shall be in the
name of the Heirs of Cosen Piraso represented by Richard A. Acop, of legal age, married, Filipino citizen,
and with residence and postal address at Acop, Tublay, Benguet Province and Lot Nos. 3, 5, 6, 7 and 8
shall be in the name of Joan L. Gorio of legal age, single, Filipino citizen, and with residence and postal
address at Romulo Drive, Pacdal, Baguio City.

Petitioners are guaranteed the right to ancestral lands provided for under Section 8, R.A. 8371 and such
other rights granted by law.

SO ORDERED.[14]
The dispositive portion of Resolution No. 108-2010-AL provides:
WHEREFORE, premises considered, Petition is hereby GRANTED and the Ancestral Domains Office,
through the Director, is directed to prepare Certificate of Ancestral Land Titles (CALTs) for each of the
respective parcel of ancestral land described in the technical descriptions, bearing CALT number as
follows:   
1. CALT NO. CAR-BAG-1110-000276 for Parcel Lot 1
 2. CALT NO. CAR-BAG-1110-000277 for Parcel Lot 2
3. CALT NO. CAR-BAG-1110-000278 for Parcel Lot 3
4. CALT NO. CAR-BAG-1110-000279 for Parcel Lot 4
5. CALT NO. CAR-BAG-1110-000280 for Parcel Lot 5
6. CALT NO. CAR-BAG-1110-000281 for Parcel Lot 6
7. CALT NO. CAR-BAG-1110-000282 for Parcel Lot 7
8. CALT NO. CAR-BAG-1110-000283 for Parcel Lot 8
9. CALT NO. CAR-BAG-1110-000284 for Parcel Lot 9
10. CALT NO. CAR-BAG-1110-000285 for Parcel Lot 10
11. CALT NO. CAR-BAG-1110-000286 for Parcel Lot 11
12. CALT NO. CAR-BAG-1110-000287 for Parcel Lot 12
13. CALT NO. CAR-BAG-1110-000288 for Parcel Lot 13
14. CALT NO. CAR-BAG-1110-000289 for Parcel Lot 14
15. CALT NO. CAR-BAG-1110-000290 for Parcel Lot 15
16. CALT NO. CAR-BAG-1110-000291 for Parcel Lot 16
17. CALT NO. CAR-BAG-1110-000292 for Parcel Lot 17
18. CALT NO. CAR-BAG-1110-000293 for Parcel Lot 18
19. CALT NO. CAR-BAG-1110-000294 for Parcel Lot 19
20. CALT NO. CAR-BAG-1110-000295 for Parcel Lot 20
21. CALT NO. CAR-BAG-1110-000296 for Parcel Lot 21
22. CALT NO. CAR-BAG-1110-000297 for Parcel Lot 22
23. CALT NO. CAR-BAG-1110-000298 for Parcel Lot 23
24. CALT NO. CAR-BAG-1110-000299 for Parcel Lot 24
25. CALT NO. CAR-BAG-1110-000300 for Parcel Lot 25
26. CALT NO. CAR-BAG-1110-000301 for Parcel Lot 26
27. CALT NO. CAR-BAG-1110-000302 for Parcel Lot 27
28. CALT NO. CAR-BAG-1110-000303 for Parcel Lot 28

Lots 1, 2, 4, 5, 6, 8, 10, 14, 15, 16, 18, and 21 will each be issued Certificates of Ancestral Land Title in
the name of the Heirs of Josephine Abanag and Heirs of Mercedes A. Tabon, represented by Isaias
Abanag, of legal age, single, Filipino, and with residence and postal address at No. 1 Gibraltar Road,
Pacdal, Baguio City and Marion T. Pool, of legal age, widow, Filipino, and with residence and postal
address at No. 1 Gibraltar Road, Pacdal, Baguio City[.]

Lots 11, 12, 13, 19, 22, 23, 25, 26, 27, and 30 will each be issued Certificates of Ancestral Land Title in
the name of Joan L. Gorio, of legal age, single, Filipino citizen and with residence and postal address at
Romulo Drive, Pacdal, Baguio City[.]

Lots 3, 7, 9, 20, 24, 29, 31 ad 32 will each be issued Certificates of Ancestral Land Title in the name of
Virginia C. Gao-an, of legal age, single, Filipino citizen, and with residence and postal address at Justice
Village, Baguio City.

Lot 17 will be issued a Certificate of Ancestral Land Title in the name of Virginia C. Gao-an, of legal age,
single, Filipino citizen, and with residence and postal address at Justice Village, Baguio City and the 600
sq.m. portion thereof will be in the name of Isaias Abanag, of legal age, single, Filipino citizen, and with
residence and postal address at No. 1 Gibraltar Road, Baguio City.

Lot 28 will be in the name of Virginia C. Gao-an, of legal age, single, Filipino citizen, and with residence
and postal address at Justice Village, Baguio City and the 1,000 sq.m. in the name of Isaias Abanag, of
legal age, single, Filipino citizen, and with residence and postal address at No. 1 Gibraltar Road, Baguio
City.

There was a Deed of Undertaking by the Petitioners supporting their claim. Petitioners are guaranteed the
right to ancestral lands provided for under Section 8, R.A. 8371 and such other rights granted by law.

SO ORDERED.[15]

The Ruling of the Court of Appeals

In its Decision[16] promulgated on 15 January 2013, the Court of Appeals "agrees with the finding of the NCIP that Baguio
City is no different from any part of the Philippines and that there is no sensible difference that merits the city's exclusion
from the coverage of the IPRA x x x."[17] The dispositive portion of the ruling provides:
WHEREFORE, premises considered, the instant Petition for Certiorari, Prohibition and Mandamus is
DENIED for lack of merit, the Prayer for Issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction are DENIED for being moot and academic and the assailed Resolution Nos. 107-
 2010-AL and 108-2010-AL both dated 10 November 2010 and both rendered by the National
Commission on Indigenous Peoples are hereby AFFIRMED.

SO ORDERED.[18]

The Issues

In this Petition, the Republic of the Philippines seeks a reversal of the decision of the Court of Appeals and raises the
following arguments:
1. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT
DECLARED THAT LANDS WITHIN BAGUIO CITY AND THE BAGUIO TOWNSITE
RESERVATION ARE COVERED BY IPRA, CONTRARY TO LAW AND JURISPRUDENCE
COROLLARY FOR THE FOLLOWING REASONS:
    

1. THE BAGUIO TOWNSITE RESERVATION, WITH THE EXCEPTION OF EXISTING

PROPERTY RIGHTS RECOGNIZED OR VESTED BEFORE THE EFFECTIVITY OF THE
IPRA, IS EXEMPT FROM THE COVERAGE OF SAID LAW AS PROVIDED IN SECTION 78
THEREOF.
2. THE NCIP HAS NO JURISDICTION TO ISSUE CALTS OVER LANDS WITHIN BAGUIO
CITY AND THE BAGUIO TOWNSITE RESERVATION, OUTSIDE OF THOSE OVER
WHICH PRIOR LAND RIGHTS  AND TITLES HAVE  BEEN  EARLIER  RECOGNIZED BY
JUDICIAL, ADMINISTRATIVE, OR OTHER PROCESSES BEFORE THE EFFECTIVITY OF
THE IPRA.

2. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE  ERROR  WHEN  IT 

RULED THAT  THE ASSAILED NCIP RESOLUTIONS ARE VALID, CONTRARY TO THE
CONSTITUTION AND APPLICABLE LAWS AND JURISPRUDENCE.
3. ASSUMING ARGUENDO THAT THE SUBJECT CERTIFICATES OF  ANCESTRAL  LAND
TITLES  ARE VALID,  THE  HONORABLE  COURT  OF  APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT UPHELD THE ISSUANCE OF TCT BASED ON THE CALTS.
THERE IS NO LAW WHICH ALLOWS THEIR CONVERSION INTO TORRENS CERTIFICATES
OF TITLE.[19]
The Republic seeks the issuance of a writ of preliminary prohibitory injunction, and a permanent injunction to restrain and
enjoin the NCIP from further issuing Certificates of Ancestral Domain Title (CADT) and CALTs in Baguio City. The
subject CALTs cover almost one-fifth (1/5) of the 57.49 square kilometers that comprise Baguio City.

The Ruling of this Court

We grant the petition.

Under the facts, the NCIP has

no legal authority to issue
CALTs or CADTs in favor of
the subject properties included
as Townsite Reservation areas
in Baguio City.

Republic Act No. 8371 (RA 8371) or the "Indigenous Peoples' Rights Act of 1997" (IPRA) expressly excludes the City of
Baguio from the application of the general provisions of the IPRA. Section 78 of RA 8371 provides that "[t]he City of
Baguio shall remain to be governed by its Charter and all lands proclaimed as part of its townsite reservation shall remain
as such until otherwise reclassified by appropriate legislation." Section 78 of RA 8371 states:
SECTION 78. Special Provision. — The City of Baguio shall remain to be governed by its Charter
and all lands proclaimed as part of its townsite reservation shall remain as such until otherwise
reclassified by appropriate legislation: Provided, That prior land rights and titles recognized and/or
acquired through any judicial, administrative or other processes before the effectivity of this Act shall
remain valid: Provided, further, That this provision shall not apply to any territory which becomes part of
the City of Baguio after the effectivity of this Act. (Emphasis supplied)
Section 78 is a special provision in the IPRA which clearly mandates that (1) the City of Baguio shall not be subject to
provisions of the IPRA but shall still be governed by its own charter; (2) all lands previously proclaimed as part of
the City of Baguio's Townsite Reservation shall remain as such; (3) the re-classification of properties within the
Townsite Reservation of the City of Baguio can only be made through a law passed by Congress; (4) prior land rights
and titles recognized and acquired through any judicial, administrative or other process before the effectivity of the
IPRA shall remain valid; and (5) territories which became part of the City of Baguio after effectivity of the IPRA are
exempted. Thus, RA 8371 is clear that, for properties part of the townsite reservation of Baguio City before the passage of
the IPRA, no new CALT or CADT can be issued by the NCIP. Under RA 8371, the NCIP is devoid of any power to re-
classify lands previously included as part of the Townsite Reservation of Baguio City before RA 8371 was
enacted. The said power to re-classify these properties is solely vested in Congress and can only be exercised by
Congress through the enactment of a new law. Such prohibition to reclassify is reiterated in the Implementing Rules of
the IPRA. Rule XIII, Section 1 of the IPRA law provides:
Section 1. Special Provision. The provisions of the Act relating to the civil, political, social and human
rights and those pertaining to the identification, delineation, recognition, and titling of ancestral lands and
domains are applicable throughout the country; Provided; That lands within the Baguio Townsite
Reservation shall not be reclassified except through appropriate legislation x x x. (Emphasis
supplied)
Section 78 of the IPRA is clear that the Charter of Baguio City shall govern the determination of land rights within Baguio
City and not the IPRA. The said declaration by Congress is conclusive. In fact, a review of the Congressional
Deliberations on both the House and Senate bills which gave birth to the IPRA reveal that the clear intent of the framers
is to exempt Baguio City's land areas particularly the Baguio City's Townsite Reservation from the coverage of the
IPRA. House Bill No. 9125 was sponsored by Abra Rep. Jeremias Zapata, then Chairman of the Committee on Cultural
Communities. The said House bill was originally authored and subsequently presented and defended on the floor by Rep.
Gregorio Andolana of North Cotabato. During the Congressional Debates, House Bill No. 9125 contained a special
provision on Baguio City. The particular provision, Section 86 was amended during the House Deliberations thereon, as
follows:
MR: AVILA: One last amendment, Mr. Speaker. On page 35, line 25 (27), after the phrase, "This Act
shall not apply to lands of the City of Baguio which shall remain to be covered by its charter and its
townsite reservation status," the phrase "NOTHING IN THIS ACT SHALL BE READ TO MEAN A
DIMINUTION OF PREVIOUS OR EXISTING RIGHTS," subject to style, Mr. Speaker.

MR. ZAPATA: The Committee accepts subject to style, Mr. Speaker.

THE DEPUTY SPEAKER (Mr. Perez, H.) Is there any objection? (Silence) The Chair hears none;
amendment is approved.[20] (Emphasis supplied)
Consequently, Section 86 was amended to read:
The City of Baguio shall remain to be governend by its Charter and all lands proclaimed as part of its
townsite reservation shall remain as such until otherwise reclassified by appropriate legislation: Provided,
That prior land rights and titles recognized and/or acquired through any judical, administrative or other
processes before the effectivity of this Act shall remain valid: Provided, further, That this provision shall
not apply to any territory which becomes part of the City of Baguio after the effectivity of this Act.[21]
The amended version of Section 86, House Bill No. 9125 was eventually adopted in whole as Section 78 of Senate Bill
No. 1728. Senate Bill No. 1728, sponsored by Senator Juan Flavier, passed into law as Republic Act No. 8371 or the
IPRA in 1997. The clear legislative intent is that, despite the enactment of the IPRA, Baguio City shall remain to be
governed by its charter and that all lands proclaimed as part of Baguio City's Townsite Reservation shall remain
to be a part of the Townsite Reservation unless reclassified by Congress. The NCIP cannot transgress this clear
legislative intent. The IPRA expressly excludes land proclaimed to be part of the Baguio Townsite Reservation. Absent
legislation passed by Congress, the Baguio Townsite Reservation shall belong to the public and exclusively for public
purpose. The Wright Park, the Secretary's Cottage, the Senate President's Cottage, the Mansion House, and the public
roads therein which are all covered by the assailed CALTs shall remain to exist for the benefit and enjoyment of the
public. These subject lands comprise of historical heritage and belong to the State. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:

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

(2)  Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)
While the IPRA does not generally authorize the NCIP to issue ancestral land titles within Baguio City, there are also
recognized exceptions under Section 78. These refer to (1) prior land rights and titles recognized and acquired through any
judicial, administrative or other process before the effectivity of the IPRA; and (2) territories which became part of
Baguio after the effectivity of the IPRA. For prior land rights, the remedy afforded to indigenous cultural communities is
Act No. 926.[22] Section 32 of Act No. 926 provides:

CHAPTER IV
FREE PATENTS TO NATIVE SETTLERS

Sec. 32. Any native of the Philippine Islands now as occupant and cultivator of
unreserved, unappropriated agricultural public land, as defined by the Act of Congress of
July first, nineteen hundred and two, who has continuously occupied and cultivated such
land, either by himself or through his ancestors, since August first, eighteen hundred and
ninety; or who prior to August first, eighteen hundred and ninety eight continuously
occupied and cultivated such land for three years immediately prior to said date, and who
has been continuously since July fourth, nineteen hundred and two, until the date of the
taking effect of this Act, an occupier and cultivator of such land, shall be entitled to have
 a patent issued to him without compensation for such tract of land, not exceeding sixteen
hectares, as hereinafter in this chapter provided.
On 1 September 1909, Baguio City was incorporated by the Philippine Assembly. On 12 April 1912, the Baguio Townsite
Reservation was established. Upon the establishment of the Baguio Townsite Reservation, there remained a question as to
what portions of the reservation were public and private. If declared private, such lands were registrable under Act No.
496 or the Land Registration Act, as provided for by Act No. 926 or the Public Land Act. In 1912, Civil Reservation Case
No. 1, General Land Registration Office (GLRO) Reservation Record No. 211 was filed with the Court of Land
Registration to resolve which lands were declared public and private. Section 62 of Act No. 926 provides:
Sec. 62. Whenever any lands in the Philippine Islands are set apart as town sites, under the provisions of
chapter five of this Act, it shall be lawful for the Chief of the Bureau of Public Lands, with the approval
of the Secretary of the Interior, to notify the judge of the Court of Land Registration that such lands have
been reserved as a town site and that all private lands or interests therein within the limits described
forthwith to be brought within the operation of the Land Registration Act, and to become registered land
within the meaning of said Registration Act. It shall be the duty of the judge of said court to issue a notice
thereof, stating that claims for all private lands of interests therein within the limits described must
be presented for registration under the Land Registration Act in the manner provided in Act
Numbered six hundred and twenty seven entitled "An Act to bring immediately under the operation of
the land Registration Act all lands lying within the boundaries lawfully set apart for military reservations,
and all land[s] desired to be purchased by the Government of the United [S]tates for military purposes."
The procedure for the purpose of this section and the legal effects thereof shall thereupon be in all respect
as provided in sections three, four, five, and six of said Act numbered six hundred and twenty seven.
(Emphasis supplied)
Under Act No. 627, any landowner affected by the declaration of military reservations must register their titles within the
period stated in the Land Registration Act. Otherwise, such land rights would be considered barred.[23] Pursuant to Section
62, the Court of First Instance (CFI) of Benguet issued a notice on 22 July 1915 requiring all persons claiming lots inside
the Baguio Townsite Reservation to file within six months from the date of the notice petitions for the registration of their
titles under Act No. 496. On 14 June 1922, the General Land Registration Office submitted to the CFI a report on the
applications for registration and the case was duly heard. On 13 November 1922, the CFI of Benguet, in resolving Civil
Reservation Case No. 1, held that all claims for private lands by all persons not presented for registration within the period
in Act No. 627 are barred forever. Notwithstanding the CFI decision, several native residents of Baguio City sought the
exclusion of lands occupied by them from the Baguio Townsite Reservation. Thus, on 16 August 1954, President Ramon
Magsaysay issued Administrative Order No. 55,[24] series of 1954. The said Order authorized the formation of a committee
to study the claims of the inhabitants, with a view of determining whether it was in public interest that the said
landholdings be segregated from the Baguio Townsite Reservation and opened to disposition under the Public Land Act.
Forty-eight (48) Igorot claimants originally filed claims under the said administrative order. Two hundred eighty-five
(285) others later filed additional claims.[25] Respondents were not among the original and additional
claimants. Finally, in Republic v. Fañgonil,[26] this Court laid to rest claims within the Baguio Townsite Reservation, to
wit:
This case is about the registration of lots located within the Baguio Townsite Reservation. As
background, it should be noted that in 1912 a petition was filed in the Court of Land Registration
regarding the Baguio Townsite Reservation, Expediente de Reserva No. 1, GLRO Reservation
Record No. 211. In 1914, when the Land Registration Court was abolished, the record was
transferred to the Court of First Instance of Benguet.

The purpose of Case No. 211 was to determine once and for all what portions of the Baguio Townsite
Reservation were private and registerable under Act No. 496 as provided in section 62 of Act No. 926.
Once so determined, no further registration proceeding would be allowed (Secs. 3 and 4, Act No. 627).

The court on July 22, 1915 issued a notice requiring all persons claiming lots inside the reservation to file
within six months from the date of the notice petitions for the registration of their titles under Act No.
496. On June 13, 1922, the General Land Registration Office submitted to the court a report regarding the
applications for registration. The case was duly heard.

Judge C. M. Villareal in a decision dated November 13, 1922 held that all lands within the Reservation
are public lands with the exception of (1) lands reserved for specified public uses and (2) lands claimed
and adjudicated as private property. He ruled that claims for private lands by all persons not presented for
registration within the period fixed in Act No. 627, in relation to the first Public Land Law, Act No.
926, were barred forever. (Secs. 3 and 4, Act No. 627.)

That 1922 decision established the rule that lots of the Baguio Townsite Reservation, being public
domain, are not registerable under Act No. 496. As held by Judge Belmonte in a 1973 case, the Baguio
Court of First Instance "has no Jurisdiction to entertain any land registration proceedings" under Act No.
496 and the Public Land Law, covering any lot within the Baguio Townsite Reservation which was
terminated in 1922 (Camdas vs. Director of Lands, L-37782, Resolution of this Court of March 8, 1974,
dismissing petition for review of Judge Belmonte's ruling).

In the instant case, after more than half a century from the 1922 decision declaring the townsite public
domain, or during the years 1972 to 1976, Modesta Paris, Lagya Paris, Samuel Baliwan, Pablo Ramos,
Jr., Josephine Abanag, Menita T. Victor, Emiliano Bautista and Odi Dianson filed with the Court of First
Instance of Baguio applications for the registration of lots (with considerable areas) inside the Baguio
Townsite Reservation.

Alternatively, they allege that in case the lots are not registerable under Act No. 496, then section 48 (b)
and (c) of the Public Land Law should be applied because they and their predecessors have been in
possession of the lots for more than thirty years.

The Director of Lands opposed the applications. He filed motions to dismiss on the grounds of lack of
jurisdiction, prescription and res judicata. He relied on the decision in the first registration case, a
proceeding in rem, which barred all subsequent registrations of the Baguio Townsite lots. He contended
that the disposition of said lots should be made by the Director of Lands under Chapter 11 of the Public
Land Law regarding Townsite Reservations. (See Cojuangco vs. Marcos, 82 SCRA 156).

The trial judge admits that section 48 cannot be invoked by the applicants because it applies only to
disposable agricultural lands situated outside the reservation. He concedes that lands within the Baguio
Townsite Reservation may not be acquired by long possession for over thirty years subsequent to Case
No. 211 (p. 195, Rollo).

But he refused to dismiss the application[s] because in his opinion "there is a necessity [for] the
presentation of satisfactory evidence in a regular hearing as to the presence or absence of complete
service of notice" so that the court can determine whether the applications are barred by res judicata. He
relies on the isolated case of Zarate vs. Director of Lands, 58 Phil. 156.

The Solicitor General assailed by certiorari that order denying the motions to dismiss.

Sections 3 and 4 of Act No. 627, the law governing military reservations, contemplate notification to two
classes of persons, namely, (1) those who are living upon or in visible possession of any part of the
military reservation and (2) persons who are not living upon or in visible possession but are absentees.

A distinction is made between these two classes of persons as to the manner in which service of the notice
shall be made. Service is complete as to absentees when publication of the notice in the newspaper is
completed and duly fixed upon the four corners of the premises. The six-month period commences to run
from that time.

On the other hand, as to those who are living upon or in visible possession of the lands, service is not
complete, and the six-month period does not begin to run until the notice is served upon them personally.
Their rights relative to the period within which they must respond are determined by the date of the
personal service.

Their notice was a personal notice given by personal service. Only such notice could set the running of
the six-month period against them. (Lagariza, Saba and Garcia vs. Commanding General, 22 Phil. 297,
302; Zarate vs. Director of Lands, 58 Phil. 156,159-160.)

As already noted, the fact is that the notice in Case No. 211 was issued on July 22,1915. The clerk of
court certified that 134 persons living upon or in visible possession of any part of the reservation
were personally served with notice of the reservation. Section 3 of Act No. 627 provides that the
certificate of the clerk of court is "conclusive proof of service". (Zarate case, pp. 158,162.)

In the Zarate case, the applications for registration of lots within the Baguio Townsite Reservation were
filed in 1930 and 1931 or more than eight years after the decision was rendered in 1922.

The Zarate case is truly an exceptional case because the applicants were able to prove that in 1915 they
were in visible occupation of their lots and the clerk of court did not serve personal notice upon them. The
expediente of Case No. 211 was then still existing. The Zarate case cannot be a precedent at this late
hour.

The situation in the Zarate case has not been duplicated since 1933. Judge Fangonil seeks to apply the
ruling therein to the instant eight cases. We find that his order is unwarranted or unreasonable. It would
reopen Case No. 211. It would give way to baseless litigations intended to be foreclosed by that 1912
case.

Private claimants to lands within the Baguio Townsite Reservation were given a chance to register
their lands in Case No. 211. The provisions of Act No. 627, allowing them to do so, are in harmony
with the 1909 epochal decision of Justice Holmes in Cariño vs. Insular Government, 212 U.S. 449,41
Phil. 935. The two Igorots named Zarate and those who were allowed to register their lots in Case
No. 211, like Mateo Cariño, the Igorot involved in the Cariño case, inherited their lands from their
ancestors. They had possession of the lands since time immemorial. The Igorots were allowed to
 avail themselves of registration under Act No. 496.

Here, the eight applicants do not base their applications under Act No. 496 on any purchase or
grant from the State nor on possession since time immemorial. That is why Act No. 496 cannot
apply to them. (See Manila Electric Company vs. Castro-Bartolome, L- 49623, June 29, 1982, 114
SCRA 799.) They are not "Igorot claimants" (See p. 35, Memo of Solicitor General).

Moreover, Annex I of the petition for certiorari shows that the previous attempts of some applicants and
their predecessors to reopen Case No. 211 were dismissed as shown below:

Name Date Filed Date Dismissed

1) Samuel Baliwan Dec. 27, 1968 Aug. 15, 1970

2) Tommy Banguillas,
  predecessor of
Pablo Ramos, Jr. May 6, 1965 June 19, 1967

3) Josephine Abanag Jan. 9, 1961 July 9, 1963

4) Sergio Molintas,
predecessor of    
Josephine Abanag Dec. 26, 1968 Oct. 31, 1974

5) Josephine Abanag April 26, 1966 Nov. 12, 1974

6) Lagya Paris Oct. 15, 1965 Nov. 13, 1974

In the case of Abanag, she succeeded to two lots claimed by Sumay and Molintas for which Torrens titles
were issued in Case No. 211 on October 21, 1919 (Annexes J and K of Petition). The lots, which Abanag
now seeks to register, were not previously claimed by her predecessors in Case No. 211 (p. 33, Sol. Gen.'s
Memo).

We hold that the trial court erred in requiring the presentation of evidence as to the notice required under
Act No. 627. Such evidence cannot be produced at this time because the court record of Case No. 211
was completely destroyed during the last war.

Anyway, the applicants have the burden of proving that their predecessors were living upon or in visible
possession of the lands in 1915 and were not served any notice. If they have such evidence, apart from
unreliable oral testimony, they should have produced it during the hearing on the motions to dismiss.

To support his motions to dismiss, the Solicitor General introduced evidence proving that after Case No.
211 it has always been necessary to issue Presidential proclamations for the disposition of portions of the
Baguio Townsite Reservation (Annex E of Petition).

The period of more than fifty years completely bars the applicants from securing relief due to the alleged
lack of personal notice to their predecessors. The law helps the vigilant but not those who sleep on their
rights. "For time is a means of destroying obligations and actions, because time runs against the slothful
and contemners of their own rights."

WHEREFORE, the order denying the motions to dismiss is reversed and set aside. The applications for
registration are hereby dismissed. No costs.

SO ORDERED. [27] (Boldfacing supplied, italicization  in the original)

In Fañgonil, the alleged claims were not previously claimed by the predecessors-in-interest and, therefore, the Court
declared that the said properties were not susceptible of registration. Since the claimants did not base their applications
under Act No. 496 or any purchase from the State, the Court held that the said claims were not considered valid native
claims. Under Fañgonil, 134 persons living upon or in visible possession were personally served with the notice of
reservation. Section 3 of Act No. 627 provides that the certification by the clerk of court is "conclusive proof of service"
of the said notice. Since respondents in the present case claim possession since time immemorial, their predecessors were
necessarily given notice of the reservation and, hence, should have filed their claims within the stated period. However,
no such claim was filed. In fact, the said lots in the present case were not shown to be part of any ancestral land
prior to the effectivity of the IPRA. To stress, private respondents' rights over the subject properties located in the
Townsite Reservation in Baguio City were never recognized in any administrative or judicial proceedings prior to
the effectivity of the IPRA law. The CALTs and CADTs issued by the NCIP to respondents are thus void.

WHEREFORE, the Court GRANTS the petition. The Court REVERSES the Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 126498. The National Commission on Indigenous Peoples Resolution Nos. 107-2010-AL and
108-2010-AL; O-CALT Nos. 129 and 130 including corresponding TCT Nos. with CALT Nos.:
CALT NO. CAR-BAG-1110-000268 for Parcel Lot 1
CALT NO. CAR-BAG-1110-000269 for Parcel Lot 2
CALT NO. CAR-BAG-1110-000270 for Parcel Lot 3
CALT NO. CAR-BAG-1110-000271 for Parcel Lot 4
CALT NO. CAR-BAG-1110-000272 for Parcel Lot 5
CALT NO. CAR-BAG-1110-000273 for Parcel Lot 6
CALT NO. CAR-BAG-1110-000274 for Parcel Lot 7
CALT NO. CAR-BAG-1110-000275 for Parcel Lot 8
CALT NO. CAR-BAG-1110-000276 for Parcel Lot 1
CALT NO. CAR-BAG-1110-000277 for Parcel Lot 2
CALT NO. CAR-BAG-1110-000278 for Parcel Lot 3
CALT NO. CAR-BAG-1110-000279 for Parcel Lot 4
CALT NO. CAR-BAG-1110-000280 for Parcel Lot 5
CALT NO. CAR-BAG-1110-000281 for Parcel Lot 6
CALT NO. CAR-BAG-1110-000282 for Parcel Lot 7
CALT NO. CAR-BAG-1110-000283 for Parcel Lot 8
CALT NO. CAR-BAG-1110-000284 for Parcel Lot 9
CALT NO. CAR-BAG-1110-000285 for Parcel Lot 10
CALT NO. CAR-BAG-1110-000286 for Parcel Lot 11
CALT NO. CAR-BAG-1110-000287 for Parcel Lot 12
CALT NO. CAR-BAG-1110-000288 for Parcel Lot 13
CALT NO. CAR-BAG-1110-000289 for Parcel Lot 14
CALT NO. CAR-BAG-1110-000290 for Parcel Lot 15
CALT NO. CAR-BAG-1110-000291 for Parcel Lot 16
CALT NO. CAR-BAG-1110-000292 for Parcel Lot 17
CALT NO. CAR-BAG-1110-000293 for Parcel Lot 18
CALT NO. CAR-BAG-1110-000294 for Parcel Lot 19
CALT NO. CAR-BAG-1110-000295 for Parcel Lot 20
CALT NO. CAR-BAG-1110-000296 for Parcel Lot 21
CALT NO. CAR-BAG-1110-000297 for Parcel Lot 22
CALT NO. CAR-BAG-1110-000298 for Parcel Lot 23
CALT NO. CAR-BAG-1110-000299 for Parcel Lot 24
CALT NO. CAR-BAG-1110-000300 for Parcel Lot 25
CALT NO. CAR-BAG-1110-000301 for Parcel Lot 26
CALT NO. CAR-BAG-1110-000302 for Parcel Lot 27
CALT NO. CAR-BAG-1110-000303 for Parcel Lot 28
and all derivative titles thereto issued subsequent to the filing of the petition are declared NULL and VOID.

SO ORDERED.

Caguioa, Reyes, J., Jr., Lazaro-Javier, and Zalameda, JJ., concur.

 EN BANC

[G.R. NO. 164527 : August 15, 2007]

FRANCISCO I. CHAVEZ, Petitioner, v. NATIONAL HOUSING AUTHORITY, R-II BUILDERS, INC., R-II

HOLDINGS, INC., HARBOUR CENTRE PORT TERMINAL, INC., and MR. REGHIS ROMERO
II, Respondents.

DECISION

VELASCO, JR., J.:

In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order and/or Writ of Preliminary
Injunction under Rule 65, petitioner, in his capacity as taxpayer, seeks:

to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993 between the National Housing
Authority and R-II Builders, Inc. and the Smokey Mountain Development and Reclamation Project embodied therein; the
subsequent amendments to the said JVA; and all other agreements signed and executed in relation thereto - including, but
not limited to the Smokey Mountain Asset Pool Agreement dated 26 September 1994 and the separate agreements for
Phase I and Phase II of the Project as well as all other transactions which emanated therefrom, for being
UNCONSTITUTIONAL and INVALID;

to enjoin respondents'particularly respondent NHA from further implementing and/or enforcing the said project and other
agreements related thereto, and from further deriving and/or enjoying any rights, privileges and interest therefrom x x x;
andcralawlibrary

to compel respondents to disclose all documents and information relating to the project including, but not limited to, any
subsequent agreements with respect to the different phases of the project, the revisions over the original plan, the
additional works incurred thereon, the current financial condition of respondent R-II Builders, Inc., and the transactions
made respecting the project.1

The Facts

On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO) 1612 approving and directing
the implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan (the Plan). The
Metro Manila Commission, in coordination with various government agencies, was tasked as the lead agency to
implement the Plan as formulated by the Presidential Task Force on Waste Management created by Memorandum
Circular No. 39. A day after, on March 2, 1988, MO 161-A3 was issued, containing the guidelines which prescribed the
functions and responsibilities of fifteen (15) various government departments and offices tasked to implement the Plan,
namely: Department of Public Works and Highway (DPWH), Department of Health (DOH), Department of Environment
and Natural Resources (DENR), Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine Constabulary Integrated National
Police, Philippine Information Agency and the Local Government Unit (referring to the City of Manila), Department of
Social Welfare and Development, Presidential Commission for Urban Poor, National Housing Authority (NHA),
Department of Labor and Employment, Department of Education, Culture and Sports (now Department of Education),
and Presidential Management Staff.

Specifically, respondent NHA was ordered to "conduct feasibility studies and develop low-cost housing projects at the
dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects." 4 On the other hand, the DENR was
tasked to "review and evaluate proposed projects under the Plan with regard to their environmental impact, conduct
regular monitoring of activities of the Plan to ensure compliance with environmental standards and assist DOH in the
conduct of the study on hospital waste management."5

At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland in Balut, Tondo, Manila,
where numerous Filipinos resided in subhuman conditions, collecting items that may have some monetary value from the
garbage. The Smokey Mountain dumpsite is bounded on the north by the Estero Marala, on the south by the property of
the National Government, on the east by the property of B and I Realty Co., and on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain low-cost housing project which
resulted in the formulation of the "Smokey Mountain Development Plan and Reclamation of the Area Across R-10" or the
Smokey Mountain Development and Reclamation Project (SMDRP; the Project). The Project aimed to convert the
Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across R-10,
adjacent to the Smokey Mountain as the enabling component of the project.6 Once finalized, the Plan was submitted to
President Aquino for her approval.

On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was enacted. 7 Its declared
policy under Section 1 is "[t]o recognize the indispensable role of the private sector as the main engine for national growth
and development and provide the most appropriate favorable incentives to mobilize private resources for the purpose."
Sec. 3 authorized and empowered "[a]ll government infrastructure agencies, including government-owned and controlled
corporations and local government units x x x to enter into contract with any duly pre-qualified private contractor for the
financing, construction, operation and maintenance of any financially viable infrastructure facilities through the build-
operate-transfer or build and transfer scheme."

RA 6957 defined "build-and-transfer" scheme as "[a] contractual arrangement whereby the contractor undertakes the
construction, including financing, of a given infrastructure facility, and its turnover after the completion to the government
agency or local government unit concerned which shall pay the contractor its total investment expended on the project,
plus reasonable rate of return thereon." The last paragraph of Sec. 6 of the BOT Law provides that the repayment scheme
in the case of "land reclamation or the building of industrial estates" may consist of "[t]he grant of a portion or percentage
of the reclaimed land or industrial estate built, subject to the constitutional requirements with respect to the ownership of
lands."

On February 10, 1992, Joint Resolution No. 038 was passed by both houses of Congress. Sec. 1 of this resolution
provided, among other things, that:

Section 1. There is hereby approved the following national infrastructure projects for implementation under the provisions
of Republic Act No. 6957 and its implementing rules and regulations:

xxx

(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and related facilities;

xxx

(k) Land reclamation, dredging and other related development facilities;

(l) Industrial estates, regional industrial centers and export processing zones including steel mills, iron-
making and petrochemical complexes and related infrastructure and utilities;

xxx

(p) Environmental and solid waste management-related facilities such as collection equipment,
composting plants, incinerators, landfill and tidal barriers, among others; andcralawlibrary

(q) Development of new townsites and communities and related facilities.

This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the approval of all national
infrastructure projects by the Congress.

On January 17, 1992, President Aquino proclaimed MO 4159 approving and directing the implementation of the SMDRP.
Secs. 3 and 4 of the Memorandum Order stated:

Section 3. The National Housing Authority is hereby directed to implement the Smokey Mountain Development Plan and
Reclamation of the Area Across R-10 through a private sector joint venture scheme at the least cost to the government.

Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed to the National Housing
Authority as well as the area to be reclaimed across R-10. (Emphasis supplied.)

In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of proposals regarding the
technical feasibility of reclamation, while the DENR was directed to (1) facilitate titling of Smokey Mountain and of the
area to be reclaimed and (2) assist in the technical evaluation of proposals regarding environmental impact statements.10

In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the implementation of the
Plan, chaired by the National Capital Region-Cabinet Officer for Regional Development (NCR-CORD) with the heads of
the NHA, City of Manila, DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development Bank of the
Philippines (DBP) as members.11 The NEDA subsequently became a member of the EXECOM. Notably, in a September
2, 1994 Letter,12 PEA General Manager Amado Lagdameo approved the plans for the reclamation project prepared by the
NHA.

In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was created composed of the
technical representatives of the EXECOM "[t]o assist the NHA in the evaluation of the project proposals, assist in the
resolution of all issues and problems in the project to ensure that all aspects of the development from squatter relocation,
waste management, reclamation, environmental protection, land and house construction meet governing regulation of the
region and to facilitate the completion of the project."13

Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for the right to become NHA's
joint venture partner in the implementation of the SMDRP. The notices were published in newspapers of general
circulation on January 23 and 26 and February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13) contractors
who responded, only five (5) contractors fully complied with the required pre-qualification documents. Based on the
evaluation of the pre-qualification documents, the EXECOM declared the New San Jose Builders, Inc. and R-II Builders,
Inc. (RBI) as the top two contractors.14

Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and Financing Plan) of the top two
(2) contractors in this manner:

(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;

(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing Construction and
Reclamation;

(3) The DENR evaluated Technical Proposals on Waste Management and Disposal by conducting the
Environmental Impact Analysis; andcralawlibrary

(4) The NHA and the City of Manila evaluated the socio-economic benefits presented by the proposals.

On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the Philippines.

On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to approve the R-II Builders, Inc.
(RBI) proposal which garnered the highest score of 88.475%.

Subsequently, the EXECOM made a Project briefing to President Ramos. As a result, President Ramos issued
Proclamation No. 3915 on September 9, 1992, which reads:

WHEREAS, the National Housing Authority has presented a viable conceptual plan to convert the Smokey Mountain
dumpsite into a habitable housing project, inclusive of the reclamation of the area across Road Radial 10 (R-10) adjacent
to the Smokey Mountain as the enabling component of the project;

xxx

These parcels of land of public domain are hereby placed under the administration and disposition of the National
Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land
use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port-related
activities.

In order to facilitate the early development of the area for disposition, the Department of Environment and Natural
Resources, through the Lands and Management Bureau, is hereby directed to approve the boundary and subdivision
survey and to issue a special patent and title in the name of the National Housing Authority, subject to final survey and
private rights, if any there be. (Emphasis supplied.)

On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI "[s]ubject to
final review and approval of the Joint Venture Agreement by the Office of the President."16

On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement17 (JVA) for the development of the
Smokey Mountain dumpsite and the reclamation of the area across R-10 based on Presidential Decree No. (PD)
75718 which mandated NHA "[t]o undertake the physical and socio-economic upgrading and development of lands of the
public domain identified for housing," MO 161-A which required NHA to conduct the feasibility studies and develop a
low-cost housing project at the Smokey Mountain, and MO 415 as amended by MO 415-A which approved the
Conceptual Plan for Smokey Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project
"involves the clearing of Smokey Mountain for eventual development into a low cost medium rise housing complex and
industrial/commercial site with the reclamation of the area directly across [R-10] to act as the enabling component of the
Project."19 The JVA covered a lot in Tondo, Manila with an area of two hundred twelve thousand two hundred thirty-four
(212,234) square meters and another lot to be reclaimed also in Tondo with an area of four hundred thousand (400,000)
square meters.

The Scope of Work of RBI under Article II of the JVA is as follows:

a) To fully finance all aspects of development of Smokey Mountain and reclamation of no more than 40
hectares of Manila Bay area across Radial Road 10.

b) To immediately commence on the preparation of feasibility report and detailed engineering with
emphasis to the expedient acquisition of the Environmental Clearance Certificate (ECC) from the DENR.

c) The construction activities will only commence after the acquisition of the ECC, and

d) Final details of the contract, including construction, duration and delivery timetables, shall be based on
the approved feasibility report and detailed engineering.

Other obligations of RBI are as follows:

2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed Engineering as
approved by the Office of the President. All costs and expenses for hiring technical personnel, date
gathering, permits, licenses, appraisals, clearances, testing and similar undertaking shall be for the
account of the [RBI].

2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units complete with basic
amenities such as plumbing, electrical and sewerage facilities within the temporary housing project as
staging area to temporarily house the squatter families from the Smokey Mountain while development is
being undertaken. These temporary housing units shall be turned over to the [NHA] for disposition.

2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on the leveled
Smokey Mountain complete with basic utilities and amenities, in accordance with the plans and
specifications set forth in the Final Report approved by the [NHA]. Completed units ready for mortgage
take out shall be turned over by the [RBI] to NHA on agreed schedule.

2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10] as contained in
Proclamation No. 39 as the enabling component of the project and payment to the [RBI] as its asset share.

2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to complete all herein
development works to be undertaken on a phase to phase basis in accordance with the work program
stipulated therein.

The profit sharing shall be based on the approved pre-feasibility report submitted to the EXECOM, viz:

For the developer (RBI):

1. To own the forty (40) hectares of reclaimed land.

2. To own the commercial area at the Smokey Mountain area composed of 1.3 hectares, and

3. To own all the constructed units of medium rise low cost permanent housing units beyond the 3,500
units share of the [NHA].

For the NHA:

1. To own the temporary housing consisting of 3,500 units.

2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at the Smokey
Mountain area.

3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the Smokey Mountain area
to be awarded to qualified on site residents.

4. To own the Industrial Area site consisting of 3.2 hectares, and

5. To own the open spaces, roads and facilities within the Smokey Mountain area.
In the event of "extraordinary increase in labor, materials, fuel and non-recoverability of total project expenses," 20 the OP,
upon recommendation of the NHA, may approve a corresponding adjustment in the enabling component.

The functions and responsibilities of RBI and NHA are as follows:

For RBI:

4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to the expedient acquisition, with
the assistance of the [NHA] of Environmental Compliance Certificate (ECC) from the Environmental Management
Bureau (EMB) of the [DENR]. Construction shall only commence after the acquisition of the ECC. The Environment
Compliance Certificate (ECC) shall form part of the FINAL REPORT.

The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed engineering and architectural
drawings, technical specifications and other related and required documents relative to the Smokey Mountain area.

With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to develop the same in a manner that it
deems necessary to recover the [RBI's] investment, subject to environmental and zoning rules.

4.02 Finance the total project cost for land development, housing construction and reclamation of the PROJECT.

4.03 Warrant that all developments shall be in compliance with the requirements of the FINAL REPORT.

4.04 Provide all administrative resources for the submission of project accomplishment reports to the [NHA] for proper
evaluation and supervision on the actual implementation.

4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to the PROJECT, from the owners
of the adjacent lots for access road, water, electrical power connections and drainage facilities.

4.06 Provide temporary field office and transportation vehicles (2 units), one (1) complete set of computer and one (1)
unit electric typewriter for the [NHA's] field personnel to be charged to the PROJECT.

For the NHA:

4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within Smokey Mountain to the
Temporary Housing Complex or to other areas prepared as relocation areas with the assistance of the [RBI]. The [RBI]
shall be responsible in releasing the funds allocated and committed for relocation as detailed in the FINAL REPORT.

4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all necessary permits, licenses,
appraisals, clearances and accreditations for the PROJECT subject to existing laws, rules and regulations.

4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain and Reclamation Area while the
land development and construction of housing units are in progress to determine whether the development and
construction works are undertaken in accordance with the FINAL REPORT. If in its judgment, the PROJECT is not
pursued in accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to undertake necessary remedial
works. All expenses, charges and penalties incurred for such remedial, if any, shall be for the account of the [RBI].

4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x

4.11 Handle the processing and documentation of all sales transactions related to its assets shares from the venture such as
the 3,500 units of permanent housing and the allotted industrial area of 3.2 hectares.

4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be deducted from the proceeds due to the
[NHA].

4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for the Smokey Mountain and Reclamation
Area within 90 days upon submission of Survey returns to the Land Management Sector. The land titles to the 40-hectare
reclaimed land, the 1.3 hectare commercial area at the Smokey Mountain area and the constructed units of medium-rise
permanent housing units beyond the 3,500 units share of the [NHA] shall be issued in the name of the [RBI] upon
completion of the project. However, the [RBI] shall have the authority to pre-sell its share as indicated in this agreement.

The final details of the JVA, which will include the construction duration, costs, extent of reclamation, and delivery
timetables, shall be based on the FINAL REPORT which will be contained in a Supplemental Agreement to be executed
later by the parties.

The JVA may be modified or revised by written agreement between the NHA and RBI specifying the clauses to be
revised or modified and the corresponding amendments.
If the Project is revoked or terminated by the Government through no fault of RBI or by mutual agreement, the
Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable rate of return not
exceeding that stated in the feasibility study and in the contract as of the date of such revocation, cancellation, or
termination on a schedule to be agreed upon by both parties.

As a preliminary step in the project implementation, consultations and dialogues were conducted with the settlers of the
Smokey Mountain Dumpsite Area. At the same time, DENR started processing the application for the Environmental
Clearance Certificate (ECC) of the SMDRP. As a result however of the consultative dialogues, public hearings, the report
on the on-site field conditions, the Environmental Impact Statement (EIS) published on April 29 and May 12, 1993 as
required by the Environmental Management Bureau of DENR, the evaluation of the DENR, and the recommendations
from other government agencies, it was discovered that design changes and additional work have to be undertaken to
successfully implement the Project.21

Thus, on February 21, 1994, the parties entered into another agreement denominated as the Amended and Restated Joint
Venture Agreement22 (ARJVA) which delineated the different phases of the Project. Phase I of the Project involves the
construction of temporary housing units for the current residents of the Smokey Mountain dumpsite, the clearing and
leveling-off of the dumpsite, and the construction of medium-rise low-cost housing units at the cleared and leveled
dumpsite.23 Phase II of the Project involves the construction of an incineration area for the on-site disposal of the garbage
at the dumpsite.24 The enabling component or consideration for Phase I of the Project was increased from 40 hectares of
reclaimed lands across R-10 to 79 hectares.25 The revision also provided for the enabling component for Phase II of 119
hectares of reclaimed lands contiguous to the 79 hectares of reclaimed lands for Phase I. 26 Furthermore, the amended
contract delineated the scope of works and the terms and conditions of Phases I and II, thus:

The PROJECT shall consist of Phase I and Phase II.

Phase I shall involve the following:

A. the construction of 2,992 units of temporary housing for the affected residents while clearing and
development of Smokey Mountain [are] being undertaken

b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units of medium rise
housing and the development of the industrial/commercial site within the Smokey Mountain area

c. the reclamation and development of a 79 hectare area directly across Radial Road 10 to serve as the
enabling component of Phase I

Phase II shall involve the following:

A. the construction and operation of an incinerator plant that will conform to the emission standards of
the DENR

b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed under Phase I
to serve as the enabling component of Phase II.

Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from 3,500 units under the
JVA.27 However, it was required to construct 3,520 medium-rise low-cost permanent housing units instead of 3,500 units
under the JVA. There was a substantial change in the design of the permanent housing units such that a "loft shall be
incorporated in each unit so as to increase the living space from 20 to 32 square meters. The additions and changes in the
Original Project Component are as follows:

ORIGINAL CHANGES/REVISIONS

1. TEMPORARY HOUSING

Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life of 3 years,
gauge 26 G.I. roofing sheets future 12 SM floor area. use as permanent structures for
factory and warehouses mixed 17 sm & 12 sm floor area.

2. MEDIUM RISE MASS

HOUSING

Box type precast Shelter Conventional and precast component 20 square meter concrete
structures, 32 square floor area with 2.4 meter meter floor area with loft floor height; bare
type, 160 units/ (sleeping quarter) 3.6 m. floor building. height, painted and improved
 architectural façade, 80 units/building.

3. MITIGATING MEASURES

3.1 For reclamation work Use of clean dredgefill material below the MLLW and SM
material mixed with dredgefill above MLLW.

A. 100% use of Smokey Mountain material as dredgefill Use of Steel

Sheet Piles needed for longer depth of embedment.

b. Concrete Sheet Piles short depth of embedment

c. Silt removal approximately Need to remove more than 3.0

1.0 meter only meters of silt after sub-soil investigation.28

These material and substantial modifications served as justifications for the increase in the share of RBI
from 40 hectares to 79 hectares of reclaimed land.

Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA, the stipulated
cost for Phase I was pegged at six billion six hundred ninety-three million three hundred eighty-seven
thousand three hundred sixty-four pesos (PhP 6,693,387,364).

In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM submitted the ARJVA
for approval by the OP. After review of said agreement, the OP directed that certain terms and conditions
of the ARJVA be further clarified or amended preparatory to its approval. Pursuant to the President's
directive, the parties reached an agreement on the clarifications and amendments required to be made on
the ARJVA.

On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and Restated Joint
Venture Agreement (AARJVA)29 clarifying certain terms and condition of the ARJVA, which was
submitted to President Ramos for approval, to wit:

Phase II shall involve the following:

A. the construction and operation of an incinerator plant that will conform to the emission
standards of the DENR

b. the reclamation and development of 119-hectare area contiguous to that to be

reclaimed under Phase I to serve as the enabling component of Phase II, the exact size
and configuration of which shall be approved by the SMDRP Committee30

Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:

2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area directly across
Radial Road 10 (R-10) to serve as payment to the DEVELOPER as its asset share for Phase I and to
develop such land into commercial area with port facilities; provided, that the port plan shall be integrated
with the Philippine Port Authority's North Harbor plan for the Manila Bay area and provided further, that
the final reclamation and port plan for said reclaimed area shall be submitted for approval by the Public
Estates Authority and the Philippine Ports Authority, respectively: provided finally, that subject to par.
2.02 above, actual reclamation work may commence upon approval of the final reclamation plan by the
Public Estates Authority.

xxx

9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and shall read as
follows:

5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY through no fault of the
DEVELOPER, the AUTHORITY shall compensate the DEVELOPER for the value of the completed portions of, and
actual expenditures on the PROJECT plus a reasonable rate of return thereon, not exceeding that stated in the Cost
Estimates of Items of Work previously approved by the SMDRP Executive Committee and the AUTHORITY and stated
in this Agreement, as of the date of such revocation, cancellation, or termination, on a schedule to be agreed upon by the
parties, provided that said completed portions of Phase I are in accordance with the approved FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 199431 increasing the proposed area for
reclamation across R-10 from 40 hectares to 79 hectares,32 to wit:

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the
powers vested in me by the law, and as recommended by the SMDRP Executive Committee, do hereby
authorize the increase of the area of foreshore or submerged lands of Manila Bay to be reclaimed, as
previously authorized under Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s. 1992),
from Four Hundred Thousand (400,000) square meters, more or less, to Seven Hundred Ninety Thousand
(790,000) square meters, more or less.

On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591 conveying in favor of
NHA an area of 211,975 square meters covering the Smokey Mountain Dumpsite.

In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary Teofisto T. Guingona, Jr.,
approved the ARJVA as amended by the AARJVA.

On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No. 39, conveying in favor of
NHA a 401,485-square meter area.

On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC), now known as the Home
Guaranty Corporation, and the Philippine National Bank (PNB)33 executed the Smokey Mountain Asset Pool Formation
Trust Agreement (Asset Pool Agreement).34 Thereafter, a Guaranty Contract was entered into by NHA, RBI, and HIGC.

On June 23, 1994, the Legislature passed the Clean Air Act. 35 The Act made the establishment of an incinerator illegal and
effectively barred the implementation of the planned incinerator project under Phase II. Thus, the off-site disposal of the
garbage at the Smokey Mountain became necessary.36

The land reclamation was completed in August 1996.37

Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying
in favor of NHA an additional 390,000 square meter area.

During the actual construction and implementation of Phase I of the SMDRP, the Inter-Agency Technical Committee
found and recommended to the EXECOM on December 17, 1997 that additional works were necessary for the completion
and viability of the Project. The EXECOM approved the recommendation and so, NHA instructed RBI to implement the
change orders or necessary works.38

Such necessary works comprised more than 25% of the original contract price and as a result, the Asset Pool incurred
direct and indirect costs. Based on C1 12 A of the Implementing Rules and Regulations of PD 1594, a supplemental
agreement is required for "all change orders and extra work orders, the total aggregate cost of which being more than
twenty-five (25%) of the escalated original contract price."

The EXECOM requested an opinion from the Department of Justice (DOJ) to determine whether a bidding was required
for the change orders and/or necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated August 26, 1993
and November 12, 1993, opined that "a rebidding, pursuant to the aforequoted provisions of the implementing rules
(referring to PD 1594) would not be necessary where the change orders inseparable from the original scope of the project,
in which case, a negotiation with the incumbent contractor may be allowed."

Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a supplemental agreement
covering said necessary works.

On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the aforementioned necessary
works and submitted it to the President on March 24, 1998 for approval.

Outgoing President Ramos decided to endorse the consideration of the Supplemental Agreement to incoming President
Joseph E. Estrada. On June 30, 1998, Estrada became the 13th Philippine President.

However, the approval of the Supplemental Agreement was unacted upon for five months. As a result, the utilities and the
road networks were constructed to cover only the 79-hectare original enabling component granted under the ARJVA. The
220-hectare extension of the 79-hectare area was no longer technically feasible. Moreover, the financial crises and
unreliable real estate situation made it difficult to sell the remaining reclaimed lots. The devaluation of the peso and the
increase in interest cost led to the substantial increase in the cost of reclamation.

On August 1, 1998, the NHA granted RBI's request to suspend work on the SMDRP due to "the delay in the approval of
the Supplemental Agreement, the consequent absence of an enabling component to cover the cost of the necessary works
for the project, and the resulting inability to replenish the Asset Pool funds partially used for the completion of the
necessary works."39

As of August 1, 1998 when the project was suspended, RBI had "already accomplished a portion of the necessary works
and change orders which resulted in [RBI] and the Asset Pool incurring advances for direct and indirect cost which
amount can no longer be covered by the 79-hectare enabling component under the ARJVA."40

Repeated demands were made by RBI in its own capacity and on behalf of the asset pool on NHA for payment for the
advances for direct and indirect costs subject to NHA validation.

In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the SMDRP EXECOM and
further directed it to review the Supplemental Agreement and submit its recommendation on the completion of the
SMDRP.

The reconstituted EXECOM conducted a review of the project and recommended the amendment of the March 20, 1998
Supplemental Agreement "to make it more feasible and to identify and provide new sources of funds for the project and
provide for a new enabling component to cover the payment for the necessary works that cannot be covered by the 79-
hectare enabling component under the ARJVA."41

The EXECOM passed Resolution Nos. 99-16-01 and 99-16-0242 which approved the modification of the Supplemental
Agreement, to wit:

a) Approval of 150 hectares additional reclamation in order to make the reclamation feasible as part of the
enabling component.

b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based on surveys) to the
SMDRP Asset Pool.

c) The inclusion in the total development cost of other additional, necessary and indispensable
infrastructure works and the revision of the original cost stated in the Supplemental Agreement dated
March 20, 1998 from PhP 2,953,984,941.40 to PhP 2,969,134,053.13.

d) Revision in the sharing agreement between the parties.

In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and complete the SMDRP subject to
certain guidelines and directives.

After the parties in the case at bar had complied with the March 23, 2000 Memorandum, the NHA November 9, 2000
Resolution No. 4323 approved "the conveyance of the 17-hectare Vitas property in favor of the existing or a newly
created Asset Pool of the project to be developed into a mixed commercial-industrial area, subject to certain conditions."

On January 20, 2001, then President Estrada was considered resigned. On the same day, President Gloria M. Arroyo took
her oath as the 14th President of the Philippines.

As of February 28, 2001, "the estimated total project cost of the SMDRP has reached P8.65 billion comprising of P4.78
billion in direct cost and P3.87 billion in indirect cost,"43 subject to validation by the NHA.

On August 28, 2001, NHA issued Resolution No. 4436 to pay for "the various necessary works/change orders to SMDRP,
to effect the corresponding enabling component consisting of the conveyance of the NHA's Vitas Property and an
additional 150-hectare reclamation area" and to authorize the release by NHA of PhP 480 million "as advance to the
project to make the Permanent Housing habitable, subject to reimbursement from the proceeds of the expanded enabling
component."44

On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the parties, and on February 28,
2002, the Housing and Urban Development Coordinating Council (HUDCC) submitted the agreement to the OP for
approval.

In the July 20, 2002 Cabinet Meeting, HUDCC was directed "to submit the works covered by the PhP 480 million
[advance to the Project] and the ASA to public bidding."45 On August 28, 2002, the HUDCC informed RBI of the decision
of the Cabinet.

In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the government "to bid out the
remaining works under the ASA thereby unilaterally terminating the Project with RBI and all the agreements related
thereto." RBI demanded the payment of just compensation "for all accomplishments and costs incurred in developing the
SMDRP plus a reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA and Section 6.2 of the ASA."46
Consequently, the parties negotiated the terms of the termination of the JVA and other subsequent agreements.

On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA) whereby both parties agreed to
terminate the JVA and other subsequent agreements, thus:

1. TERMINATION

1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the works
covered by the P480 Million and the ASA to public bidding, the following agreements
executed by and between the NHA and the DEVELOPER are hereby terminated, to wit:

A. Joint Venture Agreement (JVA) dated 19 March 1993

b. Amended and Restated Joint Venture Agreement (ARJVA) dated 21

February 1994

c. Amendment and Restated Joint Venture Agreement dated 11 August

1994

d. Supplemental Agreement dated 24 March 1998

e. Amended Supplemental Agreement (ASA) dated 19 November 2001.

xxx

5. SETTLEMENT OF CLAIMS

5.1 Subject to the validation of the DEVELOPER's claims, the NHA hereby agrees to initially
compensate the Developer for the abovementioned costs as follows:

A. Direct payment to DEVELOPER of the amounts herein listed in the following

manner:

a.1 P250 Million in cash from the escrow account in accordance with
Section 2 herewith;

a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area

immediately after joint determination of the appraised value of the said
property in accordance with the procedure herein set forth in the last
paragraph of Section 5.3. For purposes of all payments to be made
through conveyance of real properties, the parties shall secure from the
NHA Board of Directors all documents necessary and sufficient to effect
the transfer of title over the properties to be conveyed to RBI, which
documents shall be issued within a reasonable period.

5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation process referred to
in Section 4 hereof, may be paid in cash, bonds or through the conveyance of properties or any
combination thereof. The manner, terms and conditions of payment of the balance shall be specified and
agreed upon later within a period of three months from the time a substantial amount representing the
unpaid balance has been validated pursuant hereto including, but not limited to the programming of
quarterly cash payments to be sourced by the NHA from its budget for debt servicing, from its income or
from any other sources.

5.3 In any case the unpaid balance is agreed to be paid, either partially or totally through conveyance of
properties, the parties shall agree on which properties shall be subject to conveyance. The NHA and
DEVELOPER hereby agree to determine the valuation of the properties to be conveyed by getting the
average of the appraisals to be made by two (2) mutually acceptable independent appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an agreement with the asset pool for the
development and operations of a port in the Smokey Mountain Area which is a major component of SMDRP to provide a
source of livelihood and employment for Smokey Mountain residents and spur economic growth. A Subscription
Agreement was executed between the Asset Pool and HCPTI whereby the asset pool subscribed to 607 million common
shares and 1,143 million preferred shares of HCPTI. The HCPTI preferred shares had a premium and penalty interest of
7.5% per annum and a mandatory redemption feature. The asset pool paid the subscription by conveying to HCPTI a 10-
hectare land which it acquired from the NHA being a portion of the reclaimed land of the SMDRP. Corresponding
certificates of titles were issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and 251358.
Due to HCPTI's failure to obtain a license to handle foreign containerized cargo from PPA, it suffered a net income loss of
PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in 2003. The Project Governing Board of the Asset Pool later
conveyed by way of dacion en pago a number of HCPTI shares to RBI in lieu of cash payment for the latter's work in
SMDRP.

On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition which impleaded as
respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero II, raising constitutional issues.

The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21) permanent housing structures
had been turned over by respondent RBI. It claimed that 2,510 beneficiary-families belonging to the poorest of the poor
had been transferred to their permanent homes and benefited from the Project.

The Issues

The grounds presented in the instant petition are:

Neither respondent NHA nor respondent R-II builders may validly reclaim foreshore and submerged land because:

1. Respondent NHA and R-II builders were never granted any power and authority to reclaim lands of the
public domain as this power is vested exclusively with the PEA.

2. Even assuming that respondents NHA and R-II builders were given the power and authority to reclaim
foreshore and submerged land, they were never given the authority by the denr to do so.

II

Respondent R-II builders cannot acquire the reclaimed foreshore and submerged land areas because:

1. The reclaimed foreshore and submerged parcels of land are inalienable public lands which are beyond
the commerce of man.

2. Assuming arguendo that the subject reclaimed foreshore and submerged parcels of land were already
declared alienable lands of the public domain, respondent R-II builders still could not acquire the same
because there was never any declaration that the said lands were no longer needed for public use.

3. Even assuming that the subject reclaimed lands are alienable and no longer needed for public use,
respondent R-II builders still cannot acquire the same because there was never any law authorizing the
sale thereof.

4. There was never any public bidding awarding ownership of the subject land to respondent R-II
builders.

5. Assuming that all the requirements for a valid transfer of alienable public had been performed,
respondent R-II Builders, being private corporation is nonetheless expresslyprohibited by the Philippine
Constitution to acquire lands of the public domain.

III

Respondent harbour, being a private corporation whose majority stocks are owned and controlled by respondent Romero's
Corporations - R-II builders and R-II Holdings - is disqualified from being a transferee of public land.

IV

Respondents must be compelled to disclose all information related to the smokey mountain development and reclamation
project.

The Court's Ruling

Before we delve into the substantive issues raised in this petition, we will first deal with several procedural matters raised
by respondents.

Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the petition.

Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the avails of the suit can file
a complaint or petition.47 Respondents claim that petitioner is not a proper party-in-interest as he was unable to show that
"he has sustained or is in immediate or imminent danger of sustaining some direct and personal injury as a result of the
execution and enforcement of the assailed contracts or agreements."48 Moreover, they assert that not all government
contracts can justify a taxpayer's suit especially when no public funds were utilized in contravention of the Constitution or
a law.

We explicated in Chavez v. PCGG 49 that in cases where issues of transcendental public importance are presented, there is
no necessity to show that petitioner has experienced or is in actual danger of suffering direct and personal injury as the
requisite injury is assumed. We find our ruling in Chavez v. PEA 50 as conclusive authority on locus standi in the case at
bar since the issues raised in this petition are averred to be in breach of the fair diffusion of the country's natural resources
and the constitutional right of a citizen to information which have been declared to be matters of transcendental public
importance. Moreover, the pleadings especially those of respondents readily reveal that public funds have been indirectly
utilized in the Project by means of Smokey Mountain Project Participation Certificates (SMPPCs) bought by some
government agencies.

Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.

Whether petitioner's direct recourse to this Court was proper

Respondents are one in asserting that petitioner circumvents the principle of hierarchy of courts in his petition. Judicial
hierarchy was made clear in the case of People v. Cuaresma, thus:

There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts
should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation
of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket.51 x x x

The OSG claims that the jurisdiction over petitions for prohibition and mandamus is concurrent with other lower courts
like the Regional Trial Courts and the Court of Appeals. Respondent NHA argues that the instant petition is misfiled
because it does not introduce special and important reasons or exceptional and compelling circumstances to warrant direct
recourse to this Court and that the lower courts are more equipped for factual issues since this Court is not a trier of facts.
Respondents RBI and RHI question the filing of the petition as this Court should not be unduly burdened with
"repetitions, invocation of jurisdiction over constitutional questions it had previously resolved and settled."

In the light of existing jurisprudence, we find paucity of merit in respondents' postulation.

While direct recourse to this Court is generally frowned upon and discouraged, we have however ruled in Santiago v.
Vasquez that such resort to us may be allowed in certain situations, wherein this Court ruled that petitions for certiorari,
prohibition, or mandamus, though cognizable by other courts, may directly be filed with us if "the redress desired cannot
be obtained in the appropriate courts or where exceptional compelling circumstances justify availment of a remedy within
and calling for the exercise of [this Court's] primary jurisdiction."52 chanrobles virtual law library

The instant petition challenges the constitutionality and legality of the SMDRP involving several hectares of government
land and hundreds of millions of funds of several government agencies. Moreover, serious constitutional challenges are
made on the different aspects of the Project which allegedly affect the right of Filipinos to the distribution of natural
resources in the country and the right to information of a citizen matters which have been considered to be of
extraordinary significance and grave consequence to the public in general. These concerns in the instant action compel us
to turn a blind eye to the judicial structure meant to provide an orderly dispensation of justice and consider the instant
petition as a justified deviation from an established precept.

Core factual matters undisputed

Respondents next challenge the projected review by this Court of the alleged factual issues intertwined in the issues
propounded by petitioner. They listed a copious number of questions seemingly factual in nature which would make this
Court a trier of facts.53

We find the position of respondents bereft of merit.

For one, we already gave due course to the instant petition in our January 18, 2005 Resolution. 54 In said issuance, the
parties were required to make clear and concise statements of established facts upon which our decision will be based.

Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the facts needed to
decide the instant petition are well established from the admissions of the parties in their pleadings 55 and those derived
from the documents appended to said submissions. Indeed, the core facts which are the subject matter of the numerous
issues raised in this petition are undisputed.

Now we will tackle the issues that prop up the instant petition.

Since petitioner has cited our decision in PEA as basis for his postulations in a number of issues, we first resolve the query
is PEA applicable to the case at bar?cralaw library

A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.

The Court finds that PEA is not a binding precedent to the instant petition because the facts in said case are substantially
different from the facts and circumstances in the case at bar, thus:

(1) The reclamation project in PEA was undertaken through a JVA entered into between PEA and
AMARI. The reclamation project in the instant NHA case was undertaken by the NHA, a national
government agency in consultation with PEA and with the approval of two Philippine Presidents;

(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim submerged
areas without public bidding on April 25, 1995. In the instant NHA case, the NHA and RBI executed a
JVA after RBI was declared the winning bidder on August 31, 1992 as the JVA partner of the NHA in the
SMDRP after compliance with the requisite public bidding.

(3) In PEA, there was no law or presidential proclamation classifying the lands to be reclaimed as
alienable and disposal lands of public domain. In this RBI case, MO 415 of former President Aquino and
Proclamation No. 39 of then President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598,
classified the reclaimed lands as alienable and disposable;

(4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA and
AMARI.chanrobles virtual law library In this NHA case, the JVA and subsequent amendments were
already substantially implemented. Subsequently, the Project was terminated through a MOA signed on
August 27, 2003. Almost one year later on August 5, 2004, the Chavez petition was filed;

(5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA after the Chavez
petition was filed with the Court and after Senate Committee Report No. 560 was issued finding that the
subject lands are inalienable lands of public domain. In the instant petition, RBI and other respondents are
considered to have signed the agreements in good faith as the Project was terminated even before the
Chavez petition was filed;

(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the parties and not in
accordance with the BOT Law. The NHA-RBI JVA and subsequent amendments constitute a BOT
contract governed by the BOT Law; andcralawlibrary

(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a government entity
tasked to dispose of public lands under Executive Order No. (EO) 525.56 In the NHA case, the reclaimed
lands were transferred to NHA, a government entity NOT tasked to dispose of public land and therefore
said alienable lands were converted to patrimonial lands upon their transfer to NHA.57

Thus the PEA Decision58 cannot be considered an authority or precedent to the instant case. The principle of stare
decisis59 has no application to the different factual setting of the instant case.

We will now dwell on the substantive issues raised by petitioner. After a perusal of the grounds raised in this petition, we
find that most of these issues are moored on our PEA Decision which, as earlier discussed, has no application to the
instant petition. For this reason alone, the petition can already be rejected. Nevertheless, on the premise of the
applicability of said decision to the case at bar, we will proceed to resolve said issues.

First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim foreshore and submerged land
because they were not given any power and authority to reclaim lands of the public domain as this power was delegated
by law to PEA.

Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public domain, the Public Estates
Authority (PEA), petitioner claims, is "the primary authority for the reclamation of all foreshore and submerged lands of
public domain," and relies on PEA where this Court held:

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National Government." The same section also
states that "[A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x." Thus, under EO No.
525, in relation to PD No. 3-A and PD No. 1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the
government entity "to undertake the reclamation of lands and ensure their maximum utilization in promoting public
welfare and interests." Since large portions of these reclaimed lands would obviously be needed for public service, there
must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for
public service.60

In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by PEA or through a contract
executed by PEA with another person or entity but by the NHA through an agreement with respondent RBI. Therefore, he
concludes that the reclamation is null and void.

Petitioner's contention has no merit.

EO 525 reads:

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

The aforequoted provision points to three (3) requisites for a legal and valid reclamation project, viz:

(1) approval by the President;

(2) favorable recommendation of PEA; andcralawlibrary

(3) undertaken by any of the following:

A. by PEA

b. by any person or entity pursuant to a contract it executed with PEA

c. by the National Government agency or entity authorized under its charter to reclaim
lands subject to consultation with PEA

Without doubt, PEA under EO 525 was designated as the agency primarily responsible for integrating, directing, and
coordinating all reclamation projects. Primarily means "mainly, principally, mostly, generally." Thus, not all reclamation
projects fall under PEA's authority of supervision, integration, and coordination. The very charter of PEA, PD
1084,61 does not mention that PEA has the exclusive and sole power and authority to reclaim lands of public domain. EO
525 even reveals the exception reclamation projects by a national government agency or entity authorized by its charter to
reclaim land. One example is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and develop
submerged areas for port related purposes. Under its charter, PD 857, PPA has the power "to reclaim, excavate, enclose or
raise any of the lands" vested in it.

Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily responsible for integrating,
directing and coordinating reclamation projects, such authority is NOT exclusive and such power to reclaim may be
granted or delegated to another government agency or entity or may even be undertaken by the National Government
itself, PEA being only an agency and a part of the National Government.

Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP. After a scrutiny of the facts
culled from the records, we find that the project met all the three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a matter of fact, two Philippine Presidents approved
the same, namely: Presidents Aquino and Ramos. President Aquino sanctioned the reclamation of both the SMDRP
housing and commercial-industrial sites through MO 415 (s. 1992) which approved the SMDRP under Sec. 1 and directed
NHA "x x x to implement the Smokey Mountain Development Plan and Reclamation of the Area across R-10 through a
private sector joint venture scheme at the least cost to government" under Section 3.

For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly reserved the Smokey Mountain
Area and the Reclamation Area for a housing project and related commercial/industrial development.

Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the increase of the Reclamation Area
from 40 hectares of foreshore and submerged land of the Manila Bay to 79 hectares. It speaks of the reclamation of
400,000 square meters, more or less, of the foreshore and submerged lands of Manila Bay adjoining R-10 as an enabling
component of the SMDRP.

As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975 square meters of Smokey
Mountain, Special Patent No. 3592 covering 401,485 square meters of reclaimed land, and Special Patent No. 3598
covering another 390,000 square meters of reclaimed land were issued by the DENR.

Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.

2. The requisite favorable endorsement of the reclamation phase was impliedly granted by PEA. President Aquino saw to
it that there was coordination of the project with PEA by designating its general manager as member of the EXECOM
tasked to supervise the project implementation. The assignment was made in Sec. 2 of MO 415 which provides:

Section 2. An Executive Committee is hereby created to oversee the implementation of the Plan, chaired by the NCR-
CORD, with the heads of the following agencies as members: The National Housing Authority, the City of Manila, the
Department of Public Works and Highways, the Public Estates Authority, the Philippine Ports Authority, the Department
of Environment and Natural Resources and the Development Bank of the Philippines. (Emphasis supplied.)

The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated as part of the
recommendations of the EXECOM created under MO 415. While there was no specific recommendation on the SMDRP
emanating solely from PEA, we find that the approbation of the Project and the land reclamation as an essential
component by the EXECOM of which PEA is a member, and its submission of the SMDRP and the agreements on the
Project to the President for approval amply met the second requirement of EO 525.

3. The third element was also present the reclamation was undertaken either by PEA or any person or entity under contract
with PEA or by the National Government agency or entity authorized under its charter to reclaim lands subject to
consultation with PEA. It cannot be disputed that the reclamation phase was not done by PEA or any person or entity
under contract with PEA. However, the reclamation was implemented by the NHA, a national government agency whose
authority to reclaim lands under consultation with PEA is derived from its charter PD 727 and other pertinent laws'RA
727962 and RA 6957 as amended by RA 7718.

While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had more than enough
authority to do so under existing laws. While PD 757, the charter of NHA, does not explicitly mention "reclamation" in
any of the listed powers of the agency, we rule that the NHA has an implied power to reclaim land as this is vital or
incidental to effectively, logically, and successfully implement an urban land reform and housing program enunciated in
Sec. 9 of Article XIII of the 1987 Constitution.

Basic in administrative law is the doctrine that a government agency or office has express and implied powers based on its
charter and other pertinent statutes. Express powers are those powers granted, allocated, and delegated to a government
agency or office by express provisions of law. On the other hand, implied powers are those that can be inferred or are
implicit in the wordings of the law63 or conferred by necessary or fair implication in the enabling act.64 In Angara v.
Electoral Commission, the Court clarified and stressed that when a general grant of power is conferred or duty enjoined,
every particular power necessary for the exercise of the one or the performance of the other is also conferred by necessary
implication.65 It was also explicated that when the statute does not specify the particular method to be followed or used by
a government agency in the exercise of the power vested in it by law, said agency has the authority to adopt any
reasonable method to carry out its functions.66

The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA 6957, and PD 3-A,67 viz:

1. NHA's power to reclaim derived from PD 757 provisions:

A. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the goals of NHA:

Section 3. Progress and Objectives. The Authority shall have the following purposes and objectives:
 xxx

b) To undertake housing, development, resettlement or other activities as would enhance the provision of
housing to every Filipino;

c) To harness and promote private participation in housing ventures in terms of capital expenditures, land,
expertise, financing and other facilities for the sustained growth of the housing industry. (Emphasis
supplied.)

Land reclamation is an integral part of the development of resources for some of the housing requirements of the NHA.
Private participation in housing projects may also take the form of land reclamation.

b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore Development Authority (TFDA),
has the power to reclaim, thus:

Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing Corporation (PHHC), the
Presidential Assistant on Housing Resettlement Agency (PAHRA), the Tondo Foreshore Development Authority (TFDA),
the Central Institute for the Training and Relocation of Urban Squatters (CITRUS), the Presidential Committee for
Housing and Urban Resettlement (PRECHUR), Sapang Palay Development Committee, Inter-Agency Task Force to
Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all other existing government
housing and resettlement agencies, task forces and ad-hoc committees, are hereby dissolved. Their powers and functions,
balance of appropriations, records, assets, rights, and choses in action, are transferred to, vested in, and assumed by the
Authority. x x x (Emphasis supplied.)

PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers, and functions. Sec. 2 provides:

Section 2. Objectives and Purposes. The Authority shall have the following purposes and objectives:

a) To undertake all manner of activity, business or development projects for the establishment of
harmonious, comprehensive, integrated and healthy living community in the Tondo Foreshoreland and its
resettlement site;

b) To undertake and promote the physical and socio-economic amelioration of the Tondo Foreshore
residents in particular and the nation in general (Emphasis supplied.)

The powers and functions are contained in Sec. 3, to wit:

a) To develop and implement comprehensive and integrated urban renewal programs for the Tondo
Foreshore and Dagat-dagatan lagoon and/or any other additional/alternative resettlement site and to
formulate and enforce general and specific policies for its development which shall ensure reasonable
degree of compliance with environmental standards.

b) To prescribe guidelines and standards for the reservation, conservation and utilization of public lands
covering the Tondo Foreshore land and its resettlement sites;

c) To construct, acquire, own, lease, operate and maintain infrastructure facilities, housing complex, sites
and services;

d) To determine, regulate and supervise the establishment and operation of housing, sites, services and
commercial and industrial complexes and any other enterprises to be constructed or established within the
Tondo Foreshore and its resettlement sites;

e) To undertake and develop, by itself or through joint ventures with other public or private entities, all or
any of the different phases of development of the Tondo Foreshore land and its resettlement sites;

f) To acquire and own property, property-rights and interests, and encumber or otherwise dispose of the
same as it may deem appropriate (Emphasis supplied.)

From the foregoing provisions, it is readily apparent that the TFDA has the explicit power to develop public lands
covering the Tondo foreshore land and any other additional and alternative resettlement sites under letter b, Sec. 3 of PD
570. Since the additional and/or alternative sites adjacent to Tondo foreshore land cover foreshore and submerged areas,
the reclamation of said areas is necessary in order to convert them into a comprehensive and integrated resettlement
housing project for the slum dwellers and squatters of Tondo. Since the powers of TFDA were assumed by the NHA, then
the NHA has the power to reclaim lands in the Tondo foreshore area which covers the 79-hectare land subject of
Proclamations Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the authority to reclaim land, thus:

Sec. 6. Powers and functions of the Authority. The Authority shall have the following powers and functions to be
exercised by the Board in accordance with its established national human settlements plan prepared by the Human
Settlements Commission:

(a) Develop and implement the comprehensive and integrated housing program provided for in Section
hereof;

xxx

(c) Prescribe guidelines and standards for the reservation, conservation and utilization of public lands
identified for housing and resettlement;

xxx

(e) Develop and undertake housing development and/or resettlement projects through joint ventures or
other arrangements with public and private entities;

xxx

(k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and
reasonable;

(l) Acquire property rights and interests and encumber or otherwise dispose the same as it may deem
appropriate;

xxx

(s) Perform such other acts not inconsistent with this Decree, as may be necessary to effect the policies
and objectives herein declared. (Emphasis supplied.)

The NHA's authority to reclaim land can be inferred from the aforequoted provisions. It can make use of public lands
under letter (c) of Sec. 6 which includes reclaimed land as site for its comprehensive and integrated housing projects
under letter (a) which can be undertaken through joint ventures with private entities under letter (e). Taken together with
letter (s) which authorizes NHA to perform such other activities "necessary to effect the policies and objectives" of PD
757, it is safe to conclude that the NHA's power to reclaim lands is a power that is implied from the exercise of its explicit
powers under Sec. 6 in order to effectively accomplish its policies and objectives under Sec. 3 of its charter. Thus, the
reclamation of land is an indispensable component for the development and construction of the SMDRP housing facilities.

2. NHA's implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHA's mandate to "[d]evelop and undertake housing development and/or resettlement projects through
joint ventures or other arrangements with public and private entities."

The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and 29 of RA 7279, which provide:

Section 12. Disposition of Lands for Socialized Housing.' The National Housing Authority, with respect to lands
belonging to the National Government, and the local government units with respect to other lands within their respective
localities, shall coordinate with each other to formulate and make available various alternative schemes for the disposition
of lands to the beneficiaries of the Program. These schemes shall not be limited to those involving transfer of ownership in
fee simple but shall include lease, with option to purchase, usufruct or such other variations as the local government units
or the National Housing Authority may deem most expedient in carrying out the purposes of this Act.

xxx

Section 29. Resettlement.' With two (2) years from the effectivity of this Act, the local government units, in coordination
with the National Housing Authority, shall implement the relocation and resettlement of persons living in danger areas
such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public places as
sidewalks, roads, parks, and playgrounds. The local government unit, in coordination with the National Housing
Authority, shall provide relocation or resettlement sites with basic services and facilities and access to employment and
livelihood opportunities sufficient to meet the basic needs of the affected families. (Emphasis supplied.)

Lands belonging to the National Government include foreshore and submerged lands which can be reclaimed to undertake
housing development and resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:

WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to conduct feasibility studies and
develop low-cost housing projects at the dumpsites of Metro Manila;

WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to convert the Smokey Mountain
dumpsite into a habitable housing project inclusive of the reclamation area across R-10 as enabling component of the
Project;

WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of Manila and other government
agencies and instrumentalities to ensure effective and efficient implementation;

WHEREAS, the government encourages private sector initiative in the implementation of its projects. (Emphasis
supplied.)

Proceeding from these "whereas" clauses, it is unequivocal that reclamation of land in the Smokey Mountain area is an
essential and vital power of the NHA to effectively implement its avowed goal of developing low-cost housing units at the
Smokey Mountain dumpsites. The interpretation made by no less than the President of the Philippines as Chief of the
Executive Branch, of which the NHA is a part, must necessarily command respect and much weight and credit.

4. RA 6957 as amended by RA 7718 the BOT Law'serves as an exception to PD 1084 and EO 525.

Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is unequivocal that all government
infrastructure agencies like the NHA can undertake infrastructure or development projects using the contractual
arrangements prescribed by the law, and land reclamation is one of the projects that can be resorted to in the BOT project
implementation under the February 10, 1992 Joint Resolution No. 3 of the 8th Congress.

From the foregoing considerations, we find that the NHA has ample implied authority to undertake reclamation projects.

Even without an implied power to reclaim lands under NHA's charter, we rule that the authority granted to NHA, a
national government agency, by the President under PD 3-A reinforced by EO 525 is more than sufficient statutory basis
for the reclamation of lands under the SMDRP.

PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers on September 23, 1972. It
provided that "[t]he provisions of any law to the contrary notwithstanding, the reclamation of areas, underwater, whether
foreshore or inland, shall be limited to the National Government or any person authorized by it under the proper contract."
It repealed, in effect, RA 1899 which previously delegated the right to reclaim lands to municipalities and chartered cities
and revested it to the National Government.68 Under PD 3-A, "national government" can only mean the Executive Branch
headed by the President. It cannot refer to Congress as it was dissolved and abolished at the time of the issuance of PD 3-
A on September 23, 1972. Moreover, the Executive Branch is the only implementing arm in the government with the
equipment, manpower, expertise, and capability by the very nature of its assigned powers and functions to undertake
reclamation projects. Thus, under PD 3-A, the Executive Branch through the President can implement reclamation of
lands through any of its departments, agencies, or offices.

Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA, which was granted, among
others, the power "to reclaim land, including foreshore and submerged areas by dredging, filling or other means or to
acquire reclaimed lands." The PEA's power to reclaim is not however exclusive as can be gleaned from its charter, as the
President retained his power under PD 3-A to designate another agency to reclaim lands.

On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for integrating, directing, and
coordinating reclamation projects for and on behalf of the National Government although other national government
agencies can be designated by the President to reclaim lands in coordination with the PEA. Despite the issuance of EO
525, PD 3-A remained valid and subsisting. Thus, the National Government through the President still retained the power
and control over all reclamation projects in the country.

The power of the National Government through the President over reclamation of areas, that is, underwater whether
foreshore or inland, was made clear in EO 54369 which took effect on June 24, 2006. Under EO 543, PEA was renamed
the Philippine Reclamation Authority (PRA) and was granted the authority to approve reclamation projects, a power
previously reposed in the President under EO 525. EO 543 reads:

Section 1. The power of the President to approve reclamation projects is hereby delegated to the Philippine Reclamation
Authority [formerly PEA], through its governing board, subject to compliance with existing laws and rules and subject to
the condition that reclamation contracts to be executed with any person or entity go through public bidding.

Section 2. Nothing in the Order shall be construed as diminishing the President's authority to modify, amend or nullify
PRA's action.
Section 3. All executive issuances inconsistent with this Executive Order are hereby repealed or amended accordingly.
(Emphasis supplied.)

Sec. 2 of EO 543 strengthened the power of control and supervision of the President over reclamation of lands as s/he can
modify, amend, or nullify the action of PEA (now PRA).

From the foregoing issuances, we conclude that the President's delegation to NHA, a national government agency, to
reclaim lands under the SMDRP, is legal and valid, firmly anchored on PD 3-A buttressed by EO 525 notwithstanding the
absence of any specific grant of power under its charter, PD 757.

Second Issue: Whether respondents NHA and RBI were given the

power and authority by DENR to reclaim foreshore and submerged

lands

Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim, they were not
authorized to do so by the DENR.

Again, reliance is made on our ruling in PEA where it was held that the DENR's authority is necessary in order for the
government to validly reclaim foreshore and submerged lands. In PEA, we expounded in this manner:

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

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

In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the
power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR
is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the
President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.70

Despite our finding that PEA is not a precedent to the case at bar, we find after all that under existing laws, the NHA is
still required to procure DENR's authorization before a reclamation project in Manila Bay or in any part of the Philippines
can be undertaken. The requirement applies to PEA, NHA, or any other government agency or office granted with such
power under the law.

Notwithstanding the need for DENR permission, we nevertheless find petitioner's position bereft of merit.

The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for the following reasons:

1. Sec. 17, Art. VII of the Constitution provides that "the President shall have control of all executive departments,
bureaus and offices." The President is assigned the task of seeing to it that all laws are faithfully executed. "Control," in
administrative law, means "the power of an officer to alter, modify, nullify or set aside what a subordinate officer has
done in the performance of his duties and to substitute the judgment of the former for that of the latter."71

As such, the President can exercise executive power motu proprio and can supplant the act or decision of a subordinate
with the President's own. The DENR is a department in the executive branch under the President, and it is only an alter
ego of the latter. Ordinarily the proposed action and the staff work are initially done by a department like the DENR and
then submitted to the President for approval. However, there is nothing infirm or unconstitutional if the President decides
on the implementation of a certain project or activity and requires said department to implement it. Such is a presidential
prerogative as long as it involves the department or office authorized by law to supervise or execute the Project. Thus, as
in this case, when the President approved and ordered the development of a housing project with the corresponding
reclamation work, making DENR a member of the committee tasked to implement the project, the required authorization
from the DENR to reclaim land can be deemed satisfied. It cannot be disputed that the ultimate power over alienable and
disposable public lands is reposed in the President of the Philippines and not the DENR Secretary. To still require a
DENR authorization on the Smokey Mountain when the President has already authorized and ordered the implementation
of the Project would be a derogation of the powers of the President as the head of the executive branch. Otherwise, any
department head can defy or oppose the implementation of a project approved by the head of the executive branch, which
is patently illegal and unconstitutional.

In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the executive department, the President
may act directly or order the said department to undertake an activity, thus:

[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII of the Constitution specifies [her]
power as Chief executive departments, bureaus and offices. [She] shall ensure that the laws be faithfully executed. As
Chief Executive, President Arroyo holds the steering wheel that controls the course of her government. She lays down
policies in the execution of her plans and programs. Whatever policy she chooses, she has her subordinates to implement
them. In short, she has the power of control. Whenever a specific function is entrusted by law or regulation to her
subordinate, she may act directly or merely direct the performance of a duty x x x. Such act is well within the prerogative
of her office (emphasis supplied).72

Moreover, the power to order the reclamation of lands of public domain is reposed first in the Philippine President. The
Revised Administrative Code of 1987 grants authority to the President to reserve lands of public domain for settlement for
any specific purpose, thus:

Section 14. Power to Reserve Lands of the Public and Private Domain of the Government.' (1) The President shall have
the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public
purpose indicated until otherwise provided by law or proclamation. (Emphasis supplied.)

President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and issued MO 415 authorizing the
implementation of the Smokey Mountain Development Project plus the reclamation of the area across R-10. Then
President Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and the 40-hectare commercial/industrial
area, and Proclamation No. 465 and MO 415 increasing the area of foreshore and submerged lands of Manila Bay to be
reclaimed from 40 to 79 hectares. Having supervision and control over the DENR, both Presidents directly assumed and
exercised the power granted by the Revised Administrative Code to the DENR Secretary to authorize the NHA to reclaim
said lands. What can be done indirectly by the DENR can be done directly by the President. It would be absurd if the
power of the President cannot be exercised simply because the head of a department in the executive branch has not acted
favorably on a project already approved by the President. If such arrangement is allowed then the department head will
become more powerful than the President.

2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by the NCR-CORD to oversee the
implementation of the Project. The EXECOM was the one which recommended approval of the project plan and the joint
venture agreements. Clearly, the DENR retained its power of supervision and control over the laws affected by the Project
since it was tasked to "facilitate the titling of the Smokey Mountain and of the area to be reclaimed," which shows that it
had tacitly given its authority to the NHA to undertake the reclamation.

3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592 while then Secretary Victor O.
Ramos issued Special Patent No. 3598 that embraced the areas covered by the reclamation. These patents conveyed the
lands to be reclaimed to the NHA and granted to said agency the administration and disposition of said lands for
subdivision and disposition to qualified beneficiaries and for development for mix land use (commercial/industrial) "to
provide employment opportunities to on-site families and additional areas for port related activities." Such grant of
authority to administer and dispose of lands of public domain under the SMDRP is of course subject to the powers of the
EXECOM of SMDRP, of which the DENR is a member.

4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of supervision and control over the
lands of public domain covered by the Project.

Based on these reasons, it is clear that the DENR, through its acts and issuances, has ratified and confirmed the
reclamation of the subject lands for the purposes laid down in Proclamations Nos. 39 and 465.

Third Issue: Whether respondent RBI can acquire reclaimed

foreshore and submerged lands considered as inalienable and

outside the commerce of man

Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and submerged areas as these are
inalienable public lands beyond the commerce of man based on Art. 1409 of the Civil Code which provides:

Article 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
 xxx

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and they cannot be
alienated except for alienable agricultural lands of the public domain. One of the State's natural resources are lands of
public domain which include reclaimed lands.

Petitioner contends that for these reclaimed lands to be alienable, there must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable and disposable and open to disposition or concession. Absent such
law or proclamation, the reclaimed lands cannot be the enabling component or consideration to be paid to RBI as these are
beyond the commerce of man.

We are not convinced of petitioner's postulation.

The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the State for the
following reasons, viz:

First, there were three (3) presidential proclamations classifying the reclaimed lands across R-10 as alienable or
disposable hence open to disposition or concession, to wit:

(1) MO 415 issued by President Aquino, of which Sec. 4 states that "[t]he land covered by the Smokey
Mountain Dumpsite is hereby conveyed to the National Housing Authority as well as the area to be
reclaimed across R-10."

The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the declaration that
said lands are alienable and disposable. Otherwise, the NHA cannot effectively use them in its housing
and resettlement project.

(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands were conveyed to
NHA for subdivision and disposition to qualified beneficiaries and for development into a mixed land use
(commercial/industrial) to provide employment opportunities to on-site families and additional areas for
port-related activities. Said directive carries with it the pronouncement that said lands have been
transformed to alienable and disposable lands. Otherwise, there is no legal way to convey it to the
beneficiaries.

(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed area to 79 hectares
to be developed and disposed of in the implementation of the SMDRP. The authority put into the hands of
the NHA to dispose of the reclaimed lands tacitly sustains the conversion to alienable and disposable
lands.

Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on Proclamations Nos. 39 and 465
issued by President Ramos, without doubt, classified the reclaimed areas as alienable and disposable.

Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the lands to be
reclaimed are classified as alienable and disposable. We find however that such conclusion is derived and implicit from
the authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries.

The query is, when did the declaration take effect? It did so only after the special patents covering the reclaimed areas
were issued. It is only on such date that the reclaimed lands became alienable and disposable lands of the public domain.
This is in line with the ruling in PEA where said issue was clarified and stressed:

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom Islands, is
equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public
domain. PD No. 1085 and President Aquino's issuance of a land patent also constitute a declaration that the Freedom
Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public
domain, open to disposition or concession to qualified parties.73 (Emphasis supplied.)

Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with Special Patent Nos. 3591,
3592, and 3598 more than satisfy the requirement in PEA that "[t]here must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession (emphasis
supplied)."74
Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find that RA 6957 as amended by
RA 7718 provides ample authority for the classification of reclaimed land in the SMDRP for the repayment scheme of the
BOT project as alienable and disposable lands of public domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:

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

While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands that shall serve as payment to
the project proponent have become alienable and disposable lands and opened for disposition; nonetheless, this conclusion
is necessarily implied, for how else can the land be used as the enabling component for the Project if such classification is
not deemed made?cralaw library

It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not convert alienable lands of
public domain into private or patrimonial lands. We ruled in PEA that "alienable lands of public domain must be
transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands
can become private or patrimonial lands (emphasis supplied)."75 To lands reclaimed by PEA or through a contract with a
private person or entity, such reclaimed lands still remain alienable lands of public domain which can be transferred only
to Filipino citizens but not to a private corporation. This is because PEA under PD 1084 and EO 525 is tasked to hold and
dispose of alienable lands of public domain and it is only when it is transferred to Filipino citizens that it becomes
patrimonial property. On the other hand, the NHA is a government agency not tasked to dispose of public lands under its
charter The Revised Administrative Code of 1987. The NHA is an "end-user agency" authorized by law to administer and
dispose of reclaimed lands. The moment titles over reclaimed lands based on the special patents are transferred to the
NHA by the Register of Deeds, they are automatically converted to patrimonial properties of the State which can be sold
to Filipino citizens and private corporations, 60% of which are owned by Filipinos. The reason is obvious: if the reclaimed
land is not converted to patrimonial land once transferred to NHA, then it would be useless to transfer it to the NHA since
it cannot legally transfer or alienate lands of public domain. More importantly, it cannot attain its avowed purposes and
goals since it can only transfer patrimonial lands to qualified beneficiaries and prospective buyers to raise funds for the
SMDRP.

From the foregoing considerations, we find that the 79-hectare reclaimed land has been declared alienable and disposable
land of the public domain; and in the hands of NHA, it has been reclassified as patrimonial property.

Petitioner, however, contends that the reclaimed lands were inexistent prior to the three (3) Presidential Acts (MO 415 and
Proclamations Nos. 39 and 465) and hence, the declaration that such areas are alienable and disposable land of the public
domain, citing PEA, has no legal basis.

Petitioner's contention is not well-taken.

Petitioner's sole reliance on Proclamations Nos. 39 and 465 without taking into consideration the special patents issued by
the DENR demonstrates the inherent weakness of his proposition. As was ruled in PEA cited by petitioner himself, "PD
No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom Islands is equivalent
to an official proclamation classifying the Freedom islands as alienable or disposable lands of public domain." In a similar
vein, the combined and collective effect of Proclamations Nos. 39 and 465 with Special Patents Nos. 3592 and 3598 is
tantamount to and can be considered to be an official declaration that the reclaimed lots are alienable or disposable lands
of the public domain.

The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which evidence transfer of ownership of
reclaimed lands to the NHA, are official acts of the DENR Secretary in the exercise of his power of supervision and
control over alienable and disposable public lands and his exclusive jurisdiction over the management and disposition of
all lands of public domain under the Revised Administrative Code of 1987. Special Patent No. 3592 speaks of the transfer
of Lots 1 and 2, and RI-003901-000012-D with an area of 401,485 square meters based on the survey and technical
description approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued in favor of the NHA transferring
to said agency a tract of land described in Plan RL-00-000013 with an area of 390,000 square meters based on the survey
and technical descriptions approved by the Bureau of Lands.

The conduct of the survey, the preparation of the survey plan, the computation of the technical description, and the
processing and preparation of the special patent are matters within the technical area of expertise of administrative
agencies like the DENR and the Land Management Bureau and are generally accorded not only respect but at times even
finality.76 Preparation of special patents calls for technical examination and a specialized review of calculations and
specific details which the courts are ill-equipped to undertake; hence, the latter defer to the administrative agency which is
trained and knowledgeable on such matters.77

Subsequently, the special patents in the name of the NHA were submitted to the Register of Deeds of the City of Manila
for registration, and corresponding certificates of titles over the reclaimed lots were issued based on said special patents.
The issuance of certificates of titles in NHA's name automatically converts the reclaimed lands to patrimonial properties
of the NHA. Otherwise, the lots would not be of use to the NHA's housing projects or as payment to the BOT contractor
as the enabling component of the BOT contract. The laws of the land have to be applied and interpreted depending on the
changing conditions and times. Tempora mutantur et legis mutantur in illis (time changes and laws change with it). One
such law that should be treated differently is the BOT Law (RA 6957) which brought about a novel way of implementing
government contracts by allowing reclaimed land as part or full payment to the contractor of a government project to
satisfy the huge financial requirements of the undertaking. The NHA holds the lands covered by Special Patents Nos.
3592 and 3598 solely for the purpose of the SMDRP undertaken by authority of the BOT Law and for disposition in
accordance with said special law. The lands become alienable and disposable lands of public domain upon issuance of the
special patents and become patrimonial properties of the Government from the time the titles are issued to the NHA.

As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:

It is true that, once a patent is registered and the corresponding certificate of title is issued, the land covered by them
ceases to be part of the public domain and becomes private property, and the Torrens Title issued pursuant to the patent
becomes indefeasible upon the expiration of one year from the date of issuance of such patent.78

The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,79 Heirs of Carlos Alcaraz v. Republic,80 and the
more recent case of Doris Chiongbian-Oliva v. Republic of the Philippines.81 Thus, the 79-hectare reclaimed land became
patrimonial property after the issuance of certificates of titles to the NHA based on Special Patents Nos. 3592 and 3598.

One last point. The ruling in PEA cannot even be applied retroactively to the lots covered by Special Patents Nos. 3592
(40 hectare reclaimed land) and 3598 (39-hectare reclaimed land). The reclamation of the land under SMDRP was
completed in August 1996 while the PEA decision was rendered on July 9, 2002. In the meantime, subdivided lots
forming parts of the reclaimed land were already sold to private corporations for value and separate titles issued to the
buyers. The Project was terminated through a Memorandum of Agreement signed on August 27, 2003. The PEA decision
became final through the November 11, 2003 Resolution. It is a settled precept that decisions of the Supreme Court can
only be applied prospectively as they may prejudice vested rights if applied retroactively.

In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective application of its decisions based on
considerations of equity and fair play, thus:

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge
and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for
pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws of the Constitution shall form
a part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also
subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is
provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward.
The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have
already become vested or impairs the obligations of contract and hence, is unconstitutional.

The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus,
we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a different
view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the
old doctrine and acted on the faith thereof.82

Fourth Issue: Whether respondent RBI can acquire reclaimed

lands when there was no declaration that said lands are no

longer needed for public use

Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable lands of the public domain, still,
the reclamation is flawed for there was never any declaration that said lands are no longer needed for public use.

We are not moved by petitioner's submission.

Even if it is conceded that there was no explicit declaration that the lands are no longer needed for public use or public
service, there was however an implicit executive declaration that the reclaimed areas R-10 are not necessary anymore for
public use or public service when President Aquino through MO 415 conveyed the same to the NHA partly for housing
project and related commercial/industrial development intended for disposition to and enjoyment of certain beneficiaries
and not the public in general and partly as enabling component to finance the project.

President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed lands of the Smokey
Mountain project are no longer required for public use or service, thus:
These parcels of land of public domain are hereby placed under the administration and disposition of the National
Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land
use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port related
activities. (Emphasis supplied.)

While numerical count of the persons to be benefited is not the determinant whether the property is to be devoted to public
use, the declaration in Proclamation No. 39 undeniably identifies only particular individuals as beneficiaries to whom the
reclaimed lands can be sold, namely the Smokey Mountain dwellers. The rest of the Filipinos are not qualified; hence,
said lands are no longer essential for the use of the public in general.

In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing the area to be reclaimed from
forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are undoubtedly set aside for the beneficiaries
of SMDRP and not the public declaring the power of NHA to dispose of land to be reclaimed, thus: "The authority to
administer, develop, or dispose lands identified and reserved by this Proclamation and Proclamation No. 39 (s.1992), in
accordance with the SMDRP, as enhance, is vested with the NHA, subject to the provisions of existing laws." (Emphasis
supplied.)

MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the reclaimed areas for public
use or service as the Project cannot be successfully implemented without the withdrawal of said lands from public use or
service. Certainly, the devotion of the reclaimed land to public use or service conflicts with the intended use of the
Smokey Mountain areas for housing and employment of the Smokey Mountain scavengers and for financing the Project
because the latter cannot be accomplished without abandoning the public use of the subject land. Without doubt, the
presidential proclamations on SMDRP together with the issuance of the special patents had effectively removed the
reclaimed lands from public use.

More decisive and not in so many words is the ruling in PEA which we earlier cited, that "PD No. 1085 and President
Aquino's issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public
service." Consequently, we ruled in that case that the reclaimed lands are "open to disposition or concession to qualified
parties."83

In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have classified the reclaimed
lands as alienable and disposable and open to disposition or concession as they would be devoted to units for Smokey
Mountain beneficiaries. Hence, said lands are no longer intended for public use or service and shall form part of the
patrimonial properties of the State under Art. 422 of the Civil Code.84 As discussed a priori, the lands were classified as
patrimonial properties of the NHA ready for disposition when the titles were registered in its name by the Register of
Deeds.

Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure project are necessarily
reclassified as alienable and disposable lands under the BOT Law; otherwise, absurd and illogical consequences would
naturally result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor since there will be no
consideration for its contractual obligations. Since reclaimed land will be conveyed to the contractor pursuant to the BOT
Law, then there is an implied declaration that such land is no longer intended for public use or public service and, hence,
considered patrimonial property of the State.

Fifth Issue: Whether there is a law authorizing sale of

reclaimed lands

Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no law authorizing their sale. He
argues that unlike PEA, no legislative authority was granted to the NHA to sell reclaimed land.

This position is misplaced.

Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the NHA is not empowered by any
law to sell reclaimed land, thus:

Section 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person,
corporation or association authorized to purchase or lease public lands for agricultural purposes. The area of the land so
leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably
necessary for the purposes for which such sale or lease if requested and shall in no case exceed one hundred and forty-four
hectares: Provided, however, That this limitation shall not apply to grants, donations, transfers, made to a province,
municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public
interest; but the land so granted donated or transferred to a province, municipality, or branch or subdivision of the
Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when
authorized by Congress; Provided, further, That any person, corporation, association or partnership disqualified from
purchasing public land for agricultural purposes under the provisions of this Act, may lease land included under this title
suitable for industrial or residential purposes, but the lease granted shall only be valid while such land is used for the
purposes referred to. (Emphasis supplied.)

Reliance on said provision is incorrect as the same applies only to "a province, municipality or branch or subdivision of
the Government." The NHA is not a government unit but a government corporation performing governmental and
proprietary functions.

In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under the law to other
parties, thus:

Section 6. Powers and functions of the Authority. The Authority shall have the following powers and functions to be
exercised by the Boards in accordance with the established national human settlements plan prepared by the Human
Settlements Commission:

xxx

(k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable;

(l) Acquire property rights and interests, and encumber or otherwise dispose the same as it may deem appropriate
(Emphasis supplied.)

Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber or otherwise dispose of them
as it may deem appropriate. The transfer of the reclaimed lands by the National Government to the NHA for housing,
commercial, and industrial purposes transformed them into patrimonial lands which are of course owned by the State in its
private or proprietary capacity. Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or qualified
corporation.

Sixth Issue: Whether the transfer of reclaimed lands to RBI

was done by public bidding

Petitioner also contends that there was no public bidding but an awarding of ownership of said reclaimed lands to RBI.
Public bidding, he says, is required under Secs. 63 and 67 of CA 141 which read:

Section 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of
Lands shall ask the Secretary of Agriculture and Commerce for authority to dispose of the same. Upon receipt of such
authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or
sales of agricultural public land, that the Government will lease or sell, as the case may be, the lots or blocks specified in
the advertisement, for the purpose stated in the notice and subject to the conditions specified in this chapter.

xxx

Section 67. The lease or sale shall be made through oral bidding; and adjudication shall be made to the highest bidder.
However, where an applicant has made improvements on the land by virtue of a permit issued to him by competent
authority, the sale or lease shall be made by sealed bidding as prescribed in section twenty-six of this Act, the provisions
of which shall be applied whenever applicable. If all or part of the lots remain unleased or unsold, the Director of Lands
shall from time to time announce in the Official Gazette or in any other newspapers of general circulation, the lease of
sale of those lots, if necessary.

He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands were conveyed to RBI by
negotiated contract and not by public bidding as required by law.

This stand is devoid of merit.

There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture partner in the
Smokey Mountain Project. Notices or Invitations to Bid were published in the national dailies on January 23 and 26, 1992
and February 1, 14, 16, and 23, 1992. The bidding proper was done by the Bids and Awards Committee (BAC) on May
18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and DENR
opened the bids and evaluated them, resulting in the award of the contract to respondent RBI on October 7, 1992.

On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said JVA was amended and
restated into the ARJVA. On August 11, 1994, the ARJVA was again amended. On September 7, 1994, the OP approved
the ARJVA and the amendments to the ARJVA. From these factual settings, it cannot be gainsaid that there was full
compliance with the laws and regulations governing public biddings involving a right, concession, or property of the
government.
Petitioner concedes that he does not question the public bidding on the right to be a joint venture partner of the NHA, but
the absence of bidding in the sale of alienable and disposable lands of public domain pursuant to CA 141 as amended.

Petitioner's theory is incorrect.

Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by the Director of Lands of alienable
and disposable lands of public domain. This is not present in the case at bar. The lands reclaimed by and conveyed to the
NHA are no longer lands of public domain. These lands became proprietary lands or patrimonial properties of the State
upon transfer of the titles over the reclaimed lands to the NHA and hence outside the ambit of CA 141. The NHA can
therefore legally transfer patrimonial land to RBI or to any other interested qualified buyer without any bidding conducted
by the Director of Lands because the NHA, unlike PEA, is a government agency not tasked to sell lands of public domain.
Hence, it can only hold patrimonial lands and can dispose of such lands by sale without need of public bidding.

Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding "when government property has become
unserviceable for any cause or is no longer needed." It appears from the Handbook on Property and Supply Management
System, Chapter 6, that reclaimed lands which have become patrimonial properties of the State, whose titles are conveyed
to government agencies like the NHA, which it will use for its projects or programs, are not within the ambit of Sec. 79.
We quote the determining factors in the Disposal of Unserviceable Property, thus:

Determining Factors in the Disposal of Unserviceable Property

Property, which can no longer be repaired or reconditioned;




Property whose maintenance costs of repair more than outweigh the benefits and services that will be derived
from its continued use;




Property that has become obsolete or outmoded because of changes in technology;




Serviceable property that has been rendered unnecessary due to change in the agency's function or mandate;




Unused supplies, materials and spare parts that were procured in excess of requirements; and




Unused supplies and materials that [have] become dangerous to use because of long storage or use of which is
determined to be hazardous.85

Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in question are very much needed by
the NHA for the Smokey Mountain Project because without it, then the projects will not be successfully implemented.
Since the reclaimed lands are not unserviceable properties and are very much needed by NHA, then Sec. 79 of PD 1445
does not apply.

More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed lands transferred to a
government agency like the NHA which has entered into a BOT contract with a private firm. The reason is obvious. If the
patrimonial property will be subject to public bidding as the only way of disposing of said property, then Sec. 6 of RA
6957 on the repayment scheme is almost impossible or extremely difficult to implement considering the uncertainty of a
winning bid during public auction. Moreover, the repayment scheme of a BOT contract may be in the form of non-
monetary payment like the grant of a portion or percentage of reclaimed land. Even if the BOT partner participates in the
public bidding, there is no assurance that he will win the bid and therefore the payment in kind as agreed to by the parties
cannot be performed or the winning bid prize might be below the estimated valuation of the land. The only way to
harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT contracts
involving patrimonial lands. The law does not intend anything impossible (lex non intendit aliquid impossibile).

Seventh Issue: Whether RBI, being a private corporation,

is barred by the Constitution to acquire lands of public domain

Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the 1987 Constitution from acquiring
lands of public domain.

Petitioner's proposition has no legal mooring for the following reasons:

1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid "a portion as
percentage of the reclaimed land" subject to the constitutional requirement that only Filipino citizens or
corporations with at least 60% Filipino equity can acquire the same. It cannot be denied that RBI is a
private corporation, where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is
valid and constitutional.

2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said proclamations
were converted to alienable and disposable lands of public domain. When the titles to the reclaimed lands
were transferred to the NHA, said alienable and disposable lands of public domain were automatically
classified as lands of the private domain or patrimonial properties of the State because the NHA is an
agency NOT tasked to dispose of alienable or disposable lands of public domain. The only way it can
transfer the reclaimed land in conjunction with its projects and to attain its goals is when it is
automatically converted to patrimonial properties of the State. Being patrimonial or private properties of
the State, then it has the power to sell the same to any qualified person under the Constitution, Filipino
citizens as private corporations, 60% of which is owned by Filipino citizens like RBI.

3. The NHA is an end-user entity such that when alienable lands of public domain are transferred to said
agency, they are automatically classified as patrimonial properties. The NHA is similarly situated as
BCDA which was granted the authority to dispose of patrimonial lands of the government under RA
7227. The nature of the property holdings conveyed to BCDA is elucidated and stressed in the May 6,
2003 Resolution in Chavez v. PEA, thus:

BCDA is an entirely different government entity. BCDA is authorized by law to sell specific government lands that have
long been declared by presidential proclamations as military reservations for use by the different services of the armed
forces under the Department of National Defense. BCDA's mandate is specific and limited in area, while PEA's mandate
is general and national. BCDA holds government lands that have been granted to end-user government entitiesthe military
services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an
end-user entity, but as the government agency "primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government."

x x x Well-settled is the doctrine that public land granted to an end-user government agency for a specific public use may
subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties.
R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or
military purposes and reclassifies such lands as patrimonial property for sale to private parties.

Government owned lands, as long as they are patrimonial property, can be sold to private parties, whether Filipino citizens
or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are
patrimonial property which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the
public domain if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial
property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold
by the public or municipal corporation to private parties, whether Filipino citizens or qualified private
corporations.86 (Emphasis supplied.)

The foregoing Resolution makes it clear that the SMDRP was a program adopted by the Government under Republic Act
No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the
Private Sector, and For Other Purposes), as amended by RA 7718, which is a special law similar to RA 7227. Moreover,
since the implementation was assigned to the NHA, an end-user agency under PD 757 and RA 7279, the reclaimed lands
registered under the NHA are automatically classified as patrimonial lands ready for disposition to qualified beneficiaries.

The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private corporation, is
disqualified from being a transferee of public land. What was transferred to HCPTI is a 10-hectare lot which is already
classified as patrimonial property in the hands of the NHA. HCPTI, being a qualified corporation under the 1987
Constitution, the transfer of the subject lot to it is valid and constitutional.

Eighth Issue: Whether respondents can be compelled to disclose

all information related to the SMDRP

Petitioner asserts his right to information on all documents such as contracts, reports, memoranda, and the like relative to
SMDRP.

Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public like the current stage of the
Project, the present financial capacity of RBI, the complete list of investors in the asset pool, the exact amount of
investments in the asset pool and other similar important information regarding the Project.

He prays that respondents be compelled to disclose all information regarding the SMDRP and furnish him with originals
or at least certified true copies of all relevant documents relating to the said project including, but not limited to, the
original JVA, ARJVA, AARJVA, and the Asset Pool Agreement.

This relief must be granted.

The right of the Filipino people to information on matters of public concern is enshrined in the 1987 Constitution, thus:

ARTICLE II

xxx

SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public
disclosure of all its transactions involving public interest.

ARTICLE III

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

In Valmonte v. Belmonte, Jr., this Court explicated this way:

[A]n essential element of these freedoms is to keep open a continuing dialogue or process of communication between the
government and the people. It is in the interest of the State that the channels for free political discussion be maintained to
the end that the government may perceive and be responsive to the people's will. Yet, this open dialogue can be effective
only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants
in the discussion are aware of the issues and have access to information relating thereto can such bear fruit.87

In PEA, this Court elucidated the rationale behind the right to information:

These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the
government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These
twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official acts,
transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative
and amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x accountable to
the people," for unless citizens have the proper information, they cannot hold public officials accountable for anything.
Armed with the right information, citizens can participate in public discussions leading to the formulation of government
policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of
any democracy.88

Sec. 28, Art. II compels the State and its agencies to fully disclose "all of its transactions involving public interest." Thus,
the government agencies, without need of demand from anyone, must bring into public view all the steps and negotiations
leading to the consummation of the transaction and the contents of the perfected contract.89 Such information must pertain
to "definite propositions of the government," meaning official recommendations or final positions reached on the different
matters subject of negotiation. The government agency, however, need not disclose "intra-agency or inter-agency
recommendations or communications during the stage when common assertions are still in the process of being
formulated or are in the exploratory stage." The limitation also covers privileged communication like information on
military and diplomatic secrets; information affecting national security; information on investigations of crimes by law
enforcement agencies before the prosecution of the accused; information on foreign relations, intelligence, and other
classified information.

It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution, there is still no enabling
law that provides the mechanics for the compulsory duty of government agencies to disclose information on government
transactions. Hopefully, the desired enabling law will finally see the light of day if and when Congress decides to approve
the proposed "Freedom of Access to Information Act." In the meantime, it would suffice that government agencies post
on their bulletin boards the documents incorporating the information on the steps and negotiations that produced the
agreements and the agreements themselves, and if finances permit, to upload said information on their respective websites
for easy access by interested parties. Without any law or regulation governing the right to disclose information, the NHA
or any of the respondents cannot be faulted if they were not able to disclose information relative to the SMDRP to the
public in general.

The other aspect of the people's right to know apart from the duty to disclose is the duty to allow access to information on
matters of public concern under Sec. 7, Art. III of the Constitution. The gateway to information opens to the public the
following: (1) official records; (2) documents and papers pertaining to official acts, transactions, or decisions; and (3)
government research data used as a basis for policy development.

Thus, the duty to disclose information should be differentiated from the duty to permit access to information. There is no
need to demand from the government agency disclosure of information as this is mandatory under the Constitution; failing
that, legal remedies are available. On the other hand, the interested party must first request or even demand that he be
allowed access to documents and papers in the particular agency. A request or demand is required; otherwise, the
government office or agency will not know of the desire of the interested party to gain access to such papers and what
papers are needed. The duty to disclose covers only transactions involving public interest, while the duty to allow access
has a broader scope of information which embraces not only transactions involving public interest, but any matter
contained in official communications and public documents of the government agency.

We find that although petitioner did not make any demand on the NHA to allow access to information, we treat the
petition as a written request or demand. We order the NHA to allow petitioner access to its official records, documents,
and papers relating to official acts, transactions, and decisions that are relevant to the said JVA and subsequent
agreements relative to the SMDRP.

Ninth Issue: Whether the operative fact doctrine applies to the instant petition

Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine
which could not be used to countenance an inequitable result that is contrary to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the
SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.90

The argument of the Solicitor General is meritorious.

The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or
executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus:

As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution, the former shall be
void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are
not contrary to the laws of the Constitution." It is understandable why it should be so, the Constitution being supreme and
paramount. Any legislative or executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does
not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in
force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified,
its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the
governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time
may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be
to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination
[of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private
and official." This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila
Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in
Fernandez v. Cuerva and Co.91 (Emphasis supplied.)

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled
that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much
less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the
leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy
upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its
being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly unfair to
prevent private respondent from relying upon the order of suspension in lieu of a formal leave application. 92 (Emphasis
supplied.)

The principle was further explicated in the case of Rieta v. People of the Philippines, thus:

In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage
District v. Baxter Bank to wit:

The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was
not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the
challenged decree. x x x It is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its
invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in
various aspects 'with respect to particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light
of the nature both of the statute and of its previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions
that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.

In the May 6, 2003 Resolution in Chavez v. PEA, 93 we ruled that De Agbayani94 is not applicable to the case considering
that the prevailing law did not authorize private corporations from owning land. The prevailing law at the time was the
1935 Constitution as no statute dealt with the same issue.

In the instant case, RA 6957 was the prevailing law at the time that the joint venture agreement was signed. RA 6957,
entitled "An Act Authorizing The Financing, Construction, Operation And Maintenance Of Infrastructure Projects By The
Private Sector And For Other Purposes," which was passed by Congress on July 24, 1989, allows repayment to the private
contractor of reclaimed lands.95 Such law was relied upon by respondents, along with the above-mentioned executive
issuances in pushing through with the Project. The existence of such law and issuances is an "operative fact" to which
legal consequences have attached. This Court is constrained to give legal effect to the acts done in consonance with such
executive and legislative acts; to do otherwise would work patent injustice on respondents.

Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the transfer of land, although
illegal or unconstitutional, will not be invalidated on considerations of equity and social justice. However, in that case, we
did not apply the same considering that PEA, respondent in said case, was not entitled to equity principles there being bad
faith on its part, thus:

There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim
good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the
instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even
before the filing of this petition, two Senate Committees had already approved on September 16, 1997 Senate Committee
Report No. 560. This Report concluded, after a well-publicized investigation into PEA's sale of the Freedom Islands to
Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA
knowing and assuming all the attendant risks, including the annulment of the Amended JVA.96

Such indicia of bad faith are not present in the instant case. When the ruling in PEA was rendered by this Court on July 9,
2002, the JVAs were all executed. Furthermore, when petitioner filed the instant case against respondents on August 5,
2004, the JVAs were already terminated by virtue of the MOA between the NHA and RBI. The respondents had no reason
to think that their agreements were unconstitutional or even questionable, as in fact, the concurrent acts of the executive
department lent validity to the implementation of the Project. The SMDRP agreements have produced vested rights in
favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and
investors who made investments in the project or who bought SMPPCs. These properties and rights cannot be disturbed or
questioned after the passage of around ten (10) years from the start of the SMDRP implementation. Evidently, the
"operative fact" principle has set in. The titles to the lands in the hands of the buyers can no longer be invalidated.

The Court's Dispositions

Based on the issues raised in this petition, we find that the March 19, 1993 JVA between NHA and RBI and the SMDRP
embodied in the JVA, the subsequent amendments to the JVA and all other agreements signed and executed in relation to
it, including, but not limited to, the September 26, 1994 Smokey Mountain Asset Pool Agreement and the agreement on
Phase I of the Project as well as all other transactions which emanated from the Project, have been shown to be valid,
legal, and constitutional. Phase II has been struck down by the Clean Air Act.
With regard to the prayer for prohibition, enjoining respondents particularly respondent NHA from further implementing
and/or enforcing the said Project and other agreements related to it, and from further deriving and/or enjoying any rights,
privileges and interest from the Project, we find the same prayer meritless.

Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:

Sec. 2. Petition for prohibition. When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further
proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may
require.

It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation to the SMDRP and the
agreements relative to it. Likewise, it has not been shown what ministerial functions the NHA has with regard to the
SMDRP.

A ministerial duty is one which is so clear and specific as to leave no room for the exercise of discretion in its
performance. It is a duty which an officer performs in a given state of facts in a prescribed manner in obedience to the
mandate of legal authority, without regard to the exercise of his/her own judgment upon the propriety of the act done.97

Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA and other related agreements,
certainly does not involve ministerial functions of the NHA but instead requires exercise of judgment. In fact, Item No. 4
of the MOA terminating the JVAs provides for validation of the developer's (RBI's) claims arising from the termination of
the SMDRP through the various government agencies.98 Such validation requires the exercise of discretion.

In addition, prohibition does not lie against the NHA in view of petitioner's failure to avail and exhaust all administrative
remedies. Clear is the rule that prohibition is only available when there is no adequate remedy in the ordinary course of
law.

More importantly, prohibition does not lie to restrain an act which is already a fait accompli. The "operative fact" doctrine
protecting vested rights bars the grant of the writ of prohibition to the case at bar. It should be remembered that petitioner
was the Solicitor General at the time SMDRP was formulated and implemented. He had the opportunity to question the
SMDRP and the agreements on it, but he did not. The moment to challenge the Project had passed.

On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to disclose all documents and
information relating to the project, including, but not limited to, any subsequent agreements with respect to the different
phases of the Project, the revisions of the original plan, the additional works incurred on the Project, the current financial
condition of respondent RBI, and the transactions made with respect to the project. We earlier ruled that petitioner will be
allowed access to official records relative to the SMDRP. That would be adequate relief to satisfy petitioner's right to the
information gateway.

WHEREFORE, the petition is partially granted.

The prayer for a writ of prohibition is DENIED for lack of merit.

The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner to all public
documents and official records relative to the SMDRP including, but not limited to, the March 19, 1993 JVA between the
NHA and RBI and subsequent agreements related to the JVA, the revisions over the original plan, and the additional
works incurred on and the transactions made with respect to the Project.

No costs.

SO ORDERED.

Endnotes:

1
 Rollo, pp. 3-4.

2
 Id. at 513.

3
 Id. at 513-514.
4
 Id. at 515.

5
 Id. at 513.

6
 Id. at 297; Proclamation No. 39 dated September 9, 1992.

7
 RA 7718 was later enacted on May 5, 1994, amending certain sections of the BOT Law.

8
 "Joint Resolution Approving the List of National Projects to be Undertaken by the Private Sector
Pursuant to Republic Act No. 6957."

9
 Rollo, pp. 519-521.

10
 Id. at 296.

11
 Id. at 295.

12
 Id. at 436.

13
 Id. at 476.

14
 Id. at 477.

15
 Id. at 297-298.

16
 Id. at 479.

17
 Id. at 69-79.

 "Creating the National Housing Authority and Dissolving the Existing Housing Agencies, Defining its
18

Powers and Functions, Providing Funds Therefor, and for Other Purposes" (1975).

19
 Rollo, p. 70.

20
 Id. at 73.

21
 Id. at 479.

22
 Id. at 80-94.

23
 Id. at 83.

24
 Id.

25
 Id.

26
 Id.

27
 Id. at 84.

28
 Id. at 93.

29
 Id. at 95-104.

30
 Id. at 98.

31
 Id. at 526-533.

32
 Id. at 435.

33
 The PNB was later replaced by the Planters Development Bank.

34
 Rollo, p. 105.
35
 Id. at 18. RA 8749, "The Clean Air Act of 1999."

36
 Id.

37
 Id. at 244.

38
 Id. at 747-751.

39
 Id. at 858.

40
 Id. at 860.

41
 Id. at 859.

42
 Id.

43
 Id. at 860.

44
 Id.

45
 Id. at 861.

46
 Id.

47
 1997 Rules of Civil Procedure, Rule 3, Sec. 2.

 Bayan (Bagong Alyansang Makabayan) v. Zamora, G.R. NOS. 138570, 138572, 138587, 138680 &
48

138698, October 10, 2000, 342 SCRA 449, 478.

49
 G.R. No. 130716, December 9, 1998, 299 SCRA 744.

50
 G.R. No. 133250, July 9, 2002, 384 SCRA 152.

51
 G.R. No. 67787, April 18, 1989, 172 SCRA 415, 424.

52
 G.R. NOS. 99289-90, January 27, 1993, 217 SCRA 633, 652.

 1. Petitioner claimed that NHA awarded the Smokey Mountain project to R-II Builders through contract
53

negotiations and that there was no public bidding awarding ownership of the subject land to respondent
R-II Builders, while respondents alleged that NHA publicly bidded out the right to become NHA's joint
venture partner in the prosecution of the SMDRP;

2. Petitioner averred that "PEA had no participation whatsoever in the reclamation of the
subject lands" while respondents stated PEA had a name therein;

3. Petitioner alleged that "neither respondent NHA nor respondent R-II Builders was
given the authority [by DENR] to reclaim the subject lands" while respondents claimed
such authority was granted;

4. Mr. Chavez claimed "that there is no legislative or Presidential act classifying the
submerged areas around Smokey Mountain as alienable or disposable lands of the public
domain open to disposition" while respondents said that Presidents Aquino and Ramos
made the classification;

5. Whether respondent R-II Builders complied with its obligation to "fully finance" the
Project;

6. Whether the Project has been terminated by agreements of the parties;

7. Whether respondents Harbour Centre and Romero fraudulently caused the dilution of
the Asset Pool's Holdings in HCPTI;

8. Whether Harbour Centre contracts attached to the Petition are genuine.

54
 Rollo, p. 871.
55
 Petition, Comments, Reply, and Memoranda.

 "Designating the Public Estates Authority as the Agency Primarily Responsible for All Reclamation
56

Projects" (1979).

57
 Rollo, p. 235.

 The July 9, 2002 Decision entitled Chavez v. PEA was concurred in by 13 members of this Court who
58

voted to grant the petition. However, in the May 6, 2003 Resolution, the Court was divided when it voted
8-5 to affirm the Decision. And in the most recent November 11, 2003 Resolution of this Court, a 7-7
vote was arrived at. Thus, the July 9, 2002 Decision is still the valid case law.

 The doctrine of stare decisis provides that a conclusion reached in one case should, for the sake of
59

certainty, be applied to those which follow if the facts are substantially the same even though the parties
may be different.

60
 Supra note 50, at 221.

 "Creating the Public Estates Authority, Defining its Power and Functions, Providing Funds Therefor
61

and for Other Purposes" (1977).

 "An Act to Provide for a Comprehensive and Continuing Urban Development and Housing Program,
62

Establish the Mechanism for its Implementation, and for Other Purposes" (1992).

 Radio Communications of the Philippines, Inc. v. Santiago, Nos. L-29236 & L-29247, 58 SCRA 493,
63

August 21, 1974, 58 SCRA 493, 497.

64
 Azarcon v. Sandiganbayan, G.R. No. 116033, February 26, 1997, 268 SCRA 747, 761.

65
 63 Phil. 139, 177 (1936).

66
 Provident Tree Farms, Inc. v. Batario, Jr., G.R. No. 92285, March 28, 1994, 231 SCRA 463, 469; cited
in Agpalo, Administrative Code 14.

 "Amending Section 7 of Presidential Decree No. 3 dated September 26, 1972, by Providing for the
67

Exclusive Prosecution by Administration or by Contract of Reclamation Projects" (2005).

68
 Republic v. Court of Appeals, G.R. No. 103882, November 25, 1998, 299 SCRA 199, 303.

 "Delegating to the Philippine Reclamation Authority the Power to Approve Reclamation Projects"
69

(2006).

70
 Supra note 50, at 222-223.

71
 Taule v. Santos, G.R. No. 90336, August 12, 1991, 200 SCRA 512, 521-522.

72
 G.R. No. 157036, June 9, 2004, 431 SCRA 534, 555; citing EO 292, Book IV, Chapter 7.

73
 Supra note 50, at 217.

74
 Id. at 216.

75
 Id. at 235.

 Republic of the Philippines v. Manila Electric Company, G.R. No. 141314, April 9, 2003, 401 SCRA
76

130, 141.

77
 Id. at 142.

78
 G.R. No. 119682, January 21, 1999, 301 SCRA 450, 454-455.

79
 G.R. No. 146030, December 3, 2002, 393 SCRA 361, 373.

80
 G.R. No. 131667, July 28, 2005, 464 SCRA 280, 291.
81
 G.R. No. 163118, April 27, 2007.

82
 G.R. No. 97973, January 27, 1992, 205 SCRA 515, 527.

83
 Supra note 73.

 Article 422. Property of public dominion, when no longer intended for public use or public service,
84

shall form part of the patrimonial property of the State.

 Commission on Audit, Professional Development Center, Handbook on Property & Supply

85

Management System 91-92 (2003).

86
 G.R. No. 133250, May 6, 2003, 403 SCRA 1, 31-32.

87
 G.R. No. 74930, February 13, 1989, 170 SCRA 256, 265.

88
 Supra note 50, at 184.

89
 Id. at 185; citing V Record of the Constitutional Commission 24-25 (1986).

90
 G.R. No. 147817, August 12, 2004, 436 SCRA 273, 291-292.

91
 No. L-23127, April 29, 1971, 38 SCRA 429, 434-435.

92
 G.R. No. 131392, February 6, 2002, 376 SCRA 248, 257.

93
 Supra note 86, at 26.

94
 Supra note 91.

95
 RA 6957, Sec. 6 provides:

Section 6. Repayment Scheme. For the financing, construction, operation, and

maintenance of any infrastructure project undertaken pursuant to the provisions of this
Act, the constructor shall be entitled to a reasonable return of its investment and
operating and maintenance costs in accordance with its bid proposal as accepted by the
concerned contracting infrastructure agency or local government unit and incorporated in
the contract's terms and conditions. In the case of a build-operate-and-transfer
arrangement, this repayment scheme is to be affected by authorizing the contractor to
charge for the use of the project facility not exceeding those proposed in the bid and
incorporated in the contract: Provided, That the government infrastructure agency or local
government unit concerned shall approve the fairness and equity of the tolls, fees, rentals
and charges except in case of tolls for national highways, roads, bridges and public
thoroughfares which shall be approved by the Toll Regulatory Board: Provided, further,
That the imposition and collection of tolls, fees, rentals and charges shall be for a fixed
term as proposed in the bid and incorporated in the contract but in no case shall this term
exceed fifty (50) years: Provided, finally, That during the lifetime of the franchise, the
contractor shall undertake the necessary maintenance and repair of the facility in
accordance with standards prescribed in the bidding documents and in the contract. In the
case of a build-and-transfer arrangements, the repayment scheme is to be affected
through amortization payments by the government unit concerned to the contractor
according to the scheme proposed in the bid and incorporated in the contract.

In the case of land reclamation or the building of industrial estates, the repayment scheme
may consist of the grant of a portion of percentage of the reclaimed land or industrial
estate built, subject to the constitutional requirements with respect to the ownership of
lands.

96
 Supra note 86, at 29-30.

97
 Symaco v. Hon. Aquino, etc., 106 Phil. 1130, 1135 (1960).

98
 Rollo, p. 866.