7Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-20329

March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,

vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
Ross, Lawrence and Selph for petitioner.
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of the City of
Manila, to an original petition of the Standard Oil Company of New York, seeking a peremptory mandamus to compel the
respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of
Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of New York.
It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel of
land situated in the City of Manila and owner of the house of strong materials built thereon, upon which date she
executed a document in the form of a chattel mortgage, purporting to convey to the petitioner by way of mortgage both
the leasehold interest in said lot and the building which stands thereon.
The clauses in said document describing the property intended to be thus mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage, the following described
personal property, situated in the City of Manila, and now in possession of the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove referred to, and
in and to the premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the aforesaid leased premises.
After said document had been duly acknowledge and delivered, the petitioner caused the same to be presented to the
respondent, Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded
in the book of record of chattel mortgages. Upon examination of the instrument, the respondent was of the opinion that
it was not a chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal
property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only.
We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept the proper
fee and place the instrument on record. The duties of a register of deeds in respect to the registration of chattel
mortgage are of a purely ministerial character; and no provision of law can be cited which confers upon him any judicial
or quasi-judicial power to determine the nature of any document of which registration is sought as a chattel mortgage.
The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law (Act No. 1508), as
amended by Act No. 2496; but these have been transferred to section 198 of the Administrative Code, where they are now
found. There is nothing in any of these provisions conferring upon the register of deeds any authority whatever in
respect to the "qualification," as the term is used in Spanish law, of chattel mortgage. His duties in respect to such
instruments are ministerial only. The efficacy of the act of recording a chattel mortgage consists in the fact that it
operates as constructive notice of the existence of the contract, and the legal effects of the contract must be
discovered in the instrument itself in relation with the fact of notice. Registration adds nothing to the instrument,
considered as a source of title, and affects nobody's rights except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property and
personal property for purpose of the application of the Chattel Mortgage Law. Those articles state rules which,
considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under given conditions
property may have character different from that imputed to it in said articles. It is undeniable that the parties to a
contract may by agreement treat as personal property that which by nature would be real property; and it is a familiar
phenomenon to see things classed as real property for purposes of taxation which on general principle might be
considered personal property. Other situations are constantly arising, and from time to time are presented to this
court, in which the proper classification of one thing or another as real or personal property may be said to be
doubtful.
The point submitted to us in this case was determined on September 8, 1914, in an administrative ruling promulgated by
the Honorable James A. Ostrand, now a Justice of this Court, but acting at that time in the capacity of Judge of the
fourth branch of the Court of First Instance of the Ninth Judicial District, in the City of Manila; and little of value
can be here added to the observations contained in said ruling. We accordingly quote therefrom as follows:
It is unnecessary here to determine whether or not the property described in the document in question is real or
personal; the discussion may be confined to the point as to whether a register of deeds has authority to deny the
registration of a document purporting to be a chattel mortgage and executed in the manner and form prescribed by the
Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor continued:
Based principally upon the provisions of section quoted the Attorney-General of the Philippine Islands, in an opinion
dated August 11, 1909, held that a register of deeds has no authority to pass upon the capacity of the parties to a
chattel mortgage which is presented to him for record. A fortiori a register of deeds can have no authority to pass upon
the character of the property sought to be encumbered by a chattel mortgage. Of course, if the mortgaged property is
real instead of personal the chattel mortgage would no doubt be held ineffective as against third parties, but this is a
question to be determined by the courts of justice and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this court held that where the interest
conveyed is of the nature of real, property, the placing of the document on record in the chattel mortgage register is a
futile act; but that decision is not decisive of the question now before us, which has reference to the function of the
register of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass upon the point whether the interests conveyed
in the instrument now in question are real or personal; and we declare it to be the duty of the register of deeds to
accept the estimate placed upon the document by the petitioner and to register it, upon payment of the proper fee.

The demurrer is overruled; and unless within the period of five days from the date of the notification hereof, the
respondent shall interpose a sufficient answer to the petition, the writ of mandamus will be issued, as prayed, but
without costs. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-40411

August 7, 1935

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

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for
the parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge
found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs
against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has
operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which
the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the
machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which
were placed and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land
there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the
second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any
amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land
leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of
the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not
included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the
defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of
execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim
was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.
Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to
take possession of the machinery and other properties described in the corresponding certificates of sale executed in its favor
by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions
treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the
appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
x x x

x x x

x x x

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection
with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of
industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge
and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of
the sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as
chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. In
this connection the decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630),
whether obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery which is
involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by
a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment
of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that
machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant,
but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the
agent of the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well known, it was in
part said:

To determine this question involves fixing the nature and character of the property from the point of view of the rights of
Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia
Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the plant.
Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but also
attributes immovability in some cases to property of a movable nature, that is, personal property, because of the destination to
which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by their own nature or by
their destination or the object to which they are applicable." Numerous illustrations are given in the fifth subdivision of
section 335, which is as follows: "Machinery, vessels, instruments or implements intended by the owner of the tenements for the
industrial or works that they may carry on in any building or upon any land and which tend directly to meet the needs of the
said industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534, recapitulating the
things which, though in themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing
machinery placed in the plant it is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon, that
machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant.
Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any
person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5,
No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed
out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not
presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of
immobilization to become the property of another. It follows that abstractly speaking the machinery put by the Altagracia
Company in the plant belonging to Sanchez did not lose its character of movable property and become immovable by destination.
But in the concrete immobilization took place because of the express provisions of the lease under which the Altagracia held,
since the lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against
the lessor the cost such machinery, and it was expressly stipulated that the machinery so put in should become a part of the
plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery
was acting but as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the
machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent destination to the
machinery.
x x x

x x x

x x x

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company, being,
as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the execution upon the
judgment in their favor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes, since as to
him the property was a part of the realty which, as the result of his obligations under the lease, he could not, for the purpose
of collecting his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by
the appellant.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-15334

January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.
Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant a
franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of
Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise
on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila
Electric Co. (Meralco for short), became the transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the
City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric
transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by
respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of one of these steel towers
is attached to the petition for review, marked Annex A. Three steel towers were inspected by the lower court and parties and the
following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The findings were as follows: the ground
around one of the four posts was excavated to a depth of about eight (8) feet, with an opening of about one (1) meter in
diameter, decreased to about a quarter of a meter as it we deeper until it reached the bottom of the post; at the bottom of the
post were two parallel steel bars attached to the leg means of bolts; the tower proper was attached to the leg three bolts; with
two cross metals to prevent mobility; there was no concrete foundation but there was adobe stone underneath; as the bottom of
the excavation was covered with water about three inches high, it could not be determined with certainty to whether said adobe
stone was placed purposely or not, as the place abounds with this kind of stone; and the tower carried five high voltage wires
without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner approximate more than
one kilometer from the first tower. As in the first tower, the ground around one of the four legs was excavate from seven to
eight (8) feet deep and one and a half (1-) meters wide. There being very little water at the bottom, it was seen that there
was no concrete foundation, but there soft adobe beneath. The leg was likewise provided with two parallel steel bars bolted to a
square metal frame also bolted to each corner. Like the first one, the second tower is made up of metal rods joined together by
means of bolts, so that by unscrewing the bolts, the tower could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given above, the ground around
the two legs of the third tower was excavated to a depth about two or three inches beyond the outside level of the steel bar
foundation. It was found that there was no concrete foundation. Like the two previous ones, the bottom arrangement of the legs
thereof were found to be resting on soft adobe, which, probably due to high humidity, looks like mud or clay. It was also found
that the square metal frame supporting the legs were not attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under
Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real
property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition
for review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation
of the said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86.
The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA
exempt from taxes under part II paragraph 9 of
subject to real property tax; and (3) the City
These are assigned as errors by the petitioner

held that: (1) the steel towers come within the term "poles" which are declared
respondent's franchise; (2) the steel towers are personal properties and are not
Treasurer of Quezon City is held responsible for the refund of the amount paid.
in the brief.

The tax exemption privilege of the petitioner is quoted hereunder:

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 ... Said percentage shall be due and payable at the time stated in paragraph nineteen of Part One hereof, ... 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. (Par. 9, Part Two, Act No. 484 Respondent's Franchise; emphasis supplied.)

The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically the stem of a
small tree stripped of its branches; also by extension, a similar typically cylindrical piece or object of metal or the like".
The term also refers to "an upright standard to the top of which something is affixed or by which something is supported; as a
dovecote set on a pole; telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New International
Dictionary 2nd Ed., p. 1907.) 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 no 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, 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 consists of a framework of four steel bars or strips which are bound by steel cross-arms atop of which are crossarms 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 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.
In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires shall be constructed
upon suitable poles, this term was construed to mean either wood or metal poles and in view of the land being subject to
overflow, and the necessary carrying of numerous wires and the distance between poles, the statute was interpreted to include
towers or poles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an association used to convey its electric
power furnished to subscribers and members, constructed for the purpose of fastening high voltage and dangerous electric wires
alongside public highways. The steel supports or towers were made of iron or other metals consisting of two pieces running from
the ground up some thirty feet high, being wider at the bottom than at the top, the said two metal pieces being connected with
criss-cross iron running from the bottom to the top, constructed like ladders and loaded with high voltage electricity. In form
and structure, they are like the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power
generated from its plant to the Tower of Oxford and City of Waterbury. These steel towers are about 15 feet square at the base
and extended to a height of about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of
which extends above the surface of the soil in the tower of Oxford, and to the towers are attached insulators, arms, and other
equipment capable of carrying wires for the transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101 Conn.
383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met his death was built for the purpose of
supporting a transmission wire used for carrying high-tension electric power, but claimed that the steel towers on which it is
carried were so large that their wire took their structure out of the definition of a pole line. It was held that in defining
the word pole, one should not be governed by the wire or material of the support used, but was considering the danger from any
elevated wire carrying electric current, and that regardless of the size or material wire of its individual members, any
continuous series of structures intended and used solely or primarily for the purpose of supporting wires carrying electric
currents is a pole line (Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).
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. If the respondent would be required to employ
"wooden poles", or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century
behind the age of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons,
can better effectuate the purpose for which the respondent's franchise was granted.
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:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
x x x

x x x

x x x

(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;
x x x

x x x

x x x

(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;
x x x

x x x

x x x

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 construction 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, 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 in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of P11,651.86,
despite the fact that Quezon City is not a party to the case. It is argued that as the City Treasurer is not the real party in
interest, but Quezon City, which was not a party to the suit, notwithstanding its capacity to sue and be sued, he should not be
ordered to effect the refund. This question has not been raised in the court below, and, therefore, it cannot be properly raised
for the first time on appeal. The herein petitioner is indulging in legal technicalities and niceties which do not help him any;
for factually, it was he (City Treasurer) whom had insisted that respondent herein pay the real estate taxes, which respondent
paid under protest. Having acted in his official capacity as City Treasurer of Quezon City, he would surely know what to do,
under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-50466 May 31, 1982
CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.
AQUINO, J.:
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located
on leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps,
computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described
the said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any is placed in one
corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached in the wall of the shed or at the
concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or less, a few meters
away from the shed. This is done to prevent conflagration because gasoline and other combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is commonly placed or
constructed under the shed. The footing of the pump is a cement pad and this cement pad is imbedded in the pavement under the
shed, and evidence that the gasoline underground tank is attached and connected to the shed or building through the pipe to the
pump and the pump is attached and affixed to the cement pad and pavement covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor, the underground gasoline
tank, neon lights signboard, concrete fence and pavement and the lot where they are all placed or erected, all of them used in
the pursuance of the gasoline service station business formed the entire gasoline service-station.
As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the tenement we
consider in this particular case are (is) the pavement covering the entire lot which was constructed by the owner of the
gasoline station and the improvement which holds all the properties under question, they are attached and affixed to the
pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as well as all the improvements, machines, equipments and
apparatus are allowed by Caltex (Philippines) Inc. ...
The underground
by a steel pipe
gasoline pumps,
service station

gasoline tank is attached to the shed by the steel pipe to the pump, so with the water tank it is connected also
to the pavement, then to the electric motor which electric motor is placed under the shed. So to say that the
water pumps and underground tanks are outside of the service station, and to consider only the building as the
is grossly erroneous. (pp. 58-60, Rollo).

The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt.
It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in
good condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed
therein. Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The
realty tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are
personalty. The assessor appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice Catalino Macaraig,
Jr. and Secretary of Local Government and Community Development Jose Roo, held in its decision of June 3, 1977 that the said
machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code,
Presidential Decree No. 464, which took effect on June 1, 1974, and that the definitions of real property and personal property
in articles 415 and 416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution of January 12,
1978, denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a
declaration that t he said machines and equipment are personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this case is not
correct. When Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central Board of Assessment Appeals.
Section 7(3) of that law in providing that the Tax Court had jurisdiction to review by appeal decisions of provincial or city
boards of assessment appeals had in mind the local boards of assessment appeals but not the Central Board of Assessment Appeals

which under the Real Property Tax Code has appellate jurisdiction over decisions of the said local boards of assessment appeals
and is, therefore, in the same category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment Appeals shall become
final and executory after the lapse of fifteen days from the receipt of its decision by the appellant. Within that fifteen-day
period, a petition for reconsideration may be filed. The Code does not provide for the review of the Board's decision by this
Court.
Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board of Assessment
Appeals is the special civil action of certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax. This issue
has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and
other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the
Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to more than mere
repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it
for new or further purposes.
m) Machinery shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to the real
estate. It includes the physical facilities available for production, as well as the installations and appurtenant service
facilities, together with all other equipment designed for or essential to its manufacturing, industrial or agricultural
purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which
it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas
station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are
taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right,
unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property
by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and
installed by the lessee on leased land should be regarded as real property for purposes of execution of a judgment against the
lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with
Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as
realty).
Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is different from the issue
raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty (84 C.J.S.
181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where
Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from
taxation. The steel towers were considered personalty because they were attached to square metal frames by means of bolts and
could be moved from place to place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company which
were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is
imposition of the realty tax on Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition for
certiorari is dismissed for lack of merit. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11139

April 23, 1958

SANTOS EVANGELISTA, petitioner,

vs.
ALTO SURETY & INSURANCE CO., INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No. 8235 of the Court of
First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum of money. On the same date, he obtained a
writ of attachment, which levied upon a house, built by Rivera on a land situated in Manila and leased to him, by filing copy of
said writ and the corresponding notice of attachment with the Office of the Register of Deeds of Manila, on June 8, 1949. In due
course, judgment was rendered in favor of Evangelista, who, on October 8, 1951, bought the house at public auction held in
compliance with the writ of execution issued in said case. The corresponding definite deed of sale was issued to him on October
22, 1952, upon expiration of the period of redemption. When Evangelista sought to take possession of the house, Rivera refused
to surrender it, upon the ground that he had leased the property from the Alto Surety & Insurance Co., Inc. respondent herein
and that the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale of the
same house had been issued to respondent, as the highest bidder at an auction sale held, on September 29, 1950, in compliance
with a writ of execution issued in Civil Case No. 6268 of the same court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo
Quiambao, Rosario Guevara and Ricardo Rivera," in which judgment, for the sum of money, had been rendered in favor respondent
herein, as plaintiff therein. Hence, on June 13, 1953, Evangelista instituted the present action against respondent and Ricardo
Rivera, for the purpose of establishing his (Evangelista) title over said house, securing possession thereof, apart from
recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the sale made, and the
definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952, respectively, precede the sale to
Evangelista (October 8, 1951) and the definite deed of sale in his favor (October 22, 1952). It, also, made some special
defenses which are discussed hereafter. Rivera, in effect, joined forces with respondent. After due trial, the Court of First
Instance of Manila rendered judgment for Evangelista, sentencing Rivera and respondent to deliver the house in question to
petitioner herein and to pay him, jointly and severally, forty pesos (P40.00) a month from October, 1952, until said delivery,
plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved said respondent from the
complaint, upon the ground that, although the writ of attachment in favor of Evangelista had been filed with the Register of
Deeds of Manila prior to the sale in favor of respondent, Evangelista did not acquire thereby a preferential lien, the
attachment having been levied as if the house in question were immovable property, although in the opinion of the Court of
Appeals, it is "ostensibly a personal property." As such, the Court of Appeals held, "the order of attachment . . . should have
been served in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of Court, reading:
The property of the defendant shall be attached by the officer executing the order in the following manner:
(e) Debts and credits, and other personal property not capable of
or having in his possession or under his control, such credits or
order, and a notice that the debts owing by him to the defendant,
or under his control, belonging to the defendant, are attached in

manual delivery, by leaving with the person owing such debts,

other personal property, or with, his agent, a copy of the
and the credits and other personal property in his possession,
pursuance of such order. (Emphasis ours.)

However, the Court of Appeals seems to have been of the opinion, also, that the
accordance with subsection (c) of said section 7, as "personal property capable
in his custody", for it declared that "Evangelists could not have . . . validly
sheriff as the latter was not in possession thereof at the time he sold it at a

house of Rivera should have been attached in

of manual delivery, by taking and safely keeping
purchased Ricardo Rivera's house from the
public auction."

Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this connection, it is not disputed
that although the sale to the respondent preceded that made to Evangelists, the latter would have a better right if the writ of
attachment, issued in his favor before the sale to the respondent, had been properly executed or enforced. This question, in
turn, depends upon whether the house of Ricardo Rivera is real property or not. In the affirmative case, the applicable
provision would be subsection (a) of section 7, Rule 59 of the Rules of Court, pursuant to which the attachment should be made
"by filing with the registrar of deeds a copy of the order, together with a description of the property attached, and a notice
that it is attached, and by leaving a copy of such order, description, and notice with the occupant of the property, if any
there be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal property, the levy upon which must
be made in conformity with subsections (c) and (e) of said section 7 of Rule 59. Hence, the main issue before us is whether a
house, constructed the lessee of the land on which it is built, should be dealt with, for purpose, of attachment, as immovable
property, or as personal property.
It is, our considered opinion that said house is not personal property, much less a debt, credit or other personal property not
capable of manual delivery, but immovable property. As explicitly held, in Laddera vs. Hodges (48 Off. Gaz., 5374), "a true

building (not merely superimposed on the soil) is immovable or real property, whether it is erected by the owner of the land or
by usufructuary or lessee. This is the doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37 Phil., 644.
And it is amply supported by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal property for purposes of
said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New York vs. Jaramillo, 44 Phil., 630; De Jesus
vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is good only insofar as the contracting parties are concerned. It is
based, partly, upon the principle of estoppel. Neither this principle, nor said view, is applicable to strangers to said
contract. Much less is it in point where there has been no contract whatsoever, with respect to the status of the house
involved, as in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a contract regarding a house gave said
property the consideration of personal property in their contract, bind the sheriff in advertising the property's sale at public
auction as personal property? It is to be remembered that in the case at bar the action was to collect a loan secured by a
chattel mortgage on the house. It is also to be remembered that in practice it is the judgment creditor who points out to the
sheriff the properties that the sheriff is to levy upon in execution, and the judgment creditor in the case at bar is the party
in whose favor the owner of the house had conveyed it by way of chattel mortgage and, therefore, knew its consideration as
personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and, we should not interpret them in
such a way as to allow, the special consideration that parties to a contract may have desired to impart to real estate, for
example, as personal property, when they are, not ordinarily so. Sales on execution affect the public and third persons. The
regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of
property is suited to its character, not to the character, which the parties have given to it or desire to give it. When the
rules speak of personal property, property which is ordinarily so considered is meant; and when real property is spoken of, it
means property which is generally known as real property. The regulations were never intended to suit the consideration that
parties may have privately given to the property levied upon. Enforcement of regulations would be difficult were the convenience
or agreement of private parties to determine or govern the nature of the proceedings. We therefore hold that the mere fact that
a house was the subject of the chattel mortgage and was considered as personal property by the parties does not make said house
personal property for purposes of the notice to be given for its sale of public auction. This ruling is demanded by the need for
a definite, orderly and well defined regulation for official and public guidance and would prevent confusion and
misunderstanding.
We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a contract of chattel
mortgage between the owner and a third person, is real property within the purview of Rule 39, section 16, of the Rules of Court
as it has become a permanent fixture of the land, which, is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery
Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)"
(Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it similarly affects the
public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment by Evangelista was void or
ineffective, because, in the language of the Court of Appeals, "after presenting a Copy of the order of attachment in the Office
of the Register of Deeds, the person who might then be in possession of the house, the sheriff took no pains to serve Ricardo
Rivera, or other copies thereof." This finding of the Court of Appeals is neither conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in paragraph 3 of the complaint,
that he acquired the house in question "as a consequence of the levy of an attachment and execution of the judgment in Civil
Case No. 8235" of the Court of First Instance of Manila. In his answer (paragraph 2), Ricardo Rivera admitted said attachment
execution of judgment. He alleged, however, by way a of special defense, that the title of respondent "is superior to that of
plaintiff because it is based on a public instrument," whereas Evangelista relied upon a "promissory note" which "is only a
private instrument"; that said Public instrument in favor of respondent "is superior also to the judgment in Civil Case No.
8235"; and that plaintiff's claim against Rivera amounted only to P866, "which is much below the real value" of said house, for
which reason it would be "grossly unjust to acquire the property for such an inadequate consideration." Thus, Rivera impliedly
admitted that his house had been attached, that the house had been sold to Evangelista in accordance with the requisite
formalities, and that said attachment was valid, although allegedly inferior to the rights of respondent, and the consideration
for the sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the reasons stated in its
special defenses" namely: (1) that by virtue of the sale at public auction, and the final deed executed by the sheriff in favor
of respondent, the same became the "legitimate owner of the house" in question; (2) that respondent "is a buyer in good faith
and for value"; (3) that respondent "took possession and control of said house"; (4) that "there was no valid attachment by the
plaintiff and/or the Sheriff of Manila of the property in question as neither took actual or constructive possession or control
of the property at any time"; and (5) "that the alleged registration of plaintiff's attachment, certificate of sale and final
deed in the Office of Register of Deeds, Manila, if there was any, is likewise, not valid as there is no registry of
transactions covering houses erected on land belonging to or leased from another." In this manner, respondent claimed a better
right, merely under the theory that, in case of double sale of immovable property, the purchaser who first obtains possession in
good faith, acquires title, if the sale has not been "recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the
Philippines), and that the writ of attachment and the notice of attachment in favor of Evangelista should be considered
unregistered, "as there is no registry of transactions covering houses erected on land belonging to or leased from another." In
fact, said article 1544 of the Civil Code of the Philippines, governing double sales, was quoted on page 15 of the brief for
respondent in the Court of Appeals, in support of its fourth assignment of error therein, to the effect that it "has preference
or priority over the sale of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of attachment had been served on Rivera. No evidence
whatsoever, to the effect that Rivera had not been served with copies of said writ and notice, was introduced in the Court of
First Instance. In its brief in the Court of Appeals, respondent did not aver, or even, intimate, that no such copies were

served by the sheriff upon Rivera. Service thereof on Rivera had been impliedly admitted by the defendants, in their respective
answers, and by their behaviour throughout the proceedings in the Court of First Instance, and, as regards respondent, in the
Court of Appeals. In fact, petitioner asserts in his brief herein (p. 26) that copies of said writ and notice were delivered to
Rivera, simultaneously with copies of the complaint, upon service of summons, prior to the filing of copies of said writ and
notice with the register deeds, and the truth of this assertion has not been directly and positively challenged or denied in the
brief filed before us by respondent herein. The latter did not dare therein to go beyond making a statement for the first
time in the course of these proceedings, begun almost five (5) years ago (June 18, 1953) reproducing substantially the
aforementioned finding of the Court of Appeals and then quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue on whether or not
copies of the writ of attachment and notice of attachment had been served upon Rivera; that the defendants had impliedly
admitted-in said pleadings and briefs, as well as by their conduct during the entire proceedings, prior to the rendition of the
decision of the Court of Appeals that Rivera had received copies of said documents; and that, for this reason, evidently, no
proof was introduced thereon, we, are of the opinion, and so hold that the finding of the Court of Appeals to the effect that
said copies had not been served upon Rivera is based upon a misapprehension of the specific issues involved therein and goes
beyond the range of such issues, apart from being contrary to the aforementioned admission by the parties, and that,
accordingly, a grave abuse of discretion was committed in making said finding, which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be entered affirming that of the Court
of First Instance of Manila, with the costs of this instance against respondent, the Alto Surety and Insurance Co., Inc. It is
so ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-32266 February 27, 1989
THE DIRECTOR OF FORESTRY, petitioner
vs.
RUPERTO A. VILLAREAL, respondent.
The Solicitor General for petitioner.
Quasha, Asperilla, Ancheta, Valmonte, Pena & Marcos for respondents.

CRUZ, J.:
The basic question before the Court is the legal classification of mangrove swamps, or manglares, as they are commonly known. If
they are part of our public forest lands, they are not alienable under the Constitution. If they are considered public
agricultural lands, they may be acquired under private ownership. The private respondent's claim to the land in question must be
judged by these criteria.
The said land consists of 178,113 square meters of mangrove swamps located in the municipality of Sapian, Capiz. Ruperto
Villareal applied for its registration on January 25, 1949, alleging that he and his predecessors-in-interest had been in
possession of the land for more than forty years. He was opposed by several persons, including the petitioner on behalf of the
Republic of the Philippines. After trial, the application was approved by the Court of First Instance. of Capiz. 1 The decision
was affirmed by the Court of Appeals. 2 The Director of Forestry then came to this Court in a petition for review on certiorari
claiming that the land in dispute was forestal in nature and not subject to private appropriation. He asks that the registration
be reversed.
It should be stressed at the outset that both the petitioner and the private respondent agree that the land is mangrove land.
There is no dispute as to this. The bone of contention between the parties is the legal nature of mangrove swamps or manglares.
The petitioner claims, it is forestal and therefore not disposable and the private respondent insists it is alienable as
agricultural land. The issue before us is legal, not factual.
For a proper background of this case, we have to go back to the Philippine Bill of 1902, one of the earlier American organic
acts in the country. By this law, lands of the public domain in the Philippine Islands were classified into three grand
divisions, to wit, agricultural, mineral and timber or forest lands. This classification was maintained in the Constitution of
the Commonwealth, promulgated in 1935, until it was superseded by the Constitution of 1973. That new charter expanded the
classification of public lands to include industrial or commercial, residential, resettlement, and grazing lands and even
permitted the legislature to provide for other categories. 3 This provision has been reproduced, but with substantial
modifications, in the present Constitution. 4
Under the Commonwealth Constitution, which was the charter in force when this case arose, only agricultural lands were allowed
to be alienated. 5 Their disposition was provided for under C.A. No. 141. Mineral and timber or forest lands were not subject to
private ownership unless they were first reclassified as agricultural lands and so released for alienation.
In the leading case of Montano v. Insular Government, 6 promulgated in 1909, mangrove swamps or manglares were defined by the
Court as:
... mud flats, alternately washed and exposed by the tide, in which grows various kindred plants which will not live except when
watered by the sea, extending their roots deep into the mud and casting their seeds, which also germinate there. These
constitute the mangrove flats of the tropics, which exist naturally, but which are also, to some extent cultivated by man for
the sake of the combustible wood of the mangrove and like trees as well as for the useful nipa palm propagated thereon. Although
these flats are literally tidal lands, yet we are of the opinion that they cannot be so regarded in the sense in which that term
is used in the cases cited or in general American jurisprudence. The waters flowing over them are not available for purpose of
navigation, and they may be disposed of without impairment of the public interest in what remains.
x x x
Under this uncertain and somewhat unsatisfactory condition of the law, the custom had grown of converting manglares and nipa
lands into fisheries which became a common feature of settlement along the coast and at the same time of the change of
sovereignty constituted one of the most productive industries of the Islands, the abrogation of which would destroy vested
interests and prove a public disaster.
Mangrove swamps were thus considered agricultural lands and so susceptible of private ownership.
Subsequently, the Philippine Legislature categorically declared, despite the above-cited case, that mangrove swamps form part of
the public forests of this country. This it did in the Administrative Code of 1917, which became effective on October 1 of that
year, thus:

Section 1820. Words and phrase defined. - For the purpose of this chapter 'public forest' includes, except as otherwise
specially indicated, all unreserved public land, including nipa and mangrove swamps, and all forest reserves of whatever
character.
It is noteworthy, though, that notwithstanding this definition, the Court maintained the doctrine in the Montano case when two
years later it held in the case of Jocson v. Director of Forestry: 7
...the words timber land are always translated in the Spanish translation of that Act (Act of Congress) as terrenos forestales.
We think there is an error in this translation and that a better translation would be 'terrenos madereros.' Lumber land in
English means land with trees growing on it. The mangler plant would never be called a tree in English but a bush, and land
which has only bushes, shrubs or aquatic plants growing on it cannot be called 'timber land.
xxx xxx xxx
The fact that there are a few trees growing in a manglare or nipa swamps does not change the general character of the land from
manglare to timber land.
More to the point, addressing itself directly to above-quoted Section 1820, the Court declared:
'In the case of Mapa vs. Insular Government (10 Phil. Rep., 175), this Court said that the phrase agricultural lands as used in
Act No. 926 means those public lands acquired from Spain which are not timber or mineral lands.
Whatever may have been the meaning of the term 'forestry' under the Spanish law, the Act of Congress of July 1st 1902,
classifies the public lands in the Philippine Islands as timber, mineral or agricultural lands, and all public lands that are
not timber or mineral lands are necessarily agricultural public lands, whether they are used as nipa swamps, manglares,
fisheries or ordinary farm lands.
The definition of forestry as including manglares found in the Administrative Code of 1917 cannot affect rights which vested
prior to its enactment.
These lands being neither timber nor mineral lands, the trial court should have considered them agricultural lands. If they are
agricultural lands, then the rights of appellants are fully established by Act No. 926.
The doctrine was reiterated still later in Garchitorena Vda. de Centenera v. Obias, 8 promulgated on March 4, 1933, more than
fifteen years after the effectivity of the Administrative Code of 1917. Justice Ostrand declared for a unanimous Court:
The opposition rests mainly upon the proposition that the land covered by the application there are mangrove lands as shown in
his opponent's Exh. 1, but we think this opposition of the Director of Forestry is untenable, inasmuch as it has been definitely
decided that mangrove lands are not forest lands in the sense in which this phrase is used in the Act of Congress.
No elaboration was made on this conclusion which was merely based on the cases of Montano and Jocson. And in 1977, the above
ruling was reaffirmed in Tongson v. Director of Forestry, 9 with Justice Fernando declaring that the mangrove lands in litis
were agricultural in nature. The decision even quoted with approval the statement of the trial court that:
... Mangrove swamps where only trees of mangrove species grow, where the trees are small and sparse, fit only for firewood
purposes and the trees growing are not of commercial value as lumber do not convert the land into public land. Such lands are
not forest in character. They do not form part of the public domain.
Only last year, in Republic v. De Porkan, 10 the Court, citing Krivenko v. Register of Deeds, 11 reiterated the ruling in the
Mapa case that "all public lands that are not timber or mineral lands are necessarily agricultural public lands, whether they
are used as nipa swamps, manglares, fisheries or ordinary farm lands.
But the problem is not all that simple. As it happens, there is also a line of decisions holding the contrary view.
In Yngson v. Secretary of Agriculture and Natural Resources, 12 promulgated in 1983, the Court ruled "that the Bureau of
Fisheries has no jurisdiction to dispose of swamp lands or mangrove lands forming part of the public domain while such lands are
still classified as forest lands.
Four months later, in Heirs of Amunategui v. Director of Forestry, 13 the Court was more positive when it held, again through
Justice Gutierrez:
The Heirs of Jose Amunategui maintain that Lot No. 885 cannot be classified as forest land because it is not thickly forested
but is a 'mangrove swamps.' Although conceding that 'mangrove swamp' is included in the classification of forest land in
accordance with Section 1820 of the Revised Administrative Code, the petitioners argue that no big trees classified in Section
1821 of the said Code as first, second and third groups are found on the land in question. Furthermore, they contend that Lot
885, even if it is a mangrove swamp, is still subject to land registration proceedings because the property had been in actual
possession of private persons for many years, and therefore, said land was already 'private land' better adapted and more
valuable for agricultural than for forest purposes and not required by the public interests to be kept under forest
classification.
The petition is without merit.
A forested area classified as forest land of the public domain does not lose such classification simply because loggers or
settlers may have stripped it of its forest cover. Parcels of land classified as forest land may actually be covered with grass
or planted to crops by kaingin cultivators or other farmers. 'Forested lands' do not have to be on mountains or in out-of-theway places. Swampy areas covered by mangrove trees, nipa palms, and other trees growing in brackish or sea water may also be
classified as forest land. The classification is descriptive of its legal nature or status and does not have to be descriptive
of what the land actually looks like. Unless and until the land classsified as 'forest' is released in an official proclamation

to that effect so that it may form part of the disposable agricultural lands of the public domain, the rules on confirmation of
imperfect titles do not apply.'
The view was maintained in Vallarta v. Intermediate Appellate Court, 14 where this Court agreed with the Solicitor General's
submission that the land in dispute, which he described as "swamp mangrove or forestal land," were not private properties and so
not registerable. This case was decided only twelve days after the De Porkan case.
Faced with these apparent contradictions, the Court feels there is a need for a categorical pronouncement that should resolve
once and for all the question of whether mangrove swamps are agricultural lands or forest lands.
The determination of this question is a function initially belonging to the legislature, which has the authority to implement
the constitutional provision classifying the lands of the public domain (and is now even permitted to provide for more
categories of public lands). The legislature having made such implementation, the executive officials may then, in the discharge
of their own role, administer our public lands pursuant to their constitutional duty " to ensure that the laws be faithfully
executed' and in accordance with the policy prescribed. For their part, the courts will step into the picture if the rules laid
down by the legislature are challenged or, assuming they are valid, it is claimed that they are not being correctly observed by
the executive. Thus do the three departments, coordinating with each other, pursue and achieve the objectives of the
Constitution in the conservation and utilization of our natural resources.
In C.A. No. 141, the National Assembly delegated to the President of the Philippines the function of making periodic
classifications of public lands, thus:
Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time to time
classify the lands of the public domain into:
(a) Alienable or disposable,
(b) Lumber, 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.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable lands, the President, upon
recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are open to
disposition or concession under this Act.
With particular regard to alienable public lands, Section 9 of the same law provides:
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; and
(d) Reservations for townsites and for public and quasi-public uses.
The President, upon recommendation by the Secretary of Agriculture and Natural Resources, 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.
As for timber or forest lands, the Revised Administrative Code states as follows:
Sec. 1826. Regulation setting apart forest reserves- Revocation of same. - Upon there commendation of the Director of Forestry,
with the approval of the Department Head, the President of the Philippines may set apart forest reserves from the public lands
and he shall by proclamation declare the establishment of such reserves and the boundaries thereof, and thereafter such forest
reserves shall not be entered, sold, or otherwise disposed of, but shall remain as such for forest uses, and shall be
administered in the same manner as public forest.
The President of the Philippines may in like manner by proclamation alter or modify the boundaries of any forest reserve from
time to time, or revoke any such proclamation, and upon such revocation such forest reserve shall be and become part of the
public lands as though such proclamation had never been made.
Sec. 1827. Assignment of forest land for agricultural purposes. - Lands in public forest, not including forest reserves, upon
the certification of the Director of Forestry that said lands are better adapted and more valuable for agricultural than for
forest purposes and not required by the public interests to be kept under forest, shall be declared by the Department Head to be
agricultural lands.
With these principles in mind, we reach the following conclusion:
Mangrove swamps or manglares should be understood as comprised within the public forests of the Philippines as defined in the
aforecited Section 1820 of the Administrative Code of 1917. The legislature having so determined, we have no authority to ignore
or modify its decision, and in effect veto it, in the exercise of our own discretion. The statutory definition remains unchanged
to date and, no less noteworthy, is accepted and invoked by the executive department. More importantly, the said provision has

not been challenged as arbitrary or unrealistic or unconstitutional assuming the requisite conditions, to justify our judicial
intervention and scrutiny. The law is thus presumed valid and so must be respected. We repeat our statement in the Amunategui
case that the classification of mangrove swamps as forest lands is descriptive of its legal nature or status and does not have
to be descriptive of what the land actually looks like. That determination having been made and no cogent argument having been
raised to annul it, we have no duty as judges but to apply it. And so we shall.
Our previous description of the term in question as pertaining to our agricultural lands should be understood as covering only
those lands over which ownership had already vested before the Administrative Code of 1917 became effective. Such lands could
not be retroactively legislated as forest lands because this would be violative of a duly acquired property right protected by
the due process clause. So we ruled again only two months ago in Republic of the Philippines vs. Court of Appeals, 15 where the
possession of the land in dispute commenced as early as 1909, before it was much later classified as timberland.
It follows from all this that the land under contention being admittedly a part of the mangrove swamps of Sapian, and for which
a minor forest license had in fact been issued by the Bureau of Forestry from 1920 to 1950, it must be considered forest land.
It could therefore not be the subject of the adverse possession and consequent ownership claimed by the private respondent in
support of his application for registration. To be so, it had first to be released as forest land and reclassified as
agricultural land pursuant to the certification the Director of Forestry may issue under Section 1827 of the Revised
Administrative Code.
The private respondent invokes the survey plan of the mangrove swamps approved by the Director of Lands, 16 to prove that the
land is registerable. It should be plain, however, that the mere existence of such a plan would not have the effect of
converting the mangrove swamps, as forest land, into agricultural land. Such approval is ineffectual because it is clearly in
officious. The Director of Lands was not authorized to act in the premises. Under the aforecited law, it is the Director of
Forestry who has the authority to determine whether forest land is more valuable for agricultural rather than forestry uses, as
a basis for its declaration as agricultural land and release for private ownership.
Thus we held in the Yngson case:
It is elementary in the law governing the disposition of lands of the public domain that until timber or forest lands are
released as disposable and alienable neither the Bureau of Lands nor the Bureau of Fisheries has authority to lease, grant, sell
or otherwise dispose of these lands for homesteads, sales patents, leases for grazing or other purposes, fishpond leases and
other modes of utilization.
The Bureau of Fisheries has no jurisdiction to administer and dispose of swamp lands or mangrove lands forming part of the
public domain while such lands are still classified as forest land or timber land and not released for fishery or other
purposes.
The same rule was echoed in the Vallarta case, thus:
It is elementary in the law governing natural resources that forest land cannot be owned by private persons. It is not
registerable. The adverse possession which can be the basis of a grant of title in confirmation of imperfect title cases cannot
commence until after the forest land has been declared alienable and disposable. Possession of forest land, no matter bow long
cannot convert it into private property.'
We find in fact that even if the land in dispute were agricultural in nature, the proof the private respondent offers of
prescriptive possession thereof is remarkably meager and of dubious persuasiveness. The record contains no convincing evidence
of the existence of the informacion posesoria allegedly obtained by the original transferor of the property, let alone the fact
that the conditions for acquiring title thereunder have been satisfied. Nowhere has it been shown that the informacion posesoria
has been inscribed or registered in the registry of property and that the land has been under the actual and adverse possession
of the private respondent for twenty years as required by the Spanish Mortgage Law. 17 These matters are not presumed but must
be established with definite proof, which is lacking in this case.
Significantly, the tax declarations made by the private respondent were practically the only basis used by the appellate court
in sustaining his claim of possession over the land in question. Tax declarations are, of course, not sufficient to prove
possession and much less vest ownership in favor of the declarant, as we have held in countless cases. 18
We hold, in sum, that the private respondent has not established his right to the registration of the subject land in his name.
Accordingly, the petition must be granted.
It is reiterated for emphasis that, conformably to the legislative definition embodied in Section 1820 of the Revised
Administrative Code of 1917, which remains unamended up to now, mangrove swamps or manglares form part of the public forests of
the Philippines. As such, they are not alienable under the Constitution and may not be the subject of private ownership until
and unless they are first released as forest land and classified as alienable agricultural land.
WHEREFORE, the decision of the Court of Appeals is SET ASIDE and the application for registration of title of private respondent
is DISMISSED, with cost against him. This decision is immediately executory.
SO ORDERED.

THIRD DIVISION
[G.R. No. 152115. January 26, 2005]
NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
[G.R. No. 155055. January 26, 2005]
LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
D E C I S I O N
CORONA, J.:
Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first
petition, docketed as G.R. No. 152115, filed by Nimfa Usero, assails the September 19, 2001 decision[1] of the Court of Appeals
in CA-GR SP No. 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails the January 11,
2002 decision[2] of the Court of Appeals in CA-GR SP NO. 64181.
The undisputed facts follow.
Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2, Block 5, Golden Acres Subdivision,
Barrio Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18 Anahaw St., Pilar Village, Las Pias
City, behind the lots of petitioners Samela and Usero.
Situated between the lots of the parties is a low-level strip of land, with a stagnant body of water filled with floating water
lilies; abutting and perpendicular to the lot of petitioner Samela, the lot of the Polinars and the low-level strip of land is
the perimeter wall of Pilar Village Subdivision.
Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and the strong current passing
through it causes considerable damage to the house of respondent Polinars. Frustrated by their predicament, private respondent
spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level strip of land about three meters from their
house and rip-rapped the soil on that portion of the strip of land.
Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that the spouses Apolinar stop their
construction but the spouses paid no heed, believing the strip to be part of a creek. Nevertheless, for the sake of peace, the
Polinars offered to pay for the land being claimed by petitioners Samela and Usero. However, the parties failed to settle their
differences.
On November 9, 1998, petitioners filed separate complaints for forcible entry against the Polinars at the Metropolitan Trial
Court of Las Pias City. The case filed by petitioner Samela was docketed as Civil Case No. 5242, while that of petitioner Usero
was docketed as Civil Case No. 5243.
In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer Certificate of Title, plan of
consolidation, subdivision survey, the tax declaration in her name, and affidavits of petitioner Usero and a certain Justino
Gamela whose property was located beside the perimeter wall of Pilar Village.
The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay certification as to the existence of the
creek; a certification from the district engineer that the western portion of Pilar Village is bound by a tributary of Talon
Creek throughout its entire length; boundary and index map of Pilar Village showing that the village is surrounded by a creek
and that the Polinar property is situated at the edge of said creek; and pictures of the subject strip of land filled with water
lilies.
On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:
WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at their expense the improvements made
on the subject lot; ordering the defendants to pay the plaintiff P1,000.00 a month as reasonable compensation for the use of the
portion encroached from the filing of the complaint until the same is finally vacated; and to pay plaintiff P10,000.00 as
reasonable attorneys fees plus costs of suit.[3]
In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order on February 29, 2000, directing
petitioner Usero and the Polinar spouses to commission a professional geodetic engineer to conduct a relocation survey and to
submit the report to the trial court.
On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation survey of Useros property covered by
TCT No. T- 29545. The result of the said relocation survey, as stated in his affidavit, was as follows:
1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT No. T-29545 registered in the name of
Nimfa O. Usero;
2. That according to my survey, I found out that there is no existing creek on the boundary of the said lot;
3. That based on the relocation plan surveyed by the undersigned, attached herewith, appearing is the encroachment on the abovementioned lot by Spouses Herminigildo and Cecilia Polinar with an area of FORTY THREE (43) SQUARE METERS;

4. That this affidavit was made in compliance with Court Order dated February 23, 2000 of Metropolitan Trial Court, Las Pias
City, Branch LXXIX.[4]
On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them:
a) To vacate and remove at their expense the improvement made on the subject lot;
b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion encroached from the time of the filing of
the complaint until the same is finally vacated;
c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.
SO ORDERED.[5]
The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional Trial Court of Las Pias, Branch 253
which heard the appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the decision of the trial court and
ordered the dismissal of the complaint. It confirmed the existence of the creek between the northwestern portion of the lot of
petitioner Samela and the southwestern portion of the lot of the spouses Polinar:
Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee cannot therefore lay claim
of lawful ownership of that portion because the same forms part of public dominion. Consequently, she cannot legally stop the
defendants-appellants from rip-rapping the bank of the creek to protect the latters property from soil erosion thereby avoiding
danger to their lives and damage to property.
Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-appellants are not duty bound
to pay the former compensation for the use of the same. As a result, they may maintain the said improvements introduced thereon
subject to existing laws, rules and regulations and/or ordinances appurtenant thereto.
WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial Court, Las Pias is REVERSED.
Accordingly, the instant complaint is DISMISSED.
SO ORDERED.[6]
On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding of the Municipal Trial Court:
From the foregoing, defendants-appellants may maintain the improvements introduced on the subject portion of the lot subject to
existing laws, rules and regulations and/or ordinances pertaining thereto. Consequently, no compensation may be awarded in favor
of the plaintiff-appellee.
WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the Las Pias City Metropolitan Trial Court
is REVERSED. Accordingly, the instant complaint is DISMISSED.
From the adverse decisions of the Regional Trial Court, petitioners filed their respective petitions for review on certiorari to
the Court of Appeals. Petitioner Samelas case was docketed as CA-G.R. SP 64181 while that of petitioner Usero was docketed as
CA-G.R. SP 64718.
Both petitions failed in the CA. Thus the instant consolidated petitions.
The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly encroached upon by the spouses
Polinar, is the private property of petitioners or part of the creek and therefore part of the public domain. Clearly this an
issue which calls for a review of facts already determined by the Court of Appeals.
The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing
only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or
the assailed judgment is based on a misapprehension of facts.[7] This is obviously not the case here.
A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient evidence. That the subject strip
of land is a creek is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of land; (2) a
certification from the Second Manila Engineering District, NCR-DPWH, that the western portion of Pilar Village where the subject
strip of land is located is bounded by a tributary of Talon Creek and (3) photographs showing the abundance of water lilies in
the subject strip of land. The Court of Appeals was correct: the fact that water lilies thrive in that strip of land can only
mean that there is a permanent stream of water or creek there.
In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of their
respective lots to prove that there is no creek between their properties and that of the Polinars. However, an examination of
said TCTs reveals that the descriptions thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no boundary
description relative to the northwest portion of the property pertaining to the site of the creek. Likewise in TCT No. T-22329-A
of the spouses Polinar, the southeast portion which pertains to the site of the creek has no described boundary. Moreover the
tax declaration presented by petitioner is devoid of any entry on the west boundary vis-a-vis the location of the creek. All the
pieces of evidence taken together, we can only conclude that the adjoining portion of these boundaries is in fact a creek and
belongs to no one but the state.
Property is either of public dominion or of private ownership.[8] Concomitantly, Article 420 of the Civil Code provides:

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

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
The phrase others of similar character includes a creek which is a recess or an arm of a river. It is property belonging to the
public domain which is not susceptible to private ownership.[9] Being public water, a creek cannot be registered under the
Torrens System in the name of any individual[10].
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their property.
WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R. SP 64181 and
CA-G.R. SP 64718 are affirmed in toto.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 97764 August 10, 1992

LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of Makati, Metro Manila, MUNICIPALITY OF
PARAAQUE, METRO MANILA, PALANYAG KILUSANG BAYAN FOR SERVICE, respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Paraaque.

MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the decision of the Regional
Trial Court of Makati, Branch 62, which granted the writ of preliminary injunction applied for by respondents Municipality of
Paraaque and Palanyag Kilusang Bayan for Service (Palanyag for brevity) against petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which authorized the closure of J.
Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets located at Baclaran, Paraaque, Metro Manila and the
establishment of a flea market thereon. The said ordinance was approved by the municipal council pursuant to MMC Ordinance No.
2, Series of 1979, authorizing and regulating the use of certain city and/or municipal streets, roads and open spaces within
Metropolitan Manila as sites for flea market and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the municipal council of respondent
municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the residents do not oppose the
establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly, and that the 2 meters on both
sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed areas are developed and donated
by the Public Estate Authority.
On June 20, 1990, the municipal council of Paraaque issued a resolution authorizing Paraaque Mayor Walfrido N. Ferrer to enter
into contract with any service cooperative for the establishment, operation, maintenance and management of flea markets and/or
vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative, entered into an agreement whereby the
latter shall operate, maintain and manage the flea market in the aforementioned streets with the obligation to remit dues to the
treasury of the municipal government of Paraaque. Consequently, market stalls were put up by respondent Palanyag on the said
streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan Traffic Command, ordered the
destruction and confiscation of stalls along G.G. Cruz and J. Gabriel St. in Baclaran. These stalls were later returned to
respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag giving the latter ten (10) days to
discontinue the flea market; otherwise, the market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint petition for prohibition
and mandamus with damages and prayer for preliminary injunction, to which the petitioner filed his memorandum/opposition to the
issuance of the writ of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from enforcing his letter-order
of October 16, 1990 pending the hearing on the motion for writ of preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No. 86 s. 1990 of the Municipality' of
Paraaque and enjoining petitioner Brig. Gen. Macasiano from enforcing his letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging grave abuse of discretion
tantamount to lack or excess of jurisdiction on the part of the trial judge in issuing the assailed order.

The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by the municipal council of
Paraaque authorizing the lease and use of public streets or thoroughfares as sites for flea markets is valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public service and are therefore
public properties; that as such, they cannot be subject to private appropriation or private contract by any person, even by the
respondent Municipality of Paraaque. Petitioner submits that a property already dedicated to public use cannot be used for
another public purpose and that absent a clear showing that the Municipality of Paraaque has been granted by the legislature
specific authority to convert a property already in public use to another public use, respondent municipality is, therefore,
bereft of any authority to close municipal roads for the establishment of a flea market. Petitioner also submits that assuming
that the respondent municipality is authorized to close streets, it failed to comply with the conditions set forth by the
Metropolitan Manila Authority for the approval of the ordinance providing for the establishment of flea markets on public
streets. Lastly, petitioner contends that by allowing the municipal streets to be used by market vendors the municipal council
of respondent municipality violated its duty under the Local Government Code to promote the general welfare of the residents of
the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of power given to local government units, the
Municipality of Paraaque as such, is empowered under that law to close its roads, streets or alley subject to limitations
stated therein (i.e., that it is in accordance with existing laws and the provisions of this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its power is in fact an encroachment of
power legally vested to the municipality, precisely because when the municipality enacted the ordinance in question the
authority of the respondent as Police Superintendent ceases to be operative on the ground that the streets covered by the
ordinance ceases to be a public thoroughfare. (pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed municipal ordinance authorizing the flea
market on the public streets is valid, it is necessary to examine the laws in force during the time the said ordinance was
enacted, namely, Batas Pambansa Blg. 337, otherwise known as Local Government Code, in connection with established principles
embodied in the Civil Code an property and settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use and patrimonial property (Art. 423,
Civil Code). As to what consists of property for public use, Article 424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities and municipalities, consists of the provincial roads, city 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.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local roads used for public
service and are therefore considered public properties of respondent municipality. Properties of the local government which are
devoted to public service are deemed public and are under the absolute control of Congress (Province of Zamboanga del Norte v.
City of Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334). Hence, local governments have no authority whatsoever to control or
regulate the use of public properties unless specific authority is vested upon them by Congress. One such example of this
authority given by Congress to the local governments is the power to close roads as provided in Section 10, Chapter II of the
Local Government Code, which states:
Sec. 10. Closure of roads. A local government unit may likewise, through its head acting pursuant to a resolution of its
sangguniang and in accordance with existing law and the provisions of this Code, close any barangay, municipal, city or
provincial road, street, alley, park or square. No such way or place or any part of thereof shall be close without indemnifying
any person prejudiced thereby. A property thus withdrawn from public use may be used or conveyed for any purpose for which other
real property belonging to the local unit concerned might be lawfully used or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units to close roads and other similar public
places should be read and interpreted in accordance with basic principles already established by law. These basic principles
have the effect of limiting such authority of the province, city or municipality to close a public street or thoroughfare.
Article 424 of the Civil Code lays down the basic principle that properties of public dominion devoted to public use and made
available to the public in general are outside the commerce of man and cannot be disposed of or leased by the local government
unit to private persons. Aside from the requirement of due process which should be complied with before closing a road, street
or park, the closure should be for the sole purpose of withdrawing the road or other public property from public use when
circumstances show that such property is no longer intended or necessary for public use or public service. When it is already
withdrawn from public use, the property then becomes patrimonial property of the local government unit concerned (Article 422,
Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29, 1975, 66 SCRA 481). It is only then that
the respondent municipality can "use or convey them for any purpose for which other real property belonging to the local unit
concerned might be lawfully used or conveyed" in accordance with the last sentence of Section 10, Chapter II of Blg. 337, known
as Local Government Code. In one case, the City Council of Cebu, through a resolution, declared the terminal road of M. Borces
Street, Mabolo, Cebu City as an abandoned road, the same not being included in the City Development Plan. Thereafter, the City
Council passes another resolution authorizing the sale of the said abandoned road through public bidding. We held therein that
the City of Cebu is empowered to close a city street and to vacate or withdraw the same from public use. Such withdrawn portion
becomes patrimonial property which can be the object of an ordinary contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles,
et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are available to the public in general and
ordinarily used for vehicular traffic are still considered public property devoted to public use. In such case, the local

government has no power to use it for another purpose or to dispose of or lease it to private persons. This limitation on the
authority of the local government over public properties has been discussed and settled by this Court en banc in "Francisco V.
Dacanay, petitioner v. Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654, May 6, 1992." This Court ruled:
There is
streets,
commerce
contract
Espiritu

no doubt that the disputed areas from which the private respondents' market stalls are sought to be evicted are public
as found by the trial court in Civil Case No. C-12921. A public street is property for public use hence outside the
of man (Arts. 420, 424, Civil Code). Being outside the commerce of man, it may not be the subject of lease or others
(Villanueva, et al. v. Castaeda and Macalino, 15 SCRA 142 citing the Municipality of Cavite v. Rojas, 30 SCRA 602;
v. Municipal Council of Pozorrubio, 102 Phil. 869; And Muyot v. De la Fuente, 48 O.G. 4860).

As the stallholders pay fees to the City Government for the right to occupy portions of the public street, the City Government,
contrary to law, has been leasing portions of the streets to them. Such leases or licenses are null and void for being contrary
to law. The right of the public to use the city streets may not be bargained away through contract. The interests of a few
should not prevail over the good of the greater number in the community whose health, peace, safety, good order and general
welfare, the respondent city officials are under legal obligation to protect.
The Executive Order issued by
stallholders who were granted
for public use. Mayor Robles'
purpose they were intended to

acting Mayor Robles authorizing the use of Heroes del '96 Street as a vending area for
licenses by the city government contravenes the general law that reserves city streets and roads
Executive Order may not infringe upon the vested right of the public to use city streets for the
serve: i.e., as arteries of travel for vehicles and pedestrians.

Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed ordinance, the same
cannot be validly implemented because it cannot be considered approved by the Metropolitan Manila Authority due to noncompliance by respondent municipality of the conditions imposed by the former for the approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the residents do(es) not oppose the
establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly, and that the 2 meters on both
sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed areas are developed and donated
by the Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the foregoing conditions precedent to the
approval of the ordinance. The allegations of respondent municipality that the closed streets were not used for vehicular
traffic and that the majority of the residents do not oppose the establishment of a flea market on said streets are unsupported
by any evidence that will show that this first condition has been met. Likewise, the designation by respondents of a time
schedule during which the flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with people, houses and traffic brought about
by the proliferation of vendors occupying the streets. To license and allow the establishment of a flea market along J. Gabriel,
G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not help in solving the problem of congestion. We
take note of the other observations of the Solicitor General when he said:
. . . There have been many instances of emergencies and fires where ambulances and fire engines, instead of using the roads for
a more direct access to the fire area, have to maneuver and look for other streets which are not occupied by stalls and vendors
thereby losing valuable time which could, otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the people rushing their patients to
the hospital cannot pass through G.G. Cruz because of the stalls and the vendors. One can only imagine the tragedy of losing a
life just because of a few seconds delay brought about by the inaccessibility of the streets leading to the hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal transportation flow is disrupted
and school children have to get off at a distance still far from their schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by vendors on the streets at the end of the day. Needless to say, these
cause further pollution, sickness and deterioration of health of the residents therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners. Instead, respondents want this
Court to focus its attention solely on the argument that the use of public spaces for the establishment of a flea market is well
within the powers granted by law to a local government which should not be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down by toe Constitution
and the laws such as our Civil Code. Moreover, the exercise of such powers should be subservient to paramount considerations of
health and well-being of the members of the community. Every local government unit has the sworn obligation to enact measures
that will enhance the public health, safety and convenience, maintain peace and order, and promote the general prosperity of the
inhabitants of the local units. Based on this objective, the local government should refrain from acting towards that which
might prejudice or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to demand the demolition of the illegally
constructed stalls in public roads and streets and the officials of respondent municipality have the corresponding duty arising
from public office to clear the city streets and restore them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for lack of basis and authority in
laws applicable during its time. However, at this point, We find it worthy to note that Batas Pambansa Blg. 337, known as Local

Government Lode, has already been repealed by Republic Act No. 7160 known as Local Government Code of 1991 which took effect on
January 1, 1992. Section 5(d) of the new Code provides that rights and obligations existing on the date of effectivity of the
new Code and arising out of contracts or any other source of prestation involving a local government unit shall be governed by
the original terms and conditions of the said contracts or the law in force at the time such rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial Court dated December 17, 1990 which
granted the writ of preliminary injunction enjoining petitioner as PNP Superintendent, Metropolitan Traffic Command from
enforcing the demolition of market stalls along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets is
hereby RESERVED and SET ASIDE.
SO ORDERED.

SECOND DIVISION
REPUBLIC OF THE PHILIPPINES,
Petitioner,
- versus CELESTINA NAGUIAT,
Respondent.
G.R. No. 134209
Present:
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
Promulgated:
January 24, 2006
x-----------------------------------------------------------------------------------x
D E C I S I O N
GARCIA, J.:
Before the Court is this petition for review under Rule 45 of the Rules of Court seeking the reversal of the Decision[1] dated
May 29, 1998 of the Court of Appeals (CA) in CA-G.R. CV No. 37001 which affirmed an earlier decision[2] of the Regional Trial
Court at Iba, Zambales, Branch 69 in Land Registration Case No. N-25-1.
The decision under review recites the factual backdrop, as follows:
This is an application for registration of title to four (4) parcels of land located in Panan, Botolan, Zambales, more
particularly described in the amended application filed by Celestina Naguiat on 29 December 1989 with the Regional Trial Court
of Zambales, Branch 69. Applicant [herein respondent] alleges, inter alia, that she is the owner of the said parcels of land
having acquired them by purchase from the LID Corporation which likewise acquired the same from Demetria Calderon, Josefina
Moraga and Fausto Monje and their predecessors-in-interest who have been in possession thereof for more than thirty (30) years;
and that to the best of her knowledge, said lots suffer no mortgage or encumbrance of whatever kind nor is there any person
having any interest, legal or equitable, or in possession thereof.
On 29 June 1990, the Republic of the Philippines [herein petitioner]. . . filed an opposition to the application on the ground
that neither the applicant nor her predecessors-in interest have been in open, continuous, exclusive and notorious possession
and occupation of the lands in question since 12 June 1945 or prior thereto; that the muniments of title and tax payment
receipts of applicant do not constitute competent and sufficient evidence of a bona-fide acquisition of the lands applied for or
of his open, continuous, exclusive and notorious possession and occupation thereof in the concept of (an) owner; that the
applicants claim of ownership in fee simple on the basis of Spanish title or grant can no longer be availed of . . .; and that
the parcels of land applied for are part of the public domain belonging to the Republic of the Philippines not subject to
private appropriation.
On 15 October 1990, the lower court issued an order of general default as against the whole world, with the exception of the
Office of the Solicitor General, and proceeded with the hearing of this registration case.
After she had presented and formally offered her evidence . . . applicant rested her case. The Solicitor General, thru the
Provincial Prosecutor, interposed no objection to the admission of the exhibits. Later . . . the Provincial Prosecutor manifest
(sic) that the Government had no evidence to adduce. [3]
In a decision[4] dated September 30, 1991, the trial court rendered judgment for herein respondent Celestina Naguiat,
adjudicating unto her the parcels of land in question and decreeing the registration thereof in her name, thus:
WHEREFORE, premises considered, this Court hereby adjudicates the parcels of land situated in Panan, Botolan, Zambales,
appearing on Plan AP-03-003447 containing an area of 3,131 square meters, appearing on Plan AP-03-003446 containing an area of
15,322 containing an area of 15,387 square meters to herein applicant Celestina T. Naguiat, of legal age, Filipino citizen,
married to Rommel Naguiat and a resident of Angeles City, Pampanga together with all the improvements existing thereon and
orders and decrees registration in her name in accordance with Act No. 496, Commonwealth Act No. 14, [should be 141] as amended,
and Presidential Decree No. 1529. This adjudication, however, is subject to the various easements/reservations provided for
under pertinent laws, presidential decrees and/or presidential letters of instructions which should be annotated/ projected on
the title to be issued. And once this decision becomes final, let the corresponding decree of registration be immediately
issued. (Words in bracket added)

With its motion for reconsideration having been denied by the trial court, petitioner Republic went on appeal to the CA in CAG.R. CV No. 37001.
As stated at the outset hereof, the CA, in the herein assailed decision of May 29, 1998, affirmed that of the trial court, to
wit:
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED.
SO ORDERED.
Hence, the Republics present recourse on its basic submission that the CAs decision is not in accordance with law, jurisprudence
and the evidence, since respondent has not established with the required evidence her title in fee simple or imperfect title in
respect of the subject lots which would warrant their registration under (P.D. 1529 or Public Land Act (C.A.) 141. In
particular, petitioner Republic faults the appellate court on its finding respecting the length of respondents occupation of the
property subject of her application for registration and for not considering the fact that she has not established that the
lands in question have been declassified from forest or timber zone to alienable and disposable property.
Public forest lands or forest reserves, unless declassified and released by positive act of the Government so that they may form
part of the disposable agricultural lands of the public domain, are not capable of private appropriation.[5] As to these assets,
the rules on confirmation of imperfect title do not apply.[6] Given this postulate, the principal issue to be addressed turns on
the question of whether or not the areas in question have ceased to have the status of forest or other inalienable lands of the
public domain.
Forests, in the context of both the Public Land Act[7] and the Constitution[8] classifying lands of the public domain into
agricultural, forest or timber, mineral lands and national parks, do not necessarily refer to a large tract of wooded land or an
expanse covered by dense growth of trees and underbrush. As we stated in Heirs of Amunategui [9]A forested area classified as forest land of the public domain does not lose such classification simply because loggers or
settlers have stripped it of its forest cover. Parcels of land classified as forest land may actually be covered with grass or
planted to crops by kaingin cultivators or other farmers. Forest lands do not have to be on mountains or in out of the way
places. xxx. The classification is merely descriptive of its legal nature or status and does not have to be descriptive of what
the land actually looks like. xxx
Under Section 2, Article XII of the Constitution,[10] which embodies the Regalian doctrine, all lands of the public domain
belong to the State the source of any asserted right to ownership of land.[11] All lands not appearing to be clearly of private
dominion presumptively belong to the State.[12] Accordingly, public lands not shown to have been reclassified or released as
alienable agricultural land or alienated to a private person by the State remain part of the inalienable public domain.[13]
Under Section 6 of the Public Land Act, the prerogative of classifying or reclassifying lands of the public domain, i.e., from
forest or mineral to agricultural and vice versa, belongs to the Executive Branch of the government and not the court.[14]
Needless to stress, the onus to overturn, by incontrovertible evidence, the presumption that the land subject of an application
for registration is alienable or disposable rests with the applicant.[15]
In the present case, the CA assumed that the lands in question are already alienable and disposable. Wrote the appellate court:
The theory of [petitioner] that the properties in question are lands of the public domain
against the above doctrine. Said doctrine is a reaffirmation of the principle established
exclusive and undisputed possession of alienable public land for period prescribed by law
land, upon completion of the requisite period, ipso jure and without the need of judicial
land and becomes private property . (Word in bracket and underscoring added.)

cannot be sustained as it is directly

in the earlier cases . . . that open,
creates the legal fiction whereby the
or other sanction, ceases to be public

The principal reason for the appellate courts disposition, finding a registerable title for respondent, is her and her
predecessor-in-interests open, continuous and exclusive occupation of the subject property for more than 30 years. Prescinding
from its above assumption and finding, the appellate court went on to conclude, citing Director of Lands vs. Intermediate
Appellate Court (IAC)[16] and Herico vs. DAR,[17] among other cases, that, upon the completion of the requisite period of
possession, the lands in question cease to be public land and become private property.
Director of Lands, Herico and the other cases cited by the CA are not, however, winning cards for the respondent, for the simple
reason that, in said cases, the disposable and alienable nature of the land sought to be registered was established, or, at
least, not put in issue. And there lies the difference.
Here, respondent never presented the required certification from the proper government agency or official proclamation
reclassifying the land applied for as alienable and disposable. Matters of land classification or reclassification cannot be
assumed. It calls for proof.[18] Aside from tax receipts, respondent submitted in evidence the survey map and technical
descriptions of the lands, which, needless to state, provided no information respecting the classification of the property. As
the Court has held, however, these documents are not sufficient to overcome the presumption that the land sought to be
registered forms part of the public domain.[19]
It cannot be overemphasized that unwarranted appropriation of public lands has been a notorious practice resorted to in land
registration cases.[20] For this reason, the Court has made it a point to stress, when appropriate, that declassification of
forest and mineral lands, as the case may be, and their conversion into alienable and disposable lands need an express and
positive act from the government.[21]
The foregoing considered, the issue of whether or not respondent and her predecessor-in-interest have been in open, exclusive
and continuous possession of the parcels of land in question is now of little moment. For, unclassified land, as here, cannot be
acquired by adverse occupation or possession; occupation thereof in the concept of owner, however long, cannot ripen into
private ownership and be registered as title.[22]

WHEREFORE, the instant petition is GRANTED and the assailed decision dated May 29, 1998 of the Court of Appeals in CA-G.R. CV
No. 37001 is REVERSED and SET ASIDE. Accordingly, respondents application for original registration of title in Land
Registration Case No. N-25-1 of the Regional Trial Court at Iba, Zambales, Branch 69, is DENIED.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 155650

July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF
PARAAQUE, and CITY TREASURER OF PARAAQUE, respondents.
D E C I S I O N
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in
Paraaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport
Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos.
Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The
MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands and
Buildings") then under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land
transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the
Philippines.5
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus,
MIAA negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of the
real estate tax already due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years
1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:
TAX DECLARATION

TAXABLE YEAR

TAX DUE

PENALTY

TOTAL

E-016-01370
E-016-01374
E-016-01375
E-016-01376
E-016-01377
E-016-01378
E-016-01379
E-016-01380
*E-016-013-85
*E-016-01387
*E-016-01396
GRAND TOTAL

1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1998-2001
1998-2001
1998-2001

19,558,160.00
111,689,424.90
20,276,058.00
58,144,028.00
18,134,614.65
111,107,950.40
4,322,340.00
7,776,436.00
6,444,810.00
34,876,800.00
75,240.00
P392,435,861.95

11,201,083.20
68,149,479.59
12,371,832.00
35,477,712.00
11,065,188.59
67,794,681.59
2,637,360.00
4,744,944.00
2,900,164.50
5,694,560.00
33,858.00
P232,070,863.47

30,789,243.20
179,838,904.49
32,647,890.00
93,621,740.00
29,199,803.24
178,902,631.99
6,959,700.00
12,521,380.00
9,344,974.50
50,571,360.00
109,098.00
P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.006
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport
Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings
should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the
Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21
of the MIAA Charter is the proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for
preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real
estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CAG.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The
Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental motion for reconsideration.
Hence, MIAA filed on 5 December 2002 the present petition for review.7

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez,
Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the main lobby of the Paraaque City
Hall. The City of Paraaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a
newspaper of general circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and
Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and
Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents the City of
Paraaque, City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of
Paraaque ("respondents") from auctioning the Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents
to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day
that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the
public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the hearing,
MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted their respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA
points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the
Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the
general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these
properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax
by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA
insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and
Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself.
MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public
advantage, since in such a case the tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of
"government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a
basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An
international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents
assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local
Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue
that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport
Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate tax
under existing laws. If so exempt, then the real estate tax assessments issued by the City of Paraaque, and all proceedings
taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus
exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt
from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents
claim that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in Section 234(e) of the
Local Government Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase
appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a
government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987
defines a government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at
least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a
stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares. Section 10 of the MIAA Charter9 provides:
SECTION 10. Capital. The capital of the Authority to be contributed by the National Government shall be increased from Two
and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and
immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of
which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such
contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and
other liabilities of the Authority at the time of the takeover of the assets and other properties;
(b) That the amount of P605 million as of December
of the National Government from 1983 to 1986 to be
903 as amended, shall be converted into the equity
contribution to the capital of the Authority shall

31, 1986 representing about seventy percentum (70%) of the unremitted share
remitted to the National Treasury as provided for in Section 11 of E. O. No.
of the National Government in the Authority. Thereafter, the Government
be provided in the General Appropriations Act.

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is divided into shares and x x x
authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of
stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock
corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock
corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not
make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section
11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.11 This prevents
MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational,
professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized
to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled
corporation. What then is the legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is
like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of
the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested
with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless
the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,12
police authority13 and the levying of fees and charges.14 At the same time, MIAA exercises "all the powers of a corporation
under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."15
Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the
National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that
transforming MIAA into a "separate and autonomous body"16 will make its operation more "financially viable."17
Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which
is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples
are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko
Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or
non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or
controlled corporations in the strict sense as understood under the Administrative Code, which is the governing law defining the
legal relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government
units.(Emphasis and underscoring supplied)

Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers
of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress
may provide."18
When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly
against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the
tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater
force when local governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress
grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor
of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its
agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by
government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be
construed liberally, in favor of non tax-liability of such agencies.19
There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires
such transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national government instrumentalities for rendering essential public
services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government
instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be
express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such
power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax
national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of
constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v.
Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to
touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can
be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to
be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot be
allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the
Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial
property.
ARTICLE 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.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers,
torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports.
The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA
Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic
travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the
character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not
change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public
indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll
fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the
maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it is of public dominion or not.
Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government
collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions
as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed
restrictions and other conditions for the use of the road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the
income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport
for public use. Such fees are often termed user's tax. This means taxing those among the public who actually use a public
facility instead of taxing all the public including those who never use the particular public facility. A user's tax is more
equitable a principle of taxation mandated in the 1987 Constitution.21
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both
international and domestic air traffic,"22 are properties of public dominion because they are intended for public use. As
properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of
public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties
of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v.
Rojas that properties devoted to public use are outside the commerce of man, thus:
According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial and town
roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said
towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude
from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion
of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise
of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a
contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of
February 12, 1895, which says: "Communal things that cannot be sold because they are by their very nature outside of commerce
are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in
general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties.
While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as
was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also
cease, and the town officials should see to it that the town plazas should ever be kept open to the public and free from
encumbrances or illegal private constructions.24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an
auction sale.25
Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or
private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary
to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures
and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway
of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands
and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing
general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,"27
provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by
proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or
of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for
quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for
railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries,
public fishponds, working men's village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall
not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of
this Act or by proclamation of the President. (Emphasis and underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties
remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present
status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport
Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is
reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
SEC. 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;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation
from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the
Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority
therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head
cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of
conveyance.28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air
Transportation of the Department of Transportation and Communications. The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x
The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are
hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if
any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred
within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the
President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands,
buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and
privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment
which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis
supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory
Provisions. The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air
Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or
even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air
traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future
air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and
service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; and

WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is
given continuing authority to reorganize the National Government, which authority includes the creation of new entities,
agencies and instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of
Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and
Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the
Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any
other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the
beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the
right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport
Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic
paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or
disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the
Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing
"[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The real properties
owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of
the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies
or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt
from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This
happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of
the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government
Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is not a taxable person
under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial
use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax.
For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a
case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area
is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to
private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991
withdrew the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code. Section 193
provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted
to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code
withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not
just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax
exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the
explicit provision.
The term "All persons" encompasses the two classes of persons recognized under our laws, natural and juridical persons.
Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a
juridical person at all. (Emphasis and underscoring in the original)

The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status whether MIAA is a
juridical person or not. The minority also insists that "Sections 193 and 234 may be examined in isolation from Section 133(o)
to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of
all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local Government Code expressly
provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government
units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government
instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and
instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and
instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The saving clause
refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local
governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of
entities specifically enumerated as exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic
Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring the obvious why
the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will
result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local
governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this
theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government.
Under the minority's theory, many national government instrumentalities with juridical personalities will also be subject to any
kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical
personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research Institute,31 Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development Authority,34 Philippine Ports
Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine National
Railways.39
The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from
imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national
government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not
distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities.
The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a
national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision
of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and
instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this Code." This means
that unless the Local Government Code grants an express authorization, local governments have no power to tax the national
government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax the national
government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the national government,
its agencies and instrumentalities only if the Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the
national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity.
Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is
when the government gives the beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and
instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real
estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although
owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person.

The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the later provisions
prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of
conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes,
the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by
Sections 193 and 234 of the same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and 234 on the
other. No one has urged that there is such a conflict, much less has any one presenteda persuasive argument that there is such a
conflict. The minority's assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two
reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its subordination to
other provisions of the Code when Section 193 states "[u]nless otherwise provided in this Code." By its own words, Section 193
admits the superiority of other provisions of the Local Government Code that limit the exercise of the taxing power in Section
193. When a provision of law grants a power but withholds such power on certain matters, there is no conflict between the grant
of power and the withholding of power. The grantee of the power simply cannot exercise the power on matters withheld from its
power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units." Section 133 limits the
grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax. Section 133 states that
the taxing powers of local governments "shall not extend to the levy" of any kind of tax on the national government, its
agencies and instrumentalities. There is no clearer limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133 logically prevails
over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the "common limitations"
on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section
193 prevails over the limitations on such taxing power in Section 133, then local governments can impose any kind of tax on the
national government, its agencies and instrumentalities a gross absurdity.
Local governments have no power to tax the national government, its agencies and instrumentalities, except as otherwise provided
in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless otherwise provided in this Code."
This exception which is an exception to the exemption of the Republic from real estate tax imposed by local governments
refers to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by the
Republic, whether titled in the name of the national government, its agencies or instrumentalities, to real estate tax if the
beneficial use of such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase "government-owned or controlled
corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of the Administrative
Code admits that its definitions are not controlling when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute,
shall require a different meaning:
x x x x
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may require a
different meaning than that defined in the Administrative Code. However, this does not automatically mean that the definition in
the Administrative Code does not apply to the Local Government Code. Section 2 of the Administrative Code clearly states that
"unless the specific words x x x of a particular statute shall require a different meaning," the definition in Section 2 of the
Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code defining the phrase
"government-owned or controlled corporation" differently from the definition in the Administrative Code, the definition in the
Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the phrase "government-owned or controlled
corporation" differently from the definition in the Administrative Code. Indeed, there is none. The Local Government Code is
silent on the definition of the phrase "government-owned or controlled corporation." The Administrative Code, however, expressly
defines the phrase "government-owned or controlled corporation." The inescapable conclusion is that the Administrative Code
definition of the phrase "government-owned or controlled corporation" applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document the major
structural, functional and procedural principles and rules of governance." Thus, the Administrative Code is the governing law
defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a
statute expressly provides for a different status and relationship for a specific government unit or entity, the provisions of
the Administrative Code prevail.
The minority also contends that the phrase "government-owned or controlled corporation" should apply only to corporations
organized under the Corporation Code, the general incorporation law, and not to corporations created by special charters. The
minority sees no reason why government corporations with special charters should have a capital stock. Thus, the minority
declares:
I submit that the definition of "government-owned or controlled corporations" under the Administrative Code refer to those
corporations owned by the government or its instrumentalities which are created not by legislative enactment, but formed and

organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs
without original charters.
x x x x
It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is
limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital
shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will
also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does not distinguish
between one incorporated under the Corporation Code or under a special charter. Where the law does not distinguish, courts
should not distinguish.
Second, Congress has created through special charters several government-owned corporations organized as stock corporations.
Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The special charter40 of the
Land Bank of the Philippines provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and
eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one
hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the
provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be Five Billion Pesos to be divided into
Fifty Million common shares with par value of P100 per share. These shares are available for subscription by the National
Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares
of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the net asset values of
the Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special charters are the Philippine Crop
Insurance Corporation,42 Philippine International Trading Corporation,43 and the Philippine National Bank44 before it was
reorganized as a stock corporation under the Corporation Code. All these government-owned corporations organized under special
charters as stock corporations are subject to real estate tax on real properties owned by them. To rule that they are not
government-owned or controlled corporations because they are not registered with the Securities and Exchange Commission would
remove them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions
prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled
corporation must be established for the common good. The second condition is that the government-owned or controlled corporation
must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of
the common good and subject to the test of economic viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special
charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words,
Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply
with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned
or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being
essentially economic vehicles of the State for the common good meaning for economic development purposes these governmentowned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private
corporations.
In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not
meet the test of economic viability. These instrumentalities perform essential public services for the common good, services
that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government
may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations"
referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate
powers but performing essential governmental or public functions. Congress has plenary authority to create government
instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public
services. However, when the legislature creates through special charters corporations that perform economic or commercial
activities, such entities known as "government-owned or controlled corporations" must meet the test of economic viability
because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar governmentowned or controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in
competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled
corporations that cannot survive on their own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose
of this test, as follows:

10

MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a
sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a
government corporation loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government
and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire
government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this
is all taxpayers' money which could have been relocated to agrarian reform, to social services like health and education, to
augment the salaries of grossly underpaid public employees. And yet this is all going down the drain.
Therefore, when
enthusiasts for
viable. And so,
by Commissioner
good.45

we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future
state capitalism to excuse themselves from the responsibility of meeting the market test so that they become
Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal
Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of
the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the
interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show
capacity to function efficiently in business and that they should not go into activities which the private sector can do better.
Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits
not quantifiable in financial terms.46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing
essential public services. The State is obligated to render essential public services regardless of the economic viability of
providing such service. The non-economic viability of rendering such essential public service does not excuse the State from
withholding such essential services from the public.
However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial
objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually
organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of
the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled
corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market
place. MIAA does not compete in the market place because there is no competing international airport operated by the private
sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. The
operation of an international airport requires the presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without
visas or travel documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into
the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of
criminals, as well as to secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave
Philippine airspace, as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and buildings for the government personnel, passengers, and
airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an international airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues
principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges
every passenger are regulatory or administrative fees47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of the
Administrative Code, which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested
with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled corporation.
Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public services, it need not comply

11

with the test of economic viability. Thus, MIAA is outside the scope of the phrase "government-owned or controlled corporations"
under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled corporation" as merely
"clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of
"government-owned or controlled corporations." The Administrative Code defines what constitutes a "government-owned or
controlled corporation." To belittle this phrase as "clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the
Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or
controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of
economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services
pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is
not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the
exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public
dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are
intended for public use, and at the very least intended for public service. Whether intended for public use or public service,
the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and
Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and
status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality
and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local
governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the
Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions
of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of
Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of
public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions "ports x x x
constructed by the State," which includes public airports and seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and
Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also
repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27
September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila International Airport Authority
EXEMPT from the real estate tax imposed by the City of Paraaque. We declare VOID all the real estate tax assessments, including
the final notices of real estate tax delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the
Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to
private parties. We also declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the
Manila International Airport Authority.
No costs.
SO ORDERED.

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