G.R. No. 93654 May 6, 1992 FRANCISCO U. DACANAY, petitioner, vs. MAYOR MACARIO ASISTIO, JR.

May public streets or thoroughfares be leased or licensed to market stallholders by virtue of a city ordinance or resolution of the Metro Manila Commission? This issue is posed by the petitioner, an aggrieved Caloocan City resident who filed a special civil action of mandamus against the incumbent city mayor and city engineer, to compel these city officials to remove the market stalls from certain city streets which the aforementioned city officials have designated as flea markets, and the private respondents (stallholders) to vacate the streets. On January 5, 1979, MMC Ordinance No. 79-02 was enacted by the Metropolitan Manila Commission, designating certain city and municipal streets, roads and open spaces as sites for flea markets. Pursuant, thereto, the Caloocan City mayor opened up seven (7) flea markets in that city. One of those streets was the "Heroes del '96" where the petitioner lives. Upon application of vendors Rodolfo Teope, Mila Pastrana, Carmen Barbosa, Merle Castillo, Bienvenido Menes, Nancy Bugarin, Jose Manuel, Crisaldo Paguirigan, Alejandro Castron, Ruben Araneta, Juanita and Rafael Malibaran, and others, the respondents city mayor and city engineer, issued them licenses to conduct vending activities on said street. In 1987, Antonio Martinez, as OIC city mayor of Caloocan City, caused the demolition of the market stalls on Heroes del '96, V. Gozon and Gonzales streets. To stop Mayor Martinez' efforts to clear the city streets, Rodolfo Teope, Mila Pastrana and other stallowners filed an action for prohibition against the City of Caloocan, the OIC City Mayor and the City Engineer and/or their deputies (Civil Case No. C-12921) in the Regional Trial Court of Caloocan City, Branch 122, praying the court to issue a writ of preliminary injunction ordering these city officials to discontinue the demolition of their stalls during the pendency of the action. The court issued the writ prayed for. However, on December 20, 1987, it dismissed the petition and lifted the writ of preliminary injunction which it had earlier issued. The trial court observed that: A perusal of Ordinance 2, series of 1979 of the Metropolitan Manila Commission will show on the title itself that it is an ordinance 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, subject to the approval of the Metropolitan Manila Commission, and for other purposes which is further amplified in Section 2 of the said ordinance, quoted hereunder: Sec. 2. The streets, roads and open spaces to be used as sites for flea markets (tiangge) or vending areas; the design, measurement or specification of the structures, equipment and apparatuses to be used or put up; the allowable distances; the days and time allowed for the conduct of the businesses and/or activities herein authorized; the rates or fees or charges to be imposed, levied and collected; the kinds of merchandise, goods and commodities sold and services rendered; and other matters and activities related to the establishment, maintenance and management and operation of flea markets and vending areas, shall be determined and prescribed by the mayors of the cities and municipalities in the Metropolitan Manila where the same are located, subject to the approval of the Metropolitan Manila Commission and consistent with the guidelines hereby prescribed. Further, it is so provided in the guidelines under the said Ordinance No. 2 of the MMC that Sec. 6. In the establishment, operation, maintenance and management of flea markets and vending areas, the following guidelines, among others, shall be observed: (m) That the permittee shall remove the equipment , facilities and other appurtenances used by him in the conduct of his business after the close or termination of business hours. (Emphasis ours; pp. 15-16, Rollo.) The trial court found that Heroes del '96, Gozon and Gonzales streets are of public dominion, hence, outside the commerce of man: The Heroes del '96 street, V. Gozon street and Gonzales street, being of public dominion must, therefore, be outside of the commerce of man. Considering the nature of the subject premises, the following jurisprudence co/principles are applicable on the matter:

1) They cannot be alienated or leased or otherwise be the subject matter of contracts. (Municipality of Cavite vs. Rojas, 30 Phil. 602); 2) They cannot be acquired by prescription against the state (Insular Government vs. Aldecoa, 19 Phil. 505). Even municipalities can not acquire them for use as communal lands against the state (City of Manila vs. Insular Government, 10 Phil. 327); 3) They are not subject to attachment and execution (Tan Toco vs. Municipal Council of Iloilo, 49 Phil. 52); 4) They cannot be burdened by any voluntary easement (2-II Colin & Capitant 520) (Tolentino, Civil Code of the Phils., Vol. II, 1983 Ed. pp. 29-30). In the aforecited case of Municipality of Cavite vs. Rojas, it was held that properties for public use may not be leased to private individuals. Such a lease is null and void for the reason that a municipal council cannot withdraw part of the plaza from public use. If possession has already been given, the lessee must restore possession by vacating it and the municipality must thereupon restore to him any sums it may have collected as rent. In the case of City of Manila vs. Gerardo Garcia, 19 SCRA 413, the Supreme Court held: The property being a public one, the Manila Mayors did not have the authority to give permits, written or oral, to the squatters, and that the permits granted are therefore considered null and void. This doctrine was reiterated in the case of Baguio Citizens Action Inc. vs. The City Council, 121 SCRA 368, where it was held that: An ordinance legalizing the occupancy by squatters of public land is null and void. The authority of respondent Municipality of Makati to demolish the shanties of the petitioner's members is mandated by P.D. 772, and Sec. 1 of Letter of Instruction No. 19 orders certain public officials, one of whom is the Municipal Mayor to remove all illegal constructions including buildings on and along esteros and river banks, those along railroad tracks and those built without permits on public or private property (Zansibarian Residents Association vs. Mun. of Makati, 135 SCRA 235). The City Engineer is also among those required to comply with said Letter of Instruction. The occupation and use of private individuals of sidewalks and other public places devoted for public use constitute both public and private nuisances and nuisance per se , and this applies to even case involving the use or lease of public places under permits and licenses issued by competent authority, upon the theory that such holders could not take advantage of their unlawful permits and license and claim that the land in question is a part of a public street or a public place devoted to public use, hence, beyond the commerce of man. (Padilla, Civil Code Annotated, Vol. II, p. 59, 6th Ed., citing Umali vs. Aquino, IC. A. Rep. 339.) From the aforequoted jurisprudence/principles, the Court opines that defendants have the right to demolish the subject stalls of the plaintiffs, more so when Section 185, par. 4 of Batas Pambansa Blg. 337, otherwise known as the Local Government Code provides that the City Engineer shall: (4) . . . (c) Prevent the encroachment of private buildings and fences on the streets and public places; (j) Inspect and supervise the construction, repair, removal and safety of private buildings; (k) With the previous approval of the City Mayor in each case, order the removal of materials employed in the construction or repair of any building or structures made in violation of law or ordinance, and cause buildings and structures dangerous to the public to made secure or torn down; Further, the Charter of the City of Caloocan, Republic Act No. 5502, Art. VII, Sec. 27, par. g, 1 and m, grants the City Engineer similar powers. (Emphasis supplied; pp. 17-20, Rollo.) However, shortly after the decision came out, the city administration in Caloocan City changed hands. City Mayor Macario Asistio, Jr., as successor of Mayor Martinez, did not pursue the latter's policy of clearing and cleaning up the city streets.

Invoking the trial court's decision in Civil Case No. C-12921, Francisco U. Dacanay, a concerned citizen, taxpayer and registered voter of Barangay 74, Zone 7, District II of Caloocan City, who resides on Heroes del '96 Street, one of the affected streets, wrote a letter dated March 7, 1988 to Mayor Asistio, Jr., calling his attention to the illegally-constructed stalls on Heroes del '96 Street and asked for their demolition. Dacanay followed up that letter with another one dated April 7, 1988 addressed to the mayor and the city engineer, Luciano Sarne, Jr. (who replaced Engineer Arturo Samonte), inviting their attention to the Regional Trial Court's decision in Civil Case No. 12921. There was still no response. Dacanay sought President Corazon C. Aquino's intervention by writing her a letter on the matter. His letter was referred to the city mayor for appropriate action. The acting Caloocan City secretary, Asuncion Manalo, in a letter dated August 1, 1988, informed the Presidential Staff Director that the city officials were still studying the issue of whether or not to proceed with the demolition of the market stalls. Dacanay filed a complaint against Mayor Asistio and Engineer Sarne (OMB-0-89-0146) in the Office of the OMBUDSMAN. In their letter-comment dated April 3, 1989, said city officials explained that in view of the huge number of stallholders involved, not to mention their dependents, it would be harsh and inhuman to eject them from the area in question, for their relocation would not be an easy task. In reply, Dacanay maintained that respondents have been derelict in the performance of their duties and through manifest partiality constituting a violation of Section 3(e) of R.A. 3019, have caused undue injury to the Government and given unwarranted benefits to the stallholders. After conducting a preliminary investigation, the OMBUDSMAN rendered a final evaluation and report on August 28, 1989, finding that the respondents' inaction is purely motivated by their perceived moral and social responsibility toward their constituents, but "the fact remains that there is an omission of an act which ought to be performed, in clear violation of Sections 3(e) and (f) of Republic Act 3019 ." (pp. 83-84, Rollo.) The OMBUDSMAN recommended the filing of the corresponding information in court. As the stallholders continued to occupy Heroes del '96 Street, through the tolerance of the public respondents, and in clear violation of the decision it Civil Case No. C-12921, Dacanay filed the present petition for mandamuson June 19, 1990, praying that the public respondents be ordered to enforce the final decision in Civil Case No. C-12921 which upheld the city mayor's authority to order the demolition of market stalls on V. Gozon, Gonzales and Heroes del '96 Streets and to enforce P.D. No. 772 and other pertinent laws. On August 16, 1990, the public respondents, through the City Legal Officer, filed their Comment' on the petition. The Office of the Solicitor General asked to be excused from filing a separate Comment in behalf of the public respondents. The City Legal Officer alleged that the vending area was transferred to Heroes del '96 Street to decongest Malonzo Street, which is comparatively a busier thoroughfare; that the transfer was made by virtue of Barangay Resolution No. 30 s'78 dated January 15, 1978; that while the resolution was awaiting approval by the Metropolitan Manila Commission, the latter passed Ordinance No. 79-2, authorizing the use of certain streets and open spaces as sites for flea markets and/or vending areas; that pursuant thereto, Acting MMC Mayor Virgilio P. Robles issued Executive Order No. 135 dated January 10, 1979, ordering the establishment and operation of flea markets in specified areas and created the Caloocan City Flea Market Authority as a regulatory body; and that among the sites chosen and approved by the Metro Manila Commission, Heroes del '96 Street has considered "most viable and progressive, lessening unemployment in the city and servicing the residents with affordable basic necessities." The petition for mandamus is meritorious. There is no doubt that the disputed areas from which the private respondents' market stalls are sought to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A public street is property for public use hence outside the commerce of man (Arts. 420, 424, Civil Code). Being outside the commerce of man, it may not be the subject of lease or other contract (Villanueva et al. vs. Castaeda and Macalino, 15 SCRA 142, citing the Municipality of Cavite vs. Rojas, 30 SCRA 602; Espiritu vs. Municipal Council of Pozorrubio, 102 Phil. 869; and Muyot vs. 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 Acting Mayor Robles authorizing the use of Heroes del '96 Street as a vending area for stallholders who were granted licenses by the city government contravenes the general law that reserves city streets and roads for public use. Mayor Robles' Executive Order may not infringe upon the vested right of the public to use city streets for the purpose they were intended to serve: i.e., as arteries of travel for vehicles and pedestrians. As early as 1989, the public respondents bad started to look for feasible alternative sites for flea markets. They have had more than ample time to relocate the street vendors. WHEREFORE, it having been established that the petitioner and the general public have a legal right to the relief demanded and that the public respondents have the corresponding duty, arising from public office, to clear the city streets and restore them to their specific public purpose (Enriquez vs. Bidin, 47 SCRA 183; City of Manila vs. Garcia et al., 19 SCRA, 413 citing Unson vs. Lacson, 100 Phil. 695), the respondents City Mayor and City Engineer of Caloocan City or their successors in office are hereby ordered to immediately enforce and implement the decision in Civil Case No. C-1292 declaring that Heroes del '96, V. Gozon, and Gonzales Streets are public streets for public use, and they are ordered to remove or demolish, or cause to be removed or demolished, the market stalls occupying said city streets with utmost dispatch within thirty (30)days from notice of this decision. This decision is immediately executory. G.R. No. 92161 March 18, 1991 SIMPLICIO BINALAY et al, petitioners vs. GUILLERMO MANALO and COURT OF APPEALS, respondents. The late Judge Taccad originally owned a parcel of land situated in Tumauini, Isabela having an estimated area of twenty (20) hectares. The western portion of this land bordering on the Cagayan River has an elevation lower than that of the eastern portion which borders on the national road. Through the years, the western portion would periodically go under the waters of the Cagayan River as those waters swelled with the coming of the rains. The submerged portion, however, would re-appear during the dry season from January to August. It would remain under water for the rest of the year, that is, from September to December during the rainy season. The ownership of the landholding eventually moved from one person to another. On 9 May 1959, respondent Guillermo Manalo acquired 8.65 hectares thereof from Faustina Taccad, daughter of Judge Juan Taccad. The land sold was described in the Deed of Absolute Sale 1 as follows: . . . a parcel of agricultural land in Balug, Tumauini, Isabela, containing an area of 8.6500 hectares, more or less; bounded on the North by Francisco Forto on the East by National Road; on South by Julian Tumolva and on the West by Cagayan River; declared for taxation under Tax Declaration No. 12681 in the name of Faustina Taccad, and assessed at P 750.00. . . . Later in 1964, respondent Manalo purchased another 1.80 hectares from Gregorio Taguba who had earlier acquired the same from Judge Juan Taccad. The second purchase brought the total acquisition of respondent Manalo to 10.45 hectares. The second piece of property was more particularly described as follows: . . . a piece of agricultural land consisting of tobacco land, and containing an area of 18,000 square meters, more or less, bounded on the North by Balug Creek; on the South, by Faustina Taccad (now Guillermo R. Manalo); on the East, by a Provincial Road; and on the West, by Cagayan River assessed at P 440.00, as tax Declaration No. 3152. . . . During the cadastral survey conducted at Balug, Tumauini, Isabela on 21 October 1969, the two (2) parcels of land belonging to respondent Manalo were surveyed and consolidated into one lot, designated as Lot No. 307, Pls-964. Lot 307 which contains 4.6489 hectares includes: (a) the whole of the 1.80 hectares acquired from Gregorio Taguba; and (b) 2.8489 hectares out of the 8.65 hectares purchased from Faustina Taccad. As the survey was conducted on a rainy month, a portion of the land bought from Faustina Taccad then under water was left unsurveyed and was not included in Lot 307. The Sketch Plan submitted during the trial of this case and which was identified by respondent Manalo shows that the Cagayan River running from south to north, forks at a certain point to form two (2) branchesthe western and the eastern branchesand then unites at the other end, further north, to form a narrow strip of land. The eastern branch of the river

cuts through the land of respondent Manalo and is inundated with water only during the rainy season. The bed of the eastern branch is the submerged or the unsurveyed portion of the land belonging to respondent Manalo. For about eight (8) months of the year when the level of water at the point where the Cagayan River forks is at its ordinary depth, river water does not flow into the eastern branch. While this condition persists, the eastern bed is dry and is susceptible to cultivation. Considering that water flowed through the eastern branch of the Cagayan River when the cadastral survey was conducted, the elongated strip of land formed by the western and the eastern branches of the Cagayan River looked very much like an island. This strip of land was surveyed on 12 December 1969. 4 It was found to have a total area of 22.7209 hectares and was designated as Lot 821 and Lot 822. The area of Lot 822 is 10.8122 hectares while Lot 821 has an area of 11.9087 hectares. Lot 821 is located directly opposite Lot 307 and is separated from the latter only by the eastern branch of the Cagayan River during the rainy season and, during the dry season, by the exposed, dry river bed, being a portion of the land bought from Faustina Taccad. Respondent Manalo claims that Lot 821 also belongs to him by way of accretion to the submerged portion of the property to which it is adjacent. Petitioners who are in possession of Lot 821, upon the other hand, insist that they own Lot 821. They occupy the outer edges of Lot 821 along the river banks, i.e., the fertile portions on which they plant tobacco and other agricultural products. They also cultivate the western strip of the unsurveyed portion during summer. 5 This situation compelled respondent Manalo to file a case for forcible entry against petitioners on 20 May 1969. The case was dismissed by the Municipal Court of Tumauini, Isabela for failure of both parties to appear. On 15 December 1972, respondent Manalo again filed a case for forcible entry against petitioners. The latter case was similarly dismissed for lack of jurisdiction by the Municipal Court of Tumauini, Isabela. On 24 July 1974, respondent Manalo filed a complaints before the then Court of First Instance of Isabela, Branch 3 for quieting of title, possession and damages against petitioners. He alleged ownership of the two (2) parcels of land he bought separately from Faustina Taccad and Gregorio Taguba for which reason he prayed that judgment be entered ordering petitioners to vacate the western strip of the unsurveyed portion. Respondent Manalo likewise prayed that judgment be entered declaring him as owner of Lot 821 on which he had laid his claim during the survey. Petitioners filed their answer denying the material allegations of the complaint. The case was then set for trial for failure of the parties to reach an amicable agreement or to enter into a stipulation of facts. On 10 November 1982, the trial court rendered a decision with the following dispositive portion: WHEREFORE, in the light of the foregoing premises, the Court renders judgment against the defendants and in favor of the plaintiff and orders: 1. That plaintiff, Guillermo Manalo, is declared the lawful owner of the land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in paragraph 2-b of the Complaint; 2. That the defendants are hereby ordered to vacate the premises of the land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in paragraph 2-b of the Complaint; 3. That the defendants are being restrained from entering the premises of the land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in paragraph 2-b of the Complaint; and 4. That there is no pronouncement as to attorney's fees and costs. SO ORDERED. Petitioners appealed to the Court of Appeals which, however, affirmed the decision of the trial court. They filed a motion for reconsideration, without success. While petitioners insist that Lot 821 is part of an island surrounded by the two (2) branches of the Cagayan River, the Court of Appeals found otherwise. The Court of Appeals concurred with the finding of the trial court that Lot 821 cannot be considered separate and distinct from Lot 307 since the eastern branch of the Cagayan River substantially dries up for the most part of the year such that when this happens, Lot 821 becomes physically ( i.e., by land) connected with the dried up bed owned by respondent Manalo. Both courts below in effect rejected the assertion of petitioners that the depression on the earth's surface which separates Lot 307 and Lot 821 is, during part of the year, the bed of the eastern branch of the Cagayan River.

It is a familiar rule that the findings of facts of the trial court are entitled to great respect, and that they carry even more weight when affirmed by the Court of Appeals. This is in recognition of the peculiar advantage on the part of the trial court of being able to observe first-hand the deportment of the witnesses while testifying. Jurisprudence is likewise settled that the Court of Appeals is the final arbiter of questions of fact. But whether a conclusion drawn from such findings of facts is correct, is a question of law cognizable by this Court. In the instant case, the conclusion reached by both courts below apparently collides with their findings that periodically at the onset of and during the rainy season, river water flows through the eastern bed of the Cagayan River. The trial court held: The Court believes that the land in controversy is of the nature and character of alluvion (Accretion), for it appears that during the dry season, the body of water separating the same land in controversy (Lot No. 821, Pls-964) and the two (2) parcels of land which the plaintiff purchased from Gregorio Taguba and Justina Taccad Cayaba becomes a marshy land and is only six (6) inches deep and twelve (12) meters in width at its widest in the northern tip (Exhs. "W", "W-l", "W-2", "W-3" and "W-4"), It has been held by our Supreme Court that "the owner of the riparian land which receives the gradual deposits of alluvion, does not have to make an express act of possession. The law does not require it, and the deposit created by the current of the water becomes manifest" (Roxas vs. Tuazon, 6 Phil. 408). The Court of Appeals adhered substantially to the conclusion reached by the trial court, thus: As found by the trial court, the disputed property is not an island in the strict sense of the word since the eastern portion of the said property claimed by appellants to be part of the Cagayan River dries up during summer. Admittedly, it is the action of the heavy rains which comes during rainy season especially from September to November which increases the water level of the Cagayan river. As the river becomes swollen due to heavy rains, the lower portion of the said strip of land located at its southernmost point would be inundated with water. This is where the water of the Cagayan river gains its entry. Consequently, if the water level is high the whole strip of land would be under water. In Government of the Philippine Islands vs. Colegio de San Jose, it was held that According to the foregoing definition of the words "ordinary" and "extra-ordinary," the highest depth of the waters of Laguna de Bay during the dry season is the ordinary one, and the highest depth they attain during the extra-ordinary one (sic); inasmuch as the former is the one which is regular, common, natural, which occurs always or most of the time during the year, while the latter is uncommon, transcends the general rule, order and measure, and goes beyond that which is the ordinary depth. If according to the definition given by Article 74 of the Law of Waters quoted above, the natural bed or basin of the lakes is the ground covered by their waters when at their highest ordinary depth, the natural bed or basin of Laguna de Bay is the ground covered by its waters when at their highest depth during the dry season, that is up to the northeastern boundary of the two parcels of land in question. We find the foregoing ruling to be analogous to the case at bar. The highest ordinary level of the waters of the Cagayan River is that attained during the dry season which is confined only on the west side of Lot [821] and Lot [822]. This is the natural Cagayan river itself. The small residual of water between Lot [821] and 307 is part of the small stream already in existence when the whole of the late Judge Juan Taccad's property was still susceptible to cultivation and uneroded. The Court is unable to agree with the Court of Appeals that Government of the Philippine Islands vs. Colegio de San Jose is applicable to the present case. That case involved Laguna de Bay; since Laguna de Bay is a lake, the Court applied the legal provisions governing the ownership and use of lakes and their beds and shores, in order to determine the character and ownership of the disputed property. Specifically, the Court applied the definition of the natural bed or basin of lakes found in Article 74 of the Law of Waters of 3 August 1866. Upon the other hand, what is involved in the instant case is the eastern bed of the Cagayan River. We believe and so hold that Article 70 of the Law of Waters of 3 August 1866 is the law applicable to the case at bar: Art. 70. The natural bed or channel of a creek or river is the ground covered by its waters during the highest floods . (Emphasis supplied)

We note that Article 70 defines the natural bed or channel of a creek or river as the ground covered by its waters during the highest floods. The highest floods in the eastern branch of the Cagayan River occur with the annual coming of the rains as the river waters in their onward course cover the entire depressed portion. Though the eastern bed substantially dries up for the most part of the year ( i.e., from January to August), we cannot ignore the periodical swelling of the waters ( i.e., from September to December) causing the eastern bed to be covered with flowing river waters. The conclusion of this Court that the depressed portion is a river bed rests upon evidence of record. Firstly, respondent Manalo admitted in open court that the entire area he bought from Gregorio Taguba was included in Lot 307. If the 1.80 hectares purchased from Gregorio Taguba was included in Lot 307, then the Cagayan River referred to as the western boundary in the Deed of Sale transferring the land from Gregorio Taguba to respondent Manalo as well as the Deed of Sale signed by Faustina Taccad, must refer to the dried up bed (during the dry months) or the eastern branch of the river (during the rainy months). In the Sketch Plan attached to the records of the case, Lot 307 is separated from the western branch of the Cagayan River by a large tract of land which includes not only Lot 821 but also what this Court characterizes as the eastern branch of the Cagayan River. Secondly, the pictures identified by respondent Manalo during his direct examination depict the depressed portion as a river bed. The pictures, marked as Exhibits "W" to "W-4", were taken in July 1973 or at a time when the eastern bed becomes visible. Thus, Exhibit "W-2" which according to respondent Manalo was taken facing the east and Exhibit "W-3" which was taken facing the west both show that the visible, dried up portion has a markedly lower elevation than Lot 307 and Lot 821. It has dike-like slopes on both sides connecting it to Lot 307 and Lot 821 that are vertical upward and very prominent. This topographic feature is compatible with the fact that a huge volume of water passes through the eastern bed regularly during the rainy season. In addition, petitioner Ponciano Gannaban testified that one had to go down what he called a "cliff" from the surveyed portion of the land of respondent Manalo to the depressed portion. The cliff, as related by petitioner Gannaban, has a height of eight (8) meters. The records do not show when the Cagayan River began to carve its eastern channel on the surface of the earth. However, Exhibit "E" for the prosecution which was the Declaration of Real Property standing in the name of Faustina Taccad indicates that the eastern bed already existed even before the sale to respondent Manalo. The words "old bed" enclosed in parenthesesperhaps written to make legitimate the claim of private ownership over the submerged portionis an implied admission of the existence of the river bed. In the Declaration of Real Property made by respondent Manalo, the depressed portion assumed the name Rio Muerte de Cagayan. Indeed, the steep dike-like slopes on either side of the eastern bed could have been formed only after a prolonged period of time. Now, then, pursuant to Article 420 of the Civil Code, respondent Manalo did not acquire private ownership of the bed of the eastern branch of the river even if it was included in the deeds of absolute sale executed by Gregorio Taguba and Faustina Taccad in his favor. These vendors could not have validly sold land that constituted property of public dominion. Article 420 of the Civil Code states: 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) Although Article 420 speaks only of rivers and banks, "rivers" is a composite term which includes: (1) the running waters, (2) the bed, and (3) the banks. 19 Manresa, in commenting upon Article 339 of the Spanish Civil Code of 1889 from which Article 420 of the Philippine Civil Code was taken, stressed the public ownership of river beds: La naturaleza especial de los rios, en punto a su disfrute general, hace que sea necesario considerar en su relacion de dominio algo mas que sus aguas corrientes. En efecto en todo rio es preciso distinguir 1. esta agua corriente; 2. el alveo o cauce, y 3. las riberas. Ahora bien: son estas dos ultimas cosas siempre de dominio publico, como las aguas? Realmente no puede imaginarse un rio sin alveo y sin ribera; de suerte que al decir el Codigo civil que los rios son de dominio publico, parece que debe ir implicito el dominio publico de aquellos tres elementos que integran el rio . Por otra parte, en cuanto a los alveos o cauces tenemos la declaracion del art. 407, num 1, donde dice: son de dominion publico . . . los rios y sus cauces naturales; declaracion que concuerda con lo que dispone el art. 34 de la ley de [Aguas], segun el cual, son

de dominion publico: 1. los alveos o cauces de los arroyos que no se hallen comprendidos en el art. 33, y 2. los alveos o cauces naturales de los rios en la extension que cubran sus aguas en las mayores crecidas ordinarias. (Emphasis supplied) The claim of ownership of respondent Manalo over the submerged portion is bereft of basis even if it were alleged and proved that the Cagayan River first began to encroach on his property after the purchase from Gregorio Taguba and Faustina Taccad. Article 462 of the Civil Code would then apply divesting, by operation of law, respondent Manalo of private ownership over the new river bed. The intrusion of the eastern branch of the Cagayan River into his landholding obviously prejudiced respondent Manalo but this is a common occurrence since estates bordering on rivers are exposed to floods and other evils produced by the destructive force of the waters. That loss is compensated by, inter alia, the right of accretion acknowledged by Article 457 of the Civil Code. It so happened that instead of increasing the size of Lot 307, the eastern branch of the Cagayan River had carved a channel on it. We turn next to the issue of accretion. After examining the records of the case, the Court considers that there was no evidence to prove that Lot 821 is an increment to Lot 307 and the bed of the eastern branch of the river. Accretion as a mode of acquiring property under Article 457 of the Civil Code requires the concurrence of three (3) requisites: (a) that the deposition of soil or sediment be gradual and imperceptible; (b) that it be the result of the action of the waters of the river (or sea); and (c) that the land where accretion takes place is adjacent to the banks of rivers (or the sea coast). 22 The Court notes that the parcels of land bought by respondent Manalo border on the eastern branch of the Cagayan River. Any accretion formed by this eastern branch which respondent Manalo may claim must be deposited on or attached to Lot 307. As it is, the claimed accretion (Lot 821) lies on the bank of the river not adjacent to Lot 307 but directly opposite Lot 307 across the river. Assuming (arguendo only) that the Cagayan River referred to in the Deeds of Sale transferring ownership of the land to respondent Manalo is the western branch, the decision of the Court of Appeals and of the trial court are bare of factual findings to the effect that the land purchased by respondent Manalo received alluvium from the action of the aver in a slow and gradual manner. On the contrary, the decision of the lower court made mention of several floods that caused the land to reappear making it susceptible to cultivation. A sudden and forceful action like that of flooding is hardly the alluvial process contemplated under Article 457 of the Civil Code. It is the slow and hardly perceptible accumulation of soil deposits that the law grants to the riparian owner. Besides, it is important to note that Lot 821 has an area of 11.91 hectares. Lot 821 is the northern portion of the strip of land having a total area of 22.72 hectares. We find it difficult to suppose that such a sizable area as Lot 821 resulted from slow accretion to another lot of almost equal size. The total landholding purchased by respondent Manalo is 10.45 hectares (8.65 hectares from Faustina Taccad and 1.80 hectares from Gregorio Taguba in 1959 and 1964, respectively), in fact even smaller than Lot 821 which he claims by way of accretion. The cadastral survey showing that Lot 821 has an area of 11.91 hectares was conducted in 1969. If respondent Manalo's contention were accepted, it would mean that in a span of only ten (10) years, he had more than doubled his landholding by what the Court of Appeals and the trial court considered as accretion. As already noted, there are steep vertical dike-like slopes separating the depressed portion or river bed and Lot 821 and Lot 307. This topography of the land, among other things, precludes a reasonable conclusion that Lot 821 is an increment to the depressed portion by reason of the slow and constant action of the waters of either the western or the eastern branches of the Cagayan River. We turn finally to the issue of ownership of Lot 821. Respondent Manalo's claim over Lot 821 rests on accretion coupled with alleged prior possession. He alleged that the parcels of land he bought separately from Gregorio Taguba and Faustina Taccad were formerly owned by Judge Juan Taccad who was in possession thereof through his (Judge Taccad's) tenants. When ownership was transferred to him, respondent Manalo took over the cultivation of the property and had it declared for taxation purposes in his name. When petitioners forcibly entered into his property, he twice instituted the appropriate action before the Municipal Trial Court of Tumauini, Isabela. Against respondent Manalo's allegation of prior possession, petitioners presented tax declarations standing in their respective names. They claimed lawful, peaceful and adverse possession of Lot 821 since 1955. If respondent Manalo had proved prior possession, it was limited physically to Lot 307 and the depressed portion or the eastern river bed. The testimony of Dominga Malana who was a tenant for Justina Taccad did not indicate that she was also cultivating Lot 821. In fact, the complaints for forcible entry lodged before the Municipal Trial Court of Tumauini, Isabela pertained only to Lot 307 and the depressed portion or river bed and not to Lot 821. In the same manner, the tax

declarations presented by petitioners conflict with those of respondent Manalo. Under Article 477 of the Civil Code, the plaintiff in an action for quieting of title must at least have equitable title to or interest in the real property which is the subject matter of the action. The evidence of record on this point is less than satisfactory and the Court feels compelled to refrain from determining the ownership and possession of Lot 821, adjudging neither petitioners nor respondent Manalo as owner(s) thereof. WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-GR CV No. 04892 are hereby SET ASIDE. Respondent Manalo is hereby declared the owner of Lot 307. The regularly submerged portion or the eastern bed of the Cagayan River is hereby DECLARED to be property of public dominion. The ownership of Lot 821 shall be determined in an appropriate action that may be instituted by the interested parties inter se. No pronouncement as to costs. G.R. No. 100709. November 14, 1997 REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS, petitioner, vs. COURT OF APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA CO and ANTONIO QUILATAN AND THE REGISTER OF DEEDS OF QUEZON PROVINCE, respondents. Will the lease and/or mortgage of a portion of a realty acquired through free patent constitute sufficient ground for the nullification of such land grant? Should such property revert to the State once it is invaded by the sea and thus becomes foreshore land? The Case These are the two questions raised in the petition before us assailing the Court of Appeals Decision in CA-G.R. CV No. 02667 promulgated on June 13, 1991 which answered the said questions in the negative. Respondent Courts Decision dismissed petitioners appeal and affirmed in toto the decision of the Regional Trial Court of Calauag, Quezon, dated December 28, 1983 in Civil Case No. C-608. In turn, the Regional Trial Courts decision dismissed petitioners complaint for cancellation of the Torrens Certificate of Title of Respondent Morato and for reversion of the parcel of land subject thereof to the public domain. The Facts The petition of the solicitor general, representing the Republic of the Philippines, recites the following facts: Sometime in December, 1972, respondent Morato filed a Free Patent Application No. III-3-8186-B on a parcel of land with an area of 1,265 square meters situated at Pinagtalleran, Calauag, Quezon. On January 16, 1974, the patent was approved and the Register of Deeds of Quezon at Lucena City issued on February 4, 1974 Original Certificate of Title No. P-17789. Both the free patent and the title specifically mandate that the land shall not be alienated nor encumbered within five (5) years from the date of the issuance of the patent (Sections 118 and 124 of CA No. 141, as amended). Subsequently, the District Land Officer in Lucena City, acting upon reports that respondent Morato had encumbered the land in violation of the condition of the patent, conducted an investigation. Thereafter, it was established that the subject land is a portion of the Calauag Bay, five (5) to six (6) feet deep under water during high tide and two (2) feet deep at low tide, and not suitable to vegetation. Moreover, on October 24, 1974, a portion of the land was mortgaged by respondent Morato to respondents Nenita Co and Antonio Quilatan for P10,000.00 (pp. 2, 25, Folder of Exhibits). The spouses Quilatan constructed a house on the land. Another portion of the land was leased to Perfecto Advincula on February 2, 1976 at P100.00 a month, where a warehouse was constructed. On November 5, 1978, petitioner filed an amended complaint against respondents Morato, spouses Nenita Co and Antonio Quilatan, and the Register of Deeds of Quezon for the cancellation of title and reversion of a parcel of land to the public domain, subject of a free patent in favor of respondent Morato, on the grounds that the land is a foreshore land and was mortgaged and leased within the five-year prohibitory period (p. 46, Records). After trial, the lower court, on December 28, 1983, rendered a decision dismissing petitioners complaint. In finding for private respondents, the lower court ruled that there was no violation of the 5-year period ban against alienating or encumbering the land, because the land was merely leased and not alienated. It also found that the mortgage to Nenita Co and Antonio Quilatan covered only the improvement and not the land itself.

On appeal, the Court of Appeals affirmed the decision of the trial court. Thereafter, the Republic of the Philippines filed the present petition. The Issues Petitioner alleges that the following errors were committed by Respondent Court: I-Respondent Court erred in holding that the patent granted and certificate of title issued to Respondent Morato cannot be cancelled and annulled since the certificate of title becomes indefeasible after one year from the issuance of the title. II-Respondent Court erred in holding that the questioned land is part of a disposable public land and not a foreshore land. The Courts Ruling The petition is meritorious. First Issue: Indefeasibility of a Free Patent Title In resolving the first issue against petitioner, Respondent Court held: x x x. As ruled in Heirs of Gregorio Tengco vs . Heirs of Jose Alivalas, 168 SCRA 198. x x. The rule is well-settled that an original certificate of title issued on the strength of a homestead patent partakes of the nature of a certificate of title issued in a judicial proceeding, as long as the land disposed of is really part of the disposable land of the public domain, and becomes indefeasible and incontrovertible upon the expiration of one year from the date of promulgation of the order of the Director of Lands for the issuance of the patent. (Republic v. Heirs of Carle, 105 Phil. 1227 (1959); Ingaran v. Ramelo, 107 Phil. 498 (1960); Lopez v . Padilla, (G.R. No. L-27559, May 18, 1972, 45 SCRA 44). A homestead patent, one registered under the Land Registration Act, becomes as indefeasible as a Torrens Title. (Pamintuan v. San Agustin, 43 Phil. 558 (1982); El Hogar Filipino v . Olviga, 60 Phil. 17 (1934); Duran v . Oliva, 113 Phil. 144 (1961); Pajomayo v. Manipon, G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p. 203). Again, in Lopez vs. Court of Appeals, 169 SCRA 271, citing Iglesia ni Cristo v. Hon. Judge, CFI of Nueva Ecija, Branch I, (123 SCRA 516 (1983) and Pajomayo, et al. v. Manipon, et al. (39 SCRA 676 (1971) held that once a homestead patent granted in accordance with the Public Land Act is registered pursuant to Section 122 of Act 496, the certificate of title issued in virtue of said patent has the force and effect of a Torrens Title issued under the Land Registration Act. Indefeasibility of the title, however, may not bar the State, thru the Solicitor General, from filing an action for reversion, as ruled in Heirs of Gregorio Tengo v. Heirs of Jose Aliwalas, (supra), as follows: But, as correctly pointed out by the respondent Court of Appeals, Dr. Aliwalas title to the property having become incontrovertible, such may no longer be collaterally attacked. If indeed there had been any fraud or misrepresentation in obtaining the title, an action for reversion instituted by the Solicitor General would be the proper remedy (Sec. 101, C.A. No. 141; Director of Lands v. Jugado, G.R. No. L-14702, May 21, 1961, 2 SCRA 32; Lopez v. Padilla, supra). (p. 204). Petitioner contends that the grant of Free Patent (IV-3) 275 and the subsequent issuance of Original Certificate of Title No. P-17789 to Respondent Josefina L. Morato were subject to the conditions provided for in Commonwealth Act (CA) No. 141. It alleges that on October 24, 1974, or nine (9) months and eight (8) days after the grant of the patent, Respondent Morato, in violation of the terms of the patent, mortgaged a portion of the land to Respondent Nenita Co, who thereafter constructed a house thereon. Likewise, on February 2, 1976 and within the five-year prohibitory period, Respondent Morato leased a portion of the land to Perfecto Advincula at a monthly rent of P100.00 who, shortly thereafter, constructed a house of concrete materials on the subject land. Further, petitioner argues that the defense of indefeasibility of title is inaccurate. The original certificate of title issued to Respondent Morato contains the seeds of its own cancellation: such certificate specifically states on its face that it is subject to the provisions of Sections 118, 119, 121, 122, 124 of CA No. 141, as amended. Respondent Morato counters by stating that although a portion of the land was previously leased, it resulted from the fact that Perfecto Advincula built a warehouse in the subject land without [her] prior consent. The mortgage executed over the improvement cannot be considered a violation of the said grant since it can never affect the ownership. She states further:

x x x. the appeal of the petitioner was dismissed not because of the principle of indefeasibility of title but mainly due to failure of the latter to support and prove the alleged violations of respondent Morato. The records of this case will readily show that although petitioner was able to establish that Morato committed some acts during the prohibitory period of 5 years, a perusal thereof will also show that what petitioner was able to prove never constituted a violation of the grant. Respondent-Spouses Quilatan, on the other hand, state that the mortgage contract they entered into with Respondent Morato can never be considered as [an] alienation inasmuch as the ownership over the property remains with the owner. Besides, it is the director of lands and not the Republic of the Philippines who is the real party in interest in this case, contrary to the provision of the Public Land Act which states that actions for reversion should be instituted by the solicitor general in the name of Republic of the Philippines. We find for petitioner. Quoted below are relevant sections of Commonwealth Act No. 141, otherwise known as the Public Land Act: Sec. 118. Except in favor of the Government or any of its branches, units or institutions, or legally constituted banking corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations. No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources, which approval shall not be denied except on constitutional and legal grounds. (As amended by Com. Act No. 456, approved June 8, 1939.) Sec. 121. Except with the consent of the grantee and the approval of the Secretary of Agriculture and Natural Resources, and solely for educational, religious, or charitable purposes or for a right of way, no corporation, association, or partnership may acquire or have any right, title, interest, or property right whatsoever to any land granted under the free patent, homestead, or individual sale provisions of this Act or to any permanent improvement on such land. (As amended by Com. Act No. 615, approved May 5, 1941) Sec. 122. No land originally acquired in any manner under the provisions of this Act, nor any permanent improvement on such land, shall be encumbered, alienated or transferred, except to persons, corporations, association, or partnerships who may acquire lands of the public domain under this Act or to corporations organized in the Philippines authorized therefore by their charters. Except in cases of hereditary successions, no land or any portion thereof originally acquired under the free patent, homestead, or individual sale provisions of this Act, or any permanent improvement on such land, shall be transferred or assigned to any individual, nor shall such land or any permanent improvement thereon be leased to such individual, when the area of said land, added to that of his own, shall exceed one hundred and forty-four hectares. Any transfer, assignment, or lease made in violation hereto shall be null and void. (As amended by Com. Act No. 615, Id.) Sec. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of any of the provisions of sections one hundred and eighteen, one hundred and twenty, one hundred and twenty-one, one hundred and twenty-two, and one hundred and twenty-three of this Act shall be unlawful and null and void from its execution and shall produce the effect of annulling and cancelling the grant, title, patent, or permit originally issued, recognized or confirmed, actually or presumptively, and cause the reversion of the property and its improvements to the State. (Underscoring supplied.) The foregoing legal provisions clearly proscribe the encumbrance of a parcel of land acquired under a free patent or homestead within five years from the grant of such patent. Furthermore, such encumbrance results in the cancellation of the grant and the reversion of the land to the public domain. Encumbrance has been defined as [a]nything that impairs the use or transfer of property; anything which constitutes a burden on the title; a burden or charge upon property; a claim or lien upon property. It may be a legal claim on an estate for the discharge of which the estate is liable; an

embarrassment of the estate or property so that it cannot be disposed of without being subject to it; an estate, interest, or right in lands, diminishing their value to the general owner; a liability resting upon an estate. Do the contracts of lease and mortgage executed within five (5) years from the issuance of the patent constitute an encumbrance and violate the terms and conditions of such patent? Respondent Court answered in the negative: From the evidence adduced by both parties, it has been proved that the area of the portion of the land, subject matter of the lease contract (Exh. B) executed by and between Perfecto Advincula and Josefina L. Morato is only 10 x 12 square meters, whereas the total area of the land granted to Morato is 1,265 square meters. It is clear from this that the portion of the land leased by Advincula does not significantly affect Moratos ownership and possession. Above all, the circumstances under which the lease was executed do not reflect a voluntary and blatant intent to violate the conditions provided for in the patent issued in her favor. On the contrary, Morato was compelled to enter into that contract of lease out of sympathy and the goodness of her heart to accommodate a fellow man. x x x It is indisputable, however, that Respondent Morato cannot fully use or enjoy the land during the duration of the lease contract. This restriction on the enjoyment of her property sufficiently meets the definition of an encumbrance under Section 118 of the Public Land Act, because such contract impairs the use of the property by the grantee. In a contract of lease which is consensual, bilateral, onerous and commutative, the owner temporarily grants the use of his or her property to another who undertakes to pay rent therefor. During the term of the lease, the grantee of the patent cannot enjoy the beneficial use of the land leased. As already observed, the Public Land Act does not permit a grantee of a free patent from encumbering any portion of such land. Such encumbrance is a ground for the nullification of the award. Moratos resort to equity, i.e. that the lease was executed allegedly out of the goodness of her heart without any intention of violating the law, cannot help her. Equity, which has been aptly described as justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules of procedure. Positive rules prevail over all abstract arguments based on equity contra legem. Respondents failed to justify their position that the mortgage should not be considered an encumbrance. Indeed, we do not find any support for such contention. The questioned mortgage falls squarely within the term encumbrance proscribed by Section 118 of the Public Land Act. Verily, a mortgage constitutes a legal limitation on the estate, and the foreclosure of such mortgage would necessarily result in the auction of the property. Even if only part of the property has been sold or alienated within the prohibited period of five years from the issuance of the patent, such alienation is a sufficient cause for the reversion of the whole estate to the State. As a condition for the grant of a free patent to an applicant, the law requires that the land should not be encumbered, sold or alienated within five years from the issuance of the patent. The sale or the alienation of part of the homestead violates that condition. The prohibition against the encumbrance -- lease and mortgage included -- of a homestead which, by analogy applies to a free patent, is mandated by the rationale for the grant, viz.: It is well-known that the homestead laws were designed to distribute disposable agricultural lots of the State to landdestitute citizens for their home and cultivation. Pursuant to such benevolent intention the State prohibits the sale or encumbrance of the homestead (Section 116) within five years after the grant of the patent. After that five-year period the law impliedly permits alienation of the homestead; but in line with the primordial purpose to favor the homesteader and his family the statute provides that such alienation or conveyance (Section 117) shall be subject to the right of repurchase by the homesteader, his widow or heirs within five years. This section 117 is undoubtedly a complement of section 116. It aims to preserve and keep in the family of the homesteader that portion of public land which the State had gratuitously given to him. It would, therefore, be in keeping with this fundamental idea to hold, as we hold, that the right to repurchase exists not only when the original homesteader makes the conveyance, but also when it is made by his widow or heirs. This construction is clearly deducible from the terms of the statute. By express provision of Section 118 of Commonwealth Act 141 and in conformity with the policy of the law, any transfer or alienation of a free patent or homestead within five years from the issuance of the patent is proscribed. Such transfer nullifies said alienation and constitutes a cause for the reversion of the property to the State. The prohibition against any alienation or encumbrance of the land grant is a proviso attached to the approval of every application. Prior to the fulfillment of the requirements of law, Respondent Morato had only an inchoate right to the

property; such property remained part of the public domain and, therefore, not susceptible to alienation or encumbrance. Conversely, when a homesteader has complied with all the terms and conditions which entitled him to a patent for [a] particular tract of public land, he acquires a vested interest therein and has to be regarded an equitable owner thereof. However, for Respondent Moratos title of ownership over the patented land to be perfected, she should have complied with the requirements of the law, one of which was to keep the property for herself and her family within the prescribed period of five (5) years. Prior to the fulfillment of all requirements of the law, Respondent Moratos title over the property was incomplete. Accordingly, if the requirements are not complied with, the State as the grantor could petition for the annulment of the patent and the cancellation of the title. Respondent Morato cannot use the doctrine of the indefeasibility of her Torrens title to bar the state from questioning its transfer or encumbrance. The certificate of title issued to her clearly stipulated that its award was subject to the conditions provided for in Sections 118, 119, 121, 122 and 124 of Commonwealth Act (CA) No. 141. Because she violated Section 118, the reversion of the property to the public domain necessarily follows, pursuant to Section 124. Second Issue: Foreshore Land Reverts to the Public Domain There is yet another reason for granting this petition. Although Respondent Court found that the subject land was foreshore land, it nevertheless sustained the award thereof to Respondent Morato: First of all, the issue here is whether the land in question, is really part of the foreshore lands. The Supreme Court defines foreshore land in the case of Republic vs .Alagad, 169 SCRA 455, 464, as follows: Otherwise, where the rise in water level is due to, the extraordinary action of nature, rainful, for instance, the portions inundated thereby are not considered part of the bed or basin of the body of water in question. It cannot therefore be said to be foreshore land but land outside of the public dominion, and land capable of registration as private property. A foreshore land, on the other hand has been defined as follows: ... that part of (the land) which is between high and low water and left dry by the flux and reflux of the tides x x x x (Republic vs. C.A., Nos. L-43105, L-43190, August 31, 1984, 131 SCRA 532; Government vs . Colegio de San Jose, 53 Phil 423) The strip of land that lies between the high and low water marks and that is alternatively wet and dry according to the flow of the tide. (Rep. vs. CA, supra, 539). The factual findings of the lower court regarding the nature of the parcel of land in question reads: Evidence disclose that the marginal area of the land radically changed sometime in 1937 up to 1955 due to a strong earthquake followed by frequent storms eventually eroding the land. From 1955 to 1968, however, gradual reclamation was undertaken by the lumber company owned by the Moratos. Having thus restored the land thru mostly human hands employed by the lumber company, the area continued to be utilized by the owner of the sawmill up to the time of his death in 1965. On or about March 17, 1973, there again was a strong earthquake unfortunately causing destruction to hundreds of residential houses fronting the Calauag Bay including the Santiago Building, a cinema house constructed of concrete materials. The catastrophe totally caused the sinking of a concrete bridge at Sumulong river also in the municipality of Calauag, Quezon. On November 13, 1977 a typhoon code named Unding wrought havoc as it lashed the main land of Calauag, Quezon causing again great erosion this time than that which the area suffered in 1937. The Court noted with the significance of the newspaper clipping entitled Baryo ng Mangingisda Kinain ng Dagat (Exh. 11). Evidently this was the condition of the land when on or about December 5, 1972 defendant Josefina L. Morato filed with the Bureau of Lands her free patent application. The defendant Josefina Morato having taken possession of the land after the demise of Don Tomas Morato, she introduced improvement and continued developing the area, planted it to coconut trees. Having applied for a free patent, defendant had the land area surveyed and an approved plan (Exh. 9) based on the

cadastral survey as early as 1927 (Exh. 10) was secured. The area was declared for taxation purposes in the name of defendant Josefina Morato denominated as Tax Declaration No. 4115 (Exh. 8) and the corresponding realty taxes religiously paid as shown by Exh. 8-A). (pp. 12-14, DECISION). Being supported by substantial evidence and for failure of the appellant to show cause which would warrant disturbance, the afore-cited findings of the lower court, must be respected. Petitioner correctly contends, however, that Private Respondent Morato cannot own foreshore land: Through the encroachment or erosion by the ebb and flow of the tide, a portion of the subject land was invaded by the waves and sea advances. During high tide, at least half of the land (632.5 square meters) is 6 feet deep under water and three (3) feet deep during low tide. The Calauag Bay shore has extended up to a portion of the questioned land. While at the time of the grant of free patent to respondent Morato, the land was not reached by the water, however, due to gradual sinking of the land caused by natural calamities, the sea advances had permanently invaded a portion of subject land. As disclosed at the trial, through the testimony of the court-appointed commissioner, Engr. Abraham B. Pili, the land was under water during high tide in the month of August 1978. The water margin covers half of the property, but during low tide, the water is about a kilometer (TSN, July 19, 1979, p. 12). Also, in 1974, after the grant of the patent, the land was covered with vegetation, but it disappeared in 1978 when the land was reached by the tides (Exhs. E-1; E14). In fact, in its decision dated December 28, 1983, the lower court observed that the erosion of the land was caused by natural calamities that struck the place in 1977 (Cf. Decision, pp. 17-18). Respondent-Spouses Quilatan argue, however, that it is unfair and unjust if Josefina Morato will be deprived of the whole property just because a portion thereof was immersed in water for reasons not her own doing. As a general rule, findings of facts of the Court of Appeals are binding and conclusive upon this Court, unless such factual findings are palpably unsupported by the evidence on record or unless the judgment itself is based on a misapprehension of facts.The application for a free patent was made in 1972. From the undisputed factual findings of the Court of Appeals, however, the land has since become foreshore. Accordingly, it can no longer be subject of a free patent under the Public Land Act. Government of the Philippine Islands vs. Cabagis explained the rationale for this proscription: Article 339, subsection 1, of the Civil Code, reads: Art. 339. Property of public ownership is 1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shores, roadsteads, and that of a similar character. Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows: ARTICLE 1. The following are part of the national domain open to public use: 3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its interior or terrestrial limit is the line reached by the highest equinoctal tides. Where the tides are not appreciable, the shore begins on the land side at the line reached by the sea during ordinary storms or tempests. In the case of Aragon vs . Insular Government (19 Phil. 223), with reference to article 339 of the Civil Code just quoted, this Court said: We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb and flow of the tide, private property may not become property of public ownership. as defined in article 339 of the code, where it appear that the owner has to all intents and purposes abandoned it and permitted it to be totally destroyed, so as to become a part of the playa (shore of the sea), rada (roadstead), or the like. In the Enciclopedia Jurdica Espaola, volume XII, page 558, we read the following:

With relative frequency the opposite phenomenon occurs; that is, the sea advances and private properties are permanently invaded by the waves, and in this case they become part of the shore or beach. They then pass to the public domain, but the owner thus dispossessed does not retain any right to the natural products resulting from their new nature; it is a de facto case of eminent domain, and not subject to indemnity. In comparison, 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. When the sea moved towards the estate and the tide invaded it, the invaded property became foreshore land and passed to the realm of the public domain. In fact, the Court in Government vs. Cabangis annulled the registration of land subject of cadastral proceedings when the parcel subsequently became foreshore land. In another case, the Court voided the registration decree of a trial court and held that said court had no jurisdiction to award foreshore land to any private person or entity. The subject land in this case, being foreshore land, should therefore be returned to the public domain. WHEREFORE, the petition is GRANTED. This Court hereby REVERSES and SETS ASIDE the assailed Decision of Respondent Court and ORDERS the CANCELLATION of Free Patent No. (IV-3) 275 issued to Respondent Morato and the subsequent Original Certificate of Title No. P-17789. The subject land therefore REVERTS to the State. No costs. December 4, 1967, G.R. No. L-15829 ROMAN R. SANTOS, petitioner-appellee, vs. HON. FLORENCIO MORENO, as Secretary of Public Works and Communications and JULIAN C. CARGULLO , respondents-appellants. THE APPEAL The Honorable Secretary of Public Works & Communications appeals from the decision of the Court of First Instance of Manila declaring of private ownership certain creeks situated in barrio San Esteban, Macabebe, Pampanga. THE BACKGROUND The Zobel family of Spain formerly owned vast track of marshland in the municipality of Macabebe, Pampanga province. Called Hacienda San Esteban, it was administered and managed by the Ayala y Cia. From the year 1860 to about the year 1924 Ayala y Cia., devoted the hacienda to the planting and cultivation of nipa palms from which it gathered nipa sap or tuba. It operated a distillery plant in barrio San Esteban to turn nipa tuba into potable alcohol which was in turn manufactured into liquor. Accessibility through the nipa palms deep into the hacienda posed as a problem. Ayala y Cia., therefore dug canals leading towards the haciendas interior where most of them interlinked with each other. The canals facilitated the gathering of tuba and the guarding and patrolling of the hacienda by security guards called arundines. By the gradual process of erosion these canals acquired the characteristics and dimensions of rivers. In 1924 Ayala y Cia shifted from the business of alcohol production to bangus culture. It converted Hacienda San Esteban from a forest of nipa groves to a web of fishponds. To do so, it cut down the nipa palm, constructed dikes and closed the canals criss-crossing the hacienda. Sometime in 1925 or 1926 Ayala y Cia., sold a portion of Hacienda San Esteban to Roman Santos who also transformed the swamp land into a fishpond. In so doing, he closed and built dikes across Sapang Malauling Maragul, Quiorang Silab, Pepangebunan, Bulacus, Nigui and Nasi. The closing of the man-made canals in Hacienda San Esteban drew complaints from residents of the surrounding communities. Claiming that the closing of the canals caused floods during the rainy season, and that it deprived them of their means of transportation and fishing grounds, said residents demanded re-opening of those canals. Subsequently,

Mayor Lazaro Yambao of Macabebe, accompanied by policemen and some residents went to Hacienda San Esteban and opened the closure dikes at Sapang Malauling Maragul Nigui and Quiorang Silab. Whereupon, Roman Santos filed Civil Case No. 4488 in the Court of First Instance of Pampanga which preliminarily enjoined Mayor Yambao and others from demolishing the dikes across the canals. The municipal officials of Macabebe countered by filing a complaint (docketed as Civil Case No. 4527) in the same court. The Pampanga Court of First Instance rendered judgment in both cases against Roman Santos who immediately elevated the case to the Supreme Court. In the meantime, the Secretary of Commerce and Communications1 conducted his own investigation and found that the aforementioned six streams closed by Roman Santos were natural, floatable and navigable and were utilized by the public for transportation since time immemorial. He consequently ordered Roman Santos on November 3, 1930 to demolish the dikes across said six streams. However, on May 8, 1931 the said official revoked his decision of November 3, 1930 and declared the streams in question privately owned because they were artificially constructed. Subsequently, upon authority granted under Act 3982 the Secretary of Commerce and Communications entered into a contract with Roman Santos whereby the former recognized the private ownership of Sapang Malauling Maragul, Quiorang Silab, Pepangebunan, Bulacus, Nigui and Nasi and the latter turned over for public use two artificial canals and bound himself to maintain them in navigable state. The Provincial Board of Pampanga and the municipal councils of Macabebe and Masantol objected to the contract. However, the Secretary of Justice, in his opinion dated March 6, 1934, upheld its legality. Roman Santos withdraw his appeals in the Supreme Court. With respect to the portion of Hacienda San Esteban still owned by the Zobel family, the municipal authorities of Macabebe filed in 1930 an administrative complaint, in the Bureau of Public Works praying for the opening of the dikes and dams across certain streams in Hacienda San Esteban. Whereupon, the district engineer of Pampanga and a representative of the Bureau of Public Works conducted investigations. In the meantime, the Attorney General, upon a query from the Secretary of Commerce and Communications, rendered an opinion dated October 11, 1930 sustaining the latters power to declare streams as publicly owned under Sec. 4 of Act 2152, as amended by Act 3208. On September 29, 1930 the investigator of the Bureau of Public Works, Eliseo Panopio, submitted his report recommending the removal of the dikes and dams in question. And on the basis of said report, the Secretary of Commerce and Communications rendered his decision on November 3, 1930 ordering Ayala y Cia., to demolish the dikes and dams across the streams named therein situated in HaciendaSan Esteban. Ayala y Cia., moved for reconsideration, questioning the power of the Secretary of Commerce and Communications to order the demolition of said dikes. Days before the Secretary of Commerce and Communications rendered his aforementioned decision, Ayala y Cia., thru counsel, made representations with the Director of Public Works for a compromise agreement. In its letter dated October 11, 1930, Ayala y Cia., offered to admit public ownership of the following creeks: Antipolo, Batasan Teracan, Biuas or Batasan, Capiz, Carbon, Cutut, Dalayap, Enrique, Iba, Inaun, Margarita, Malauli or Budbud, Matalaba Palapat, Palipit Maisao, Panlovenas, Panquitan, Quinapati, Quiorang, Bubong or Malauli Malati, Salop, Sinubli and Vitas. provided the rest of the streams were declared private. Acting on said offer, the Director of Public Works instructed the surveyor in his office, Eliseo Panopio, to proceed to Pampanga and conduct another investigation. On January 23, 1931 Panopio submitted his report to the Director of Public Works recommending that some streams enumerated therein be declared public and some private on the ground that they were originally dug by the hacienda owners. The private streams were: Agape, Atlong, Cruz, Balanga, Batasan, Batasan Matlaue, Balibago, Baliti, Bato, Buengco Malati, Bungalin, Bungo Malati, Bungo Maragui, Buta-buta, Camastiles, Catlu, Cauayan or Biabas, Cela, Dampalit, Danlimpu, Dilinquente, Fabian, Laguzan, Lalap Maburac, Mabutol, Macabacle, Maragul or Macanduli, Macabacle or Mababo, Maisac, Malande, Malati, Magasawa, Maniup, Manulit, Mapanlao, Maisac, Maragul Mariablus Malate, Masamaral, Mitulid, Nasi, Nigui or Bulacus, Palipit, Maragul, Pangebonan, Paumbong, Pasco or Culali, Pilapil, Pinac Malati, Pinac, Maragul or Macabacle, Quiorang Silab or Malauli Maragul, Raymundo, Salamin, Salop Maisac, Salop Maragul, Sermon and Sinca or Mabulog. He therefore recommended revocation of the decision already mentioned above, dated November 3, 1930 of the Secretary of Commerce and Communications ordering the demolition of the dikes closing Malauling Maragul, Quiorang, Silab,

Pepangebonan, Nigui, Bulacus, Nasi, and Pinac. On February 13, 1931 the Director of Public Works concurred in Panopios report and forwarded the same the Secretary of Commerce and Communications. On February 25, 1935 the municipality of Macabebe and the Zobel family executed an agreement whereby they recognized the nature of the streams mentioned in Panopios report as public or private, depending on the findings in said report. This agreement was approved by the Secretary of Public Works and Communications on February 27, 1935 and confirmed the next day by the municipal council of Macabebe under Resolution No. 36. A few months later, that is, on June 12, 1935, the then Secretary of Justice issued an opinion holding that the contract executed by the Zobel family and the municipality of Macabebe has no validity for two reasons, namely, (1) the streams although originally dug by Ayala y Cia., lost their private nature by prescription inasmuch as the public was allowed to use them for navigation and fishing, citing Mercado vs. Municipality of Macabebe, 59 Phil. 592; and (2) at the time the Secretary of Commerce and Communications approved the said contract, he had no more power so to do, because such power under Sec. 2 of Act 2152 was revoked by the amending Act 4175 which took effect on December 7, 1934. Despite the above ruling of the Secretary of Justice, the streams in question remained closed. In 1939 administrative investigations were again conducted by various agencies of the Executive branch of our government culminating in an order of President Manuel Quezon immediately before the national elections in 1941 requiring the opening of Sapang Macanduling, Maragul Macabacle, Balbaro and Cansusu. Said streams were again closed in 1942 allegedly upon order of President Quezon.

THE CASE. Roman Santos acquired in 1940 from the Zobel family a larger portion of Hacienda San Esteban wherein are located 25 streams which were closed by Ayala y Cia., and are now the subject matter in the instant controversy. Eighteen years later, that is in 1958, Congress enacted Republic Act No. 20562 following a congressional inquiry which was kindled by a speech delivered by Senator Rogelio de la Rosa in the Senate. On August 15, 1958 Senator de la Rosa requested in writing the Secretary of Public Works and communications to proceed in pursuance of Republic Act No. 2056 against fishpond owners in the province of Pampanga who have closed rivers and appropriated them as fishponds without color of title. On the same day, Benigno Musni and other residents in the vicinity of Hacienda San Esteban petitioned the Secretary of Public Works and Communications to open the following streams: Balbaro, Batasan Matua, Bunga, Cansusu, Macabacle, Macanduling, Maragul, Mariablus, Malate, Matalabang, Maisac, Nigui, Quiorang Silab, Sapang Maragul and Sepung Bato. Thereupon, the Secretary of Public Works and Communications instructed Julian C. Cargullo to conduct an investigation on the above named streams. On October 20, 1958 Musni and his co-petitioners amended their petition to include other streams. The amended petition therefore covered the following streams: Balbaro, Balili, Banawa, Batasan Matua Bato, Bengco, Bunga, Buta-buta, Camastiles, Cansusu, Cela, Don Timpo, Mabalanga, Mabutol, Macabacle, Macabacle qng. Iba, Macanduling, Maragul, Malauli, Magasawa, Mariablus Malate Masamaral, Matalabang Maisa, Mariablus,3 Nigui, Pita, Quiorang, Silab, Sapang Maragul, Sepung Bato, Sinag and Tumbong. On March 2, 4, 10, 30 and 31, and April 1, 1959, the Secretary of Public Works and Communications rendered his decisions ordering the opening and restoration of the channel of all the streams in controversy except Sapang Malauling, Maragul, Quiorang, Silab, Nigui Pepangebonan, Nasi and Bulacus, within 30 days on the ground that said streams belong to the public domain. On April 29, 1959, that is, after receipt of the Secretarys decision dated March 4, 1959, Roman Santos filed a motion with the Court of First Instance of Man for junction against the Secretary of Public Works and Communications and Julian C. Cargullo. As prayed for preliminary injunction was granted on May 8, 1959. The Secretary of Public Work and Communications answered and alleged as defense that venue was improperly laid; that Roman Santos failed to exhaust

administrative remedies; that the contract between Ayala y Cia., and the Municipality of Macabebe is null and void; and, that Section 39 of Act 496 excludes public streams from the operation of the Torrens System. On April 29 and June 12, 1969, Roman Santos received the decision of the Secretary of Public Works and Communications dated March 10 and March 30, March 31, and April 1, 1959. Consequently, on June 24, 1959 he asked the court to cite in contempt Secretary Florendo Moreno, Undersecretary M.D. Bautista and Julian Cargullo for issuing and serving upon him the said decisions despite the existence of the preliminary injunction. The Solicitor General opposed the motion alleging that the decisions in question had long been issued when the petition for injunction was filed, that they were received after preliminary injunction issued because they were transmitted through the District Engineer of Pampanga to Roman Santos; that their issuance was for Roman Santos information and guidance; and, that the motion did not allege that respondents took steps to enforce the decision. Acting upon said motion, on July 17, 1959, the trial court considered unsatisfactory the explanation of the Solicitor General but ruled that Secretary Florencio Moreno, Undersecretary M.D. Bautista and Julian Cargullo acted in good faith. Hence, they were merely admonished to desist from any and further action in this case, observe the preliminary injunction issued by this Court, with the stern warning, however, that a repetition of the acts complained of shall be dealt with severely. On July 18, 1959 the trial court declared all the streams under litigation private, and rendered the following judgment: The Writ of preliminary injunction restraining the respondent Secretary of Public Works & Communications from enforcing the decisions of March 2 And 4, 1959 and all other similar decisions is hereby made permanent. The Secretary of Public Works and Communication and Julian Cargullo appealed to this Court from the order of July 17, 1959 issued in connection with Roman Santos motion for contempt and from the decision of the lower court on the merits of the case. ISSUES The issues are: (1) Did Roman Santos exhaust administrative remedies? (2) Was venue properly laid? (3) Did the lower court err in conducting a trial de novo of the case and in admitting evidence not presented during the administrative proceeding? (4) Do the streams involved in this case belong to the public domain or to the owner of Hacienda San Esteban according to law and the evidence submitted to the Department of Public Works and Communications? DISCUSSION OF THE ISSUES 1. Respondents maintain that Roman Santos resorted to the courts without first exhausting administrative remedies available to him, namely, (a) motion for reconsideration of the decisions of the Secretary of Public Works and Communications; and, (b) appeal to the President of the Philippines. Whether a litigant, in exhausting available administrative remedies, need move for the reconsideration of an administrative decision before he can turn to the courts for relief, would largely depend upon the pertinent law,4 the rules of procedure and the usual practice followed in a particular office.5 Republic Act No. 2056 does not require the filing of a motion for reconsideration as a condition precedent to judicial relief. From the context of the law, the intention of the legislators to forego a motion for reconsideration manifests itself clearly. Republic Act No. 2056 underscores the urgency and summary nature of the proceedings authorized thereunder. Thus in Section 2 thereof the Secretary of Public Works and Communications under pain of criminal liability is duty bound to terminate the proceedings and render his decision within a period not exceeding 90 days from the filing of the complaint. Under the same section, the party respondent concerned is given not than 30 days within which to comply with the decision of the Secretary of Public Works and Communications, otherwise the removal of the dams would be done by the Government at the expense of said party. Congress has precisely provided for a speedy and a most expeditious proceeding for the removal of illegal obstructions to rivers and on the basis of such a provision it would be preposterous to conclude that it had in mind to require a party to file a motion for reconsideration an additional proceeding which would certainly lengthen the time towards the final settlement of existing controversies. The logical conclusion is that Congress intended the decision of the Secretary of Public Works and Communications to be final and executory subject to a timely review by the courts without going through formal and time consuming preliminaries.

Moreover, the issues raised during the administrative proceedings of this case are the same ones submitted to court for resolution. No new matter was introduced during the proceeding in the court below which the Secretary of Public Works and Communications had no opportunity to correct under his authority. Furthermore, Roman Santos assailed the constitutionality of Republic Act No. 2056 and the jurisdiction of the Secretary of Public Works and Communications to order the demolition of dams across rivers or streams. Those questions are not within the competence of said Secretary to decide upon a motion for reconsideration. They are purely legal questions, not administrative in nature, and should properly be aired before a competent court as was rightly done by petitioner Roman Santos . At any rate, there is no showing in the records of this case that the Secretary of Public Works and Communications adopted rule of procedure in investigations authorized under Republic Act No. 2056 which require a party litigant to file a motion for the reconsideration of the Secretarys decision before he can appeal to the courts. Roman Santos however stated in his brief that the practice is not to entertain motions for reconsideration for the reason that Republic Act No. 2056 does not expressly or impliedly allow the Secretary to grant the same. Roman Santos statement is supported by Opinion No. 61, Series of 1959, dated April 14, 1959 of the Secretary of Justice. As to the failure of Roman Santos to appeal from the decision of the Secretary of Public Works and Communications to the President of the Philippines, suffice it to state that such appeal could be dispensed with because said Secretary is the alter ego of the President. The actions of the former are presumed to have the implied sanction of the latter.6 2. It is contended that if this case were considered as an ordinary civil action, venue was improperly laid when the same was instituted in the Court of First Instance of Manila for the reason that the case affects the title of a real property. In fine, the proposition is that since the controversy dwells on the ownership of or title to the streams located in Hacienda San Esteban, the case is real action which, pursuant to Sec. 3 of Rule 5 of the Rules of Court should have been filed in the Court of First Instance of Pampanga. The mere fact that the resolution of the controversy in this case would wholly rest on the ownership of the streams involved herein would not necessarily classify it as a real action. The purpose of this suit is to review the decision of the Secretary of Public Works and Communications to enjoin him from enforcing them and to prevent him from making and issuing similar decisions concerning the stream in Hacienda San Esteban. The acts of the Secretary of Public Works and Communications are the object of the litigation, that is, petitioner Roman Santos seeks to control them, hence, the suit ought to be filed in the Court of First Instance whose territorial jurisdiction encompasses the place where the respondent Secretary is found or is holding office. For the rule is that outside its territorial limits, the court has no power to enforce its order.7 Section 3 of Rule 5 of the Rules of Court does not apply to determine venue of this action. Applicable is Sec. 1 the same rule, which states: Sec. 1. General rule. Civil actions in Courts of First Instance may be commenced and tried where the defendant any of the defendants residents or may be found or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff. Accordingly, the Petition for injunction who correctly filed in the Court of First Instance of Manila. Respondents Secretary of Public Works and Communications and Julian Cargullo are found and hold office in the City of Manila. 3. The lower court tried this case de novo. Against this procedure respondents objected and maintained that the action, although captioned as an injunction is really a petition for certiorari to review the decision of the Secretary of Public Works and Communications. Therefore they now contend that the court should have confined itself to reviewing the decisions of the respondent Secretary of Public Works and Communications only on the basis of the evidence presented in the administrative proceedings. On the other hand, Roman Santos now, submits that the action is a proceeding independent and distinct from the administrative investigation; that, accordingly, the lower court correctly acted in trying the case anew and rendering judgment upon evidence adduced during the trial.

Whether the action instituted in the Court of First Instance be for mandamus, injunction or certiorari is not very material. In reviewing the decision of the Secretary of Public Works and Communications, the Court of First Instance shall confine its inquiry to the evidence presented during, the administrative proceedings. Evidence not presented therein shall not be admitted, and considered by the trial court. As aptly by this Court speaking through Mr. Justice J.B.L. Reyes, in a similar case: The findings of the Secretary can not be enervated by new evidence not laid before him, for that would be tantamount to holding a new investigation, and to substitute for the discretion and judgment of the Secretary the discretion and judgment of the court, to whom the statute had not entrusted the case. It is immaterial that the present action should be one for prohibition or injunction and not one for certiorari; in either event the case must be resolved upon the evidence submitted to the Secretary, since a judicial review of executive decisions does not import a trial de novo, but only an ascertainment of whether the executive findings are not in violation of the Constitution or of the laws, and are free from fraud or imposition, and whether they find reasonable support in the evidence. . . .8 The case at bar, no matter what the parties call it, is in reality a review of several administrative decisions of the Secretary of Public Works and Communications. Being so, it was error for the lower court to conduct a trial de novo. Accordingly, for purposes of this review, only the evidence presented and admitted in the administrative investigation will be considered in our determination of whether on the basis thereof the decisions of the Secretary of Public Works and Communications were correct. 4. We come to the question whether the streams involved in this case belong to the public domain or to the owner of Hacienda San Esteban. If said streams are public, then Republic Act 2056 applies, if private, then the Secretary of Public Works and Communications cannot order demolition of the dikes and dams across them pursuant to his authority granted by said law. First, we come to the question of the constitutionality of Republic Act No. 2056. The lower court held Republic Act No. 2056 constitutional but ruled that it was applied by respondents unconstitutionally. That is, it held that Roman Santos was being deprived of his property without due process of law, for the dikes of his fishponds were ordered demolished through an administrative, instead of a judicial, proceeding. This conclusion and rationalization of the lower court amount in effect to declaring the law unconstitutional, stated inversely. Note that the law provides for an expeditious administrative process to determine whether or not a dam or dike should be declare a public nuisance and ordered demolished. And to say that such an administrative process, when put to operation, is unconstitutional is tantamount to saying that the law itself violates the Constitution. In Lovina vs. Moreno, supra, We held said law constitutional. We see no reason here to hold otherwise. Discussing now the applicability of Republic Act 2056, the same applies to two types of bodies of water, namely (1) public navigable rivers, streams, coastal waters, or waterways and (b) areas declared as communal fishing grounds, as provided for in Section 1 thereof: Sec. 1. . . . the construction or building of dams, dikes or any other works which encroaches into any public navigable river, stream, coastal waters and any other navigable public waters or waterways as well as the construction or building of dams, dikes or any other works in areas declared as communal fishing grounds, shall be ordered removed as public nuisances or as prohibited constructions as herein provided: . . . We are not concerned with communal fishing grounds because the streams here involved have not been so declared, but with public navigable streams. The question therefore is: Are the streams in Hacienda San Esteban which are mentioned in the petition of Benigno Musni and others, public and navigable? Respondents contend that said streams are public on the following grounds: (1) Hacienda San Esteban was formerly a marshland and being so, it is not susceptible to appropriation. It therefore belongs to the State. Respondents rely on Montano vs. Insular Government, 12 Phil. 572. (2) The streams in question are natural streams. They are tributaries of public streams. Cited are the cases of Samson vs. Dionisio, et al., 11 Phil. 538 and Bautista vs. Alarcon, 23 Phil. 631, 636. (3) The streams have for their source public rivers, therefore they cannot be classified as canals.

(4) Assuming the streams were artificially made by Ayala y Cia., said titleholder lost ownership over them by prescription when it allowed the public to use them for navigation for a long time. Respondents cite Mercado vs. Municipal President of Macabebe, 59 Phil. 592. (5) Assuming the streams in question are not mentioned as public in the certificates of title held by Ayala y Cia., over Hacienda San Esteban, still they cannot be considered as privately owned for Section 39 of Act 496 expressly excepts public streams from private ownership. (6) The Panopio Report, which found the streams in question of private ownership was nullified by the Secretary of Justice in his opinion dated June 12, 1935. And, the contract between Ayala y Cia., and the Secretary of Commerce and Communications agreeing on the ownership of the streams in question is ultra vires. The doctrine in Montano vs. Insular Government, supra, that a marshland which is inundated by the rise of the tides belongs to the State and is not susceptible to appropriation by occupation has no application here inasmuch as in said case the land subject matter of the litigation was not yet titled and precisely Isabelo Montano sought title thereon on the strength of ten years occupation pursuant to paragraph 6, section 54 of Act 926 of the Philippine Commission. Whereas, the subject matter in this case Hacienda San Esteban is titled land and private ownership thereof by Ayala y Cia., has been recognized by the King of Spain and later by the Philippine Government when the same was registered under Act 496. Respondents further cite Bautista vs. Alarcon, 23 Phil. 631, where the plaintiff sought injunction against the defendants who allegedly constructed a dam across a public canal which conveyed water from the Obando River to fishponds belonging to several persons. The canal was situated within a public land. In sustaining the injunction granted by the Court of First Instance, this Court said: No private persons has right to usurp possession of a watercourse, branch of a river, or lake of the public domain and use, unless it shall have been proved that he constructed the same within in property of his exclusive ownership, and such usurpation constitutes a violation of the legal provisions which explicity exclude such waterways from the exclusive use or possession of a private party. (Emphasis supplied) As indicated in the above-cited case, a private person may take possession of a watercourse if he constructed the same within his property. This puts Us into inquiry whether the streams in question are natural or artificial. In so doing, We shall examine only the evidence presented before the Department of Public Works and Communications and disregard that which was presented for the first time before the lower court, following our ruling in Lovina vs. Moreno, supra. (1) Sapang Macanduling Maragul or Macanduli is presently enclosed in Fishpond No. 12 of Roman Santos. Its banks cannot anymore be seen but some traces of them could be noted by a row of isolated nipa palms. Its water is subject to the rise and fall of the tides coming from Guagua and Antipolo Rivers and it is navigable by light watercrafts. Its inlet is Antipolo River; another dike at its outlet along the Palapat River.9 It is closed by four dikes: One dike at its inlet along the Antipolo River; another dike at its cutlet along the Palatpat River; and, two dikes in between. Then exist channel at the Palapat River where the fishpond gate lies has been filled up with dredge spoils from the Pampanga River Control Project. (2) Sapang Macabacle is found in Fishpond No. 13. Its banks are still evident. This stream is about 30 meters wide, two meters deep and one and one-half to two kilometers long. Its source is Rio Cansusu. Like Macanduli, its channel is obstructed by four dikes. One of them was constructed by the engineers of the Pampanga River Control Project. (3) Sapang Balbaro which is found in Fishpond No. 13, runs from Canal Enrique near Rio Cansusu to Sapang Macabacle, a distance of about one-half kilometer. It is passable by banca. The closures of this stream consist of two dikes located at each ends on Canal Enrique and Sapang Macabacle. (4) Sapang Cansusu is a continuation of the Cansusu River. The Cansusu River opens at the Guagua River and allegedly ends at the Palanas River in front of Barrio San Esteban. At a point near the mouth of Sapang Balbaro, the owners of Hacienda San Esteban built a canal leading straight to one end of Barrio San Esteban. They called this canal Canal Enrique. And at the point where Canal Enrique joins Cansusu they built a dike across Cansusu, thus closing this very portion of the river which extends up to Palanas River where they built another closure dike. This closed portion, called Sapang Cansusu, is now part of Fishpond No. 1.

Sapang Cansusu is half a kilometer long and navigable by banca. Appellants witnesses, Beligno Musni, 41, Macario Quiambao, 96, Roman Manansala, 55 and Castor Quiambao, 76, all residents of Barrio San Esteban, testified that prior to their closure, Sapang Macaduli, Macabacle, Balbaro and Cansusu were used as passageway and as fishing grounds; that people transported through them tuba,10 wood and sasa,11 and that the tuba was brought to the distillery in Barrio San Esteban. Macario Quiambao testified also that said four streams were created by God for the town people; and that if any digging was done it was only to deepen the shallow parts to make passage easier. According to witness Anastacio Quiambao said streams were navigable, even Yangcos ship Cababayan could pass through. Simplicio Quiambao, 36, and Marcelino Ocampo, 55, stated on direct examination that before closure of the above named four streams, people from the surrounding towns of Guagua, Bacolor, Macabebe, Masantol and Sexmoan fished and navigated in them. Against the aforementioned, testimonial evidence Roman Santos presented the testimony of Nicanor Donarber, 80, Mariano Guinto, 71, and his own. Donarber, who started working as an arundin12 testified that Ayala y Cia., dug Sapang Macanduli, Balbaro and Macabacle; that he worked also in the construction together with other workers; and, that as an overseer he inspected their work. Mariano Guinto testified that he worked for Ayala y Cia., as a tuba gatherer; that in order to reach remote nipagroves by banca, they made canals; and, that he was one of the who worked in the construction of those canals. Roman Santos also testified that Sapang Macanduli, Macabacle, Balbaro and Cansusu are artificial canals excavated as far back as 1850 and due to erosion coupled with the spongy nature of the land, they acquired the proportion of rivers; that he joined Sapang Balbaro to Sapang Macabacle because the former was a dying canal; and that Cansusu River is different from Sapang Cansusu Witness Domingo Yumang likewise testified that Sapang Balbaro man-made. We observe that witnesses positively stated that Sapang Macanduli, Macabacle and Balbaro were made by the owners of Hacienda San Esteban. With respect to Sapang Cansusu none, except Roman Santos himself, testified that Sapang Cansusu is an artificial canal. It is not one of the streams found and recommended to be declared private in the Panopio Report. Sapang Cansusu follows a winding course different and, distinct from that of a canal such as that of Canal Enrique which is straight. Moreover, Sapang Cansusu is a part of Cansusu River, admittedly a public stream. (5) Sapang Maragul, Mabalanga and Don Timpo are all part of Fishpond No. 1. Maragul is 600 meters long and 30 to 35 meters wide. Mabalanga is 250 meters in length and 50 meters in width. Don Timpo is 220 meters long and 20 meters wide. All of them are navigable by banca. Maragul and Mabalanga open at Guagua River and join each other inside the hacienda to form one single stream, Sapang Don Timpo, which leads to the Matalaba River. Maragul, Mabalanga and Don Timpo, formerly ended inside the hacienda but later Mabalanga was connected to Don Timpo. Maragul was connected to Mabalanga and Sapang Cela was extended to join Maragul. Witnesses Nicanor Donarber, Mariano Ocampo and Mariano Guinto testified that Maragul, Mabalanga and Don Timpo are artificial canals dug by Ayala y Cia., and that they (Donarber and Mariano Guinto) worked in said excavations.13 Witness Mariano Guinto clarified that Don Timpo was originally dug but Mabalanga and Maragul were formerly small non-navigable streams which were deepened into artificial navigable canals by Ayala y Cia.14 Exhibit F, which is a map showing the streams and rivers in Hacienda San Esteban, shows that Maragul, Mabalanga and Don Timpo are more or less straight. From the big rivers (Guagua and Matalaba Rivers) they lead deep into the interior of the hacienda, thus confirming the testimony that they were built precisely as a means of reaching the interior of the estate by banca. The weight of evidence, therefore, indicate that said streams are manmade. (6) Sapang Bunga, now part of Bunga fishpond, gets its water from Sapanga Iba and empties at Sta. Cruz River. It is about 300-400 meters long, 5-6 meters wide and 1-1.60 meters deep. (7) Sapang Batu is found in Capiz Fishpond. About 300-400 meters long, 4-5 meters wide and 1.50-2.20 meters deep, it starts at Capiz River and ends at Malauling Maragul. From Capiz River until it intersects Sapang Nigui the stream is called Sapang Batu Commencing from Sapang Nigui and up to its end at Sapang Malauling Maragul, the stream is called Sapang Batu. Commencing from Sapang Nigui and up to its end at Sapang Malauling Maragul, the stream is called Sepong Batu. Sepong Batu is not among those streams declared in the Panopio Report as private.

(8) Sapang Banawa has one end at Palanas River and the other at Sapang Macabacle. It is about 300 meters long, 3-4 meters wide and 1.30-1.40 meters deep. Its whole length is within Fishpond No. 13 of Roman Santos. (9) Sapang Mabutol is a dead-end stream, that is, it ends inside the hacienda. It opens along Guagua river. Since its closure, it has become part of Fishpond No. 1. (10) Sapang Buta-buta, like Mabutol, dies inside the hacienda. It connects with Cansusu River and is about 100 meters long, 3-4 meters wide and 1.2-1.5 meters deep. It is now a part of Fishpond No. 13. (11) Sapang Masamaral, another stream which opens at Cansusu River And ends inside the hacienda., is 100-200 meters long, 3-4 meters wide and 1.50-2 meters deep. It now forms part of Fishpond No. 13. The uncontradicted testimony of Marcos Guinto is that Sapang Bunga, Batu, Sepong Batu, Banawa, Mabutol, Buta-Buta and Masamaral were constructed by Ayala y Cia., to gain access to the nipa the, interior of the hacienda. This testimony tallies with the findings in the Panopio Report which will be discussed herein later. The evidence adduced in the administrative proceeding conducted before a representative of the Secretary of Public Works and Communications supports the contention that said streams are merely canals built by Ayala y Cia., for easy passage into the hinterland of itshacienda. (12) Sapang Magasawa consists of two streams running parallel to each other commencing from Matalaba River and terminating at Mariablus Rivers. About 600-700 meters long, 4-5 meters wide and 1.5-2 meters deep, these two streams are navigable by banca. They are enclosed within Fishpond No. 1. (13) Sapang Mariablus Malate, about 3-4 meters wide and 250 meters long, is another stream that ends inside the hacienda and gets its water from Guagua River. It is no part of Fishpond No. 1. (14) Sapang Matalabang Malate or Maisac opens at Guagua River and ends at Sapang Cela and Matalabang Maragul. This stream, which is about 800 meters long and 18 meters wide, forms part of Fishpond No. 1 of Roman Santos. (15) Sapang Batasan Matua about 600 meters long, three meters wide and .80 meters deep at low tide and 1.90 meters deep at high tide crosses the hacienda from Mariablus River to Cansusu River. It is at present a part of Fishpond No. 1-A. (16) Sapang Camastiles, a dead end stream of about 200 to 300 meters in length, gets its water from Biuas River. It is within Fishpond No. 1. (17) Sapang Cela is within Fishpond No. 1. Its whole length situated inside the hacienda, it opens at Sapang Matalabang Malate or Maisac and ends at Sapang Malungkot. Latter Cela was extended to connect with Sapang Maragul. It is about 200 meters long and four meters wide. Mariano Guinto, 71, testified without contradiction that Sapang Mariablus Malate and Matalabang Malate were formerly small and non-navigable streams which were dug by Ayala y Cia.,15 while Batasan Matua Camastiles, Magasawa and Cela are original canals made by Ayala y Cia.,16 that he was one of those who worked in the construction of said canals; and that it took years to construct them. All these streams were recommended in the Panopio Report for declaration as private streams. (18) Sapang Sinag, 200 meters long, four to five meters wide, one meter and one and one-half meters deep at low and high tides, respectively, gets its water from Cutod River and leads inside the hacienda to connect with Sapang Atlong Cruz, a stream declared private in the Panopio Report. It is now inside Fishpond No. 14. (19) Sapang Balili, also found inside Fishpond No. 14, is about 200 meters long, three to four meters wide and one meter deep at low tide. From its mouth at Cutod River it drifts into the interior of the hacienda and joins Sapang Bengco.17 (20) Sapang Pita is within Fishpond Capiz. It takes water from Capiz River but dies 250 meters inside the hacienda. It is about four to five meters wide, and one meter deep at low tide and 1.50 meters deep at high tide. (21) Sapang Tumbong, situated inside Capiz Fishpond, derives its water from Sapang Quiorang Silab, a stream declared private by the Secretary of Public Works and Communications, and ends inside the hacienda.18 (22) Sapang Bengco is found within Fishpond No. 14. Two hundred meters long, five meters wide, and one meter deep at low tide and 1.50 meters deep at high tide it gets water from Sapang Biabas and connects with Baliling Maisac.19 According to Marcos Guinto, a witness for Roman Santos, Sapang Sinag, Balili, Pita Tumbong and Bengco were excavated a long time ago by Ayala y Cia.; and that they have a winding course because when they were made the workers followed the location of the nipa palms.20 On the other hand, Marcelo Quiambao, testified that Sapang Tumbong is a natural stream and that the reason he said so is because the stream was already there as far back as 1910 when he

reached the age of ten. No other oral evidence was presented to contradict the testimony of Marcos Guinto that the said five streams were artificially made by Ayala y Cia. To show that the streams involved in this case were used exclusively by the hacienda personnel and occasionally by members of their families, Roman Santos introduced the testimony of Eliseo Panopio, Nicanor Donarber, Blas Gaddi, Mariano Ocampo, Mariano Guinto, Alejandro Manansala and himself. The witnesses categorically testified that the public was prohibited from using the streams as a means of navigation and that the prohibition was enforced by guards called arundines. One and all, the evidence, oral and documentary, presented by Roman Santos in the administrative proceedings supports the conclusion of the lower court that the streams involved in this case were originally man-made canals constructed by the former owners of Hacienda San Esteban and that said streams were not held open for public use. This same conclusion was reached 27 years earlier by an investigator of the Bureau of Public Works whose report and recommendations were approved by the Director of Public Works and submitted to the Secretary of Commerce and Communications. As stated, pursuant to Act 2152, as amended by Act 3208, the Bureau of Public Works and the Department of Commerce and Communications locked into and settled the question of whether or not the streams situated within Hacienda San Esteban are publicly or privately owned. We refer to the so-called Panopio Report which contains the findings and recommendations of Eliseo Panopio, a surveyor in the Bureau of Public Works, who was designated to conduct formal hearings and investigation. Said report found the following streams, among others, of private ownership: Camastiles, Cela Balanga, Bato, Batasan, Bengco, Buta-buta, Don Timpo, Mabutol, Macabacle, Macanduli, Malande Malate (Bunga), Magasawa, Masamaral, Maragul, Mariablus Malate, Matalaba Malate, Nasi, Nigui, Pangebonan and Quiorang Silab on the ground that The preponderance of the probatory facts, . . ., shows that the rivers, creeks, esteros and canals listed in (1) have originally been constructed, deepened, widened, and lengthened by the owners of the Hacienda San Esteban. That they have been used as means of communication from one place to another and to the inner most of the nipales, exclusively for the employees, colonos and laborers of the said Hacienda San Esteban. That they have never been used by the public for navigation without the express consent of the owners of the said Hacienda.21 Bases for the above-quoted conclusion were the reliable informations gathered from old residents of the locality, from outsiders, the sworn statements obtained from different persons not interested in this case and the comparison of the three plans prepared in 1880, 1906 and 1930.22 The persons referred to are Martin Isip, Hilarion Lobo, Emigdio Ignacio, Castor Quiambao, Matias Sunga facio Cruz, Inocencio Dayrit, Gabriel Manansala, Lope Quiambao, Marcelino Bustos and Juan Lara . On February 13, 1931 the Director of Public Works transmitted the Panopio Report to the Secretary of Commerce and Communications recommending approval thereof. Later, on February 27, 1935, Secretary of Public Works and Communications De las Alas approved the agreement of Ayala y Cia., and the Municipality of Macabebe, concerning the ownership of the streams in Hacienda San Esteban, for being in conformity with said Panopio Report. This agreement of Ayala y Cia and the Municipality of Macabebe which was approved by the Secretary of Public Works and Communications only on February 27, 1935, could not however bind the Government because the power of the Secretary of Public Works and Communication to enter thereto had been suppressed by the Philppine Legislature when it enacted Act 4175 which effect on December 7, 1934. Nullity of the aforesaid contract would not of course affect the findings of fact contained in the Panopio Report. In weighing the evidence presented before the administrative investigation which culminated in this appeal, respondent Secretary seemed to have ignored the Panopio Report and other documentary evidence as well as the testimony of witnesses presented by petitioner but instead gave credence only to the witnesses of Benigno Musni, et al. Upon review, however, the lower court, taking into account all the evidence adduced in the administrative hearing, including the Panopio Report, as well as those presented for the first time before it, sustained petitioners averment that the streams in question were artificially made, hence of private ownership. As stated, this conclusion of the lower court which is in accord with the findings of Panopio as contained in his report, finds ample support from the evidence presented and admitted in the administrative investigation. Accordingly, we see no merit in disturbing the lower courts findings fact. We next consider the issue of whether under pertinent laws, the streams in question are public or private.

We quote Articles 339, 407 and 408 of the Spanish Civil Code of 1889: Art. 339. Property of public ownerships is 1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, river banks, shores, roadsteads, and that of a similar character; Art. 407. The following are of public ownership: 1. Rivers and their natural channels; 2. Continuous or intermittent waters from springs or brooks running in their natural channels and the channels themselves. 3. Waters rising continuously or intermittently on lands of public ownership; 4. Lakes and ponds formed by nature, on public lands, and their beds; 5. Rain waters running through ravines or sand beds, the channels of which are of public ownership; 6. Subterranean waters on public lands; 7. Waters found within the zone of operation of public works, even though constructed under contract; 8. Waters which flow continuously or intermittently from lands belonging to private persons, to the State, to provinces, or to towns, from the moment they leave such lands; 9. The waste waters of fountains, sewers, and public institutions Art. 408. The following are of private ownership: 1. Waters, either continuous or intermittent rising on private etates, while they run through them; 2. Lakes and ponds and their beds when formed by nature on such estates; 3. Subterranean waters found therein; 4. Rain water falling thereon as long as their bounderies. 5. The channels of flowing streams, continuous or intermittent, formed by rain water, and those of brooks crossing estates which are not of public ownership. The water, bed, banks, and floodgates of a ditch or aqueduct are deemed to be an integral part of the estate or building for which the waters are intended. The owners of estates through or along the boundaries of which the aqueduct passes can assert no ownership over it, nor any right to make use. of it beds or banks, unless they base their claims on title deed which specify the right or the ownership claimed. Articles 71 and 72 of the Spanish Law of Waters of August 3, 1866 state: Art. 71. The water-beds of all creeks belong to the owners of the estates or lands over which they flow. Art. 72. The water-beds on public land, of creeks through which spring waters run, are a part of the public domain. The natural water-beds or channels of rivers are also part of the public domain. Pursuant to Article 71 of the Spanish Law of Waters of August 3, 1866, and Article 408(5) of the Spanish Civil Code, channels of creeks and brooks belong to the owners of estates over which they flow. The channels, therefore, of the streams in question which may be classified creeks, belong to the owners of Hacienda San Esteban. The said streams, considered as canals, of which they originally were, are of private ownership in contemplation of Article 339(l) of the Spanish Civil Code. Under Article 339, canals constructed by the State and devoted to public use are of public ownership. Conversely, canals constructed by private persons within private lands and devoted exclusively for private use must be of private ownership. Our attention has been called to the case of Mercado v. Municipal President of Macabebe, 59 Phil. 592. There the creek (Batasan-Limasan) involved was originally dug by the estates owner who, subsequently allowed said creek to be used by the public for navigation and fishing purposes for a period of 22 years. Said this Court through Mr. Justice Diaz: And even granting that the Batasan-Limasan creek acquired the proportions which it had, before it was closed, as a result of excavations made by laborers of the appellants predecesor in interest, it being a fact that, since the time it was opened as a water route between the Nasi River and Limasan creek, the owners thereof as well as strangers, that is, both the residents of the hacienda and those of other nearby barrios and municipalities, had been using it not only for their bancas to pass through but also for fishing purposes, and it being also a fact that such was the condition of the creek

at least since 1906 until it was closed in 1928, if the appellant and her predecessors in interest had acquired any right to the creek in question by virtue of excavations which they had made thereon, they had such right through prescription, inasmuch as they failed to obtain, and in fact they have not obtained, the necessary authorization to devote it to their own use to the exclusion of all others. The use and enjoyment of a creek, as any other property simceptible of appropriation, may be acquired or lost through prescription, and the appellant and her predecessors in interest certainly lost such right through the said cause, and they cannot now claim it exclusively for themselves after the general public had been openly using the same from 1906 to 1928. . . . In the cited case, the creek could have been of private ownership had not its builder lost it by prescription. Applying the principle therein enunciated to the case at bar, the conclusion would be inevitably in favor of private ownership, considering that the owners of Hacienda San Esteban held them for their exclusive use and prohibited the public from using them. It may be noted that in the opinion, mentioned earlier, issued on June 12, 1935, the Secretary of Justice answered in the negative the query of the Secretary of Public Works and Communications whether the latter can declare of private ownership those streams which were dug up artificially, because it was assumed that the streams were used by the public as fishing ground and in transporting their commerce in bancas or in small crafts without the objection of the parties who dug them. Precisely, Mercado v. Municipality of Macabebe was given application therein. However, the facts, as then found by the Bureau of Public Works, do not support the factual premise that the streams in question were used by the public without the objection of the parties who dug them. We cannot therefore take as controlling in determining the merits of this the factual premises and the legal conclusion contained in said opinion. The case at bar should be differentiated from those cases where We held illegal the closing and/or appropriation of rivers or streams by owners of estates through which they flow for purposes of converting them into fishponds or other works.23 In those cases, the watercourses which were dammed were natural navigable streams and used habitually by the public for a long time as a means of navigation. Consequently, they belong to the public domain either as rivers pursuant to Article 407 (1) of the Spanish Civil Code of 1889 or as property devoted to public use under Article 339 of the same code. Whereas, the streams involved in this case were artificially made and devoted to the exclusive use of the hacienda owner. Finally, Sapang Cansusu, being a natural stream and a continuation of the Cansusu River, admittedly a public stream, belongs to the public domain. Its closure therefore by the predecessors of Roman Santos was illegal. The petition for the opening of Sapang Malauling Maragul, Quiorang Silab, Nigui, Pepangebunan, Nasi and Bulacus was dismissed by the Secretary of Public Works and Communications and the case considered closed. The said administrative decision has not been questioned in this appeal by either party. Hence, they are deemed excluded herein. All the other streams, being artificial and devoted exclusively for the use of the hacienda owner and his personnel, are declared of private ownership. Hence, the dams across them should not he ordered demolished as public nuisances. With respect to the issue of contempt of court on the part of the Secretary of Public Works and Communications and Julian Cargullo for the alleged issuance of a administrative decisions ordering demolition of dikes involved in this case after the writ of injunction was granted and served, suffice it to state that the lower court made no finding of contempt of court. Necessarily, there is no conviction for contempt reviewable by this Court and any discussion on the matter would be academic. WHEREFORE, the decision appealed from is affirmed, except as to Sapang Cansusu which is hereby declared public and as to which the judgment of the lower court is reversed. No costs. So ordered.

CHAVEZ V. PUBLIC ESTATE AUTHORITY FACTS: From the time of Marcos until Estrada, portions of Manila Bay were being reclaimed. A law was passed creating the Public Estate Authority which was granted with the power to transfer reclaimed lands. Now in this case, PEA entered into a Joint Venture Agreement with AMARI, a private corporation. Under the Joint Venture Agreement between AMARI and PEA, several hectares of reclaimed lands comprising the Freedom Islands and several portions of submerged areas of Manila Bay were going to be transferred to AMARI . ISSUE: Whether or not the stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to be reclaimed, violate the Constitution

RULING: YES! Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and disposable lands of the public domain Section 3 of the Constitution: Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws. Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409 of the Civil Code, contracts whose object or purpose is contrary to law, or whose object is outside the commerce of men, are inexistent and void from the beginning. The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.
G.R. No. 92013 July 25, 1990 SALVADOR H. LAUREL, petitioner, vs. RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents. G.R. No. 92047 July 25, 1990 DIONISIO S. OJEDA, petitioner, vs. EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN,respondents. These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully disclose to the public the basis of their decision to push through with the sale of the Roppongi property inspire of strong public opposition and to explain the proceedings which effectively prevent the participation of Filipino citizens and entities in the bidding process. The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required to file a comment by the Court's resolution dated February 22, 1990. The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon. The Court could not act on these cases immediately because the respondents filed a motion for an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5, 1990 but calling the attention of the respondents to the length of time the petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2) cases. I The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots being: (1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery; (2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and categorized as a commercial lot now being used as a warehouse and parking lot for the consulate staff; and

(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which is now vacant. The properties and the capital goods and services procured from the Japanese government for national development projects are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II. The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20) years in accordance with annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization of reparations and development loans. The procurements are divided into those for use by the government sector and those for private parties in projects as the then National Economic Council shall determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national development projects. The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since that time. A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima Corporation which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the lease period, all the three leased buildings shall be occupied and used by the Philippine government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment) The Philippine government retains the title all throughout the lease period and thereafter. However, the government has not acted favorably on this proposal which is pending approval and ratification between the parties. Instead, on August 11, 1986, President Aquino created a committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D. On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to avail of separations' capital goods and services in the event of sale, lease or disposition. The four properties in Japan including the Roppongi were specifically mentioned in the first "Whereas" clause. Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since only one bidder qualified. The second one, after postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed such that the $225 million floor price became merely a suggested floor price. The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at the same time for the objective is the same - to stop the sale of the Roppongi property. The petitioner in G.R. No. 92013 raises the following issues:

(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and (2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi property? Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making the property available for sale to non-Filipino citizens and entities. He also questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for being discriminatory against Filipino citizens and Filipinoowned entities by denying them the right to be informed about the bidding requirements. II In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were acquired as part of the reparations from the Japanese government for diplomatic and consular use by the Philippine government. Vice-President Laurel states that the Roppongi property is classified as one of public dominion, and not of private ownership under Article 420 of the Civil Code (See infra). The petitioner submits that the Roppongi property comes under "property intended for public service" in paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any one can attach to it, not even by the State. The Roppongi and related properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other improvements" (Second Year Reparations Schedule). The petitioner states that they continue to be intended for a necessary service. They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same remains property of public dominion so long as the government has not used it for other purposes nor adopted any measure constituting a removal of its original purpose or use. The respondents, for their part, refute the petitioner's contention by saying that the subject property is not governed by our Civil Code but by the laws of Japan where the property is located. They rely upon the rule of lex situs which is used in determining the applicable law regarding the acquisition, transfer and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine law regarding a property situated in Japan. The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the Roppongi property has ceased to become property of public dominion. It has become patrimonial property because it has not been used for public service or for diplomatic purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because the intention by the Executive Department and the Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the transfer of the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision stating that funds may be taken from the sale of Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the Senate of the government's intention to remove the Roppongi property from the public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property scheduled on March 30, 1989. III In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now avers that the executive order contravenes the constitutional mandate to conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates: (1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141). itc-asl (2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national economy and patrimony (Section 10, Article VI, Constitution); (3) The protection given to Filipino enterprises against unfair competition and trade practices;

(4) The guarantee of the right of the people to information on all matters of public concern (Section 7, Article III, Constitution); (5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino citizens of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and (6) The declaration of the state policy of full public disclosure of all transactions involving public interest (Section 28, Article III, Constitution). Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order is a misapplication of public funds He states that since the details of the bidding for the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not have the chance to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum price of $225 million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price would still be deducted. IV The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the three related properties were through reparations agreements, that these were assigned to the government sector and that the Roppongi property itself was specifically designated under the Reparations Agreement to house the Philippine Embassy. The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms of the Reparations Agreement and the corresponding contract of procurement which bind both the Philippine government and the Japanese government. There can be no doubt that it is of public dominion unless it is convincingly shown that the property has become patrimonial. This, the respondents have failed to do. As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26). The applicable provisions of the Civil Code are: ART. 419. Property is either of public dominion or of private ownership. ART. 420. The following things are property of public dominion (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks shores roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. ART. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and intended for some public service. Has the intention of the government regarding the use of the property been changed because the lot has been Idle for some years? Has it become patrimonial? The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).

The respondents enumerate various pronouncements by concerned public officials insinuating a change of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi property for public service and to make it patrimonial property under Article 422 of the Civil Code must be definite Abandonment cannot be inferred from the nonuse alone specially if the non-use was attributable not to the government's own deliberate and indubitable will but to a lack of financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on correct legal premises. A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose. Even the failure by the government to repair the building in Roppongi is not abandonment since as earlier stated, there simply was a shortage of government funds. The recent Administrative Orders authorizing a study of the status and conditions of government properties in Japan were merely directives for investigation but did not in any way signify a clear intention to dispose of the properties. Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its text expressly authorizing the sale of the four properties procured from Japan for the government sector. The executive order does not declare that the properties lost their public character. It merely intends to make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides: Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary notwithstanding, the above-mentioned properties can be made available for sale, lease or any other manner of disposition to non-Filipino citizens or to entities owned by non-Filipino citizens. Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the government sector and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos or entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No. 296. Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its implementation, the proceeds of the disposition of the properties of the Government in foreign countries, did not withdraw the Roppongi property from being classified as one of public dominion when it mentions Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not to those reserved for public use or service. Rep Act No. 6657, therefore, does not authorize the Executive Department to sell the Roppongi property. It merely enumerates possible sources of future funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside of the commerce of man cannot be tapped as a source of funds. The respondents try to get around the public dominion character of the Roppongi property by insisting that Japanese law and not our Civil Code should apply. It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in the sale of extremely valuable government property, Japanese law and not Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and exceptions to its provision is not presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith that Japanese law would allow the sale. We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should apply.

In the instant case, none of the above elements exists. The issues are not concerned with validity of ownership or title. There is no question that the property belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of property belonging to the State. And the validity of the procedures adopted to effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply. The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situsrule is misplaced. The opinion does not tackle the alienability of the real properties procured through reparations nor the existence in what body of the authority to sell them. In discussing who are capable of acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who can acquire the properties so that the constitutional limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi lot when there is no showing that it can be sold? The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the investigating committee to sell the Roppongi property was premature or, at the very least, conditioned on a valid change in the public character of the Roppongi property. Moreover, the approval does not have the force and effect of law since the President already lost her legislative powers. The Congress had already convened for more than a year. Assuming for the sake of argument, however, that the Roppongi property is no longer of public dominion, there is another obstacle to its sale by the respondents. There is no law authorizing its conveyance. Section 79 (f) of the Revised Administrative Code of 1917 provides: Section 79 (f ) Conveyances and contracts to which the Government is a party. In cases in which the Government of the Republic of the Philippines is a party to any deed or other instrument conveying the title to real estate or to any other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed by the President of the Philippines on behalf of the Government of the Philippines unless the Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied) The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive Order No. 292). 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) It is not for the President to convey valuable real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence. Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi property does not withdraw the property from public domain much less authorize its sale. It is a mere resolution; it is not a formal declaration abandoning the public character of the Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings on Senate Resolution No. 734 which raises serious policy considerations and calls for a factfinding investigation of the circumstances behind the decision to sell the Philippine government properties in Japan. The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold the authority of the President to sell the

Roppongi property. The Court stated that the constitutionality of the executive order was not the real issue and that resolving the constitutional question was "neither necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the Roppongi property." In emphasizing that "the decision of the Executive to dispose of the Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable nor did it indicate that the President was authorized to dispose of the Roppongi property. The resolution should be read to mean that in case the Roppongi property is re-classified to be patrimonial and alienable by authority of law, the proceeds of a sale may be used for national economic development projects including the CARP. Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in 1989. Having declared a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a need for legislative authority to allow the sale of the property, we see no compelling reason to tackle the constitutional issues raised by petitioner Ojeda. The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]). The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold: The Roppongi property is not just like any piece of property. It was given to the Filipino people in reparation for the lives and blood of Filipinos who died and suffered during the Japanese military occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits from them. But who would think of selling these monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered. Even if we should become paupers we should not think of selling them. For it would be as if we sold the lives and blood and tears of our countrymen. (RolloG.R. No. 92013, p.147) The petitioner in G.R. No. 92047 also states: Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole Filipino people endured in World War II. It is for what it stands for, and for what it could never bring back to life, that its significance today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property passed on to the Philippine government. Roppongi is a reminder that cannot should not be dissipated ... (Rollo-92047, p. 9) It is indeed true that the Roppongi property is valuable not so much because of the inflated prices fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos veterans and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy determination where both the President and Congress must concur. Considering the properties' importance and value, the laws on conversion and disposition of property of public dominion must be faithfully followed. WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made PERMANENT.

G.R. No. L-50466, May 31, 1982, CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents. 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 gasoline tank is attached to the shed by the steel pipe to the pump, so with the water tank it is connected also by a steel pipe to the pavement, then to the electric motor which electric motor is placed under the shed. So to say that the gasoline pumps, water pumps and underground tanks are outside of the service station, and to consider only the building as the service station 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. 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. 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 held that: (1) the steel towers come within the term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers are personal properties and are not subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These are assigned as errors by the petitioner 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 cross-arms supporting five high voltage transmission wires (See Annex A) and their sole function is to support or carry such wires. The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty. Several courts of last resort in the United States have called these steel supports "steel towers", and they 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; (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;

(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; 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.

G.R. No. L-17870, September 29, 1962, MINDANAO BUS COMPANY, petitioner, vs. THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City, respondents. This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to. Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment. In the Court of Tax Appeals the parties submitted the following stipulation of facts: Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts: 1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission; 2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province; 3. That the machineries sought to be assessed by the respondent as real properties are the following: (a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A"; (b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B"; (c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C"; (d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D"; (e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E"; (f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and (g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".

4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this agreed stipulation of facts; 5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates; 6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date.1awphl.nt The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court assigning the following errors: 1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are valid; and that said tools, equipments or machineries are immovable taxable real properties. 2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry. 3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and 4. The Tax Court erred in denying petitioner's motion for reconsideration. Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New Civil Code which provides: Art. 415. The following are immovable properties: (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. (Emphasis ours.) Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said: Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry." If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar and industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principle elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. (Emphasis ours.) So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and

principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeepwagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidental and retain their movable nature. Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another. The law that governs the determination of the question at issue is as follows: Art. 415. The following are immovable property: (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (Civil Code of the Phil.) Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land . Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building. But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land , as demanded by the law. Said equipments may not, therefore, be deemed real property. Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code. WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs. G.R. No. 6295, September 1, 1911, THE UNITED STATES, plaintiff-appellee, vs. IGNACIO CARLOS, defendant-appellant. The information filed in this case is as follows: The undersigned accuses Ignacio Carlos of the crime of theft, committed as follows: That on, during, and between the 13th day of February, 1909, and the 3d day of March, 1910, in the city of Manila, Philippine Islands, the said Ignacio Carlos, with intent of gain and without violence or intimidation against the person or force against the thing, did then and there, willfully, unlawfully, and feloniously, take, steal , and carry away two thousand two hundred and seventy-three (2,273) kilowatts of electric current, of the value of nine hundred and nine (909) pesos and twenty (20) cents Philippine currency, the property of the Manila Electric Railroad and Light Company, a corporation doing business in the Philippine Islands, without the consent of the owner thereof; to the damage and prejudice of the

saidManila Electric Railroad and Light Company in the said sum of nine hundred and nine (909) pesos and twenty (20) cents Philippine currency, equal to and equivalent of 4,546 pesetas Philippine currency. All contrary to law. (Sgd.) L. M. SOUTWORTH, Prosecuting Attorney. Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city of Manila. (Sgd.) CHARLES S. LOBINGIER, Judge, First Instance. A preliminary investigation has heretofore been conducted in this case, under my direction, having examined the witness under oath, in accordance with the provisions of section 39 of Act No. 183 of the Philippine Commission, as amended by section 2 of Act No. 612 of the Philippine Commission. (Sgd) L. M. SOUTHWORTH, Prosecuting Attorney. Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city of Manila. (Sgd.) CHARLES LOBINGIER, Judge, First Instance. A warrant for the arrest of the defendant was issued by the Honorable J. C. Jenkins on the 4th of March and placed in the hands of the sheriff. The sheriffs return shows that the defendant gave bond for his appearance. On the 14th of the same month counsel for the defendant demurrer to the complaint on the following grounds: (1) That the court has no jurisdiction over the person of the accused nor of the offense charged because the accused has not been accorded a preliminary investigation or examination as required by law and no court, magistrate, or other competent authority has determined from a sworn complaint or evidence adduced that there is probable cause to believe that a crime has been committed, or that this defendant has committed any crime. (2) That the facts charged do not constitute a public offense.

The demurrer was overruled on the same day and the defendant having refused to plead, a plea of not guilty was entered by direction of the court for him and the trial proceeded. After due consideration of all the proofs presented and the arguments of counsel the trial court found the defendant guilty of the crime charged and sentenced him to one year eight months and twenty-one days presidio correccional, to indemnify the offended party, The Manila Electric Railroad and Light Company, in the sum of P 865.26, to the corresponding subsidiary imprisonment in case of insolvency and to the payment of the costs. From this judgment the defendant appealed and makes the following assignments of error: I. The court erred in overruling the objection of the accused to the jurisdiction of the court, because he was not given a preliminary investigation as required by law, and in overruling his demurrer for the same reason. II. The court erred in declaring the accused to be guilty, in view of the evidence submitted. III. The court erred in declaring that electrical energy may be stolen.

IV. The court erred in not declaring that the plaintiff consented to the taking of the current. V. The court erred in finding the accused guilty of more than one offense. VI.The court erred in condemning the accused to pay P 865.26 to the electric company as damages. Exactly the same question as that raised in the first assignment of error, was after a thorough examination and due consideration, decided adversely to appellants contention in the case of U.S. vs. Grant and Kennedy (18 Phil. Rep. 122). No sufficient reason is presented why we should not follow the doctrine enunciated in that case. The question raised in the second assignment of error is purely one fact. Upon this point the trial court said: For considerably more than a year previous to the filing of this complaint the accused had been a consumer of electricity furnished by the Manila Electric Railroad and Light Company for a building containing the residence of the accused and three other residences, and which was equipped, according to the defendants testimony, with thirty electric lights. On March 15, 1909, the representatives of the company, believing that more light was being used than their meter showed, installed an additional meter (Exhibit A) on a pole outside of defendants house, and both it and the meter (Exhibit B) which had been previously installed in the house were read on said date. Exhibit A read 218 kilowatt hours; Exhibit B, 745 kilowatt hours. On March 3, 1910 each was read again, Exhibit A showing 2,718 kilowatt hours and Exhibit B, 968. It is undisputed that the current which supplied the house passed through both meters and the city electrician testifies that each meter was tested on the date of the last reading and was in good condition. The result of this registration therefore is that while the outsider meter (Exhibit A) showed a consumption in defendants building of 2,500 kilowatt hours of electricity, this inside meter (Exhibit B) showed but 223 kilowatt hours. In other words the actual consumption, according to the outside meter, was more than ten times as great as that registered by the one inside. Obviously this difference could not be due to normal causes, for while the electrician called by the defense (Lanusa) testifies to the possibility of a difference between two such meters, he places the extreme limit of such difference between them 5 per cent. Here, as we have seen, the difference is more than 900 per cent. Besides, according to the defendants electrician, the outside meter should normally run faster, while according to the test made in this case the inside meter (Exhibit B) ran the faster. The city electrician also testifies that the electric current could have been deflected from the inside meter by placing thereon a device known as a jumper connecting the two outside wires, and there is other testimony that there were marks on the insulation of the meter Exhibit B which showed the use of such a device. There is a further evidence that the consumption of 223 kilowatt hours, registered by the inside meter would not be a reasonable amount for the number of lights installed in defendants building during the period in question, and the accused fails to explain why he should have had thirty lights installed if he needed but four or five. On the strength of this showing a search warrant was issued for the examination of defendants premises and was duly served by a police officer (Hartpence). He was accompanied at the time by three employees of the Manila Electric Railroad and Light Company, and he found there the accused, his wife and son, and perhaps one or two others. There is a sharp conflict between the several spectators on some points but on one there is no dispute. All agree that the jumper (Exhibit C) was found in a drawer of a small cabinet in the room of defendants house where the meter was installed and not more than 20 feet therefrom. In the absence of a satisfactory explanation this constituted possession on defendants part, and such possession, under the Code of Civil Procedure, section 334 (10), raises the presumption that the accused was the owner of a device whose only use was to deflect the current from the meter. Is there any other satisfactory explanation of the jumpers presence? The only one sought to be offered is the statement by the son of the accused, a boy of twelve years, that he saw the jumper placed there by the witness Porter, an employee of the Light Company. The boy is the only witness who so testifies and Porter himself squarely denies it. We cannot agree with counsel for the defense that the

boys interest in the outcome of this case is less than that of the witness for the prosecution. It seems to us that his natural desire to shield his father would far outweigh any interest such an employee like Porter would have and which, at most, would be merely pecuniary. There is, however, one witness whom so far as appears, has no interest in the matter whatsoever. This is Officer Hartpence, who executed the search warrant. He testifies that after inspecting other articles and places in the building as he and the other spectators, including the accused, approached the cabinet in which the jumper was found, the officers attention was called to the defendants appearance and the former noticed that the latter was becoming nervous. Where the only two witnesses who are supposed to know anything of the matter thus contradict each other this item of testimony by the officer is of more than ordinary significance; for if, as the accused claims, the jumper was placed in the cabinet for the first time by Porter there would be no occasion for any change of demeanor on the part of the accused. We do not think that the officers declination to wait until defendant should secure a notary public shows bias. The presence of such an official was neither required nor authorized by law and the very efficacy of a search depends upon its swiftness. We must also agree with the prosecuting attorney that the attending circumstances do not strengthen the story told by the boy; that the latter would have been likely to call out at the time he saw the jumper being placed in the drawer, or at least directed his fathers attention to it immediately instead of waiting, as he says, until the latter was called by the officer. Finally, to accept the boys story we must believe that this company or its representatives deliberately conspired not merely to lure the defendant into the commission of a crime but to fasten upon him a crime which he did not commit and thus convict an innocent man by perjured evidence. This is a much more serious charge than that contained in the complaint and should be supported by very strong corroborating circumstances which we do not find here. We are, accordingly, unable to consider as satisfactory defendants explanation of the jumpers presence. The only alternative is the conclusion that the jumper was placed there by the accused or by someone acting for him and that it was the instrument by which the current was deflected from the matter Exhibit B and the Light Company deprived of its lawful compensation. After a careful examination of the entire record we are satisfied beyond peradventure of a doubt that the proofs presented fully support the facts as set forth in the foregoing finding. Counsel for the appellant insists that the only corporeal property can be the subject of the crime of larceny, and in the support of this proposition cites several authorities for the purpose of showing that the only subjects of larceny are tangible, movable, chattels, something which could be taken in possession and carried away, and which had some, although trifling, intrinsic value, and also to show that electricity is an unknown force and can not be a subject of larceny. In the U.S. vs. Genato (15 Phi. Rep. 170) the defendant, the owner of the store situated at No. 154 Escolta, Manila, was using a contrivance known as a jumper on the electric meter installed by the Manila Electric Railroad and the Light Company. As a result of the use of this jumper the meter, instead of making one revolution in every four seconds, registered one in seventy-seven seconds, thereby reducing the current approximately 95 per cent. Genato was charged in the municipal court with a violation of a certain ordinance of the city of Manila, and was sentenced to pay a fine of P 200. He appealed to the Court of First Instance, was again tried and sentenced to pay the same fine. An appeal was taken from the judgment of the Court of First Instance to the Supreme Court on the ground that the ordinance in question was null and void. It is true that the only question directly presented was of the validity of the city ordinance. The court, after holding that said ordinance was valid, said:

Even without them (ordinances), the right of ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles in case of subtraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the decisions of the supreme court of Spain January 20, 1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of the penal code of that country, articles identical with articles 517 and 518 of the code in force in these Islands. Article 517 of the Penal Code above referred to reads as follows: The following are guilty of larceny: (1) Those who with intent of gain and without violence or intimidation against the person, or force against things, shall take anothers personal property without the owners consent. And article 518 fixes the penalty for larceny in proportion to the value of the personal property stolen. It is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but its manifestation and effects, like those of gas, may be seen and felt. The true test of what is a proper subject of larceny seems to be not whether the subject is corporeal, but whether it is capable of appropriation by another than the owner. It is well-settled that illuminating gas may be the subject of larceny, even in the absence of a statute so providing. (Decisions of supreme court of Spain, January 20, 1887, and April 1, 1897, supra; also (England) Queen vs. Firth, L. R. 1 C. C., 172, 11 Cox C. C., 234; Queen vs. White, 3 C. & K., 363, 6 Cox C. C., 213; Woods vs. People, 222 III., 293, 7 L. R. A., 520; Commonwealth vs. Shaw, 4 Allen (Mass), 308; State vs. Wellman, 34 Minn., 221, N. W. Rep., 385, and 25 Cyc., p. 12, note 10.) In the case of Commonwealth vs. Shaw, supra, the court, speaking through Chief Justice Bigelow, said: There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried away. It is a valuable article of merchandise, bought and sold like other personal property, susceptible of being severed from a mass or larger quantity, and of being transported from place to place. In the present case it appears that it was the property of the Boston Gas Light Company; that it was in their possession by being confined in conduits and tubes which belonged to them, and that the defendant severed a portion of that which was in the pipes of the company by taking it into her house and there consuming it. All this being proved to have been done by her secretly and with intent to deprive the company of their property and to appropriate it to her own use, clearly constitutes the crime of larceny. Electricity, the same as gas, is a valuable article of merchandise, bought and sold like other personal property and is capable of appropriation by another. So no error was committed by the trial court in holding that electricity is a subject of larceny. It is urged in support of the fourth assignment of error that if it be true that the appellant did appropriate to his own use the electricity as charged he can not be held guilty of larceny for any part of the electricity thus appropriated, after the first month, for the reason that the complaining party, the Manila Electric Road and Light Company, knew of this misappropriation and consented thereto. The outside meter was installed on March 15, 1909, and read 218 kilowatt hours. On the same day the inside meter was read and showed 745 kilowatt hours. Both meters were again read on March 3, 1910, and the outside one showed 2,718 kilowatt hours while the one on the inside only showed 968, the difference in consumption during this time being 2,277 kilowatt hours. The taking of this current continued over a period of one year, less

twelve days. Assuming that the company read both meters at the end of each month; that it knew the defendant was misappropriating the current to that extent; and that t continued to furnish the current, thereby giving the defendant an opportunity to continue the misppropriation, still, we think, that the defendant is criminally responsible for the taking of the whole amount, 2,277 kilowatt hours. The company had a contract with the defendant to furnish him with current for lighting purposes. It could not stop the misappropriation without cutting off the current entirely. It could not reduce the current so as to just furnish sufficient for the lighting of two, three, or five lights, as claimed by the defendant that he used during the most of this time, but the current must always be sufficiently strong to furnish current for the thirty lights, at any time the defendant desired to use them. There is no pretense that the accused was solicited by the company or anyone else to commit the acts charged. At most there was a mere passive submission on the part of the company that the current should be taken and no indication that it wished it to be taken, and no knowledge by the defendant that the company wished him to take the current, and no mutual understanding between thecompany and the defendant, and no measures of inducement of any kind were employed by the company for the purpose of leading the defendant into temptation, and no preconcert whatever between him and company. The original design to misappropriate this current was formed by the defendant absolutely independent of any acts on the part of the company or its agents. It is true, no doubt, as a general proposition, that larceny is not committed when the property is taken with the consent of its owner. It may be difficult in some instances to determine whether certain acts constitute, in law, such consent. But under the facts in the case at bar it is not difficult to reach a conclusion that the acts performed by the plaintiff company did not constitute a consent on its part the defendant take its property. We have been unable to find a well considered case holding contrary opinion under similar facts, but, there are numerous cases holding that such acts do not constitute such consent as would relieve the taker of criminal responsibility. The fourth assignment of error is, therefore, not well founded. It is also contended that since the jumper was not used continuously, the defendant committed not a single offense but a series of offenses. It is, no doubt, true that the defendant did not allow the jumper to remain in place continuously for any number of days as the company inspected monthly the inside meter. So the jumper was put on and taken off at least monthly, if not daily, in order to avoid detection, and while the jumper was off the defendant was not misappropriating the current. The complaint alleged that the defendant did on, during, and between the 13th day of February, 1909, and the 3d of March, 1910. willfully, unlawfully, and feloniously take, steal, and carry away 2,277 kilowatts of electric current of the value of P 909. No demurrer was presented against this complaint on the ground that more than one crime was charged. The Government had no opportunity to amend or correct this error, if error at all. In the case of U.S. vs. Macaspac (12 Phil. Rep., 26), the defendant received from one Joquina Punu the sum of P 31.50, with the request to deliver it to Marcelina Dy-Oco. The defendant called upon Marcelina, but instead of delivering the said amount she asked Marcelina for P 30 in the name of Joaquina who had in no way authorized her to do so. Marcelina gave her P 30, believing that Joaquina had sent for it. Counsel for the defendant insisted that the complaint charged his client with two different crimes of estafa in violation of section 11 of General Orders, No. 58. In disposing of this question this court said: The said defect constitutes one of the dilatory pleas indicated by section 21, and the accused ought to have raised the point before the trial began. Had this been done, the complaint might have been amended in time, because it is merely a defect of form easily remediedInasmuch as in the first instance the accused did not make the corresponding dilatory plea to the irregularity of the complaint, it must be understood that has waived such objection, and is not now entitled to raise for the first time any question in reference thereto when submitting to this court her assignment of errors. Apart from the fact that the defense does not pretend that any of the essential rights of the accused have been injured, the allegation of the defect above alluded to, which in any case would only affect form of the complaint, can not justify a reversal of the judgment appealed from, according to the provisions of section 10 of General Orders, No. 58.

In the case at bar it is not pointed out wherein any of the essential rights of the defendant have been prejudiced by reason of the fact that the complaint covered the entire period. If twelve distinct and separate complaints had been filed against the defendant, one for each month, the sum total of the penalties imposed might have been very much greater than that imposed by the court in this case. The covering of the entire period by one charge has been beneficial, if anything, and not prejudicial to the rights of the defendant. The prosecuting attorney elected to cover the entire period with one charge and the accused having been convicted for this offense, he can not again be prosecuted for the stealing of the current at any time within that period. Then, again, we are of the opinion that the charge was properly laid. The electricity was stolen from the same person, in the same manner, and in the same place. It was substantially one continuous act, although the jumper might have been removed and replaced daily or monthly. The defendant was moved by one impulse to appropriate to his own use the current, and the means adopted by him for the taking of the current were in the execution of a general fraudulent plan. A person stole gas for the use of a manufactory by means of pipe, which drew off the gas from the main without allowing it to pass through the meter. The gas from this pipe was burnt every day, and turned off at night. The pipe was never closed at this junction with the main, and consequently always remained full of gas. It was held, that if the pipe always remained full, there was, in fact, a continuous taking of the gas and not a series of separate talkings. It was held also that even if the pipe had not been kept full, the taking would have been continuous, as it was substantially all one transaction. (Regina vs.Firth, L. R., 1 C. C., 172; 11 Cox C. C., 234. Cited on p. 758 of Whartons Criminal Law, vol. 1, 10th ed.) The value of the electricity taken by the defendant was found by the trial court to be P 865.26. This finding is fully in accordance with the evidence presented. So no error was committed in sentencing the defendant to indemnify the company in this amount, or to suffer the corresponding subsidiary imprisonment in case of insolvency. The judgment being strictly in accordance with the law and the merits of the case, same is hereby affirmed, with costs against the appellant.
G.R. No. 137705. August 22, 2000, SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent. After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party. The Case Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision of the Court of Appeals (CA) in CA-GR SP No. 47332 and its February 26, 1999 Resolution denying reconsideration. The decretal portion of the CA Decision reads as follows: WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED. In its February 18, 1998 Order, the Regional Trial Court (RTC) of Quezon City (Branch 218) issued a Writ of Seizure. The March 18, 1998 Resolution denied petitioners Motion for Special Protective Order, praying that the deputy sheriff be enjoined from seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal and to return to their original place whatever immobilized machineries or equipments he may have removed. The Facts

The undisputed facts are summarized by the Court of Appeals as follows: On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an application for a writ of replevin docketed as Civil Case No. Q-9833500. On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses. On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one machinery with [the] word that he [would] return for the other machineries. On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin. This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin. In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical. On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest. On April 7, 1998, they went to [the CA] via an original action for certiorari. Ruling of the Court of Appeals Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners. It also ruled that the words of the contract are clear and leave no doubt upon the true intention of the contracting parties. Observing that Petitioner Goquiolay was an experienced businessman who was not unfamiliar with the ways of the trade, it ruled that he should have realized the import of the document he signed. The CA further held: Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case below, since the merits of the whole matter are laid down before us via a petition whose sole purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The issues raised herein are proper subjects of a full-blown trial, necessitating presentation of evidence by both parties. The contract is being enforced by one, and [its] validity is attacked by the other a matter x x x which respondent court is in the best position to determine. Hence, this Petition. The Issues In their Memorandum, petitioners submit the following issues for our consideration: A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of immobilization. B. Whether or not the contract between the parties is a loan or a lease.

In the main, the Court will resolve whether the said machines are personal, not immovable, property which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will also address briefly the procedural points raised by respondent. The Courts Ruling The Petition is not meritorious. Preliminary Matter:Procedural Questions Respondent contends that the Petition failed to indicate expressly whether it was being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded Judge Hilario Laqui as respondent. There is no question that the present recourse is under Rule 45. This conclusion finds support in the very title of the Petition, which is Petition for Review on Certiorari. While Judge Laqui should not have been impleaded as a respondent, substantial justice requires that such lapse by itself should not warrant the dismissal of the present Petition. In this light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case. Main Issue: Nature of the Subject Machinery Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property. Serious policy considerations, they argue, militate against a contrary characterization. Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Section 3 thereof reads: SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody. On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows: ART. 415. The following are immovable property: (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the industry. In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code. Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. Hence, in Tumalad v. Vicencio, the Court upheld the intention of the parties to treat a house as a personal property because it had been made the subject of a chattel mortgage. The Court ruled: x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills also held that the machinery used in a factory and essential to the industry, as in the present case, was a proper subject of a writ of replevin because it was treated as personal property in a contract. Pertinent portions of the Courts ruling are reproduced hereunder: x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage. In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows: 12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building thereon, or attached in any manner to what is permanent. Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure. It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned. Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal. In any event, there is no showing that any specific third party would be adversely affected. Validity of the Lease Agreement In their Memorandum, petitioners contend that the Agreement is a loan and not a lease. Submitting documents supposedly showing that they own the subject machines, petitioners also argue in their Petition that the Agreement suffers from intrinsic ambiguity which places in serious doubt the intention of the parties and the validity of the lease agreement itself. In their Reply to respondents Comment, they further allege that the Agreement is invalid. These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of these questions, therefore, is effectively a resolution of the merits of the case. Hence, they should be threshed out in the trial, not in the proceedings involving the issuance of the Writ of Seizure. Indeed, in La Tondea Distillers v. CA, the Court explained that the policy under Rule 60 was that questions involving title to the subject property questions which petitioners are now raising -- should be determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was either to post a counter-bond or

to question the sufficiency of the plaintiffs bond. They were not allowed, however, to invoke the title to the subject property. The Court ruled: In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon therefor, as in proceedings on preliminary attachment or injunction, and thereby put at issue the matter of the title or right of possession over the specific chattel being replevied, the policy apparently being that said matter should be ventilated and determined only at the trial on the merits. Besides, these questions require a determination of facts and a presentation of evidence, both of which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in this Court under Rule 45. Reliance on the Lease Agreement It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. Accordingly, it must be presumed valid and binding as the law between the parties. Makati Leasing and Finance Corporation is also instructive on this point. In that case, the Deed of Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed because respondent had allegedly been required to sign a printed form of chattel mortgage which was in a blank form at the time of signing. The Court rejected the argument and relied on the Deed, ruling as follows: x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x Alleged Injustice Committed on the Part of Petitioners Petitioners contend that if the Court allows these machineries to be seized, then its workers would be out of work and thrown into the streets. They also allege that the seizure would nullify all efforts to rehabilitate the corporation. Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come true, should not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states: SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicants bond, or of the surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so object, he may, at any time before the delivery of the property to the applicant, require the return thereof, by filing with the court where the action is pending a bond executed to the applicant, in double the value of the property as stated in the applicants affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the payment of such sum to him as may be recovered against the adverse party, and by serving a copy bond on the applicant. WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioners. 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. 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; 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. 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. G.R. No. L-55729 March 28, 1983, ANTONIO PUNSALAN, JR., petitioner, vs. REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A. ORTIZ, respondents. The sole issue presented by petitioner for resolution is whether or not respondent Court erred in denying the Motion to Set Case for Pre-trial with respect to respondent Remedios Vda. de Lacsamana as the case had been dismissed on the ground of improper venue upon motion of co-respondent Philippine National Bank (PNB). It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of 340 square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the amount of P10,000.00, but for failure to pay said amount, the property was foreclosed on December 16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings. However, the bank secured title thereto only on December 14, 1977. In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and with the alleged acquiescence of respondent PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor, petitioner constructed a warehouse on said property. Petitioner declared said warehouse for tax purposes for which he was issued Tax Declaration No. 5619. Petitioner then leased the warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975.

On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent Lacsamana over the property. This contract was amended on July 31, 1978, particularly to include in the sale, the building and improvement thereon. By virtue of said instruments, respondent - Lacsamana secured title over the property in her name (TCT No. 173744) as well as separate tax declarations for the land and building. 1 On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages" against herein respondents PNB and Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI, Quezon City, essentially impugning the validity of the sale of the building as embodied in the Amended Deed of Sale. In this connection, petitioner alleged: 22. That defendant, Philippine National Bank, through its Branch Manager ... by virtue of the request of defendant ... executed a document dated July 31, 1978, entitled Amendment to Deed of Absolute Sale ... wherein said defendant bank as Vendor sold to defendant Lacsamana the building owned by the plaintiff under Tax Declaration No. 5619, notwithstanding the fact that said building is not owned by the bank either by virtue of the public auction sale conducted by the Sheriff and sold to the Philippine National Bank or by virtue of the Deed of Sale executed by the bank itself in its favor on September 21, 1977 ...; 23. That said defendant bank fraudulently mentioned ... that the sale in its favor should likewise have included the building, notwithstanding no legal basis for the same and despite full knowledge that the Certificate of Sale executed by the sheriff in its favor ... only limited the sale to the land, hence, by selling the building which never became the property of defendant, they have violated the principle against 'pactum commisorium'. Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana be declared null and void and that damages in the total sum of P230,000.00, more or less, be awarded to him. In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense of lack of cause of action in that she was a purchaser for value and invoked the principle in Civil Law that the "accessory follows the principal". On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid considering that the building was real property under article 415 (1) of the New Civil Code and therefore section 2(a) of Rule 4 should apply. Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale with damages is in the nature of a personal action, which seeks to recover not the title nor possession of the property but to compel payment of damages, which is not an action affecting title to real property. On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows: Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated March 13, 1980, considered against the plaintiff's opposition thereto dated April 1, 1980, including the reply therewith of said defendant, this Court resolves to DISMISS the plaintiff's complaint for improper venue considering that the plaintiff's complaint which seeks for the declaration as null and void, the amendment to Deed of Absolute Sale executed by the defendant Philippine National Bank in favor of the defendant Remedios T. Vda. de Lacsamana, on July 31, 1978, involves a warehouse allegedly owned and constructed by the plaintiff on the land of the defendant Philippine National Bank situated in the Municipality of Bamban, Province of Tarlac, which warehouse is an immovable property pursuant to Article 415, No. 1 of the New Civil Code; and, as such the action of the plaintiff is a real action affecting title to real property which, under Section 2, Rule 4 of the New Rules of Court, must be tried in the province where the property or any part thereof lies. In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that the action to annul does not involve ownership or title to property but is limited to the validity of the deed of sale and emphasized that the case should proceed with or without respondent PNB as respondent Lacsamana had already filed her Answer to the Complaint and no issue on venue had been raised by the latter. On September 1, 1980,.respondent Court denied reconsideration for lack of merit. Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana was concerned, as the issues had already been joined with the filing

of respondent Lacsamana's Answer. In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial as the case was already dismissed in the previous Orders of April 25, 1980 and September 1, 1980. Hence, this Petition for Certiorari, to which we gave due course. We affirm respondent Court's Order denying the setting for pre-trial. The warehouse claimed to be owned by petitioner is an immovable or real property as provided in article 415(l) of the Civil Code. Buildings are always immovable under the Code. A building treated separately from the land on which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as immovable property. While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action. Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Section 2, Rule 4), which was timely raised (Section 1, Rule 16). Petitioner's other contention that the case should proceed in so far as respondent Lacsamana is concerned as she had already filed an Answer, which did not allege improper venue and, therefore, issues had already been joined, is likewise untenable. Respondent PNB is an indispensable party as the validity of the Amended Contract of Sale between the former and respondent Lacsamana is in issue. It would, indeed, be futile to proceed with the case against respondent Lacsamana alone. WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitioner Antonio Punsalan, Jr. in the proper forum. Costs against petitioner. 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. 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 mandamusto 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. G.R. No. L-11658, February 15, 1918, LEUNG YEE, plaintiff-appellant, vs. FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.

The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the defendant machinery company, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated in the same registry on December 29, 1913. A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered. This deed makes no reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects which might be found to exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is to say, the month of December, 1913, and it has continued in possession ever since. At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compaia Agricola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land registry of the Province of Cavite. At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale. This action was instituted by the plaintiff to recover possession of the building from the machinery company. The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the ground that the company had its title to the building registered prior to the date of registry of the plaintiff's certificate. Article 1473 of the Civil Code is as follows: If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken possession thereof in good faith, if it should be personal property. Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry. Should there be no entry; the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The registry her referred to is of course the registry of real property, and it must be apparent that the annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which the rice-cleaning machinery was installed by the "Compaia Agricola Filipina" was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned. We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by the trial judge. We are of opinion, however, that the judgment must be sustained on the ground that the agreed statement of facts in the court below discloses that neither the purchase of the building by the plaintiff nor his inscription of the sheriff's

certificate of sale in his favor was made in good faith, and that the machinery company must be held to be the owner of the property under the third paragraph of the above cited article of the code, it appearing that the company first took possession of the property; and further, that the building and the land were sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff. It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property on the registry, it must be presumed that good faith is not an essential requisite of registration in order that it may have the effect contemplated in this article. We cannot agree with this contention. It could not have been the intention of the legislator to base the preferential right secured under this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes the inscription. Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of the 13th of May, 1908, that: This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in accordance with the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.) Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of the La Revista de los Tribunales, 13th edition.) The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale and inscribed his title in the land registry, was duly notified that the machinery company had bought the building from plaintiff's judgment debtor; that it had gone into possession long prior to the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had already been sold to the machinery company by the judgment debtor, the plaintiff cannot be said to have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's certificate of title must be held to have been tainted with the same defect. Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff was not made in good faith, we should not be understood as questioning, in any way, the good faith and genuineness of the plaintiff's claim against the "Compaia Agricola Filipina." The truth is that both the plaintiff and the defendant company appear to have had just and righteous claims against their common debtor. No criticism can properly be made of the exercise of the utmost diligence by the plaintiff in asserting and exercising his right to recover the amount of his claim from the estate of the common debtor. We are strongly inclined to believe that in procuring the levy of execution upon the factory building and in buying it at the sheriff's sale, he considered that he was doing no more than he had a right to do under all the circumstances, and it is highly possible and even probable that he thought at that time that he would be able to maintain his position in a contest with the machinery company. There was no collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have hoped, and doubtless he did hope, that the title of the machinery company would not stand the test of an action in a court of law; and if later developments had confirmed his unfounded hopes, no one could question the legality of the propriety of the course he adopted. But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a purchaser in good faith.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with that measure of precaution which may reasonably be acquired of a prudent man in a like situation. Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.) We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in the court below should be affirmed with costs of this instance against the appellant. So ordered.