G.R. No.

L-12691 February 27, 1959

SIMEON T. DAGDAG, plaintiff-appellee,
vs.
VIENTE NE!OM"ENO, ET AL., defendants-appellants.
Jesus Paredes for appellee.
Mariano Sta. Romana for appellants.
#ENG$ON, J.%
Forwarded by the Court of Appeals, this lawsuit coming from Nueva Ecija, concern a small
parcel of land. ubmitted for decision below upon a stipulation of facts, it raises legal
!uestions only.
A portion of "ot No. #$%&, Cabanatuan Cadaster 'admittedly alienable or disposable public
land way bac( in )*)&+ is covered by ales ,atent No. -.) issued to /argarita 0uanson, and
also by lease No. 1* e2ecuted by the 3ureau of "ands in favor of Andres de 4era. 5he
overlapping was recently discovered, and their successors in interest now litigate for
possession and6or ownership.
5he ales ,atent was inscribed in the office of the 7egister of 8eeds on 0uly )), )*-$, and
9riginal Certificate of 5itle No. &% was accordingly issued in the same of /argarita 0uanson,
who later sold the land of 7emegio 0uanson 3autista ')*-%+, who in turn sold it to 3alarian
:ncorporated ')*-*+. :n /ay )*.;, imeon 5. 8agdag bought it from 3alarin, :nc. After every
sale, the corresponding 5ransfer Certificate of 5itle was given out.
9n the other hand, the lease to 8e 4era signed in 0une )*)& covered adjoining land of a
bigger area. :t was transferred by him to 7egino Nepomuceno. 9riginally for a -.-years period
e2piring on 0une #;, )*1), it was e2tended for another li(e period in )*1*. 8agdag<s title, and
those of his predecessors contained no annotation of such lease, of which neither he nor they
any (nowledge.
After purchasing the land, imeon 5. 8agdag had it relocated and the portion in !uestion
turned out to be in possession of the heirs of 7egino Nepomuceno, appellants herein allegedly
by virtue of the lease. 5he latter refused to surrender it, even in the face of 8agdag<s patent and
title, and despite the 8irector of "ands< administrative determination in February )*.#,
practically holding that their contract of lease did not, could not and should not e2tend to the
area granted to 8agdag<s predecessors.
=ence, this judicial proceeding instituted by 8agdag in the Nueva Ecija court of first instance,
wherein he was declared to be the owner of the whole "ot #$%& and entitled to the products
thereof. 5he =onorable 0ose N. "eutrio, 0udge, e2plained that >the sales patent issued in the
name of /argarita 0uanson having been registered with the office of the 7egister of 8eeds,
and title having been issued by the 7egister of 8eeds in the name of /argarita 0uanson, "ot
#$%& was thereafter brought under the operation of the "and 7egistration Act. 5he title issued
in the name of /argarita 0uanson, 9riginal Certificate of 5itle No. &% was free from all liens
and incumbrances. 5his land was transferred successively, until it was ac!uired by the plaintiff
herein, and the certificate of title was issued in his name free from any lien or encumbrances,
and free from the claim of 7egino Nepomuceno as losses. 5he plaintiffs herein cannot,
therefore, be bound by the fact that "ot #$%& is within the lease of Andres de 4era which had
been transferred to 7egino Nepomuceno, the father and predecessor of the defendants herein.
5he said lease not having been annotated on the certificate of title, and it not having been
neither proved or alleged that the plaintiff had purchased the land (nowing that "ot #$%& is a
portion of the land leased to Andres de 4era which had been ac!uired by the defendant<s
predecessors-in-interest, it cannot prejudice the plaintiff who is presumed to be an innocent
purchaser for value. 5he fact that the lease in favor of Andres de 4era had been registered,
cannot bind and prejudice the plaintiff for "ot #$%& being a registered land, he need not go
farther than the title.>
5he above observations deserve our approval. 5hey conform with our decisions on
indefeasibility of public land patents when registered in the corresponding 7egister of 8eeds
9ffice.
)
?e regard these to be veritable 5orrens 5itle subject to no encumbrances e2cept those
stated therein, plus those specified by the status 'lease is not one of them+.
:n addition to the above reason given by his =onor, it should be remembered that when the
lease was renewed in 1949, the portion in !uestion was no longer public land subject to the
disposition of the 8irector of "ands because it had already been granted to /argarita 0uanson
and had become private property@ therefore, it could not have been included in the renewal of
such lease of public land.
8efendant<s position may be summed up, in their own words, as followsA
?hen the contract of lease of the predecessor of the defendants was duly issued and
registered in the office of the register of deeds of Nueva Ecija, and when the patent
for the certificate of sale in favor of the predecessor of the plaintiff was issued and
registered in the said register of deeds of Nueva Ecija, both documents have the
force and effect of registered properties under the land 7egistration Act as provided
for in . . . 'section )-- of the "and 7egistration "aw+. . . .
As the titles of the parties have come under the operation of the "and 7egistration
Act, and in case of overlapping titles, the older title should prevail. 5he title of the
defendants was issued and registered on 0une )1, )*)&. 5he title of the plaintiff was
registered on August ., )*-$. 5he title of the defendants should, therefore prevail,
and they should have been declared the owners of the land in !uestion. 'pp. %-*
Appellants 3rief+ BEmphasis 9ursC.
5he flaw in their argument lies in the assumption that their lease contract constituted a >title>,
or deed or conveyance within the meaning of section )--, which for convenience is !uoted
belowA
?henever public lands in the ,hilippine :slands belonging to the Dovernment of the
Enited tates or the Dovernment of the ,hilippine :slands are alienated, granted, or
conveyed to persons or to public or private corporations, the same shall be brought
forthwith under the operation of this Act and shall become registered lands. :t shall
be the duty of the officials issuing the instrument of alienation, grant, or conveyance
in behalf of the Dovernment to cause such instrument, before its delivery to the
grantee, to be filed with the register of deeds for the province where the land lies and
to be there registered li(e other deeds and conveyance, whereupon a certificate shall
be entered as in other cases of registered land, and an owner<s duplicate issue to the
grantee. 5he deed, grant, or instrument of conveyance from the Dovernment to the
grantee shall not ta(e effect as a conveyance or bind the land, . . . After due
registration and issue of the certificate and owner<s duplicate such shall be registered
land for all purposes under this Act.
Epon carefully reading the above, we thin( it clear that the documents mentioned, wherein
lands are >alienated, granted, or conveyed>, are documents transferring ownership not
documents of lease, transferring mere possession. 9bserve especially that the statue directs the
issuance to the grantee of >an owner<s duplicate certificate>. Appellants may not, therefore,
assert a title just as good-so they claim-as appellee<s and older besides. o, the 5orrens 5itle of
appellee must prevail.
0udgment affirmed, with costs against appellants.
G.R. No. 1&&25' (u)y 9, 2''2
FRANISO I. *AVE$, petitioner,
vs.
!"#LI ESTATES A"T*ORIT+ a,- AMARI OASTAL #A+ DEVELO!MENT
OR!ORATION, respondents.
AR!IO, J.:
5his is an original ,etition for /andamus with prayer for a writ of preliminary injunction and
a temporary restraining order. 5he petition see(s to compel the ,ublic Estates Authority
'>,EA> for brevity+ to disclose all facts on ,EA<s then on-going renegotiations with Amari
Coastal 3ay and 8evelopment Corporation '>A/A7:> for brevity+ to reclaim portions of
/anila 3ay. 5he petition further see(s to enjoin ,EA from signing a new agreement with
A/A7: involving such reclamation.
T.e Fa/01
9n November -;, )*$#, the government, through the Commissioner of ,ublic =ighways,
signed a contract with the Construction and 8evelopment Corporation of the ,hilippines
'>C8C,> for brevity+ to reclaim certain foreshore and offshore areas of /anila 3ay. 5he
contract also included the construction of ,hases : and :: of the /anila-Cavite Coastal 7oad.
C8C, obligated itself to carry out all the wor(s in consideration of fifty percent of the total
reclaimed land.
9n February 1, )*$$, then ,resident Ferdinand E. /arcos issued ,residential 8ecree No. );%1
creating ,EA. ,8 No. );%1 tas(ed ,EA >to reclaim land, including foreshore and submerged
areas,> and >to develop, improve, ac!uire, 2 2 2 lease and sell any and all (inds of lands.>
)
9n
the same date, then ,resident /arcos issued ,residential 8ecree No. );%. transferring to ,EA
the >lands reclaimed in the foreshore and offshore of the /anila 3ay>
-
under the /anila-
Cavite Coastal 7oad and 7eclamation ,roject '/CC77,+.
9n 8ecember -*, )*%), then ,resident /arcos issued a memorandum directing ,EA to amend
its contract with C8C,, so that >BACll future wor(s in /CC77, 2 2 2 shall be funded and
owned by ,EA.> Accordingly, ,EA and C8C, e2ecuted a /emorandum of Agreement dated
8ecember -*, )*%), which statedA
>'i+ C8C, shall underta(e all reclamation, construction, and such other wor(s in the
/CC77, as may be agreed upon by the parties, to be paid according to progress of
wor(s on a unit price6lump sum basis for items of wor( to be agreed upon, subject to
price escalation, retention and other terms and conditions provided for in
,residential 8ecree No. ).*1. All the financing re!uired for such wor(s shall be
provided by ,EA.
2 2 2
'iii+ 2 2 2 C8C, shall give up all its development rights and hereby agrees to cede
and transfer in favor of ,EA, all of the rights, title, interest and participation of
C8C, in and to all the areas of land reclaimed by C8C, in the /CC77, as of
8ecember #;, )*%) which have not yet been sold, transferred or otherwise disposed
of by C8C, as of said date, which areas consist of appro2imately Ninety-Nine
5housand Four =undred eventy 5hree '**,1$#+ s!uare meters in the Financial
Center Area covered by land pledge No. . and appro2imately 5hree /illion 5hree
=undred Eighty 5wo 5housand Eight =undred Eighty Eight '#,#%-,%%%+ s!uare
meters of reclaimed areas at varying elevations above /ean "ow ?ater "evel
located outside the Financial Center Area and the First Neighborhood Enit.>
#
9n 0anuary )*, )*%%, then ,resident CoraFon C. A!uino issued pecial ,atent No. #.)$,
granting and transferring to ,EA >the parcels of land so reclaimed under the /anila-Cavite
Coastal 7oad and 7eclamation ,roject '/CC77,+ containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four '),*).,%*1+ s!uare meters.> ubse!uently,
on April *, )*%%, the 7egister of 8eeds of the /unicipality of ,araGa!ue issued 5ransfer
Certificates of 5itle Nos. $#;*, $#)), and $#)-, in the name of ,EA, covering the three
reclaimed islands (nown as the >Freedom :slands> located at the southern portion of the
/anila-Cavite Coastal 7oad, ,araGa!ue City. 5he Freedom :slands have a total land area of
9ne /illion Five =undred eventy Eight 5housand Four =undred and Forty 9ne '),.$%,11)+
s!uare meters or ).$.%1) hectares.
9n April -., )**., ,EA entered into a 0oint 4enture Agreement '>04A> for brevity+ with
A/A7:, a private corporation, to develop the Freedom :slands. 5he 04A also re!uired the
reclamation of an additional -.; hectares of submerged areas surrounding these islands to
complete the configuration in the /aster 8evelopment ,lan of the outhern 7eclamation
,roject-/CC77,. ,EA and A/A7: entered into the 04A through negotiation without public
bidding.
1
9n April -%, )**., the 3oard of 8irectors of ,EA, in its 7esolution No. )-1.,
confirmed the 04A.
.
9n 0une %, )**., then ,resident Fidel 4. 7amos, through then E2ecutive
ecretary 7uben 5orres, approved the 04A.
&
9n November -*, )**&, then enate ,resident Ernesto /aceda delivered a privilege speech in
the enate and denounced the 04A as the >grandmother of all scams.> As a result, the enate
Committee on Dovernment Corporations and ,ublic Enterprises, and the Committee on
Accountability of ,ublic 9fficers and :nvestigations, conducted a joint investigation. 5he
enate Committees reported the results of their investigation in enate Committee 7eport No.
.&; dated eptember )&, )**$.
$
Among the conclusions of their report areA ')+ the reclaimed
lands ,EA see(s to transfer to A/A7: under the 04A are lands of the public domain which
the government has not classified as alienable lands and therefore ,EA cannot alienate these
lands@ '-+ the certificates of title covering the Freedom :slands are thus void, and '#+ the 04A
itself is illegal.
9n 8ecember ., )**$, then ,resident Fidel 4. 7amos issued ,residential Administrative
9rder No. #&. creating a "egal 5as( Force to conduct a study on the legality of the 04A in
view of enate Committee 7eport No. .&;. 5he members of the "egal 5as( Force were the
ecretary of 0ustice,
%
the Chief ,residential "egal Counsel,
*
and the Dovernment Corporate
Counsel.
);
5he "egal 5as( Force upheld the legality of the 04A, contrary to the conclusions
reached by the enate Committees.
))
9n April 1 and ., )**%, the Philippine ail! "n#uirer and $oda! published reports that there
were on-going renegotiations between ,EA and A/A7: under an order issued by then
,resident Fidel 4. 7amos. According to these reports, ,EA 8irector Nestor Halaw, ,EA
Chairman Arsenio Iulo and retired Navy 9fficer ergio CruF composed the negotiating panel
of ,EA.
9n April )#, )**%, Antonio /. Julueta filed before the Court a Petition for Prohibition with
%pplication for the "ssuance of a $emporar! Restraining &rder and Preliminar!
"n'unction doc(eted as D.7. No. )#-**1 see(ing to nullify the 04A. 5he Court dismissed the
petition >for unwarranted disregard of judicial hierarchy, without prejudice to the refiling of
the case before the proper court.>
)-
9n April -$, )**%, petitioner Fran( :. ChaveF '>,etitioner> for brevity+ as a ta2payer, filed the
instant Petition for Mandamus with Pra!er for the "ssuance of a (rit of Preliminar!
"n'unction and $emporar! Restraining &rder. ,etitioner contends the government stands to
lose billions of pesos in the sale by ,EA of the reclaimed lands to A/A7:. ,etitioner prays
that ,EA publicly disclose the terms of any renegotiation of the 04A, invo(ing ection -%,
Article ::, and ection $, Article :::, of the )*%$ Constitution on the right of the people to
information on matters of public concern. ,etitioner assails the sale to A/A7: of lands of the
public domain as a blatant violation of ection #, Article K:: of the )*%$ Constitution
prohibiting the sale of alienable lands of the public domain to private corporations. Finally,
petitioner asserts that he see(s to enjoin the loss of billions of pesos in properties of the tate
that are of public dominion.
After several motions for e2tension of time,
)#
,EA and A/A7: filed their Comments on
9ctober )*, )**% and 0une -., )**%, respectively. /eanwhile, on 8ecember -%, )**%,
petitioner filed an 9mnibus /otionA 'a+ to re!uire ,EA to submit the terms of the renegotiated
,EA-A/A7: contract@ 'b+ for issuance of a temporary restraining order@ and 'c+ to set the case
for hearing on oral argument. ,etitioner filed a 7eiterative /otion for :ssuance of a 579
dated /ay -&, )***, which the Court denied in a 7esolution dated 0une --, )***.
:n a 7esolution dated /arch -#, )***, the Court gave due course to the petition and re!uired
the parties to file their respective memoranda.
9n /arch #;, )***, ,EA and A/A7: signed the Amended 0oint 4enture Agreement
'>Amended 04A,> for brevity+. 9n /ay -%, )***, the 9ffice of the ,resident under the
administration of then ,resident 0oseph E. Estrada approved the Amended 04A.
8ue to the approval of the Amended 04A by the 9ffice of the ,resident, petitioner now prays
that on >constitutional and statutory grounds the renegotiated contract be declared null and
void.>
)1
T.e I11ue1
5he issues raised by petitioner, ,EA
).
and A/A7:
)&
are as followsA
:. ?=E5=E7 5=E ,7:NC:,A" 7E":EF ,7AIE8 F97 :N 5=E ,E5:5:9N
A7E /995 AN8 ACA8E/:C 3ECAEE 9F E3ELEEN5 E4EN5@
::. ?=E5=E7 5=E ,E5:5:9N /E7:5 8:/:A" F97 FA:":ND 59
93E74E 5=E ,7:NC:,"E D94E7N:ND 5=E =:E7A7C=I 9F C9E75@
:::. ?=E5=E7 5=E ,E5:5:9N /E7:5 8:/:A" F97 N9N-
EK=AE5:9N 9F A8/:N:57A5:4E 7E/E8:E@
:4. ?=E5=E7 ,E5:5:9NE7 =A )&*+S S$%," 59 37:ND 5=: E:5@
4. ?=E5=E7 5=E C9N5:5E5:9NA" 7:D=5 59 :NF97/A5:9N
:NC"E8E 9FF:C:A" :NF97/A5:9N 9N 9N-D9:ND NED95:A5:9N
3EF97E A F:NA" AD7EE/EN5@
4:. ?=E5=E7 5=E 5:,E"A5:9N :N 5=E A/EN8E8 09:N5 4EN5E7E
AD7EE/EN5 F97 5=E 57ANFE7 59 A/A7: 9F CE75A:N "AN8,
7EC"A:/E8 AN8 5:"" 59 3E 7EC"A:/E8, 4:9"A5E 5=E )*%$
C9N5:5E5:9N@ AN8
4::. ?=E5=E7 5=E C9E75 : 5=E ,79,E7 F97E/ F97 7A::ND 5=E
:EE 9F ?=E5=E7 5=E A/EN8E8 09:N5 4EN5E7E AD7EE/EN5 :
D79"I 8:A84AN5ADE9E 59 5=E D94E7N/EN5.
T.e our021 Ru)3,4
First issue: whether the principal reliefs prayed for in the petition are moot and academic
because of subsequent events.
5he petition prays that ,EA publicly disclose the >terms and conditions of the on-going
negotiations for a new agreement.> 5he petition also prays that the Court enjoin ,EA from
>privately entering into, perfecting and6or e2ecuting any new agreement with A/A7:.>
,EA and A/A7: claim the petition is now moot and academic because A/A7: furnished
petitioner on 0une -), )*** a copy of the signed Amended 04A containing the terms and
conditions agreed upon in the renegotiations. 5hus, ,EA has satisfied petitioner<s prayer for a
public disclosure of the renegotiations. "i(ewise, petitioner<s prayer to enjoin the signing of
the Amended 04A is now moot because ,EA and A/A7: have already signed the Amended
04A on /arch #;, )***. /oreover, the 9ffice of the ,resident has approved the Amended
04A on /ay -%, )***.
,etitioner counters that ,EA and A/A7: cannot avoid the constitutional issue by simply fast-
trac(ing the signing and approval of the Amended 04A before the Court could act on the
issue. ,residential approval does not resolve the constitutional issue or remove it from the
ambit of judicial review.
?e rule that the signing of the Amended 04A by ,EA and A/A7: and its approval by the
,resident cannot operate to moot the petition and divest the Court of its jurisdiction. ,EA and
A/A7: have still to implement the Amended 04A. 5he prayer to enjoin the signing of the
Amended 04A on constitutional grounds necessarily includes preventing its implementation if
in the meantime ,EA and A/A7: have signed one in violation of the Constitution.
,etitioner<s principal basis in assailing the renegotiation of the 04A is its violation of ection
#, Article K:: of the Constitution, which prohibits the government from alienating lands of the
public domain to private corporations. :f the Amended 04A indeed violates the Constitution, it
is the duty of the Court to enjoin its implementation, and if already implemented, to annul the
effects of such unconstitutional contract.
5he Amended 04A is not an ordinary commercial contract but one which see(s to transfer
title and ownership to 367.5 hectares of reclaimed lands and submerged areas of anila
!ay to a single private corporation. :t now becomes more compelling for the Court to resolve
the issue to insure the government itself does not violate a provision of the Constitution
intended to safeguard the national patrimony. upervening events, whether intended or
accidental, cannot prevent the Court from rendering a decision if there is a grave violation of
the Constitution. :n the instant case, if the Amended 04A runs counter to the Constitution, the
Court can still prevent the transfer of title and ownership of alienable lands of the public
domain in the name of A/A7:. Even in cases where supervening events had made the cases
moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate
controlling principles to guide the bench, bar, and the public.
)$
Also, the instant petition is a case of first impression. All previous decisions of the Court
involving ection #, Article K:: of the )*%$ Constitution, or its counterpart provision in the
)*$# Constitution,
)%
covered agricultural landssold to private corporations which ac!uired the
lands from private parties. 5he transferors of the private corporations claimed or could claim
the right to "udicial confirmation of their imperfect titles
)*
under #itle $$ of Commonwealth
Act. )1) '>CA No. )1)> for brevity+. :n the instant case, A/A7: see(s to ac!uire from ,EA, a
public corporation, reclaimed lands and submerged areas for non%agricultural purposes
by purchase under ,8 No. );%1 'charter of ,EA+ and #itle $$$ of CA No. )1). Certain
underta(ings by A/A7: under the Amended 04A constitute the consideration for the
purchase. Neither A/A7: nor ,EA can claim judicial confirmation of their titles because the
lands covered by the Amended 04A are newly reclaimed or still to be reclaimed. 0udicial
confirmation of imperfect title re!uires open, continuous, e2clusive and notorious occupation
of agricultural lands of the public domain for at least thirty years since 0une )-, )*1. or
earlier. 3esides, the deadline for filing applications for judicial confirmation of imperfect title
e2pired on 8ecember #), )*%$.
-;
"astly, there is a need to resolve immediately the constitutional issue raised in this petition
because of the possible transfer at any time by ,EA to A/A7: of title and ownership to
portions of the reclaimed lands. Ender the Amended 04A, ,EA is obligated to transfer to
A/A7: the latter<s seventy percent proportionate share in the reclaimed areas as the
reclamation progresses. 5he Amended 04A even allows A/A7: to mortgage at any time
the entirereclaimed area to raise financing for the reclamation project.
-)
&econd issue: whether the petition merits dismissal for failing to observe the principle
governing the hierarchy of courts.
,EA and A/A7: claim petitioner ignored the judicial hierarchy by see(ing relief directly
from the Court. 5he principle of hierarchy of courts applies generally to cases involving
factual !uestions. As it is not a trier of facts, the Court cannot entertain cases involving factual
issues. 5he instant case, however, raises constitutional issues of transcendental importance to
the public.
--
5he Court can resolve this case without determining any factual issue related to
the case. Also, the instant case is a petition for mandamus which falls under the original
jurisdiction of the Court under ection ., Article 4::: of the Constitution. ?e resolve to
e2ercise primary jurisdiction over the instant case.
#hird issue: whether the petition merits dismissal for non%e'haustion of administrative
remedies.
,EA faults petitioner for see(ing judicial intervention in compelling ,EA to disclose publicly
certain information without first as(ing ,EA the needed information. ,EA claims petitioner<s
direct resort to the Court violates the principle of e2haustion of administrative remedies. :t
also violates the rule that mandamus may issue only if there is no other plain, speedy and
ade!uate remedy in the ordinary course of law.
,EA distinguishes the instant case from 5aGada v. 5uvera
-#
where the Court granted the
petition for mandamus even if the petitioners there did not initially demand from the 9ffice of
the ,resident the publication of the presidential decrees. ,EA points out that in 5aGada, the
E2ecutive 8epartment had an affirmative statutory duty under Article - of the Civil
Code
-1
and ection ) of Commonwealth Act No. &#%
-.
to publish the presidential decrees.
5here was, therefore, no need for the petitioners in 5aGada to ma(e an initial demand from the
9ffice of the ,resident. :n the instant case, ,EA claims it has no affirmative statutory duty to
disclose publicly information about its renegotiation of the 04A. 5hus, ,EA asserts that the
Court must apply the principle of e2haustion of administrative remedies to the instant case in
view of the failure of petitioner here to demand initially from ,EA the needed information.
5he original 04A sought to dispose to A/A7: public lands held by ,EA, a government
corporation. Ender ection $* of the Dovernment Auditing Code,
-&
the disposition of
government lands to private parties re!uires public bidding. ()* was under a positive legal
duty to disclose to the public the terms and conditions for the sale of its lands. 5he law
obligated ,EA to ma(e this public disclosure even without demand from petitioner or from
anyone. ,EA failed to ma(e this public disclosure because the original 04A, li(e the Amended
04A, was the result of a negotiated contract, not of a public bidding. Considering that ,EA
had an affirmative statutory duty to ma(e the public disclosure, and was even in breach of this
legal duty, petitioner had the right to see( direct judicial intervention.
/oreover, and this alone is determinative of this issue, the principle of e2haustion of
administrative remedies does not apply when the issue involved is a purely legal or
constitutional !uestion.
-$
5he principal issue in the instant case is the capacity of A/A7: to
ac!uire lands held by ,EA in view of the constitutional ban prohibiting the alienation of lands
of the public domain to private corporations. ?e rule that the principle of e2haustion of
administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
,EA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that ,EA refused to perform an
affirmative duty imposed on ,EA by the Constitution. ,EA also claims that petitioner has not
shown that he will suffer any concrete injury because of the signing or implementation of the
Amended 04A. 5hus, there is no actual controversy re!uiring the e2ercise of the power of
judicial review.
5he petitioner has standing to bring this ta2payer<s suit because the petition see(s to compel
,EA to comply with its constitutional duties. 5here are two constitutional issues involved
here. First is the right of citiFens to information on matters of public concern. econd is the
application of a constitutional provision intended to insure the e!uitable distribution of
alienable lands of the public domain among Filipino citiFens. 5he thrust of the first issue is to
compel ,EA to disclose publicly information on the sale of government lands worth billions of
pesos, information which the Constitution and statutory law mandate ,EA to disclose. 5he
thrust of the second issue is to prevent ,EA from alienating hundreds of hectares of alienable
lands of the public domain in violation of the Constitution, compelling ,EA to comply with a
constitutional duty to the nation.
/oreover, the petition raises matters of transcendental importance to the public. :n +have, v.
(+--,
-%
the Court upheld the right of a citiFen to bring a ta2payer<s suit on matters of
transcendental importance to the public, thus -
>3esides, petitioner emphasiFes, the matter of recovering the ill-gotten wealth of the
/arcoses is an issue of <transcendental importance to the public.< =e asserts that
ordinary ta2payers have a right to initiate and prosecute actions !uestioning the
validity of acts or orders of government agencies or instrumentalities, if the issues
raised are of <paramount public interest,< and if they <immediately affect the social,
economic and moral well being of the people.<
/oreover, the mere fact that he is a citiFen satisfies the re!uirement of personal
interest, when the proceeding involves the assertion of a public right, such as in this
case. =e invo(es several decisions of this Court which have set aside the procedural
matter of locus standi, when the subject of the case involved public interest.
2 2 2
:n $a-ada v. $uvera, the Court asserted that when the issue concerns a public right
and the object of mandamus is to obtain the enforcement of a public duty, the people
are regarded as the real parties in interest@ and because it is sufficient that petitioner
is a citiFen and as such is interested in the e2ecution of the laws, he need not show
that he has any legal or special interest in the result of the action. :n the aforesaid
case, the petitioners sought to enforce their right to be informed on matters of public
concern, a right then recogniFed in ection &, Article :4 of the )*$# Constitution, in
connection with the rule that laws in order to be valid and enforceable must be
published in the 9fficial DaFette or otherwise effectively promulgated. :n ruling for
the petitioners< legal standing, the Court declared that the right they sought to be
enforced <is a public right recogniFed by no less than the fundamental law of the
land.<
)egaspi v. *ivil Service *ommission, while reiterating 5aGada, further declared that
<when a mandamus proceeding involves the assertion of a public right, the
re!uirement of personal interest is satisfied by the mere fact that petitioner is a
citiFen and, therefore, part of the general <public< which possesses the right.<
Further, in %lbano v. Re!es, we said that while e2penditure of public funds may not
have been involved under the !uestioned contract for the development, management
and operation of the /anila :nternational Container 5erminal, <public interest BwasC
definitely involved considering the important role Bof the subject contractC . . . in the
economic development of the country and the magnitude of the financial
consideration involved.< ?e concluded that, as a conse!uence, the disclosure
provision in the Constitution would constitute sufficient authority for upholding the
petitioner<s standing.
imilarly, the instant petition is anchored on the right of the people to information
and access to official records, documents and papers M a right guaranteed under
ection $, Article ::: of the )*%$ Constitution. ,etitioner, a former solicitor general,
is a Filipino citiFen. 3ecause of the satisfaction of the two basic re!uisites laid down
by decisional law to sustain petitioner<s legal standing, i.e. ')+ the enforcement of a
public right '-+ espoused by a Filipino citiFen, we rule that the petition at bar should
be allowed.>
?e rule that since the instant petition, brought by a citiFen, involves the enforcement of
constitutional rights - to information and to the e!uitable diffusion of natural resources -
matters of transcendental public importance, the petitioner has the re!uisite locus standi.
Fifth issue: whether the constitutional right to information includes official information on
on%going negotiations before a final agreement.
ection $, Article ::: of the Constitution e2plains the people<s right to information on matters
of public concern in this mannerA
>ec. $. 5he right of the people to information on matters of public concern shall be
recogniFed. *ccess to official records. and to documents. and papers pertaining to
official acts. transactions. or decisions, as well as to government research data used
as basis for policy development, shall be afforded the citiFen, subject to such
limitations as may be provided by law.> 'Emphasis supplied+
5he tate policy of full transparency in all transactions involving public interest reinforces the
people<s right to information on matters of public concern. 5his tate policy is e2pressed in
ection -%, Article :: of the Constitution, thusA
>ec. -%. ubject to reasonable conditions prescribed by law, the tate adopts and
implements a policy of full public disclosure of all its transactions involving public
interest.> 'Emphasis supplied+
5hese twin provisions of the Constitution see( to promote transparency in policy-ma(ing and
in the operations of the government, as well as provide the people sufficient information to
e2ercise effectively other constitutional rights. 5hese twin provisions are essential to the
e2ercise of freedom of e2pression. :f the government does not disclose its official acts,
transactions and decisions to citiFens, whatever citiFens say, even if e2pressed without any
restraint, will be speculative and amount to nothing. 5hese twin provisions are also essential to
hold public officials >at all times 2 2 2 accountable to the people,>
-*
for unless citiFens have
the proper information, they cannot hold public officials accountable for anything. Armed with
the right information, citiFens can participate in public discussions leading to the formulation
of government policies and their effective implementation. An informed citiFenry is essential
to the e2istence and proper functioning of any democracy. As e2plained by the Court
in/almonte v. !elmonte. Jr.
#;
N
>An essential element of these freedoms is to (eep open a continuing dialogue or
process of communication between the government and the people. :t is in the
interest of the tate that the channels for free political discussion be maintained to
the end that the government may perceive and be responsive to the people<s will.
Iet, this open dialogue can be effective only to the e2tent that the citiFenry is
informed and thus able to formulate its will intelligently. 9nly when the participants
in the discussion are aware of the issues and have access to information relating
thereto can such bear fruit.>
,EA asserts, citing +have, v. (+--,
#)
that in cases of on-going negotiations the right to
information is limited to >definite propositions of the government.> ,EA maintains the right
does not include access to >intra-agency or inter-agency recommendations or communications
during the stage when common assertions are still in the process of being formulated or are in
the <e2ploratory stage<.>
Also, A/A7: contends that petitioner cannot invo(e the right at the pre-decisional stage or
before the closing of the transaction. 5o support its contention, A/A7: cites the following
discussion in the )*%& Constitutional CommissionA
5Mr. Suare6. And when we say <transactions< which should be distinguished from
contracts, agreements, or treaties or whatever, does the Dentleman refer to the steps
leading to the consummation of the contract, or does he refer to the contract itselfO
Mr. O7)e% #he 0transactions0 used here. $ suppose is generic and therefore. it can
cover both steps leading to a contract and already a consummated contract. r.
(residing 1fficer.
r. &uare,: #his contemplates inclusion of negotiations leading to the
consummation of the transaction.
r. 1ple: 2es. sub"ect only to reasonable safeguards on the national interest.
r. &uare,: 5han( you.>
#-
'Emphasis supplied+
A/A7: argues there must first be a consummated contract before petitioner can invo(e the
right. 7e!uiring government officials to reveal their deliberations at the pre-decisional stage
will degrade the !uality of decision-ma(ing in government agencies. Dovernment officials
will hesitate to e2press their real sentiments during deliberations if there is immediate public
dissemination of their discussions, putting them under all (inds of pressure before they decide.
?e must first distinguish between information the law on public bidding re!uires ,EA to
disclose publicly, and information the constitutional right to information re!uires ,EA to
release to the public. 3efore the consummation of the contract, ,EA must, on its own and
without demand from anyone, disclose to the public matters relating to the disposition of its
property. 5hese include the siFe, location, technical description and nature of the property
being disposed of, the terms and conditions of the disposition, the parties !ualified to bid, the
minimum price and similar information. ,EA must prepare all these data and disclose them to
the public at the start of the disposition process, long before the consummation of the contract,
because the Dovernment Auditing Code re!uires public bidding. :f ,EA fails to ma(e this
disclosure, any citiFen can demand from ,EA this information at any time during the bidding
process.
:nformation, however, on on%going evaluation or review of bids or proposals being
underta(en by the bidding or review committee is not immediately accessible under the right
to information. ?hile the evaluation or review is still on-going, there are no >official acts,
transactions, or decisions> on the bids or proposals. =owever, once the committee ma(es
its official recommendation, there arises a 3definite proposition3 on the part of the
government. From this moment, the public<s right to information attaches, and any citiFen can
access all the non-proprietary information leading to such definite proposition. :n +have, v.
(+--,
##
the Court ruled as followsA
>Considering the intent of the framers of the Constitution, we believe that it is
incumbent upon the ,CDD and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed settlement
they have decided to ta(e up with the ostensible owners and holders of ill-gotten
wealth. uch information, though, must pertain to definite propositions of the
government, not necessarily to intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the process of
being formulated or are in the >e2ploratory> stage. 5here is need, of course, to
observe the same restrictions on disclosure of information in general, as discussed
earlier N such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information.> 'Emphasis supplied+
Contrary to A/A7:<s contention, the commissioners of the )*%& Constitutional Commission
understood that the right to information 3contemplates inclusion of negotiations leading to
the consummation of the transaction.3 Certainly, a consummated contract is not a
re!uirement for the e2ercise of the right to information. 9therwise, the people can never
e2ercise the right if no contract is consummated, and if one is consummated, it may be too late
for the public to e2pose its defects.1.wphi1.n/t
7e!uiring a consummated contract will (eep the public in the dar( until the contract, which
may be grossly disadvantageous to the government or even illegal, becomes a fait accompli.
5his negates the tate policy of full transparency on matters of public concern, a situation
which the framers of the Constitution could not have intended. uch a re!uirement will
prevent the citiFenry from participating in the public discussion of any proposedcontract,
effectively truncating a basic right enshrined in the 3ill of 7ights. ?e can allow neither an
emasculation of a constitutional right, nor a retreat by the tate of its avowed >policy of full
disclosure of all its transactions involving public interest.>
5he right covers three categories of information which are >matters of public concern,>
namelyA ')+ official records@ '-+ documents and papers pertaining to official acts, transactions
and decisions@ and '#+ government research data used in formulating policies. 5he first
category refers to any document that is part of the public records in the custody of government
agencies or officials. 5he second category refers to documents and papers recording,
evidencing, establishing, confirming, supporting, justifying or e2plaining official acts,
transactions or decisions of government agencies or officials. 5he third category refers to
research data, whether raw, collated or processed, owned by the government and used in
formulating government policies.
5he information that petitioner may access on the renegotiation of the 04A includes
evaluation reports, recommendations, legal and e2pert opinions, minutes of meetings, terms of
reference and other documents attached to such reports or minutes, all relating to the 04A.
=owever, the right to information does not compel ,EA to prepare lists, abstracts, summaries
and the li(e relating to the renegotiation of the 04A.
#1
5he right only affords access to records,
documents and papers, which means the opportunity to inspect and copy them. 9ne who
e2ercises the right must copy the records, documents and papers at his e2pense. 5he e2ercise
of the right is also subject to reasonable regulations to protect the integrity of the public
records and to minimiFe disruption to government operations, li(e rules specifying when and
how to conduct the inspection and copying.
#.
5he right to information, however, does not e2tend to matters recogniFed as privileged
information under the separation of powers.
#&
5he right does not also apply to information on
military and diplomatic secrets, information affecting national security, and information on
investigations of crimes by law enforcement agencies before the prosecution of the accused,
which courts have long recogniFed as confidential.
#$
5he right may also be subject to other
limitations that Congress may impose by law.
5here is no claim by ,EA that the information demanded by petitioner is privileged
information rooted in the separation of powers. 5he information does not cover ,residential
conversations, correspondences, or discussions during closed-door Cabinet meetings which,
li(e internal deliberations of the upreme Court and other collegiate courts, or e2ecutive
sessions of either house of Congress,
#%
are recogniFed as confidential. 5his (ind of information
cannot be pried open by a co-e!ual branch of government. A fran( e2change of e2ploratory
ideas and assessments, free from the glare of publicity and pressure by interested parties, is
essential to protect the independence of decision-ma(ing of those tas(ed to e2ercise
,residential, "egislative and 0udicial power.
#*
5his is not the situation in the instant case.
?e rule, therefore, that the constitutional right to information includes official information
on on%going negotiations before a final contract. 5he information, however, must constitute
definite propositions by the government and should not cover recogniFed e2ceptions li(e
privileged information, military and diplomatic secrets and similar matters affecting national
security and public order.
1;
Congress has also prescribed other limitations on the right to
information in several legislations.
1)
&i'th issue: whether stipulations in the *mended J/* for the transfer to **4$ of lands.
reclaimed or to be reclaimed. violate the +onstitution.
#he 4egalian 5octrine
5he ownership of lands reclaimed from foreshore and submerged areas is rooted in the
7egalian doctrine which holds that the tate owns all lands and waters of the public domain.
Epon the panish con!uest of the ,hilippines, ownership of all >lands, territories and
possessions> in the ,hilippines passed to the panish Crown.
1-
5he Hing, as the sovereign
ruler and representative of the people, ac!uired and owned all lands and territories in the
,hilippines e2cept those he disposed of by grant or sale to private individuals.
5he )*#., )*$# and )*%$ Constitutions adopted the 7egalian doctrine substituting, however,
the tate, in lieu of the Hing, as the owner of all lands and waters of the public domain. 5he
7egalian doctrine is the foundation of the time-honored principle of land ownership that >all
lands that were not ac!uired from the Dovernment, either by purchase or by grant, belong to
the public domain.>
1#
Article ##* of the Civil Code of )%%*, which is now Article 1-; of the
Civil Code of )*.;, incorporated the 7egalian doctrine.
1wnership and 5isposition of 4eclaimed 6ands
5he panish "aw of ?aters of )%&& was the first statutory law governing the ownership and
disposition of reclaimed lands in the ,hilippines. 9n /ay )%, )*;$, the ,hilippine
Commission enacted Act No. )&.1 which provided for the lease. but not the sale. of
reclaimed lands of the government to corporations and individuals. "ater, on November -*,
)*)*, the ,hilippine "egislature approved Act No. -%$1, the ,ublic "and Act, which
authoriFed the lease. but not the sale. of reclaimed lands of the government to corporations
and individuals. 9n November $, )*#&, the National Assembly passed Commonwealth Act
No. )1), also (nown as the ,ublic "and Act, which authori,ed the lease. but not the sale. of
reclaimed lands of the government to corporations and individuals. CA No. )1) continues to
this day as the general law governing the classification and disposition of lands of the public
domain.
#he &panish 6aw of 7aters of 8966 and the +ivil +ode of 899:
Ender the panish "aw of ?aters of )%&&, the shores, bays, coves, inlets and all waters within
the maritime Fone of the panish territory belonged to the public domain for public use.
11
5he
panish "aw of ?aters of )%&& allowed the reclamation of the sea under Article ., which
provided as followsA
>Article .. "ands reclaimed from the sea in conse!uence of wor(s constructed by
the tate, or by the provinces, pueblos or private persons, with proper permission,
shall become the property of the party constructing such wor(s, unless otherwise
provided by the terms of the grant of authority.>
Ender the panish "aw of ?aters, land reclaimed from the sea belonged to the party
underta(ing the reclamation, provided the government issued the necessary permit and did not
reserve ownership of the reclaimed land to the tate.
Article ##* of the Civil Code of )%%* defined property of public dominion as followsA
>Art. ##*. ,roperty of public dominion is N
). 5hat devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the tate, riverban(s, shores, roadsteads, and that of a similar
character@
-. 5hat belonging e2clusively to the tate which, without being of general public
use, is employed in some public service, or in the development of the national
wealth, such as walls, fortresses, and other wor(s for the defense of the territory, and
mines, until granted to private individuals.>
,roperty devoted to public use referred to property open for use by the public. :n contrast,
property devoted to public service referred to property used for some specific public service
and open only to those authoriFed to use the property.
,roperty of public dominion referred not only to property devoted to public use, but also to
property not so used but employed to develop the national wealth. 5his class of property
constituted property of public dominion although employed for some economic or commercial
activity to increase the national wealth.
Article #1) of the Civil Code of )%%* governed the re-classification of property of public
dominion into private property, to witA
>Art. #1). ,roperty of public dominion, when no longer devoted to public use or to
the defense of the territory, shall become a part of the private property of the tate.>
5his provision, however, was not self-e2ecuting. 5he legislature, or the e2ecutive department
pursuant to law, must declare the property no longer needed for public use or territorial
defense before the government could lease or alienate the property to private parties.
1.
*ct ;o. 865< of the (hilippine +ommission
9n /ay %, )*;$, the ,hilippine Commission enacted Act No. )&.1 which regulated the lease
of reclaimed and foreshore lands. 5he salient provisions of this law were as followsA
>ection ). 5he control and disposition of the foreshore as defined in e2isting law,
and the title to all -overnment or public lands made or reclaimed by the
-overnment by dredging or filling or otherwise throughout the ,hilippine
:slands, shall be retained by the -overnment without prejudice to vested rights and
without prejudice to rights conceded to the City of /anila in the "uneta E2tension.
ection -. 'a+ 5he ecretary of the :nterior shall cause all Dovernment or public
lands made or reclaimed by the Dovernment by dredging or filling or otherwise to
be divided into lots or bloc(s, with the necessary streets and alleyways located
thereon, and shall cause plats and plans of such surveys to be prepared and filed with
the 3ureau of "ands.
'b+ Epon completion of such plats and plans the -overnor%-eneral shall give
notice to the public that such parts of the lands so made or reclaimed as are not
needed for public purposes will be leased for commercial and business purposes, 2
2 2.
2 2 2
'e+ #he leases above provided for shall be disposed of to the highest and best
bidder therefore, subject to such regulations and safeguards as the Dovernor-Deneral
may by e2ecutive order prescribe.> 'Emphasis supplied+
Act No. )&.1 mandated that the government should retain title to all lands reclaimed by the
government. 5he Act also vested in the government control and disposition of foreshore lands.
,rivate parties could lease lands reclaimed by the government only if these lands were no
longer needed for public purpose. Act No. )&.1 mandated public bidding in the lease of
government reclaimed lands. Act No. )&.1 made government reclaimed lands sui generis in
that unli(e other public lands which the government could sell to private parties, these
reclaimed lands were available only for lease to private parties.
Act No. )&.1, however, did not repeal ection . of the panish "aw of ?aters of )%&&. Act
No. )&.1 did not prohibit private parties from reclaiming parts of the sea under ection . of
the panish "aw of ?aters. "ands reclaimed from the sea by private parties with government
permission remained private lands.
*ct ;o. =97< of the (hilippine 6egislature
9n November -*, )*)*, the ,hilippine "egislature enacted Act No. -%$1, the ,ublic "and
Act.
1&
5he salient provisions of Act No. -%$1, on reclaimed lands, were as followsA
>ec. &. #he -overnor%-eneral. upon the recommendation of the &ecretary of
*griculture and ;atural 4esources. shall from time to time classify the lands of
the public domain into N
'a+ *lienable or disposable,
'b+ 5imber, and
'c+ /ineral lands, 2 2 2.
ec. $. For the purposes of the government and disposition of alienable or
disposable public lands, the -overnor%-eneral. upon recommendation by the
&ecretary of *griculture and ;atural 4esources. shall from time to time declare
what lands are open to disposition or concession under this *ct.>
ec. %. 1nly those lands shall be declared open to disposition or concession which
have been officially delimited or classified 2 2 2.
2 2 2
ec. ... Any tract of land of the public domain which, being neither timber nor
mineral land, shall be classified as suitable for residential purposes or for
commercial. industrial. or other productive purposes other than agricultural
purposes, and shall be open to disposition or concession, shall be disposed of under
the provisions of this chapter, and not otherwise.
ec. .&. #he lands disposable under this title shall be classified as followsA
>a? 6ands reclaimed by the -overnment by dredging. filling. or other
means@
>b? Foreshore@
>c? arshy lands or lands covered with water bordering upon the shores
or ban(s of navigable la(es or rivers@
'd+ "ands not included in any of the foregoing classes.
2 2 2.
ec. .%. #he lands comprised in classes >a?. >b?. and >c? of section fifty%si' shall be
disposed of to private parties by lease only and not otherwise, as soon as the
-overnor%-eneral. upon recommendation by the &ecretary of *griculture and
;atural 4esources. shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. #he lands included in class
>d? may be disposed of by sale or lease under the provisions of this *ct. > 'Emphasis
supplied+
ection & of Act No. -%$1 authoriFed the Dovernor-Deneral to >classify lands of the public
domain into 2 2 2 alienable or disposable>
1$
lands. ection $ of the Act empowered the
Dovernor-Deneral to >declare what lands are open to disposition or concession.> ection % of
the Act limited alienable or disposable lands only to those lands which have been >officially
delimited and classified.>
ection .& of Act No. -%$1 stated that lands >disposable under this title
1%
shall be classified>
as government reclaimed, foreshore and marshy lands, as well as other lands. All these lands,
however, must be suitable for residential, commercial, industrial or other productive non%
agricultural purposes. 5hese provisions vested upon the Dovernor-Deneral the power to
classify inalienable lands of the public domain into disposable lands of the public domain.
5hese provisions also empowered the Dovernor-Deneral to classify further such disposable
lands of the public domain into government reclaimed, foreshore or marshy lands of the public
domain, as well as other non-agricultural lands.
ection .% of Act No. -%$1 categorically mandated that disposable lands of the public domain
classified as government reclaimed, foreshore and marshy lands 3shall be disposed of to
private parties by lease only and not otherwise.3 5he Dovernor-Deneral, before allowing the
lease of these lands to private parties, must formally declare that the lands were >not necessary
for the public service.> Act No. -%$1 reiterated the tate policy to lease and not to sell
government reclaimed, foreshore and marshy lands of the public domain, a policy first
enunciated in )*;$ in Act No. )&.1. Dovernment reclaimed, foreshore and marshy lands
remained sui generis, as the only alienable or disposable lands of the public domain that the
government could not sell to private parties.
5he rationale behind this tate policy is obvious. Dovernment reclaimed, foreshore and
marshy public lands for non-agricultural purposes retain their inherent potential as areas for
public service. 5his is the reason the government prohibited the sale, and only allowed the
lease, of these lands to private parties. 5he tate always reserved these lands for some future
public service.
Act No. -%$1 did not authoriFe the reclassification of government reclaimed, foreshore and
marshy lands into other non-agricultural lands under ection .& 'd+. "ands falling under
ection .& 'd+ were the only lands for non-agricultural purposes the government could sell to
private parties. 5hus, under Act No. -%$1, the government could not sell government
reclaimed, foreshore and marshy lands to private parties. unless the legislature passed a law
allowing their sale.
1*
Act No. -%$1 did not prohibit private parties from reclaiming parts of the sea pursuant to
ection . of the panish "aw of ?aters of )%&&. "ands reclaimed from the sea by private
parties with government permission remained private lands.
5ispositions under the 8:35 +onstitution
9n /ay )1, )*#., the )*#. Constitution too( effect upon its ratification by the Filipino
people. 5he )*#. Constitution, in adopting the 7egalian doctrine, declared in ection ),
Article K:::, that N
>ection ). All agricultural, timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy and
other natural resources of the ,hilippines belong to the tate, and their disposition,
e2ploitation, development, or utiliFation shall be limited to citiFens of the
,hilippines or to corporations or associations at least si2ty per centum of the capital
of which is owned by such citiFens, subject to any e2isting right, grant, lease, or
concession at the time of the inauguration of the Dovernment established under this
Constitution. ;atural resources. with the e'ception of public agricultural land.
shall not be alienated, and no license, concession, or lease for the e2ploitation,
development, or utiliFation of any of the natural resources shall be granted for a
period e2ceeding twenty-five years, renewable for another twenty-five years, e2cept
as to water rights for irrigation, water supply, fisheries, or industrial uses other than
the development of water power, in which cases beneficial use may be the measure
and limit of the grant.> 'Emphasis supplied+
5he )*#. Constitution barred the alienation of all natural resources e2cept public agricultural
lands, which were the only natural resources the tate could alienate. 5hus, foreshore lands,
considered part of the tate<s natural resources, became inalienable by constitutional fiat,
available only for lease for -. years, renewable for another -. years. 5he government could
alienate foreshore lands only after these lands were reclaimed and classified as alienable
agricultural lands of the public domain. Dovernment reclaimed and marshy lands of the public
domain, being neither timber nor mineral lands, fell under the classification of public
agricultural lands.
.;
=owever, government reclaimed and marshy lands, although subject to
classification as disposable public agricultural lands, could only be leased and not sold to
private parties because of Act No. -%$1.
5he prohibition on private parties from ac!uiring ownership of government reclaimed and
marshy lands of the public domain was only a statutory prohibition and the legislature could
therefore remove such prohibition. 5he )*#. Constitution did not prohibit individuals and
corporations from ac!uiring government reclaimed and marshy lands of the public domain that
were classified as agricultural lands under e2isting public land laws. ection -, Article K::: of
the )*#. Constitution provided as followsA
>ection -. ;o private corporation or association may acquire. lease. or hold
public agricultural lands in e'cess of one thousand and twenty four hectares. nor
may any individual acquire such lands by purchase in e'cess of one hundred and
forty hectares. or by lease in e'cess of one thousand and twenty%four hectares, or
by homestead in e2cess of twenty-four hectares. "ands adapted to graFing, not
e2ceeding two thousand hectares, may be leased to an individual, private
corporation, or association.> 'Emphasis supplied+
till, after the effectivity of the )*#. Constitution, the legislature did not repeal ection .% of
Act No. -%$1 to open for sale to private parties government reclaimed and marshy lands of the
public domain. 9n the contrary, the legislature continued the long established tate policy of
retaining for the government title and ownership of government reclaimed and marshy lands
of the public domain.
+ommonwealth *ct ;o. 8<8 of the (hilippine ;ational *ssembly
9n November $, )*#&, the National Assembly approved Commonwealth Act No. )1), also
(nown as the ,ublic "and Act, which compiled the then e2isting laws on lands of the public
domain. CA No. )1), as amended, remains to this day the e'isting general law governing the
classification and disposition of lands of the public domain other than timber and mineral
lands.
.)
ection & of CA No. )1) empowers the ,resident to classify lands of the public domain into
>alienable or disposable>
.-
lands of the public domain, which prior to such classification are
inalienable and outside the commerce of man. ection $ of CA No. )1) authoriFes the
,resident to >declare what lands are open to disposition or concession.> ection % of CA No.
)1) states that the government can declare open for disposition or concession only lands that
are >officially delimited and classified.> ections &, $ and % of CA No. )1) read as followsA
>ec. &. #he (resident. upon the recommendation of the &ecretary of *griculture
and +ommerce. shall from time to time classify the lands of the public domain
into N
>a? *lienable or disposable,
'b+ 5imber, and
'c+ /ineral lands,
and may at any time and in li(e manner transfer such lands from one class to
another,
.#
for the purpose of their administration and disposition.
ec. $. For the purposes of the administration and disposition of alienable or
disposable public lands, the (resident. upon recommendation by the &ecretary of
*griculture and +ommerce. shall from time to time declare what lands are open
to disposition or concession under this Act.
ec. %. 1nly those lands shall be declared open to disposition or concession which
have been officially delimited and classified and, when practicable, surveyed, and
which have not been reserved for public or quasi%public uses, nor appropriated by
the Dovernment, nor in any manner become private property, nor those on which a
private right authoriFed and recogniFed by this Act or any other valid law may be
claimed, or which, having been reserved or appropriated, have ceased to be so. 2 2
2.>
5hus, before the government could alienate or dispose of lands of the public domain, the
,resident must first officially classify these lands as alienable or disposable, and then declare
them open to disposition or concession. 5here must be no law reserving these lands for public
or !uasi-public uses.
5he salient provisions of CA No. )1), on government reclaimed, foreshore and marshy lands
of the public domain, are as followsA
>ec. .%. *ny tract of land of the public domain which. being neither timber nor
mineral land. is intended to be used for residential purposes or for commercial.
industrial. or other productive purposes other than agricultural. and is open to
disposition or concession. shall be disposed of under the provisions of this chapter
and not otherwise.
ec. .*. #he lands disposable under this title shall be classified as followsA
>a? 6ands reclaimed by the -overnment by dredging. filling. or other
means@
>b? Foreshore@
>c? arshy lands or lands covered with water bordering upon the shores
or ban(s of navigable la(es or rivers@
'd+ "ands not included in any of the foregoing classes.
ec. &;. Any tract of land comprised under this title may be leased or sold, as the
case may be, to any person, corporation, or association authoriFed to purchase or
lease public lands for agricultural purposes. 2 2 2.
ec. &). #he lands comprised in classes >a?. >b?. and >c? of section fifty%nine shall
be disposed of to private parties by lease only and not otherwise, as soon as the
(resident, upon recommendation by the ecretary of Agriculture, shall declare that
the same are not necessary for the public service and are open to disposition under
this chapter. #he lands included in class >d? may be disposed of by sale or lease
under the provisions of this *ct.> 'Emphasis supplied+
ection &) of CA No. )1) readopted, after the effectivity of the )*#. Constitution, ection .%
of Act No. -%$1 prohibiting the sale of government reclaimed, foreshore and marshy
disposable lands of the public domain. All these lands are intended for residential,
commercial, industrial or other non-agricultural purposes. As before, ection &) allowed only
the lease of such lands to private parties. 5he government could sell to private parties only
lands falling under ection .* 'd+ of CA No. )1), or those lands for non-agricultural purposes
not classified as government reclaimed, foreshore and marshy disposable lands of the public
domain. Foreshore lands, however, became inalienable under the )*#. Constitution which
only allowed the lease of these lands to !ualified private parties.
ection .% of CA No. )1) e2pressly states that disposable lands of the public domain intended
for residential, commercial, industrial or other productive purposes other than agricultural
>shall be disposed of under the provisions of this chapter and not otherwise.> Ender ection
); of CA No. )1), the term >disposition> includes lease of the land. Any disposition of
government reclaimed, foreshore and marshy disposable lands for non-agricultural purposes
must comply with Chapter :K, 5itle ::: of CA No. )1),
.1
unless a subse!uent law amended or
repealed these provisions.
:n his concurring opinion in the landmar( case of 4epublic 4eal )state +orporation v. +ourt
of *ppeals,
..
0ustice 7eynato . ,uno summariFed succinctly the law on this matter, as
followsA
>Foreshore lands are lands of public dominion intended for public use. o too are
lands reclaimed by the government by dredging, filling, or other means. Act )&.1
mandated that the control and disposition of the foreshore and lands under water
remained in the national government. aid law allowed only the <leasing< of
reclaimed land. 5he ,ublic "and Acts of )*)* and )*#& also declared that the
foreshore and lands reclaimed by the government were to be >disposed of to private
parties by lease only and not otherwise.> 3efore leasing, however, the Dovernor-
Deneral, upon recommendation of the ecretary of Agriculture and Natural
7esources, had first to determine that the land reclaimed was not necessary for the
public service. 5his re!uisite must have been met before the land could be disposed
of. !ut even then. the foreshore and lands under water were not to be alienated
and sold to private parties. #he disposition of the reclaimed land was only by
lease. #he land remained property of the &tate.> 'Emphasis supplied+
As observed by 0ustice ,uno in his concurring opinion, >Commonwealth Act No. )1) has
remained in effect at present.>
5he tate policy prohibiting the sale to private parties of government reclaimed, foreshore and
marshy alienable lands of the public domain, first implemented in )*;$ was thus reaffirmed in
CA No. )1) after the )*#. Constitution too( effect. 5he prohibition on the sale of foreshore
lands, however, became a constitutional edict under the )*#. Constitution. Foreshore lands
became inalienable as natural resources of the tate, unless reclaimed by the government and
classified as agricultural lands of the public domain, in which case they would fall under the
classification of government reclaimed lands.
After the effectivity of the )*#. Constitution, government reclaimed and marshy disposable
lands of the public domain continued to be only leased and not sold to private parties.
.&
5hese
lands remained sui generis, as the only alienable or disposable lands of the public domain the
government could not sell to private parties.
ince then and until now, the only way the government can sell to private parties government
reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law
authoriFing such sale. CA No. )1) does not authoriFe the ,resident to reclassify government
reclaimed and marshy lands into other non-agricultural lands under ection .* 'd+. "ands
classified under ection .* 'd+ are the only alienable or disposable lands for non-agricultural
purposes that the government could sell to private parties.
/oreover, ection &; of CA No. )1) e'pressly re!uires congressional authority before lands
under ection .* that the government previously transferred to government units or entities
could be sold to private parties. ection &; of CA No. )1) declares that N
>ec. &;. 2 2 2 5he area so leased or sold shall be such as shall, in the judgment of
the ecretary of Agriculture and Natural 7esources, be reasonably necessary for the
purposes for which such sale or lease is re!uested, and shall not e2ceed one hundred
and forty-four hectaresA ,rovided, however, 5hat this limitation shall not apply to
grants, donations, or transfers made to a province, municipality or branch or
subdivision of the Dovernment for the purposes deemed by said entities conducive
to the public interest@but the land so granted. donated. or transferred to a province.
municipality or branch or subdivision of the -overnment shall not be alienated.
encumbered. or otherwise disposed of in a manner affecting its title. e'cept when
authori,ed by +ongressA 2 2 2.> 'Emphasis supplied+
5he congressional authority re!uired in ection &; of CA No. )1) mirrors the legislative
authority re!uired in ection .& of Act No. -%$1.
9ne reason for the congressional authority is that ection &; of CA No. )1) e2empted
government units and entities from the ma2imum area of public lands that could be ac!uired
from the tate. 5hese government units and entities should not just turn around and sell these
lands to private parties in violation of constitutional or statutory limitations. 9therwise, the
transfer of lands for non-agricultural purposes to government units and entities could be used
to circumvent constitutional limitations on ownership of alienable or disposable lands of the
public domain. :n the same manner, such transfers could also be used to evade the statutory
prohibition in CA No. )1) on the sale of government reclaimed and marshy lands of the public
domain to private parties. ection &; of CA No. )1) constitutes by operation of law a lien on
these lands.
.$
:n case of sale or lease of disposable lands of the public domain falling under ection .* of
CA No. )1), ections &# and &$ re!uire a public bidding. ections &# and &$ of CA No. )1)
provide as followsA
>ec. &#. ?henever it is decided that lands covered by this chapter are not needed
for public purposes, the 8irector of "ands shall as( the ecretary of Agriculture and
Commerce 'now the ecretary of Natural 7esources+ for authority to dispose of the
same. Epon receipt of such authority, the 8irector of "ands shall give notice by
public advertisement in the same manner as in the case of leases or sales of
agricultural public land, 2 2 2.
ec. &$. #he lease or sale shall be made by oral bidding@ and ad"udication shall be
made to the highest bidder. 2 2 2.> 'Emphasis supplied+
5hus, CA No. )1) mandates the Dovernment to put to public auction all leases or sales of
alienable or disposable lands of the public domain.
.%
"i(e Act No. )&.1 and Act No. -%$1 before it, CA No. )1) did not repeal ection . of the
panish "aw of ?aters of )%&&. ,rivate parties could still reclaim portions of the sea with
government permission. =owever, the reclaimed land could become private land only if
classified as alienable agricultural land of the public domain open to disposition under CA
No. )1). 5he )*#. Constitution prohibited the alienation of all natural resources e2cept public
agricultural lands.
#he +ivil +ode of 8:5A
5he Civil Code of )*.; readopted substantially the definition of property of public dominion
found in the Civil Code of )%%*. Articles 1-; and 1-- of the Civil Code of )*.; state that N
>Art. 1-;. 5he following things are property of public dominionA
')+ 5hose intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the tate, ban(s, shores, roadsteads, and others of similar
character@
'-+ 5hose which belong to the tate, without being for public use, and are intended
for some public service or for the development of the national wealth.
2 2 2.
Art. 1--. ,roperty of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the tate.>
Again, the government must formally declare that the property of public dominion is no longer
needed for public use or public service, before the same could be classified as patrimonial
property of the tate.
.*
:n the case of government reclaimed and marshy lands of the public
domain, the declaration of their being disposable, as well as the manner of their disposition, is
governed by the applicable provisions of CA No. )1).
"i(e the Civil Code of )%%*, the Civil Code of )*.; included as property of public dominion
those properties of the tate which, without being for public use, are intended for public
service or the >development of the national wealth.> 5hus, government reclaimed and marshy
lands of the tate, even if not employed for public use or public service, if developed to
enhance the national wealth, are classified as property of public dominion.
5ispositions under the 8:73 +onstitution
5he )*$# Constitution, which too( effect on 0anuary )$, )*$#, li(ewise adopted the 7egalian
doctrine. ection %, Article K:4 of the )*$# Constitution stated that N
>ec. %. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural
resources of the ,hilippines belong to the tate. 7ith the e'ception of agricultural.
industrial or commercial. residential. and resettlement lands of the public domain.
natural resources shall not be alienated, and no license, concession, or lease for the
e2ploration, development, e2ploitation, or utiliFation of any of the natural resources
shall be granted for a period e2ceeding twenty-five years, renewable for not more
than twenty-five years, e2cept as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, in which
cases, beneficial use may be the measure and the limit of the grant.> 'Emphasis
supplied+
5he )*$# Constitution prohibited the alienation of all natural resources with the e2ception of
>agricultural, industrial or commercial, residential, and resettlement lands of the public
domain.> :n contrast, the )*#. Constitution barred the alienation of all natural resources
e2cept >public agricultural lands.> =owever, the term >public agricultural lands> in the )*#.
Constitution encompassed industrial, commercial, residential and resettlement lands of the
public domain.
&;
:f the land of public domain were neither timber nor mineral land, it would
fall under the classification of agricultural land of the public domain. !oth the 8:35 and 8:73
+onstitutions. therefore. prohibited the alienation of all natural resources e'cept
agricultural lands of the public domain.
5he )*$# Constitution, however, limited the alienation of lands of the public domain to
individuals who were citiFens of the ,hilippines. ,rivate corporations, even if wholly owned
by ,hilippine citiFens, were no longer allowed to ac!uire alienable lands of the public domain
unli(e in the )*#. Constitution. ection )), Article K:4 of the )*$# Constitution declared that
N
>ec. )). 5he 3atasang ,ambansa, ta(ing into account conservation, ecological, and
development re!uirements of the natural resources, shall determine by law the siFe
of land of the public domain which may be developed, held or ac!uired by, or leased
to, any !ualified individual, corporation, or association, and the conditions
therefor. ;o private corporation or association may hold alienable lands of the
public domain e'cept by lease not to e2ceed one thousand hectares in area nor may
any citiFen hold such lands by lease in e2cess of five hundred hectares or ac!uire by
purchase, homestead or grant, in e2cess of twenty-four hectares. No private
corporation or association may hold by lease, concession, license or permit, timber
or forest lands and other timber or forest resources in e2cess of one hundred
thousand hectares. =owever, such area may be increased by the 3atasang ,ambansa
upon recommendation of the National Economic and 8evelopment Authority.>
'Emphasis supplied+
5hus, under the )*$# Constitution, private corporations could hold alienable lands of the
public domain only through lease. 9nly individuals could now ac!uire alienable lands of the
public domain, and private corporations became absolutely barred from acquiring any Bind
of alienable land of the public domain. 5he constitutional ban e2tended to all (inds of
alienable lands of the public domain, while the statutory ban under CA No. )1) applied only
to government reclaimed, foreshore and marshy alienable lands of the public domain.
(5 ;o. 8A9< +reating the (ublic )states *uthority
9n February 1, )*$$, then ,resident Ferdinand /arcos issued ,residential 8ecree No. );%1
creating ,EA, a wholly government owned and controlled corporation with a special charter.
ections 1 and % of ,8 No. );%1, vests ,EA with the following purposes and powersA
>ec. 1. ,urpose. 5he Authority is hereby created for the following purposesA
'a+ #o reclaim land. including foreshore and submerged areas. by dredging.
filling or other means. or to acquire reclaimed land@
'b+ 5o develop, improve, ac!uire, administer, deal in, subdivide, dispose, lease and
sell any and all Binds of lands, buildings, estates and other forms of real property,
owned, managed, controlled and6or operated by the government@
'c+ 5o provide for, operate or administer such service as may be necessary for the
efficient, economical and beneficial utiliFation of the above properties.
ec. .. ,owers and functions of the Authority. 5he Authority shall, in carrying out
the purposes for which it is created, have the following powers and functionsA
'a+5o prescribe its by-laws.
2 2 2
'i+ #o hold lands of the public domain in e2cess of the area permitted to private
corporations by statute.
'j+ #o reclaim lands and to construct wor( across, or otherwise, any stream,
watercourse, canal, ditch, flume 2 2 2.
2 2 2
'o+ 5o perform such acts and e2ercise such functions as may be necessary for the
attainment of the purposes and objectives herein specified.> 'Emphasis supplied+
,8 No. );%1 authoriFes ,EA to reclaim both foreshore and submerged areas of the public
domain. Foreshore areas are those covered and uncovered by the ebb and flow of the
tide.
&)
ubmerged areas are those permanently under water regardless of the ebb and flow of
the tide.
&-
Foreshore and submerged areas indisputably belong to the public domain
&#
and are
inalienable unless reclaimed, classified as alienable lands open to disposition, and further
declared no longer needed for public service.
5he ban in the )*$# Constitution on private corporations from ac!uiring alienable lands of the
public domain did not apply to ,EA since it was then, and until today, a fully owned
government corporation. 5he constitutional ban applied then, as it still applies now, only to
>private corporations and associations.> ,8 No. );%1 e2pressly empowers ()* 3to hold
lands of the public domain> even >in e2cess of the area permitted to private corporations by
statute.> #hus. ()* can hold title to private lands. as well as title to lands of the public
domain.
:n order for ,EA to sell its reclaimed foreshore and submerged alienable lands of the public
domain, there must be legislative authority empowering ,EA to sell these lands. 5his
legislative authority is necessary in view of ection &; of CA No.)1), which states N
>ec. &;. 2 2 2@ but the land so granted, donated or transferred to a province,
municipality, or branch or subdivision of the Dovernment shall not be alienated,
encumbered or otherwise disposed of in a manner affecting its title, e'cept when
authori,ed by +ongress@ 2 2 2.> 'Emphasis supplied+
?ithout such legislative authority, ,EA could not sell but only lease its reclaimed foreshore
and submerged alienable lands of the public domain. Nevertheless, any legislative authority
granted to ,EA to sell its reclaimed alienable lands of the public domain would be subject to
the constitutional ban on private corporations from ac!uiring alienable lands of the public
domain. =ence, such legislative authority could only benefit private individuals.
5ispositions under the 8:97 +onstitution
5he )*%$ Constitution, li(e the )*#. and )*$# Constitutions before it, has adopted the
7egalian doctrine. 5he )*%$ Constitution declares that all natural resources are >owned by the
&tate,> and e2cept for alienable agricultural lands of the public domain, natural resources
cannot be alienated. ections - and #, Article K:: of the )*%$ Constitution state that N
>ection -. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife,
flora and fauna, and other natural resources are owned by the &tate. 7ith the
e'ception of agricultural lands. all other natural resources shall not be alienated.
5he e2ploration, development, and utiliFation of natural resources shall be under the
full control and supervision of the tate. 2 2 2.
ection #. "ands of the public domain are classified into agricultural, forest or
timber, mineral lands, and national par(s. Agricultural lands of the public domain
may be further classified by law according to the uses which they may be
devoted. *lienable lands of the public domain shall be limited to agricultural
lands. (rivate corporations or associations may not hold such alienable lands of
the public domain e'cept by lease. for a period not e'ceeding twenty%five years.
renewable for not more than twenty%five years. and not to e'ceed one thousand
hectares in area. CitiFens of the ,hilippines may lease not more than five hundred
hectares, or ac!uire not more than twelve hectares thereof by purchase, homestead,
or grant.
5a(ing into account the re!uirements of conservation, ecology, and development,
and subject to the re!uirements of agrarian reform, the Congress shall determine, by
law, the siFe of lands of the public domain which may be ac!uired, developed, held,
or leased and the conditions therefor.> 'Emphasis supplied+
5he )*%$ Constitution continues the tate policy in the )*$# Constitution banning private
corporations fromacquiring any Bind of alienable land of the public domain. "i(e the )*$#
Constitution, the )*%$ Constitution allows private corporations to hold alienable lands of the
public domain only through lease. As in the )*#. and )*$# Constitutions, the general law
governing the lease to private corporations of reclaimed, foreshore and marshy alienable lands
of the public domain is still CA No. )1).
#he 4ationale behind the +onstitutional !an
5he rationale behind the constitutional ban on corporations from ac!uiring, e2cept through
lease, alienable lands of the public domain is not well understood. 8uring the deliberations of
the )*%& Constitutional Commission, the commissioners probed the rationale behind this ban,
thusA
>F7. 3E7NAA /r. 4ice-,resident, my !uestions have reference to page #, line .
which saysA
PNo private corporation or association may hold alienable lands of the public domain
e2cept by lease, not to e2ceed one thousand hectares in area.<
:f we recall, this provision did not e2ist under the )*#. Constitution, but this was
introduced in the )*$# Constitution. :n effect, it prohibits private corporations from
ac!uiring alienable public lands. !ut it has not been very clear in "urisprudence
what the reason for this is. :n some of the cases decided in )*%- and )*%#, it was
indicated that the purpose of this is to prevent large landholdings. :s that the intent
of this provisionO
/7. 4:""EDAA : thin( that is the spirit of the provision.
F7. 3E7NAA :n e2isting decisions involving the :glesia ni Cristo, there were
instances where the :glesia ni Cristo was not allowed to ac!uire a mere #)#-s!uare
meter land where a chapel stood because the upreme Court said it would be in
violation of this.> 'Emphasis supplied+
:n *yog v. +usi,
&1
the Court e2plained the rationale behind this constitutional ban in this wayA
>:ndeed, one purpose of the constitutional prohibition against purchases of public
agricultural lands by private corporations is to e!uitably diffuse land ownership or to
encourage <owner-cultivatorship and the economic family-siFe farm< and to prevent a
recurrence of cases li(e the instant case. =uge landholdings by corporations or
private persons had spawned social unrest.>
=owever, if the constitutional intent is to prevent huge landholdings, the Constitution could
have simply limited the siFe of alienable lands of the public domain that corporations could
ac!uire. 5he Constitution could have followed the limitations on individuals, who could
ac!uire not more than -1 hectares of alienable lands of the public domain under the )*$#
Constitution, and not more than )- hectares under the )*%$ Constitution.
:f the constitutional intent is to encourage economic family-siFe farms, placing the land in the
name of a corporation would be more effective in preventing the brea(-up of farmlands. :f the
farmland is registered in the name of a corporation, upon the death of the owner, his heirs
would inherit shares in the corporation instead of subdivided parcels of the farmland. 5his
would prevent the continuing brea(-up of farmlands into smaller and smaller plots from one
generation to the ne2t.
:n actual practice, the constitutional ban strengthens the constitutional limitation on
individuals from ac!uiring more than the allowed area of alienable lands of the public domain.
?ithout the constitutional ban, individuals who already ac!uired the ma2imum area of
alienable lands of the public domain could easily set up corporations to ac!uire more alienable
public lands. An individual could own as many corporations as his means would allow him.
An individual could even hide his ownership of a corporation by putting his nominees as
stoc(holders of the corporation. 5he corporation is a convenient vehicle to circumvent the
constitutional limitation on ac!uisition by individuals of alienable lands of the public domain.
5he constitutional intent, under the )*$# and )*%$ Constitutions, is to transfer ownership of
only a limited area of alienable land of the public domain to a !ualified individual. 5his
constitutional intent is safeguarded by the provision prohibiting corporations from ac!uiring
alienable lands of the public domain, since the vehicle to circumvent the constitutional intent
is removed. 5he available alienable public lands are gradually decreasing in the face of an
ever-growing population. 5he most effective way to insure faithful adherence to this
constitutional intent is to grant or sell alienable lands of the public domain only to individuals.
5his, it would seem, is the practical benefit arising from the constitutional ban.
#he *mended Joint /enture *greement
5he subject matter of the Amended 04A, as stated in its second ?hereas clause, consists of
three properties, namelyA
). >B5Chree partially reclaimed and substantially eroded islands along Emilio
Aguinaldo 3oulevard in ,arana!ue and "as ,inas, /etro /anila, with a combined
titled area of ),.$%,11) s!uare meters@>
-. >BACnother area of -,1-),..* s!uare meters contiguous to the three islands@> and
#. >BACt A/A7:<s option as approved by ,EA, an additional #.; hectares more or
less to regulariFe the configuration of the reclaimed area.>
&.
,EA confirms that the Amended 04A involves >the development of the Freedom :slands and
further reclamation of about -.; hectares 2 2 2,> plus an option >granted to A/A7: to
subse!uently reclaim another #.; hectares 2 2 2.>
&&
:n short, the Amended 04A covers a reclamation area of $.; hectares. 1nly 857.9< hectares
of the 75A%hectare reclamation pro"ect have been reclaimed. and the rest of the 5:=.85
hectares are still submerged areas forming part of anila !ay.
Ender the Amended 04A, A/A7: will reimburse ,EA the sum of ,),%*1,)-*,-;;.;; for
,EA<s >actual cost> in partially reclaiming the Freedom :slands. A/A7: will also complete, at
its own e2pense, the reclamation of the Freedom :slands. A/A7: will further shoulder all the
reclamation costs of all the other areas, totaling .*-.). hectares, still to be reclaimed. A/A7:
and ,EA will share, in the proportion of $; percent and #; percent, respectively, the total net
usable area which is defined in the Amended 04A as the total reclaimed area less #; percent
earmar(ed for common areas. 5itle to A/A7:<s share in the net usable area, totaling #&$..
hectares, will be issued in the name of A/A7:. ection ..- 'c+ of the Amended 04A provides
that N
>2 2 2, ,EA shall have the duty to e2ecute without delay the necessary deed of
transfer or conveyance of the title pertaining to A/A7:<s "and share based on the
"and Allocation ,lan. ()*. when requested in writing by **4$. shall then
cause the issuance and delivery of the proper certificates of title covering
**4$0s 6and &hare in the name of **4$, 2 2 2@ provided, that if more than
seventy percent '$;Q+ of the titled area at any given time pertains to A/A7:, ,EA
shall deliver to A/A7: only seventy percent '$;Q+ of the titles pertaining to
A/A7:, until such time when a corresponding proportionate area of additional land
pertaining to ,EA has been titled.> 'Emphasis supplied+
$ndisputably. under the *mended J/* **4$ will acquire and own a ma'imum of 367.5
hectares of reclaimed land which will be titled in its name.
5o implement the Amended 04A, ,EA delegated to the unincorporated ,EA-A/A7: joint
venture ,EA<s statutory authority, rights and privileges to reclaim foreshore and submerged
areas in /anila 3ay. ection #.-.a of the Amended 04A states that N
>,EA hereby contributes to the joint venture its rights and privileges to perform
7awland 7eclamation and =oriFontal 8evelopment as well as own the 7eclamation
Area, thereby granting the 0oint 4enture the full and e2clusive right, authority and
privilege to underta(e the ,roject in accordance with the /aster 8evelopment ,lan.>
5he Amended 04A is the product of a renegotiation of the original 04A dated April -., )**.
and its supplemental agreement dated August *, )**..
#he #hreshold $ssue
5he threshold issue is whether A/A7:, a private corporation, can ac!uire and own under the
Amended 04A #&$.. hectares of reclaimed foreshore and submerged areas in /anila 3ay in
view of ections - and #, Article K:: of the )*%$ Constitution which state thatA
>ection -. All lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife,
flora and fauna, and other natural resources are owned by the tate. 7ith the
e'ception of agricultural lands. all other natural resources shall not be alienated.
2 2 2.
2 2 2
ection #. 2 2 2 Alienable lands of the public domain shall be limited to agricultural
lands. (rivate corporations or associations may not hold such alienable lands of
the public domain e'cept by lease, 2 2 2.>'Emphasis supplied+
+lassification of 4eclaimed Foreshore and &ubmerged *reas
,EA readily concedes that lands reclaimed from foreshore or submerged areas of /anila 3ay
are alienable or disposable lands of the public domain. :n its /emorandum,
&$
,EA admits that
N
>Ender the ,ublic "and Act 'CA )1), as amended+, reclaimed lands are classified
as alienable and disposable lands of the public domainA
<ec. .*. 5he lands disposable under this title shall be classified as
followsA
'a+ "ands reclaimed by the government by dredging, filling, or other
means@
2 2 2.<> 'Emphasis supplied+
"i(ewise, the "egal 5as( Force
&%
constituted under ,residential Administrative 9rder No. #&.
admitted in its 7eport and 7ecommendation to then ,resident Fidel 4. 7amos, 3C4Declaimed
lands are classified as alienable and disposable lands of the public domain.>
&*
5he "egal
5as( Force concluded that N
>8. Conclusion
7eclaimed lands are lands of the public domain. =owever, by statutory authority,
the rights of ownership and disposition over reclaimed lands have been transferred
to ,EA, by virtue of which ,EA, as owner, may validly convey the same to any
!ualified person without violating the Constitution or any statute.
5he constitutional provision prohibiting private corporations from holding public
land, e2cept by lease 'ec. #, Art. K4::,
$;
)*%$ Constitution+, does not apply to
reclaimed lands whose ownership has passed on to ,EA by statutory grant.>
Ender ection -, Article K:: of the )*%$ Constitution, the foreshore and submerged areas of
/anila 3ay are part of the >lands of the public domain, waters 2 2 2 and other natural
resources> and conse!uently >owned by the tate.> As such, foreshore and submerged areas
>shall not be alienated,> unless they are classified as >agricultural lands> of the public domain.
5he mere reclamation of these areas by ,EA does not convert these inalienable natural
resources of the tate into alienable or disposable lands of the public domain. 5here must be a
law or presidential proclamation officially classifying these reclaimed lands as alienable or
disposable and open to disposition or concession. /oreover, these reclaimed lands cannot be
classified as alienable or disposable if the law has reserved them for some public or !uasi-
public use.
$)
ection % of CA No. )1) provides that >only those lands shall be declared open to disposition
or concession which have been officially delimited and classified.>
$-
5he ,resident has the
authority to classify inalienable lands of the public domain into alienable or disposable lands
of the public domain, pursuant to ection & of CA No. )1). :n "aurel vs. Darcia,
$#
the
E2ecutive 8epartment attempted to sell the 7oppongi property in 5o(yo, 0apan, which was
ac!uired by the ,hilippine Dovernment for use as the Chancery of the ,hilippine Embassy.
Although the Chancery had transferred to another location thirteen years earlier, the Court still
ruled that, under Article 1--
$1
of the Civil Code, a property of public dominion retains such
character until formally declared otherwise. 5he Court ruled that N
>5he fact that the 7oppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any such
conversion happens only if the property is withdrawn from public use 'Cebu 92ygen
and Acetylene Co. v. 3ercilles, && C7A 1%) B)*$.C. * property continues to be
part of the public domain. not available for private appropriation or ownership
0until there is a formal declaration on the part of the government to withdraw it
from being such0 ':gnacio v. 8irector of "ands, );% ,hil. ##. B)*&;C.> 'Emphasis
supplied+
,8 No. );%., issued on February 1, )*$$, authoriFed the issuance of special land patents for
lands reclaimed by ,EA from the foreshore or submerged areas of /anila 3ay. 9n 0anuary
)*, )*%% then ,resident CoraFon C. A!uino issued pecial ,atent No. #.)$ in the name of
,EA for the ).$.%1 hectares comprising the partially reclaimed Freedom :slands.
ubse!uently, on April *, )*** the 7egister of 8eeds of the /unicipality of ,arana!ue issued
5C5 Nos. $#;*, $#)) and $#)- in the name of ,EA pursuant to ection );# of ,8 No. ).-*
authoriFing the issuance of certificates of title corresponding to land patents. 5o this day, these
certificates of title are still in the name of ,EA.
,8 No. );%., coupled with ,resident A!uino<s actual issuance of a special patent covering
the Freedom :slands, is e!uivalent to an official proclamation classifying the Freedom :slands
as alienable or disposable lands of the public domain. ,8 No. );%. and ,resident A!uino<s
issuance of a land patent also constitute a declaration that the Freedom :slands are no longer
needed for public service. #he Freedom $slands are thus alienable or disposable lands of the
public domain. open to disposition or concession to qualified parties.
At the time then ,resident A!uino issued pecial ,atent No. #.)$, ,EA had already reclaimed
the Freedom :slands although subse!uently there were partial erosions on some areas. 5he
government had also completed the necessary surveys on these islands. 5hus, the Freedom
:slands were no longer part of /anila 3ay but part of the land mass. ection #, Article K:: of
the )*%$ Constitution classifies lands of the public domain into >agricultural, forest or timber,
mineral lands, and national par(s.> 3eing neither timber, mineral, nor national par( lands, the
reclaimed Freedom :slands necessarily fall under the classification of agricultural lands of the
public domain. Ender the )*%$ Constitution, agricultural lands of the public domain are the
only natural resources that the tate may alienate to !ualified private parties. All other natural
resources, such as the seas or bays, are >waters 2 2 2 owned by the tate> forming part of the
public domain, and are inalienable pursuant to ection -, Article K:: of the )*%$ Constitution.
A/A7: claims that the Freedom :slands are private lands because C8C,, then a private
corporation, reclaimed the islands under a contract dated November -;, )*$# with the
Commissioner of ,ublic =ighways. A/A7:, citing Article . of the panish "aw of ?aters of
)%&&, argues that >if the ownership of reclaimed lands may be given to the party constructing
the wor(s, then it cannot be said that reclaimed lands are lands of the public domain which the
tate may not alienate.>
$.
Article . of the panish "aw of ?aters reads as followsA
>Article .. "ands reclaimed from the sea in conse!uence of wor(s constructed by
the tate, or by the provinces, pueblos or private persons, with proper permission,
shall become the property of the party constructing such wor(s, unless otherwise
provided by the terms of the grant of authority.> 'Emphasis supplied+
Ender Article . of the panish "aw of ?aters of )%&&, private parties could reclaim from the
sea only with >proper permission> from the tate. ,rivate parties could own the reclaimed land
only if not >otherwise provided by the terms of the grant of authority.> 5his clearly meant that
no one could reclaim from the sea without permission from the tate because the sea is
property of public dominion. :t also meant that the tate could grant or withhold ownership of
the reclaimed land because any reclaimed land, li(e the sea from which it emerged, belonged
to the tate. 5hus, a private person reclaiming from the sea without permission from the tate
could not ac!uire ownership of the reclaimed land which would remain property of public
dominion li(e the sea it replaced.
$&
Article . of the panish "aw of ?aters of )%&& adopted
the time-honored principle of land ownership that >all lands that were not ac!uired from the
government, either by purchase or by grant, belong to the public domain.>
$$
Article . of the panish "aw of ?aters must be read together with laws subse!uently enacted
on the disposition of public lands. :n particular, CA No. )1) re!uires that lands of the public
domain must first be classified as alienable or disposable before the government can alienate
them. 5hese lands must not be reserved for public or !uasi-public purposes.
$%
/oreover, the
contract between C8C, and the government was e2ecuted after the effectivity of the )*$#
Constitution which barred private corporations from ac!uiring any (ind of alienable land of
the public domain. 5his contract could not have converted the Freedom :slands into private
lands of a private corporation.
,residential 8ecree No. #-A, issued on 0anuary )), )*$#, revo(ed all laws authoriFing the
reclamation of areas under water and revested solely in the National Dovernment the power to
reclaim lands. ection ) of ,8 No. #-A declared that N
>#he provisions of any law to the contrary notwithstanding, the reclamation of
areas under water, whether foreshore or inland, shall be limited to the ;ational
-overnment or any person authori,ed by it under a proper contract. 'Emphasis
supplied+
2 2 2.>
,8 No. #-A repealed ection . of the panish "aw of ?aters of )%&& because reclamation of
areas under water could now be underta(en only by the National Dovernment or by a person
contracted by the National Dovernment. ,rivate parties may reclaim from the sea only under a
contract with the National Dovernment, and no longer by grant or permission as provided in
ection . of the panish "aw of ?aters of )%&&.
E2ecutive 9rder No. .-., issued on February )1, )*$*, designated ,EA as the National
Dovernment<s implementing arm to underta(e >all reclamation projects of the government,>
which >shall be undertaBen by the ()* or through a proper contract e'ecuted by it with any
person or entity.> Ender such contract, a private party receives compensation for reclamation
services rendered to ,EA. ,ayment to the contractor may be in cash, or in (ind consisting of
portions of the reclaimed land, subject to the constitutional ban on private corporations from
ac!uiring alienable lands of the public domain. 5he reclaimed land can be used as payment in
(ind only if the reclaimed land is first classified as alienable or disposable land open to
disposition, and then declared no longer needed for public service.
5he Amended 04A covers not only the Freedom :slands, but also an additional .*-.).
hectares which are still submerged and forming part of /anila 3ay. #here is no legislative or
(residential act classifying these submerged areas as alienable or disposable lands of the
public domain open to disposition. 5hese submerged areas are not covered by any patent or
certificate of title. 5here can be no dispute that these submerged areas form part of the public
domain, and in their present state are inalienable and outside the commerce of man. Entil
reclaimed from the sea, these submerged areas are, under the Constitution, >waters 2 2 2
owned by the tate,> forming part of the public domain and conse!uently inalienable. 9nly
when actually reclaimed from the sea can these submerged areas be classified as public
agricultural lands, which under the Constitution are the only natural resources that the tate
may alienate. 9nce reclaimed and transformed into public agricultural lands, the government
may then officially classify these lands as alienable or disposable lands open to disposition.
5hereafter, the government may declare these lands no longer needed for public service. 9nly
then can these reclaimed lands be considered alienable or disposable lands of the public
domain and within the commerce of man.
5he classification of ,EA<s reclaimed foreshore and submerged lands into alienable or
disposable lands open to disposition is necessary because ,EA is tas(ed under its charter to
underta(e public services that re!uire the use of lands of the public domain. Ender ection .
of ,8 No. );%1, the functions of ,EA include the followingA >B5Co own or operate railroads,
tramways and other (inds of land transportation, 2 2 2@ B5Co construct, maintain and operate
such systems of sanitary sewers as may be necessary@ B5Co construct, maintain and operate
such storm drains as may be necessary.> ,EA is empowered to issue >rules and regulations as
may be necessary for the proper use by private parties of any or all of the highways. roads.
utilities. buildings andEor any of its properties and to impose or collect fees or tolls for their
use.> 5hus, part of the reclaimed foreshore and submerged lands held by the ,EA would
actually be needed for public use or service since many of the functions imposed on ,EA by
its charter constitute essential public services.
/oreover, ection ) of E2ecutive 9rder No. .-. provides that ,EA >shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and on
behalf of the National Dovernment.> 5he same section also states that >BACll reclamation
projects shall be approved by the ,resident upon recommendation of the ,EA, and shall be
underta(en by the ,EA or through a proper contract e2ecuted by it with any person or entity@ 2
2 2.> 5hus, under E9 No. .-., in relation to ,8 No. #-A and ,8 No.);%1, ,EA became the
primary implementing agency of the National Dovernment to reclaim foreshore and
submerged lands of the public domain. E9 No. .-. recogniFed ,EA as the government entity
>to underta(e the reclamation of lands and ensure their ma2imum utiliFation in promoting
public welfare and interests.>
$*
ince large portions of these reclaimed lands would obviously
be needed for public service, there must be a formal declaration segregating reclaimed lands
no longer needed for public service from those still needed for public service.1.wphi1.n/t
ection # of E9 No. .-., by declaring that all lands reclaimed by ,EA >shall belong to or be
owned by the ,EA,> could not automatically operate to classify inalienable lands into
alienable or disposable lands of the public domain. 9therwise, reclaimed foreshore and
submerged lands of the public domain would automatically become alienable once reclaimed
by ,EA, whether or not classified as alienable or disposable.
5he 7evised Administrative Code of )*%$, a later law than either ,8 No. );%1 or E9 No.
.-., vests in the 8epartment of Environment and Natural 7esources '>8EN7> for brevity+ the
following powers and functionsA
>ec. 1. ,owers and Functions. 5he 8epartment shallA
')+ 2 2 2
2 2 2
'1+ )'ercise supervision and control over forest lands, alienable and disposable
public lands, mineral resources and, in the process of e2ercising such control,
impose appropriate ta2es, fees, charges, rentals and any such form of levy and
collect such revenues for the e2ploration, development, utiliFation or gathering of
such resources@
2 2 2
')1+ (romulgate rules. regulations and guidelines on the issuance of licenses.
permits. concessions. lease agreements and such other privileges concerning the
development. e'ploration and utili,ation of the country0s marine. freshwater. and
bracBish water and over all aquatic resources of the country and shall continue to
oversee. supervise and police our natural resources@ cancel or cause to cancel such
privileges upon failure, non-compliance or violations of any regulation, order, and
for all other causes which are in furtherance of the conservation of natural resources
and supportive of the national interest@
').+ )'ercise e'clusive "urisdiction on the management and disposition of all
lands of the public domain and serve as the sole agency responsible for
classification, sub-classification, surveying and titling of lands in consultation with
appropriate agencies.>
%;
'Emphasis supplied+
As manager, conservator and overseer of the natural resources of the tate, 8EN7 e2ercises
>supervision and control over alienable and disposable public lands.> 8EN7 also e2ercises
>e2clusive jurisdiction on the management and disposition of all lands of the public domain.>
5hus, 8EN7 decides whether areas under water, li(e foreshore or submerged areas of /anila
3ay, should be reclaimed or not. 5his means that ,EA needs authoriFation from 8EN7 before
,EA can underta(e reclamation projects in /anila 3ay, or in any part of the country.
8EN7 also e2ercises e2clusive jurisdiction over the disposition of all lands of the public
domain. =ence, 8EN7 decides whether reclaimed lands of ,EA should be classified as
alienable under ections &
%)
and $
%-
of CA No. )1). 9nce 8EN7 decides that the reclaimed
lands should be so classified, it then recommends to the ,resident the issuance of a
proclamation classifying the lands as alienable or disposable lands of the public domain open
to disposition. ?e note that then 8EN7 ecretary Fulgencio . Factoran, 0r. countersigned
pecial ,atent No. #.)$ in compliance with the 7evised Administrative Code and ections &
and $ of CA No. )1).
:n short, 8EN7 is vested with the power to authoriFe the reclamation of areas under water,
while ,EA is vested with the power to underta(e the physical reclamation of areas under
water, whether directly or through private contractors. 8EN7 is also empowered to classify
lands of the public domain into alienable or disposable lands subject to the approval of the
,resident. 9n the other hand, ,EA is tas(ed to develop, sell or lease the reclaimed alienable
lands of the public domain.
Clearly, the mere physical act of reclamation by ,EA of foreshore or submerged areas does
not ma(e the reclaimed lands alienable or disposable lands of the public domain, much less
patrimonial lands of ,EA. "i(ewise, the mere transfer by the National Dovernment of lands of
the public domain to ,EA does not ma(e the lands alienable or disposable lands of the public
domain, much less patrimonial lands of ,EA.
Absent two official acts N a classification that these lands are alienable or disposable and open
to disposition and a declaration that these lands are not needed for public service, lands
reclaimed by ,EA remain inalienable lands of the public domain. 9nly such an official
classification and formal declaration can convert reclaimed lands into alienable or disposable
lands of the public domain, open to disposition under the Constitution, 5itle : and 5itle :::
%#
of
CA No. )1) and other applicable laws.
%1
()*0s *uthority to &ell 4eclaimed 6ands
,EA, li(e the "egal 5as( Force, argues that as alienable or disposable lands of the public
domain, the reclaimed lands shall be disposed of in accordance with CA No. )1), the ,ublic
"and Act. ,EA, citing ection &; of CA No. )1), admits that reclaimed lands transferred to a
branch or subdivision of the government >shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, e'cept when authori,ed by +ongressA 2 2
2.>
%.
'Emphasis by ,EA+
:n 6aurel vs. -arcia,
%&
the Court cited ection 1% of the 7evised Administrative Code of
)*%$, which states that N
>ec. 1%. 9fficial AuthoriFed to Convey 7eal ,roperty. ?henever real property of
the Dovernment is authori,ed by law to be conveyed, the deed of conveyance shall
be e2ecuted in behalf of the government by the followingA 2 2 2.>
5hus, the Court concluded that a law is needed to convey any real property belonging to the
Dovernment. 5he Court declared that -
>:t is not for the ,resident to convey real property of the government on his or her
own sole will. *ny such conveyance must be authori,ed and approved by a law
enacted by the +ongress. :t re!uires e2ecutive and legislative concurrence.>
'Emphasis supplied+
,EA contends that ,8 No. );%. and E9 No. .-. constitute the legislative authority allowing
,EA to sell its reclaimed lands. ,8 No. );%., issued on February 1, )*$$, provides that N
>#he land reclaimed in the foreshore and offshore area of anila !ay pursuant to
the contract for the reclamation and construction of the /anila-Cavite Coastal 7oad
,roject between the 7epublic of the ,hilippines and the Construction and
8evelopment Corporation of the ,hilippines dated November -;, )*$# and6or any
other contract or reclamation covering the same area is hereby transferred.
conveyed and assigned to the ownership and administration of the (ublic )states
*uthority established pursuant to ,8 No. );%1@ ,rovided, however, 5hat the rights
and interests of the Construction and 8evelopment Corporation of the ,hilippines
pursuant to the aforesaid contract shall be recogniFed and respected.
=enceforth, the ,ublic Estates Authority shall e2ercise the rights and assume the
obligations of the 7epublic of the ,hilippines '8epartment of ,ublic =ighways+
arising from, or incident to, the aforesaid contract between the 7epublic of the
,hilippines and the Construction and 8evelopment Corporation of the ,hilippines.
:n consideration of the foregoing transfer and assignment, the ,ublic Estates
Authority shall issue in favor of the 7epublic of the ,hilippines the corresponding
shares of stoc( in said entity with an issued value of said shares of stoc( 'which+
shall be deemed fully paid and non-assessable.
5he ecretary of ,ublic =ighways and the Deneral /anager of the ,ublic Estates
Authority shall e2ecute such contracts or agreements, including appropriate
agreements with the Construction and 8evelopment Corporation of the ,hilippines,
as may be necessary to implement the above.
&pecial land patentEpatents shall be issued by the &ecretary of ;atural 4esources
in favor of the (ublic )states *uthority without pre"udice to the subsequent
transfer to the contractor or his assignees of such portion or portions of the land
reclaimed or to be reclaimed as provided for in the above%mentioned contract. 1n
the basis of such patents. the 6and 4egistration +ommission shall issue the
corresponding certificate of title.> 'Emphasis supplied+
9n the other hand, ection # of E9 No. .-., issued on February )1, )*$*, provides that -
>ec. #. *ll lands reclaimed by ()* shall belong to or be owned by the ()* which
shall be responsible for its administration, development, utiliFation or disposition in
accordance with the provisions of ,residential 8ecree No. );%1. Any and all income
that the ,EA may derive from the sale, lease or use of reclaimed lands shall be used
in accordance with the provisions of ,residential 8ecree No. );%1.>
5here is no e2press authority under either ,8 No. );%. or E9 No. .-. for ,EA to sell its
reclaimed lands. ,8 No. );%. merely transferred >ownership and administration> of lands
reclaimed from /anila 3ay to ,EA, while E9 No. .-. declared that lands reclaimed by ,EA
>shall belong to or be owned by ,EA.> E9 No. .-. e2pressly states that ,EA should dispose
of its reclaimed lands >in accordance with the provisions of ,residential 8ecree No. );%1,> the
charter of ,EA.
,EA<s charter, however, e2pressly tas(s ,EA >to develop, improve, ac!uire, administer, deal
in, subdivide, dispose, lease and sell any and all Binds of lands 2 2 2 owned, managed,
controlled and6or operated by the government.>
%$
'Emphasis supplied+ #here is. therefore.
legislative authority granted to ()* to sell its lands. whether patrimonial or alienable lands
of the public domain. ,EA may sell to private parties its patrimonial properties in accordance
with the ,EA charter free from constitutional limitations. 5he constitutional ban on private
corporations from ac!uiring alienable lands of the public domain does not apply to the sale of
,EA<s patrimonial lands.
,EA may also sell its alienable or disposable lands of the public domain to private
individuals since, with the legislative authority, there is no longer any statutory prohibition
against such sales and the constitutional ban does not apply to individuals. ,EA, however,
cannot sell any of its alienable or disposable lands of the public domain to private corporations
since ection #, Article K:: of the )*%$ Constitution e2pressly prohibits such sales. 5he
legislative authority benefits only individuals. ,rivate corporations remain barred from
ac!uiring any (ind of alienable land of the public domain, including government reclaimed
lands.
5he provision in ,8 No. );%. stating that portions of the reclaimed lands could be transferred
by ,EA to the >contractor or his assignees> 'Emphasis supplied+ would not apply to private
corporations but only to individuals because of the constitutional ban. 9therwise, the
provisions of ,8 No. );%. would violate both the )*$# and )*%$ Constitutions.
#he requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of ,EA are classified as alienable or disposable lands open to
disposition, and further declared no longer needed for public service, ,EA would have to
conduct a public bidding in selling or leasing these lands. ,EA must observe the provisions of
ections &# and &$ of CA No. )1) re!uiring public auction, in the absence of a law e2empting
,EA from holding a public auction.
%%
pecial ,atent No. #.)$ e2pressly states that the patent
is issued by authority of the Constitution and ,8 No. );%1, >supplemented by Commonwealth
Act No. )1), as amended.> 5his is an ac(nowledgment that the provisions of CA No. )1)
apply to the disposition of reclaimed alienable lands of the public domain unless otherwise
provided by law. E2ecutive 9rder No. &.1,
%*
which authoriFes ,EA >to determine the (ind and
manner of payment for the transfer> of its assets and properties, does not e2empt ,EA from
the re!uirement of public auction. E9 No. &.1 merely authoriFes ,EA to decide the mode of
payment, whether in (ind and in installment, but does not authoriFe ,EA to dispense with
public auction.
/oreover, under ection $* of ,8 No. )11., otherwise (nown as the Dovernment Auditing
Code, the government is re!uired to sell valuable government property through public bidding.
ection $* of ,8 No. )11. mandates that N
>ection $*. 7hen government property has become unserviceable for any cause,
or is no longer needed, it shall, upon application of the officer accountable therefor,
be inspected by the head of the agency or his duly authoriFed representative in the
presence of the auditor concerned and, if found to be valueless or unsaleable, it may
be destroyed in their presence. $f found to be valuable. it may be sold at public
auction to the highest bidder under the supervision of the proper committee on
award or similar body in the presence of the auditor concerned or other authoriFed
representative of the Commission, after advertising by printed notice in the 1fficial
-a,ette. or for not less than three consecutive days in any newspaper of general
circulation, or where the value of the property does not warrant the e2pense of
publication, by notices posted for a li(e period in at least three public places in the
locality where the property is to be sold. $n the event that the public auction fails.
the property may be sold at a private sale at such price as may be fi'ed by the
same committee or body concerned and approved by the +ommission.>
:t is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price.
*;
5he Commission on Audit implements
ection $* of the Dovernment Auditing Code through Circular No. %*--*&
*)
dated 0anuary -$,
)*%*. 5his circular emphasiFes that government assets must be disposed of only through
public auction, and a negotiated sale can be resorted to only in case of >failure of public
auction.>
At the public auction sale, only ,hilippine citiFens are !ualified to bid for ,EA<s reclaimed
foreshore and submerged alienable lands of the public domain. ,rivate corporations are barred
from bidding at the auction sale of any (ind of alienable land of the public domain.
,EA originally scheduled a public bidding for the Freedom :slands on 8ecember );, )**).
,EA imposed a condition that the winning bidder should reclaim another -.; hectares of
submerged areas to regulariFe the shape of the Freedom :slands, under a &;-1; sharing of the
additional reclaimed areas in favor of the winning bidder.
*-
No one, however, submitted a bid.
9n 8ecember -#, )**1, the Dovernment Corporate Counsel advised ,EA it could sell the
Freedom :slands through negotiation, without need of another public bidding, because of the
failure of the public bidding on 8ecember );, )**).
*#
=owever, the original 04A dated April -., )**. covered not only the Freedom :slands and the
additional -.; hectares still to be reclaimed, it also granted an option to A/A7: to reclaim
another #.; hectares. 5he original 04A, a negotiated contract, enlarged the reclamation area
to 75A hectares.
*1
5he failure of public bidding on 8ecember );, )**), involving only 1;$.%1
hectares,
*.
is not a valid justification for a negotiated sale of $.; hectares, almost double the
area publicly auctioned. 3esides, the failure of public bidding happened on 8ecember );,
)**), more than three years before the signing of the original 04A on April -., )**.. 5he
economic situation in the country had greatly improved during the intervening period.
4eclamation under the !1# 6aw and the 6ocal -overnment +ode
5he constitutional prohibition in ection #, Article K:: of the )*%$ Constitution is absolute
and clearA >,rivate corporations or associations may not hold such alienable lands of the public
domain e2cept by lease, 2 2 2.> Even 7epublic Act No. &*.$ '>395 "aw,> for brevity+, cited
by ,EA and A/A7: as legislative authority to sell reclaimed lands to private parties,
recogniFes the constitutional ban. ection & of 7A No. &*.$ states N
>ec. &. 7epayment cheme. - For the financing, construction, operation and
maintenance of any infrastructure projects underta(en through the build-operate-
and-transfer arrangement or any of its variations pursuant to the provisions of this
Act, the project proponent 2 2 2 may li(ewise be repaid in the form of a share in the
revenue of the project or other non-monetary payments, such as, but not limited to,
the grant of a portion or percentage of the reclaimed land, sub"ect to the
constitutional requirements with respect to the ownership of the landA 2 2 2.>
'Emphasis supplied+
A private corporation, even one that underta(es the physical reclamation of a government
395 project, cannot ac!uire reclaimed alienable lands of the public domain in view of the
constitutional ban.
ection #;- of the "ocal Dovernment Code, also mentioned by ,EA and A/A7:, authoriFes
local governments in land reclamation projects to pay the contractor or developer in (ind
consisting of a percentage of the reclaimed land, to witA
>ection #;-. Financing, Construction, /aintenance, 9peration, and /anagement of
:nfrastructure ,rojects by the ,rivate ector. 2 2 2
2 2 2
:n case of land reclamation or construction of industrial estates, the repayment plan
may consist of the grant of a portion or percentage of the reclaimed land or the
industrial estate constructed.>
Although ection #;- of the "ocal Dovernment Code does not contain a proviso similar to
that of the 395 "aw, the constitutional restrictions on land ownership automatically apply
even though not e2pressly mentioned in the "ocal Dovernment Code.
5hus, under either the 395 "aw or the "ocal Dovernment Code, the contractor or developer,
if a corporate entity, can only be paid with leaseholds on portions of the reclaimed land. :f the
contractor or developer is an individual, portions of the reclaimed land, not e2ceeding )-
hectares
*&
of non-agricultural lands, may be conveyed to him in ownership in view of the
legislative authority allowing such conveyance. 5his is the only way these provisions of the
395 "aw and the "ocal Dovernment Code can avoid a direct collision with ection #, Article
K:: of the )*%$ Constitution.
4egistration of lands of the public domain
Finally, ,EA theoriFes that the >act of conveying the ownership of the reclaimed lands to
public respondent ,EA transformed such lands of the public domain to private lands.> 5his
theory is echoed by A/A7: which maintains that the >issuance of the special patent leading to
the eventual issuance of title ta(es the subject land away from the land of public domain and
converts the property into patrimonial or private property.> :n short, ,EA and A/A7: contend
that with the issuance of pecial ,atent No. #.)$ and the corresponding certificates of titles,
the ).$.%1 hectares comprising the Freedom :slands have become private lands of ,EA. :n
support of their theory, ,EA and A/A7: cite the following rulings of the CourtA
). Sumail v. Judge of *0" of *otabato,
*$
where the Court held N
>9nce the patent was granted and the corresponding certificate of title was issued,
the land ceased to be part of the public domain and became private property over
which the 8irector of "ands has neither control nor jurisdiction.>
-. )ee 1ong 1o2 v. avid,
*%
where the Court declared -
>After the registration and issuance of the certificate and duplicate certificate of title
based on a public land patent, the land covered thereby automatically comes under
the operation of 7epublic Act 1*& subject to all the safeguards provided
therein.>#. 1eirs of 3regorio $engco v. 1eirs of Jose %liwalas,
**
where the Court
ruled -
>?hile the 8irector of "ands has the power to review homestead patents, he may do
so only so long as the land remains part of the public domain and continues to be
under his e2clusive control@ but once the patent is registered and a certificate of title
is issued, the land ceases to be part of the public domain and becomes private
property over which the 8irector of "ands has neither control nor jurisdiction.>
1. Manalo v. "ntermediate %ppellate *ourt,
);;
where the Court held N
>?hen the lots in dispute were certified as disposable on /ay )*, )*$), and free
patents were issued covering the same in favor of the private respondents, the said
lots ceased to be part of the public domain and, therefore, the 8irector of "ands lost
jurisdiction over the same.>
..7epublic v. Court of Appeals,
);)
where the Court stated N
>,roclamation No. #.;, dated 9ctober *, )*.&, of ,resident /agsaysay legally
effected a land grant to the /indanao /edical Center, 3ureau of /edical ervices,
8epartment of =ealth, of the whole lot, validly sufficient for initial registration
under the "and 7egistration Act. uch land grant is constitutive of a <fee simple< title
or absolute title in favor of petitioner /indanao /edical Center. 5hus, ection )--
of the Act, which governs the registration of grants or patents involving public
lands, provides that <?henever public lands in the ,hilippine :slands belonging to
the Dovernment of the Enited tates or to the Dovernment of the ,hilippines are
alienated, granted or conveyed to persons or to public or private corporations, the
same shall be brought forthwith under the operation of this Act '"and 7egistration
Act, Act 1*&+ and shall become registered lands.<>
5he first four cases cited involve petitions to cancel the land patents and the corresponding
certificates of titlesissued to private parties. 5hese four cases uniformly hold that the 8irector
of "ands has no jurisdiction over private lands or that upon issuance of the certificate of title
the land automatically comes under the 5orrens ystem. 5he fifth case cited involves the
registration under the 5orrens ystem of a )-.%-hectare public land granted by the National
Dovernment to /indanao /edical Center, a government unit under the 8epartment of =ealth.
5he National Dovernment transferred the )-.%-hectare public land to serve as the site for the
hospital buildings and other facilities of /indanao /edical Center, which performed a public
service. 5he Court affirmed the registration of the )-.%-hectare public land in the name of
/indanao /edical Center under ection )-- of Act No. 1*&. 5his fifth case is an e2ample of
a public land being registered under Act No. 1*& without the land losing its character as a
property of public dominion.
:n the instant case, the only patent and certificates of title issued are those in the name of ,EA,
a wholly government owned corporation performing public as well as proprietary functions.
No patent or certificate of title has been issued to any private party. No one is as(ing the
8irector of "ands to cancel ,EA<s patent or certificates of title. :n fact, the thrust of the instant
petition is that ,EA<s certificates of title should remain with ,EA, and the land covered by
these certificates, being alienable lands of the public domain, should not be sold to a private
corporation.
7egistration of land under Act No. 1*& or ,8 No. ).-* does not vest in the registrant private
or public ownership of the land. 7egistration is not a mode of ac!uiring ownership but is
merely evidence of ownership previously conferred by any of the recogniFed modes of
ac!uiring ownership. 7egistration does not give the registrant a better right than what the
registrant had prior to the registration.
);-
5he registration of lands of the public domain under
the 5orrens system, by itself, cannot convert public lands into private lands.
);#
0urisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to
government units and entities li(e ,EA. 5he transfer of the Freedom :slands to ,EA was made
subject to the provisions of CA No. )1) as e2pressly stated in pecial ,atent No. #.)$ issued
by then ,resident A!uino, to witA
>N9?, 5=E7EF97E, HN9? IE, that by authority of the Constitution of the
,hilippines and in conformity with the provisions of ,residential 8ecree No. );%1.
supplemented by +ommonwealth *ct ;o. 8<8. as amended, there are hereby
granted and conveyed unto the ,ublic Estates Authority the aforesaid tracts of land
containing a total area of one million nine hundred fifteen thousand eight hundred
ninety four '),*).,%*1+ s!uare meters@ the technical description of which are hereto
attached and made an integral part hereof.> 'Emphasis supplied+
5hus, the provisions of CA No. )1) apply to the Freedom :slands on matters not covered by
,8 No. );%1. ection &; of CA No. )1) prohibits, >e2cept when authoriFed by Congress,> the
sale of alienable lands of the public domain that are transferred to government units or entities.
ection &; of CA No. )1) constitutes, under ection 11 of ,8 No. ).-*, a >statutory lien
affecting title> of the registered land even if not annotated on the certificate of
title.
);1
Alienable lands of the public domain held by government entities under ection &; of
CA No. )1) remain public lands because they cannot be alienated or encumbered unless
Congress passes a law authoriFing their disposition. Congress, however, cannot authoriFe the
sale to private corporations of reclaimed alienable lands of the public domain because of the
constitutional ban. 9nly individuals can benefit from such law.
5he grant of legislative authority to sell public lands in accordance with ection &; of CA No.
)1) does not automatically convert alienable lands of the public domain into private or
patrimonial lands. 5he alienable lands of the public domain must be transferred to !ualified
private parties, or to government entities not tas(ed to dispose of public lands, before these
lands can become private or patrimonial lands. 9therwise, the constitutional ban will become
illusory if Congress can declare lands of the public domain as private or patrimonial lands in
the hands of a government agency tas(ed to dispose of public lands. 5his will allow private
corporations to ac!uire directly from government agencies limitless areas of lands which, prior
to such law, are concededly public lands.
Ender E9 No. .-., ,EA became the central implementing agency of the National
Dovernment to reclaim foreshore and submerged areas of the public domain. 5hus, E9 No.
.-. declares that N
>EKECE5:4E 978E7 N9. .-.
8esignating the ,ublic Estates Authority as the Agency ,rimarily 7esponsible for
all 7eclamation ,rojects
?hereas, there are several reclamation projects which are ongoing or being
proposed to be underta(en in various parts of the country which need to be evaluated
for consistency with national programs@
?hereas, there is a need to give further institutional support to the Dovernment<s
declared policy to provide for a coordinated, economical and efficient reclamation of
lands@
?hereas, ,residential 8ecree No. #-A re!uires that all reclamation of areas shall be
limited to the National Dovernment or any person authoriFed by it under proper
contract@
7hereas. a central authority is needed to act on behalf of the ;ational
-overnment which shall ensure a coordinated and integrated approach in the
reclamation of lands@
7hereas. (residential 5ecree ;o. 8A9< creates the (ublic )states *uthority as a
government corporation to undertaBe reclamation of lands and ensure their
ma'imum utili,ation in promoting public welfare and interests@ and
?hereas, ,residential 8ecree No. )1)& provides the ,resident with continuing
authority to reorganiFe the national government including the transfer, abolition, or
merger of functions and offices.
N9?, 5=E7EF97E, :, FE78:NAN8 E. /A7C9, ,resident of the ,hilippines,
by virtue of the powers vested in me by the Constitution and pursuant to ,residential
8ecree No. )1)&, do hereby order and direct the followingA
ection ). #he (ublic )states *uthority >()*? shall be primarily responsible for
integrating. directing. and coordinating all reclamation pro"ects for and on behalf
of the ;ational -overnment. All reclamation projects shall be approved by the
,resident upon recommendation of the ,EA, and shall be underta(en by the ,EA or
through a proper contract e2ecuted by it with any person or entity@ ,rovided, that,
reclamation projects of any national government agency or entity authoriFed under
its charter shall be underta(en in consultation with the ,EA upon approval of the
,resident.
2 2 2 .>
As the central implementing agency tas(ed to underta(e reclamation projects nationwide, with
authority to sell reclaimed lands, ,EA too( the place of 8EN7 as the government agency
charged with leasing or selling reclaimed lands of the public domain. 5he reclaimed lands
being leased or sold by ,EA are not private lands, in the same manner that 8EN7, when it
disposes of other alienable lands, does not dispose of private lands but alienable lands of the
public domain. 9nly when !ualified private parties ac!uire these lands will the lands become
private lands. $n the hands of the government agency tasBed and authori,ed to dispose of
alienable of disposable lands of the public domain. these lands are still public. not private
lands.
Furthermore, ,EA<s charter e2pressly states that ,EA >shall hold lands of the public domain>
as well as >any and all (inds of lands.> ,EA can hold both lands of the public domain and
private lands. 5hus, the mere fact that alienable lands of the public domain li(e the Freedom
:slands are transferred to ,EA and issued land patents or certificates of title in ,EA<s name
does not automatically ma(e such lands private.
5o allow vast areas of reclaimed lands of the public domain to be transferred to ,EA as
private lands will sanction a gross violation of the constitutional ban on private corporations
from ac!uiring any (ind of alienable land of the public domain. ,EA will simply turn
around, as ()* has now done under the *mended J/*, and transfer several hundreds of
hectares of these reclaimed and still to be reclaimed lands to a single private corporation in
only one transaction. 5his scheme will effectively nullify the constitutional ban in ection #,
Article K:: of the )*%$ Constitution which was intended to diffuse e!uitably the ownership of
alienable lands of the public domain among Filipinos, now numbering over %; million strong.
5his scheme, if allowed, can even be applied to alienable agricultural lands of the public
domain since ,EA can >ac!uire 2 2 2 any and all (inds of lands.> 5his will open the
floodgates to corporations and even individuals ac!uiring hundreds of hectares of alienable
lands of the public domain under the guise that in the hands of ,EA these lands are private
lands. 5his will result in corporations amassing huge landholdings never before seen in this
country - creating the very evil that the constitutional ban was designed to prevent. 5his will
completely reverse the clear direction of constitutional development in this country. 5he )*#.
Constitution allowed private corporations to ac!uire not more than ),;-1 hectares of public
lands.
);.
5he )*$# Constitution prohibited private corporations from ac!uiring any (ind of
public land, and the )*%$ Constitution has une!uivocally reiterated this prohibition.
5he contention of ,EA and A/A7: that public lands, once registered under Act No. 1*& or
,8 No. ).-*, automatically become private lands is contrary to e2isting laws. everal laws
authoriFe lands of the public domain to be registered under the 5orrens ystem or Act No.
1*&, now ,8 No. ).-*, without losing their character as public lands. ection )-- of Act No.
1*&, and ection );# of ,8 No. ).-*, respectively, provide as followsA
Act No. 1*&
>ec. )--. ?henever public lands in the ,hilippine :slands belonging to the 2 2 2
Dovernment of the ,hilippine :slands are alienated, granted, or conveyed to persons
or the public or private corporations, the same shall be brought forthwith under the
operation of this Act and shall become registered lands.>
,8 No. ).-*
>ec. );#. Certificate of 5itle to ,atents. ?henever public land is by the
Dovernment alienated, granted or conveyed to any person, the same shall be
brought forthwith under the operation of this 8ecree.> 'Emphasis supplied+
3ased on its legislative history, the phrase >conveyed to any person> in ection );# of ,8 No.
).-* includes conveyances of public lands to public corporations.
Alienable lands of the public domain >granted, donated, or transferred to a province,
municipality, or branch or subdivision of the Dovernment,> as provided in ection &; of CA
No. )1), may be registered under the 5orrens ystem pursuant to ection );# of ,8 No. ).-*.
uch registration, however, is e2pressly subject to the condition in ection &; of CA No. )1)
that the land >shall not be alienated, encumbered or otherwise disposed of in a manner
affecting its title. e'cept when authori,ed by +ongress.> 5his provision refers to government
reclaimed, foreshore and marshy lands of the public domain that have been titled but still
cannot be alienated or encumbered unless e2pressly authoriFed by Congress. 5he need for
legislative authority prevents the registered land of the public domain from becoming private
land that can be disposed of to !ualified private parties.
5he 7evised Administrative Code of )*%$ also recogniFes that lands of the public domain may
be registered under the 5orrens ystem. ection 1%, Chapter )-, 3oo( : of the Code states N
>ec. 1%. 9fficial AuthoriFed to Convey 7eal ,roperty. ?henever real property of
the Dovernment is authoriFed by law to be conveyed, the deed of conveyance shall
be e2ecuted in behalf of the government by the followingA
')+ 2 2 2
'-+ For property belonging to the 4epublic of the (hilippines. but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the e2ecutive head of the agency or instrumentality.> 'Emphasis supplied+
5hus, private property purchased by the National Dovernment for e2pansion of a public wharf
may be titled in the name of a government corporation regulating port operations in the
country. ,rivate property purchased by the National Dovernment for e2pansion of an airport
may also be titled in the name of the government agency tas(ed to administer the airport.
,rivate property donated to a municipality for use as a town plaFa or public school site may
li(ewise be titled in the name of the municipality.
);&
All these properties become properties of
the public domain, and if already registered under Act No. 1*& or ,8 No. ).-*, remain
registered land. 5here is no re!uirement or provision in any e2isting law for the de-registration
of land from the 5orrens ystem.
,rivate lands ta(en by the Dovernment for public use under its power of eminent domain
become un!uestionably part of the public domain. Nevertheless, ection %. of ,8 No. ).-*
authoriFes the 7egister of 8eeds to issue in the name of the National Dovernment new
certificates of title covering such e2propriated lands. ection %. of ,8 No. ).-* states N
>ec. %.. "and ta(en by eminent domain. ?henever any registered land, or interest
therein, is e2propriated or ta(en by eminent domain, the National Dovernment,
province, city or municipality, or any other agency or instrumentality e2ercising
such right shall file for registration in the proper 7egistry a certified copy of the
judgment which shall state definitely by an ade!uate description, the particular
property or interest e2propriated, the number of the certificate of title, and the nature
of the public use. A memorandum of the right or interest ta(en shall be made on
each certificate of title by the 7egister of 8eeds, and where the fee simple is
ta(en, a new certificate shall be issued in favor of the ;ational -overnment.
province. city. municipality, or any other agency or instrumentality e2ercising such
right for the land so ta(en. 5he legal e2penses incident to the memorandum of
registration or issuance of a new certificate of title shall be for the account of the
authority ta(ing the land or interest therein.> 'Emphasis supplied+
Conse!uently, lands registered under Act No. 1*& or ,8 No. ).-* are not e2clusively private
or patrimonial lands. "ands of the public domain may also be registered pursuant to e2isting
laws.
A/A7: ma(es a parting shot that the Amended 04A is not a sale to A/A7: of the Freedom
:slands or of the lands to be reclaimed from submerged areas of /anila 3ay. :n the words of
A/A7:, the Amended 04A >is not a sale but a joint venture with a stipulation for
reimbursement of the original cost incurred by ,EA for the earlier reclamation and
construction wor(s performed by the C8C, under its )*$# contract with the 7epublic.>
?hether the Amended 04A is a sale or a joint venture, the fact remains that the Amended 04A
re!uires ,EA to >cause the issuance and delivery of the certificates of title conveying
A/A7:<s "and hare in the name of A/A7:.>
);$
5his stipulation still contravenes ection #, Article K:: of the )*%$ Constitution which
provides that private corporations >shall not hold such alienable lands of the public domain
e2cept by lease.> 5he transfer of title and ownership to A/A7: clearly means that A/A7:
will >hold> the reclaimed lands other than by lease. 5he transfer of title and ownership is a
>disposition> of the reclaimed lands, a transaction considered a sale or alienation under CA
No. )1),
);%
the Dovernment Auditing Code,
);*
and ection #, Article K:: of the )*%$
Constitution.
5he 7egalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas
form part of the public domain and are inalienable. "ands reclaimed from foreshore and
submerged areas also form part of the public domain and are also inalienable, unless converted
pursuant to law into alienable or disposable lands of the public domain. =istorically, lands
reclaimed by the government are sui generis, not available for sale to private parties unli(e
other alienable public lands. 7eclaimed lands retain their inherent potential as areas for public
use or public service. Alienable lands of the public domain, increasingly becoming scarce
natural resources, are to be distributed e!uitably among our ever-growing population. 5o
insure such e!uitable distribution, the )*$# and )*%$ Constitutions have barred private
corporations from ac!uiring any (ind of alienable land of the public domain. 5hose who
attempt to dispose of inalienable natural resources of the tate, or see( to circumvent the
constitutional ban on alienation of lands of the public domain to private corporations, do so at
their own ris(.
?e can now summariFe our conclusions as followsA
). 5he ).$.%1 hectares of reclaimed lands comprising the Freedom :slands, now
covered by certificates of title in the name of ,EA, are alienable lands of the public
domain. ,EA may lease these lands to private corporations but may not sell or
transfer ownership of these lands to private corporations. ,EA may only sell these
lands to ,hilippine citiFens, subject to the ownership limitations in the )*%$
Constitution and e2isting laws.
-. 5he .*-.). hectares of submerged areas of /anila 3ay remain inalienable natural
resources of the public domain until classified as alienable or disposable lands open
to disposition and declared no longer needed for public service. 5he government can
ma(e such classification and declaration only after ,EA has reclaimed these
submerged areas. 9nly then can these lands !ualify as agricultural lands of the
public domain, which are the only natural resources the government can alienate. :n
their present state, the .*-.). hectares of submerged areas are inalienable and
outside the commerce of man.
#. ince the Amended 04A see(s to transfer to A/A7:, a private corporation,
ownership of $$.#1 hectares
));
of the Freedom :slands, such transfer is void for
being contrary to ection #, Article K:: of the )*%$ Constitution which prohibits
private corporations from ac!uiring any (ind of alienable land of the public domain.
1. ince the Amended 04A also see(s to transfer to A/A7: ownership of -*;.).&
hectares
)))
of still submerged areas of /anila 3ay, such transfer is void for being
contrary to ection -, Article K:: of the )*%$ Constitution which prohibits the
alienation of natural resources other than agricultural lands of the public domain.
,EA may reclaim these submerged areas. 5hereafter, the government can classify
the reclaimed lands as alienable or disposable, and further declare them no longer
needed for public service. till, the transfer of such reclaimed alienable lands of the
public domain to A/A7: will be void in view of ection #, Article K:: of the )*%$
Constitution which prohibits private corporations from ac!uiring any (ind of
alienable land of the public domain.
Clearly, the Amended 04A violates glaringly ections - and #, Article K:: of the )*%$
Constitution. Ender Article )1;*
))-
of the Civil Code, contracts whose >object or purpose is
contrary to law,> or whose >object is outside the commerce of men,> are >ine2istent and void
from the beginning.> 5he Court must perform its duty to defend and uphold the Constitution,
and therefore declares the Amended J/* null and void ab initio.
&eventh issue: whether the +ourt is the proper forum to raise the issue of whether the
*mended J/* is grossly disadvantageous to the government.
Considering that the Amended 04A is null and void ab initio, there is no necessity to rule on
this last issue. 3esides, the Court is not a trier of facts, and this last issue involves a
determination of factual matters.
?=E7EF97E, the petition is GRANTED. 5he ,ublic Estates Authority and Amari Coastal
3ay 8evelopment Corporation are !ERMANENTL+ EN(OINED from implementing the
Amended 0oint 4enture Agreement which is hereby declared N"LL and VOID ab initio.
9 978E7E8.
G.R. No. 188'57 (a,uary 17, 2''5
RE!"#LI OF T*E !*ILI!!INES, petitioner,
vs.
T*E *ONORA#LE O"RT OF A!!EALS a,- ORA$ON NAG"IT, respondents.
8 E C : : 9 N
TINGA, J.:
5his is a Petition for Review on *ertiorari under 7ule 1. of the )**$ 7ules of Civil
,rocedure, see(ing to review the 8ecision) of the i2th 8ivision of the Court of Appeals
dated 0uly )-, -;;; in CA-D.7. , No. .)*-). 5he appellate court affirmed the decisions of
both the 7egional 5rial Court '75C+,- 3ranch %, of Halibo, A(lan dated February -&, )***,
and the $th /unicipal Circuit 5rial Court '/C5C+# of :bajay-Nabas, A(lan dated February
)%, )**%, which granted the application for registration of a parcel of land of CoraFon Naguit
'Naguit+, the respondent herein.
5he facts are as followsA
9n 0anuary ., )**#, Naguit, a Filipino citiFen, of legal age and married to /anolito . Naguit,
filed with the /C5C of :bajay-Nabas, A(lan, a petition for registration of title of a parcel of
land situated in 3rgy. Enion, Nabas, A(lan. 5he parcel of land is designated as "ot No. );;1*,
Cad. $.%-8, Nabas Cadastre, A, N ;&;1)1-;)1$$*, and contains an area of #),#$1 s!uare
meters. 5he application see(s judicial confirmation of respondentRs imperfect title over the
aforesaid land.
9n February -;, )**., the court held initial hearing on the application. 5he public prosecutor,
appearing for the government, and 0ose Angeles, representing the heirs of 7ustico Angeles,
opposed the petition. 9n a later date, however, the heirs of 7ustico Angeles filed a formal
opposition to the petition. Also on February -;, )**., the court issued an order of general
default against the whole world e2cept as to the heirs of 7ustico Angeles and the government.
5he evidence on record reveals that the subject parcel of land was originally declared for
ta2ation purposes in the name of 7amon Erbano 'Erbano+ in )*1. under 5a2 8eclaration No.
#%%% until )**).1 9n 0uly *, )**-, Erbano e2ecuted a 8eed of Luitclaim in favor of the heirs
of =onorato /aming '/aming+, wherein he renounced all his rights to the subject property
and confirmed the sale made by his father to /aming sometime in )*.. or
)*.&..ubse!uently, the heirs of /aming e2ecuted a deed of absolute sale in favor of
respondent Naguit who thereupon started occupying the same. he constituted /anuel 3lanco,
0r. as her attorney-in-fact and administrator. 5he administrator introduced improvements,
planted trees, such as mahogany, coconut and gemelina trees in addition to e2isting coconut
trees which were then .; to &; years old, and paid the corresponding ta2es due on the subject
land. At present, there are parcels of land surrounding the subject land which have been issued
titles by virtue of judicial decrees. Naguit and her predecessors-in-interest have occupied the
land openly and in the concept of owner without any objection from any private person or
even the government until she filed her application for registration.
After the presentation of evidence for Naguit, the public prosecutor manifested that the
government did not intend to present any evidence while oppositor 0ose Angeles, as
representative of the heirs of 7ustico Angeles, failed to appear during the trial despite notice.
9n eptember -$, )**$, the /C5C rendered a decision ordering that the subject parcel be
brought under the operation of the ,roperty 7egistration 8ecree or ,residential 8ecree ',.8.+
No. ).-* and that the title thereto registered and confirmed in the name of Naguit.&
5he 7epublic of the ,hilippines '7epublic+, thru the 9ffice of the olicitor Deneral '9D+,
filed a motion for reconsideration. 5he 9D stressed that the land applied for was declared
alienable and disposable only on 9ctober )., )*%;, per the certification from 7egional
E2ecutive 8irector 7aoul 5. Deollegue of the 8epartment of Environment and Natural
7esources, 7egion 4:.$ =owever, the court denied the motion for reconsideration in an order
dated February )%, )**%.%1awphi1.n4t
5hereafter, the 7epublic appealed the decision and the order of the /C5C to the 75C, Halibo,
A(lan, 3ranch %. 9n February -&, )***, the 75C rendered its decision, dismissing the
appeal.*
Endaunted, the 7epublic elevated the case to the Court of Appeals via 7ule 1- of the )**$
7ules of Civil ,rocedure. 9n 0uly )-, -;;;, the appellate court rendered a decision dismissing
the petition filed by the 7epublic and affirmed in toto the assailed decision of the 75C.
=ence, the present petition for review raising a pure !uestion of law was filed by the 7epublic
on eptember 1, -;;;.);
5he 9D assails the decision of the Court of Appeals contending that the appellate court
gravely erred in holding that there is no need for the governmentRs prior release of the subject
lot from the public domain before it can be considered alienable or disposable within the
meaning of ,.8. No. ).-*, and that Naguit had been in possession of "ot No. );;1* in the
concept of owner for the re!uired period.))
=ence, the central !uestion for resolution is whether is necessary under ection )1')+ of the
,roperty 7egistration 8ecree that the subject land be first classified as alienable and
disposable before the applicantRs possession under a bona fide claim of ownership could even
start.
5he 9D invo(es our holding in irector of )ands v. "ntermediate %ppellate *ourt)- in
arguing that the property which is in open, continuous and e2clusive possession must first be
alienable. ince the subject land was declared alienable only on 9ctober )., )*%;, Naguit
could not have maintained a bona fide claim of ownership since 0une )-, )*1., as re!uired by
ection )1 of the ,roperty 7egistration 8ecree, since prior to )*%;, the land was not alienable
or disposable, the 9D argues.
ection )1 of the ,roperty 7egistration 8ecree, governing original registration proceedings,
bears close e2amination. :t e2pressly providesA
EC5:9N )1. ?ho may apply.M 5he following persons may file in the proper Court of First
:nstance an application for registration of title to land, whether personally or through their
duly authoriFed representativesA
')+ those who by themselves or through their predecessors-in-interest have been in
open, continuous, e2clusive and notorious possession and occupation of alienable
and disposable lands of the public domain under a bona fide claim of ownership
since 0une )-, )*1., or earlier.
'-+ 5hose who have ac!uired ownership over private lands by prescription under the
provisions of e2isting laws.
. . . .
5here are three obvious re!uisites for the filing of an application for registration of title under
ection )1')+ N that the property in !uestion is alienable and disposable land of the public
domain@ that the applicants by themselves or through their predecessors-in-interest have been
in open, continuous, e2clusive and notorious possession and occupation, and@ that such
possession is under a bona fide claim of ownership since 0une )-, )*1. or earlier.
,etitioner suggests an interpretation that the alienable and disposable character of the land
should have already been established since 0une )-, )*1. or earlier. 5his is not borne out by
the plain meaning of ection )1')+. >ince 0une )-, )*1.,> as used in the provision, !ualifies
its antecedent phrase >under a bonafide claim of ownership.> Denerally spea(ing, !ualifying
words restrict or modify only the words or phrases to which they are immediately associated,
and not those distantly or remotely located.)# %d pro5imum antecedents fiat relation nisi
impediatur sentencia.
3esides, we are mindful of the absurdity that would result if we adopt petitionerRs position.
Absent a legislative amendment, the rule would be, adopting the 9DRs view, that all lands of
the public domain which were not declared alienable or disposable before 0une )-, )*1.
would not be susceptible to original registration, no matter the length of unchallenged
possession by the occupant. uch interpretation renders paragraph ')+ of ection )1 virtually
inoperative and even precludes the government from giving it effect even as it decides to
reclassify public agricultural lands as alienable and disposable. 5he unreasonableness of the
situation would even be aggravated considering that before 0une )-, )*1., the ,hilippines was
not yet even considered an independent state.
:nstead, the more reasonable interpretation of ection )1')+ is that it
merely re!uires the property sought to be registered as already
alienable and disposable at the time the application for registration of
title is filed. :f the tate, at the time the application is made, has not yet
deemed it proper to release the property for alienation or disposition,
the presumption is that the government is still reserving the right to
utiliFe the property@ hence, the need to preserve its ownership in the
tate irrespective of the length of adverse possession even if in good
faith. =owever, if the property has already been classified as alienable
and disposable, as it is in this case, then there is already an intention on
the part of the tate to abdicate its e2clusive prerogative over the
property.
5his reading aligns conformably with our holding in 7epublic v. Court of
Appeals .)1 5herein, the Court noted that >to prove that the land subject of an application
for registration is alienable, an applicant must establish the e2istence of a positive act of the
government such as a presidential proclamation or an e2ecutive order@ an administrative
action@ investigation reports of 3ureau of "ands investigators@ and a legislative act or a
statute.>).:n that case, the subject land had been certified by the 8EN7 as alienable and
disposable in )*%;, thus the Court concluded that the alienable status of the land, compounded
by the established fact that therein respondents had occupied the land even before )*-$,
sufficed to allow the application for registration of the said property. :n the case at bar, even
the petitioner admits that the subject property was released and certified as within alienable
and disposable Fone in )*%; by the 8EN7.)&
5his case is distinguishable from 6racewell v. *ourt of %ppeals,)$ wherein the Court noted
that while the claimant had been in possession since )*;%, it was only in )*$- that the lands in
!uestion were classified as alienable and disposable. 5hus, the bid at registration therein did
not succeed. :n 6racewell, the claimant had filed his application in )*&#, or nine '*+ years
before the property was declared alienable and disposable.1awphi1.n4t 5hus, in this case,
where the application was made years after the property had been certified as alienable and
disposable, the6racewell ruling does not apply.
A different rule obtains for forest lands,)% such as those which form part of a reservation for
provincial par( purposes)* the possession of which cannot ripen into ownership.-; :t is
elementary in the law governing natural resources that forest land cannot be owned by private
persons. As held in Palomo v. *ourt of %ppeals,-) forest land is not registrable and
possession thereof, no matter how lengthy, cannot convert it into private property, unless such
lands are reclassified and considered disposable and alienable.-- :n the case at bar, the
property in !uestion was undisputedly classified as disposable and alienable@ hence, the ruling
in Palomo is inapplicable, as correctly held by the Court of Appeals.-#
:t must be noted that the present case was decided by the lower courts on the basis of ection
)1')+ of the ,roperty 7egistration 8ecree, which pertains to original registration through
ordinary registration proceedings. 5he right to file the application for registration derives from
a bona fide claim of ownership going bac( to 0une )-, )*1. or earlier, by reason of the
claimantRs open, continuous, e2clusive and notorious possession of alienable and disposable
lands of the public domain.
A similar right is given under ection 1%'b+ of the ,ublic "and Act, which readsA
ec. 1%. 5he following described citiFens of the ,hilippines, occupying lands of the public
domain or claiming to own any such land or an interest therein, but those titles have not been
perfected or completed, may apply to the Court of First :nstance of the province where the
land is located for confirmation of their claims and the issuance of a certificate of title
therefor, under the "and 7egistration Act, to witA
222 222 222
'b+ 5hose who by themselves or through their predecessors in interest have been in open,
continuous, e2clusive, and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of ac!uisition of ownership, for at least thirty years
immediately preceding the filing of the application for confirmation of title e2cept when
prevented by war or force majeure. 5hese shall be conclusively presumed to have performed
all the conditions essential to a Dovernment grant and shall be entitled to a certificate of title
under the provisions of this chapter.
?hen the ,ublic "and Act was first promulgated in )*#&, the period of possession deemed
necessary to vest the right to register their title to agricultural lands of the public domain
commenced from 0uly -&, )%*1. =owever, this period was amended by 7.A. No. )*1-, which
provided that the bona fide claim of ownership must have been for at least thirty '#;+ years.
5hen in )*$$, ection 1%'b+ of the ,ublic "and Act was again amended, this time by ,.8. No.
);$#, which pegged the rec(oning date at 0une )-, )*1.. 5his new starting point is concordant
with ection )1')+ of the ,roperty 7egistration 8ecree.
:ndeed, there are no material differences between ection )1')+ of the ,roperty 7egistration
8ecree and ection 1%'b+ of the ,ublic "and Act, as amended. 5rue, the ,ublic "and Act does
refer to >agricultural lands of the public domain,> while the ,roperty 7egistration 8ecree uses
the term >alienable and disposable lands of the public domain.> :t must be noted though that
the Constitution declares that >alienable lands of the public domain shall be limited to
agricultural lands.>-1 Clearly, the subject lands under ection 1%'b+ of the ,ublic "and Act
and ection )1')+ of the ,roperty 7egistration 8ecree are of the same type.
8id the enactment of the ,roperty 7egistration 8ecree and the amendatory ,.8. No. );$#
preclude the application for registration of alienable lands of the public domain, possession
over which commenced only after 0une )-, )*1.O :t did not, considering ection )1'-+ of the
,roperty 7egistration 8ecree, which governs and authoriFes the application of >those who
have ac!uired ownership of private lands by prescription under the provisions of e2isting
laws.>
,rescription is one of the modes of ac!uiring ownership under the Civil Code. -. 5here is a
consistent jurisprudential rule that properties classified as alienable public land may be
converted into private property by reason of open, continuous and e2clusive possession of at
least thirty '#;+ years.-& ?ith such conversion, such property may now fall within the
contemplation of >private lands> under ection )1'-+, and thus susceptible to registration by
those who have ac!uired ownership through prescription. 5hus, even if possession of the
alienable public land commenced on a date later than 0une )-, )*1., and such possession
being been open, continuous and e2clusive, then the possessor may have the right to register
the land by virtue of ection )1'-+ of the ,roperty 7egistration 8ecree.
5he land in !uestion was found to be cocal in nature, it having been planted with coconut trees
now over fifty years old.-$ 5he inherent nature of the land but confirms its certification in
)*%; as alienable, hence agricultural. 5here is no impediment to the application of ection
)1')+ of the ,roperty 7egistration 8ecree, as correctly accomplished by the lower
courts.l7vvphi1.net
5he 9D posits that the Court of Appeals erred in holding that Naguit had been in possession
in the concept of owner for the re!uired period. 5he argument begs the !uestion. :t is again
hinged on the assertionMshown earlier to be unfoundedMthat there could have been no bona
fide claim of ownership prior to )*%;, when the subject land was declared alienable or
disposable.
?e find no reason to disturb the conclusion of both the 75C and the Court of Appeals that
Naguit had the right to apply for registration owing to the continuous possession by her and
her predecessors-in-interest of the land since )*1.. 5he basis of such conclusion is primarily
factual, and the Court generally respects the factual findings made by lower courts. Notably,
possession since )*1. was established through proof of the e2istence of .; to &;-year old trees
at the time Naguit purchased the property as well as ta2 declarations e2ecuted by Erbano in
)*1.. Although ta2 declarations and realty ta2 payment of property are not conclusive
evidence of ownership, nevertheless, they are good indicia of the possession in the concept of
owner for no one in his right mind would be paying ta2es for a property that is not in his actual
or at least constructive possession. 5hey constitute at least proof that the holder has a claim of
title over the property. 5he voluntary declaration of a piece of property for ta2ation purposes
manifests not only oneRs sincere and honest desire to obtain title to the property and announces
his adverse claim against the tate and all other interested parties, but also the intention to
contribute needed revenues to the Dovernment. uch an act strengthens oneRs bona fide claim
of ac!uisition of ownership.-%
Considering that the possession of the subject parcel of land by the respondent can be traced
bac( to that of her predecessors-in-interest which commenced since )*1. or for almost fifty
'.;+ years, it is indeed beyond any cloud of doubt that she has ac!uired title thereto which may
be properly brought under the operation of the 5orrens system. 5hat she has been in
possession of the land in the concept of an owner, open, continuous, peaceful and without any
opposition from any private person and the government itself ma(es her right thereto
undoubtedly settled and deserving of protection under the law.
9*EREFORE, foregoing premises considered, the assailed ecision of the Court of
Appeals dated 0uly )-, -;;; is hereby AFF:7/E8. No costs.
9 978E7E8.
:G.R. No. 127;;2. De/e<ber 1, 2''8=
LA #"GAL-#>LAAN TRI#AL ASSOIATION, IN., Re7re1e,0e- by 301 .a3r<a,
F>LONG MIG"EL M. L"MA+ONG? 9IG#ERTO E. TA@ADA?
!ONIANO #ENNAGEN? (AIME TADEO? RENATO R. ONSTANTINO
(R.? F>LONG AG"STIN M. DA#IE? RO#ERTO !. AMLO+? RAAIM L.
DA#IE? SIMEON *. DOLO(O? IMELDA M. GANDON? LEN+ #.
G"SANAN? MARELO L. G"SANAN? A"INTOL A. LA#"A+AN?
LOMINGGES D. LA9A+? #ENITA !. TA"A+AN? M3,or1 (OL+ L.
#"GO+, Re7re1e,0e- by *31 Fa0.er "NDERO D. #"GO+ a,- ROGER M.
DADING? Re7re1e,0e- by *31 Fa0.er ANTONIO L. DADING? ROM+ M.
LAGARO, Re7re1e,0e- by *31 Fa0.er TOTING A. LAGARO? MIBEN+
(ONG #. L"MA+ONG, Re7re1e,0e- by *31 Fa0.er MIG"EL M.
L"MA+ONG? RENE T. MIG"EL, Re7re1e,0e- by *31 Mo0.er EDIT*A T.
MIG"EL? ALDEMAR L. SAL, Re7re1e,0e- by *31 Fa0.er DANN+ M. SAL?
DAIS+ REARSE, Re7re1e,0e- by *er Mo0.er L+DIA S. SANTOS?
ED9ARD M. EM"+? ALAN !. MAM!ARAIR? MARIO L. MANGAL?
ALDEN S. T"SAN? AM!ARO S. +A!? VIRGILIO "LAR? MARVI M.V.F.
LEONEN? ("LIA REGINA "LAR, GIAN ARLO "LAR, VIRGILIO
"LAR (R., Re7re1e,0e- by T.e3r Fa0.er VIRGILIO "LAR? !A"L
ANTONIO !. VILLAMOR, Re7re1e,0e- by *31 !are,01 (OSE VILLAMOR
a,- ELI$A#ET* !"A-VILLAMOR? ANA GININA R. TAL(A, Re7re1e,0e-
by *er Fa0.er MARIO (OSE #. TAL(A? S*ARMAINE R. "NANAN,
Re7re1e,0e- by *er Fa0.er ALFREDO M. "NANAN? ANTONIO (OSE A.
VIT"G III, Re7re1e,0e- by *31 Mo0.er ANNALI$A A. VIT"G, LEAN D.
NARVADE$, Re7re1e,0e- by *31 Fa0.er MAN"EL E. NARVADE$ (R.?
ROSERIO MARALAG LINGATING, Re7re1e,0e- by *er Fa0.er RIO
OLIM!IO A. LINGATING? MARIO (OSE #. TAL(A? DAVID E. DE VERA?
MARIA MILAGROS L. SAN (OSE? Sr. S"SAN O. #OLANIO, OND?
LOLITA G. DEMONTEVERDE? #EN(IE L. NEA"INTO?
B)C
ROSE LILIA S.
ROMANO? RO#ERTO S. VER$OLA? ED"ARDO A"RELIO . RE+ES?
LEAN LO"EL A. !ERIA, Re7re1e,0e- by *31 Fa0.er EL!IDIO V. !ERIA?
B-C
GREEN FOR"M !*ILI!!INES? GREEN FOR"M 9ESTERN VISA+AS
CGF-9VD? ENVIRONMENTAL LEGAL ASSISTANE ENTER CELAD?
BAISA*AN T"NGO SA BA"NLARAN NG BANA+"NAN AT
RE!ORMANG !ANSABA*AN CBAISA*AND?
B#C
!ARTNERS*I! FOR
AGRARIAN REFORM a,- R"RAL DEVELO!MENT SERVIES, IN.
C!ARRDSD? !*ILI!!INE !ARTNERS*I! FOR T*E DEVELO!MENT OF
*"MAN RESO"RES IN T*E R"RAL AREAS, IN. C!*ILD*RRAD?
9OMEN>S LEGAL #"REA" C9L#D? ENTER FOR ALTERNATIVE
DEVELO!MENT INITIATIVES, IN. CADID? "!LAND DEVELO!MENT
INSTIT"TE C"DID? BINAI+A*AN FO"NDATION, IN.? SENTRO NG
ALTERNATI#ONG LINGA! !ANLIGAL CSALIGAND? a,- LEGAL
RIG*TS AND NAT"RAL RESO"RES ENTER, IN. CLRD, petitioners.
vs. VITOR O. RAMOS, Se/re0ary, De7ar0<e,0 oE E,F3ro,<e,0 a,- Na0ura)
Re1our/e1 CDENRD? *ORAIO RAMOS, D3re/0or, M3,e1 a,- Geo1/3e,/e1
#ureau CMG#-DENRD? R"#EN TORRES, EGe/u03Fe Se/re0ary? a,- 9M
C!*ILI!!INESD, IN.,
B1C
respondents.
R E S O L " T I O N
!ANGANI#AN, J.:
All mineral resources are owned by the tate. 5heir e2ploration, development and
utiliFation 'E8E+ must always be subject to the full control and supervision of the tate.
/ore specifically, given the inade!uacy of Filipino capital and technology in large8scale E8E
activities, the tate may secure the help of foreign companies in all relevant matters --
especially financial and technical assistance -- provided that, at all times, the tate maintains
its right of full control. 5he foreign assistor or contractor assumes all financial, technical and
entrepreneurial ris(s in the E8E activities@ hence, it may be given reasonable management,
operational, mar(eting, audit and other prerogatives to protect its investments and to enable
the business to succeed.
Full control is not anathematic to day-to-day management by the contractor, provided
that the tate retains the power to direct overall strategy@ and to set aside, reverse or modify
plans and actions of the contractor. 5he idea of full control is similar to that which is
e2ercised by the board of directors of a private corporationA the performance of managerial,
operational, financial, mar(eting and other functions may be delegated to subordinate officers
or given to contractual entities, but the board retains full residual control of the business.
?ho or what organ of government actually e2ercises this power of control on behalf of
the tateO 5he Constitution is crystal clearA the !re13-e,0. :ndeed, the Chief E2ecutive is the
official constitutionally mandated to Senter into agreements with foreign owned
corporations.T 9n the other hand, Congress may review the action of the ,resident once it is
notified of Severy contract entered into in accordance with this BconstitutionalC provision
within thirty days from its e2ecution.T :n contrast to this e2press mandate of the ,resident and
Congress in the E8E of natural resources, Article K:: of the Constitution is silent on the role
of the judiciary. =owever, should the ,resident and6or Congress gravely abuse their discretion
in this regard, the courts may -- in a proper case -- e2ercise their residual duty under Article
4:::. Clearly then, the judiciary should not inordinately interfere in the e2ercise of this
presidential power of control over the E8E of our natural resources.
5he Constitution should be read in broad, life-giving stro(es. :t should not be used to
strangulate economic growth or to serve narrow, parochial interests. 7ather, it should be
construed to grant the ,resident and Congress sufficient discretion and reasonable leeway to
enable them to attract foreign investments and e2pertise, as well as to secure for our people
and our posterity the blessings of prosperity and peace.
9n the basis of this control standard, this Court upholds the constitutionality of the
,hilippine /ining "aw, its :mplementing 7ules and 7egulations -- insofar as they relate to
financial and technical agreements -- as well as the subject Financial and 5echnical Assistance
Agreement 'F5AA+.
B.C
!acBground
5he ,etition for ,rohibition and /andamus before the Court challenges the
constitutionality of ')+ 7epublic Act No. B7AC $*1- '5he ,hilippine /ining Act of )**.+@ '-+
its :mplementing 7ules and 7egulations '8EN7 Administrative 9rder No. B8A9C *&-1;+@ and
'#+ the F5AA dated /arch #;, )**.,
B&C
e2ecuted by the government with ?estern /ining
Corporation ',hilippines+, :nc. '?/C,+.
B$C
9n 0anuary -$, -;;1, the Court en banc promulgated its 8ecision
B%C
granting the ,etition and
declaring the unconstitutionality of certain provisions of 7A $*1-, 8A9 *&-1;, as well as of the entire
F5AA e2ecuted between the government and ?/C,, mainly on the finding that F5AAs are 1erF3/e
/o,0ra/01 7ro.3b30e- by 0.e 19;7 o,1030u03o,.
5he 8ecision struc( down the subject F5AA for being similar to service contracts,
B*C
which,
though permitted under the )*$# Constitution,
B);C
were subse!uently denounced for being antithetical
to the principle of sovereignty over our natural resources, because they allowed foreign control over
the e2ploitation of our natural resources, to the prejudice of the Filipino nation.
5he 8ecision !uoted several legal scholars and authors who had criticiFed service
contracts for, inter alia9 vesting in the foreign contractor e5clusive management and control of
the enterprise, including operation of the field in the event petroleum was discovered@ control
of production, e2pansion and development@ nearly unfettered control over the disposition and
sale of the products discovered6e2tracted@ effective ownership of the natural resource at the
point of e2traction@ and beneficial ownership of our economic resources. According to the
8ecision, the )*%$ Constitution 'ection - of Article K::+ effectively banned such service
contracts.
ubse!uently, respondents filed separate /otions for 7econsideration. :n a 7esolution
dated /arch *, -;;1, the Court re!uired petitioners to comment thereon. :n the 7esolution of
0une %, -;;1, it set the case for 9ral Argument on 0une -*, -;;1.
After hearing the opposing sides, the Court re!uired the parties to submit their respective
/emoranda in amplification of their arguments. :n a 7esolution issued later the same day,
0une -*, -;;1, the Court noted, inter alia9 the /anifestation and /otion 'in lieu of comment+
filed by the 9ffice of the olicitor Deneral '9D+ on behalf of public respondents. 5he 9D
said that it was not interposing any objection to the /otion for :ntervention filed by the
Chamber of /ines of the ,hilippines, :nc. 'C/,+ and was in fact joining and adopting the
latterRs /otion for 7econsideration.
/emoranda were accordingly filed by the intervenor as well as by petitioners, public
respondents, and private respondent, dwelling at length on the three issues discussed below.
"ater, ?/C, submitted its 7eply /emorandum, while the 9D -- in obedience to an 9rder
of this Court -- filed a Compliance submitting copies of more F5AAs entered into by the
government.
#hree $ssues $dentified by the +ourt
8uring the 9ral Argument, the Court identified the three issues to be resolved in the
present controversy, as followsA
). =as the case been rendered moot by the sale of ?/C shares in ?/C, to agittarius
'&; percent of agittariusR e!uity is owned by Filipinos and6or Filipino-owned corporations
while 1; percent is owned by :ndophil 7esources N", an Australian company+ and by the
subse!uent transfer and registration of the F5AA from ?/C, to agittariusO
-. Assuming that the case has been rendered moot, would it still be proper to resolve the
constitutionality of the assailed provisions of the /ining "aw, 8A9 *&-1; and the ?/C,
F5AAO
#. ?hat is the proper interpretation of the phrase %greements "nvolving :ither $echnical
or 0inancial %ssistance contained in paragraph 1 of ection - of Article K:: of the
ConstitutionO
&hould the otion for 4econsideration
!e -rantedF
7espondentsR and intervenorRs /otions for 7econsideration should be granted, for the
reasons discussed below. 5he foregoing three issues identified by the Court shall now be
ta(en up seriatim.
F3r10 I11ue%
ootness
:n declaring unconstitutional certain provisions of 7A $*1-, 8A9 *&-1;, and the
?/C, F5AA, the majority 8ecision agreed with petitionersR contention that the subject
F5AA had been e2ecuted in violation of ection - of Article K:: of the )*%$ Constitution.
According to petitioners, the F5AAs entered into by the government with foreign-owned
corporations are limited by the fourth paragraph of the said provision to agreements
involving onl! technical or financial assistance for large-scale e2ploration, development and
utiliFation of minerals, petroleum and other mineral oils. Furthermore, the foreign contractor
is allegedly permitted by the F5AA in !uestion to fully manage and control the mining
operations and, therefore, to ac!uire Sbeneficial ownershipT of our mineral resources.
5he 8ecision merely shrugged off the /anifestation by ?/,C informing the Court ')+
that on 0anuary -#, -;;), ?/C had sold all its shares in ?/C, to agittarius /ines, :nc., &;
percent of whose e!uity was held by Filipinos@ and '-+ that the assailed F5AA had li(ewise
been transferred from ?/C, to agittarius.
B))C
5he ponencia declared that the instant case
had not been rendered moot by the transfer and registration of the F5AA to a Filipino-owned
corporation, and that the validity of the said transfer remained in dispute and awaited final
judicial determination.
B)-C
,atently therefore, the 8ecision is anchored on the assumption that
?/C, had remained a foreign corporation.
5he cru2 of this issue of mootness is the fact that ?/C,, at the time it entered into the
0$%%9 happened to be wholly owned by ?/C 7esources :nternational ,ty., "td. '?/C+,
which in turn was a wholly owned subsidiary of ?estern /ining Corporation =oldings "td., a
publicly listed major Australian mining and e2ploration company.
5he nullity of the F5AA was obviously premised upon the contractor being
a Eore34, corporation. =ad the F5AA been originally issued to a Filipino-owned corporation,
there would have been no constitutionality issue to spea( of. Epon the other hand, the
conveyance of the ?/C, F5AA to a Filipino corporation can be li(ened to the sale of land to
a foreigner who subse!uently ac!uires Filipino citiFenship, or who later resells the same land
to a Filipino citiFen. 5he conveyance would be validated, as the property in !uestion would
no longer be owned by a dis!ualified vendee.
And, inasmuch as the F5AA is to be implemented now by a Filipino corporation, it is no
longer possible for the Court to declare it unconstitutional. 5he case pending in the Court of
Appeals is a dispute between two Filipino companies 'agittarius and "epanto+, both claiming
the right to purchase the foreign shares in ?/C,. o, regardless of which side eventually
wins, the F5AA would still be in the hands of a !ualified Filipino company. Considering that
there is no longer any justiciable controversy, the plea to nullify the /ining "aw has become a
virtual petition for declaratory relief, over which this Court has no original jurisdiction.
:n their Final /emorandum9 however, petitioners argue that the case has not become
moot, considering the invalidity of the alleged sale of the shares in ?/C, from ?/C to
agittarius, and of the transfer of the F5AA from ?/C, to agittarius, resulting in the
change of contractor in the F5AA in !uestion. And even assuming that the said transfers were
valid, there still e2ists an actual case predicated on the invalidity of 7A $*1- and its
:mplementing 7ules and 7egulations '8A9 *&-1;+. ,resently, we shall discuss petitionersR
objections to the transfer of both the shares and the F5AA. (e shall ta2e up the alleged
invalidit! of R% ;94< and %& 9=84> later on in the discussion of the third issue.
;o #ransgression of the +onstitution
by the #ransfer of the 7+( &hares
,etitioners claim, first9 that the alleged invalidity of the transfer of the (M*P shares to
agittarius violates the fourth paragraph of ection - of Article K:: of the
Constitution@ second9 that it is contrary to the provisions of the ?/C, F5AA itself@
and third9 that the sale of the shares is suspect and should therefore be the subject of a case in
which its validity may properly be litigated.
9n the first ground, petitioners assert that paragraph 1 of ection - of Article K::
permits the government to enter into F5AAs only with foreign-owned corporations.
,etitioners insist that the first paragraph of this constitutional provision limits the participation
of Filipino corporations in the e2ploration, development and utiliFation of natural resources to
only three species of contracts -- production sharing, co-production and joint venture -- to the
e2clusion of all other arrangements or variations thereof, and the ?/C, F5AA may therefore
not be validly assumed and implemented by agittarius. "n short9 petitioners claim that a
0ilipino corporation is not allowed b! the *onstitution to enter into an 0$%% with the
government.
=owever, a te2tual analysis of the first paragraph of ection - of Article K:: does not
support petitionersR argument. 5he pertinent part of the said provision statesA ?Sec. <. 5 5 5
$he e5ploration9 development and utili@ation of natural resources shall be under the full
control and supervision of the State. $he State ma! directl! underta2e such activities9 or it
ma! enter into co8production9 'oint venture9 or production8sharing agreements with 0ilipino
citi@ens9 or corporations or associations at least si5t! per centum of whose capital is owned b!
such citi@ens. 5 5 5.A Nowhere in the provision is there any e2press limitation or restriction
insofar as arrangements other than the three aforementioned contractual schemes are
concerned.
Neither can one reasonably discern any implied stricture to that effect. 3esides, there is
no basis to believe that the framers of the Constitution, a majority of whom were obviously
concerned with furthering the development and utiliFation of the countryRs natural resources,
could have wanted to restrict Filipino participation in that area. 5his point is clear, especially
in the light of the overarching constitutional principle of giving preference and priority to
Filipinos and Filipino corporations in the development of our natural resources.
3esides, even assuming 'purely for argumentRs sa(e+ that a constitutional limitation
barring Filipino corporations from holding and implementing an F5AA actually e2ists,
nevertheless, such provision would apply only to the transfer of the F5AA to agittarius, but
definitely not to the sale of ?/CRs e!uity sta(e in ?/C, to agittarius. 9therwise, an
unreasonable curtailment of property rights without due process of law would ensue.
,etitionersR argument must therefore fail.
F#** ;ot $ntended
&olely for Foreign +orporation
E!ually barren of merit is the second ground cited by petitioners -- that the F5AA was
intended to apply solely to a foreign corporation, as can allegedly be seen from the provisions
therein. 5hey manage to cite only one ?/C, F5AA provision that can be regarded as clearly
intended to apply only to a foreign contractorA ection )-, which provides for international
commercial arbitration under the auspices of the :nternational Chamber of Commerce, after
local remedies are e2hausted. 5his provision, however, does not necessarily imply that the
?/C, F5AA cannot be transferred to and assumed by a Filipino corporation li(e
agittarius, in which event the said provision should simpl! be disregarded as a superfluit!.
;o ;eed for a &eparate
6itigation of the &ale of &hares
,etitioners claim as third ground the SsuspiciousT sale of shares from ?/C to
agittarius@ hence, the need to litigate it in a separate case. ection 1; of 7A $*1- 'the
/ining "aw+ allegedly re!uires the ,residentRs prior approval of a transfer.
A re-reading of the said provision, however, leads to a different conclusion. ?Sec.
4>. Assignment65ransfer -- % financial or technical assistance agreement ma! be assigned or
transferred9 in whole or in part9 to a #ualified person sub'ect to the prior approval of the
PresidentB Provided9 $hat the President shall notif! *ongress of ever! financial or technical
assistance agreement assigned or converted in accordance with this provision within thirt!
CD>E da!s from the date of the approval thereof.A
Section 4> e5pressl! applies to the assignment or transfer of the 0$%%9 not to the sale
and transfer of shares of stoc2 in (M*P. /oreover, when the transferee of an F5AA is
another foreigncorporation, there is a logical application of the re!uirement of prior approval
by the ,resident of the 7epublic and notification to Congress in the event of assignment or
transfer of an F5AA. :n this situation, such approval and notification are appropriate
safeguards, considering that the new contractor is the subject of a foreign government.
9n the other hand, when the transferee of the F5AA happens to be
a 0ilipino corporation, the need for such safeguard is not critical@ hence, the lac( of prior
approval and notification may not be deemed fatal as to render the transfer invalid. 3esides, it
is not as if approval by the ,resident is entirely absent in this instance. As pointed out by
private respondent in its /emorandum9
B)#C
the issue of approval is the subject of one of the
cases brought by "epanto against agittarius in D7 No. )&-##). 5hat case involved the
review of the 8ecision of the Court of Appeals dated November -), -;;# in CA-D7 , No.
$1)&), which affirmed the 8EN7 9rder dated 8ecember #), -;;) and the 8ecision of the
9ffice of the ,resident dated 0uly -#, -;;-, both approving the assignment of the ?/C,
F5AA to agittarius.
,etitioners also !uestion the sale price and the financial capacity of the transferee.
According to the 8eed of Absolute ale dated 0anuary -#, -;;), e2ecuted between ?/C and
agittarius, the price of the ?/C, shares was fi2ed at EU*,%$.,;;;, e!uivalent to ,..#
million at an e2change rate of .&A). agittarius had an authoriFed capital stoc( of ,-.;
million and a paid up capital of ,&; million. 5herefore, at the time of approval of the sale by
the 8EN7, the debt-to-e!uity ratio of the transferee was over *A) -- hardly ideal for an F5AA
contractor, according to petitioners.
=owever, private respondents counter that the 8eed of ale specifically provides that
the payment of the purchase price would ta(e place onl! after SagittariusF commencement of
commercial production from mining operations, if at all. Conse!uently, under the
circumstances, we believe it would not be reasonable to conclude, as petitioners did, that the
transfereeRs high debt-to-e!uity ratio per se necessarily carried negative implications for the
enterprise@ and it would certainly be improper to invalidate the sale on that basis, as petitioners
propose.
F#** ;ot /oid.
#hus #ransferrable
5o bolster further their claim that the case is not moot, petitioners insist that the F5AA
is void and, hence cannot be transferred@ and that its transfer does not operate to cure the
constitutional infirmity that is inherent in it@ neither will a change in the circumstances of one
of the parties serve to ratify the void contract.
?hile the discussion in their Final /emorandum was s(impy, petitioners in their
Comment 'on the /7+ did ratiocinate that this Court had declared the F5AA to be void
because, at the time it was e2ecuted with ?/C,, the latter was a fully foreign-owned
corporation, in which the former vested full control and management with respect to the
e2ploration, development and utiliFation of mineral resources, contrary to the provisions of
paragraph 1 of ection - of Article K:: of the Constitution. And since the F5AA was per se
void, no valid right could be transferred@ neither could it be ratified, so petitioners conclude.
,etitioners have assumed as fact that which has yet to be established. 0irst and
foremost, the 8ecision of this Court declaring the F5AA void has not yet become final. 5hat
was precisely the reason the Court still heard 9ral Argument in this case. Second, the F5AA
does not vest in the foreign corporation full control and supervision over the e2ploration,
development and utiliFation of mineral resources, to the e2clusion of the government. 5his
point will be dealt with in greater detail below@ but for now, suffice it to say that a perusal of
the F5AA provisions will prove that the government has effective overall direction and
control of the mining operations, including mar(eting and product pricing, and that the
contractorRs wor( programs and budgets are subject to its review and approval or disapproval.
As will be detailed later on, the government does not have to micro-manage the mining
operations and dip its hands into the day-to-day management of the enterprise in order to be
considered as having overall control and direction. 3esides, for practical and pragmatic
reasons, there is a need for government agencies to delegate certain aspects of the
management wor( to the contractor. 5hus the basis for declaring the F5AA void still has to be
revisited, ree2amined and reconsidered.
,etitioners sniff at the citation of *have@ v. Public :states %uthorit!,
B)1C
and 1alili v. *%,
B).C
claiming that the doctrines in these cases are wholly inapplicable to the instant case.
*have@ clearly teachesA ?$hus9 the *ourt has ruled consistentl! that where a 0ilipino
citi@en sells land to an alien who later sells the land to a 0ilipino9 the invalidit! of the first
transfer is corrected b! the subse#uent sale to a citi@en. Similarl!9 where the alien who bu!s
the land subse#uentl! ac#uires Philippine citi@enship9 the sale is validated since the purpose
of the constitutional ban to limit land ownership to 0ilipinos has been achieved. "n short9 the
law disregards the constitutional dis#ualification of the bu!er to hold land if the land is
subse#uentl! transferred to a #ualified part!9 or the bu!er himself becomes a #ualified
part!.A
B)&C
:n their Comment, petitioners contend that in *have@ and 1alili9 the object of the
transfer 'the land+ was not what was assailed for alleged unconstitutionality. 7ather, it was the
transaction that was assailed@ hence subse!uent compliance with constitutional provisions
would cure its infirmity. :n contrast, in the instant case it is the F5AA itself, the object of the
transfer, that is being assailed as invalid and unconstitutional. o, petitioners claim that the
subse!uent transfer of a void F5AA to a Filipino corporation would not cure the defect.
,etitioners are confusing themselves. 5he present ,etition has been filed, precisely
because the grantee of the F5AA was a wholly owned subsidiary of a foreign corporation. :t
cannot be gainsaid that anyone would have asserted that the same F5AA was void if it had at
the outset been issued to a Filipino corporation. 5he F5AA, therefore, is not per se defective
or unconstitutional. :t was !uestioned only because it had been issued to an allegedly non-
!ualified, foreign-owned corporation.
?e believe that this case is clearly analogous to 1alili9 in which the land ac!uired by a
non-Filipino was re-conveyed to a !ualified vendee and the original transaction was thereby
cured. ,araphrasing1alili9 the same rationale applies to the instant caseA
assuming arguendo the invalidity of its prior grant to a foreign corporation, the disputed
F5AA -- being now held by a Filipino corporation -- can no longer be assailed@ the objective
of the constitutional provision -- to (eep the e2ploration, development and utiliFation of our
natural resources in Filipino hands -- has been served.
/ore accurately spea(ing, the present situation is one degree better than that obtaining
in 1alili9 in which the original sale to a non-Filipino was clearly and indisputably violative of
the constitutional prohibition and thus void ab initio. :n the present case, the issuance6grant of
the subject F5AA to the then foreign-owned ?/C, was not illegal, void or unconstitutional
at the time. 5he matter had to be brought to court, precisely for adjudication as to whether the
F5AA and the /ining "aw had indeed violated the Constitution. ince, up to this point, the
decision of this Court declaring the F5AA void has yet to become final, to all intents and
purposes, the F5AA must be deemed valid and constitutional.
B)$C
At bottom, we find completely outlandish petitionersR contention that an F5AA could be
entered into by the government only with a foreign corporation, never with a 0ilipino
enterprise. :ndeed, the nationalistic provisions of the Constitution are all anchored on the
protection of Filipino interests. =ow petitioners can now argue that foreigners have the
e2clusive right to F5AAs totally overturns the entire basis of the ,etition -- preference for the
Filipino in the e2ploration, development and utiliFation of our natural resources. "t does not
ta2e deep 2nowledge of law and logic to understand that what the *onstitution grants to
foreigners should be e#uall! available to 0ilipinos.
Se/o,- I11ue%
7hether the +ourt +an &till 5ecide the +ase.
)ven *ssuming $t $s oot
All the protagonists are in agreement that the Court has jurisdiction to decide this
controversy, even assuming it to be moot.
,etitioners stress the following points. 0irst, while a case becomes moot and academic
when ?there is no more actual controvers! between the parties or no useful purpose can be
served in passing upon the merits9A
B)%C
what is at issue in the instant case is not only the
validity of the ?/C, F5AA, but also the constitutionality of 7A $*1- and its :mplementing
7ules and 7egulations. Second9 the acts of private respondent cannot operate to cure the law
of its alleged unconstitutionality or to divest this Court of its jurisdiction to decide. $hird9 the
Constitution imposes upon the upreme Court the duty to declare invalid any law that offends
the Constitution.
,etitioners also argue that no amendatory laws have been passed to ma(e the /ining
Act of )**. conform to constitutional strictures 'assuming that, at present, it does not+@ that
public respondents will continue to implement and enforce the statute until this Court rules
otherwise@ and that the said law continues to be the source of legal authority in accepting,
processing and approving numerous applications for mining rights.
:ndeed, it appears that as of 0une #;, -;;-, some 1# F5AA applications had been filed
with the /ines and Deosciences 3ureau '/D3+, with an aggregate area of -,;&1,*;%.&.
hectares -- spread over "uFon, the 4isayas and /indanao
B)*C
-- applied for. :t may be a bit far-
fetched to assert, as petitioners do, that each and every F5AA that was entered into under the
provisions of the /ining Act Sinvites potential litigationT for as long as the constitutional
issues are not resolved with finality. Nevertheless, we must concede that there e5ists the
distinct possibilit! that one or more of the future 0$%%s will be the sub'ect of !et another suit
grounded on constitutional issues.
3ut of e!ual if not greater significance is the cloud of uncertainty hanging over the
mining industry, which is even now scaring away foreign investments. Attesting to this
climate of an2iety is the fact that the Chamber of /ines of the ,hilippines saw the urgent need
to intervene in the case and to present its position during the 9ral Argument@ and that
ecretary Deneral 7omulo Neri of the National Economic 8evelopment Authority 'NE8A+
re!uested this Court to allow him to spea(, during that 9ral Argument, on the economic
conse!uences of the 8ecision of 0anuary -$, -;;1.
B-;C
?e are convinced. (e now agree that the *ourt must recogni@e the e5ceptional
character of the situation and the paramount public interest involved9 as well as the necessit!
for a ruling to put an end to the uncertainties plaguing the mining industr! and the affected
communities as a result of doubts cast upon the constitutionalit! and validit! of the Mining
%ct9 the sub'ect 0$%% and future 0$%%s9 and the need to avert a multiplicit! of
suits. ,araphrasing 3on@ales v. *ommission on :lections9
B-)C
it is evident that strong reasons
of public policy demand that the constitutionality issue be resolved now.
B--C
:n further support of the immediate resolution of the constitutionality issue, public
respondents cite %cop v. 3uingona9
B-#C
to the effect that the courts will decide a !uestion --
otherwise moot and academic -- if it is ?capable of repetition9 !et evading review.A
B-1C
,ublic
respondents as( the Court to avoid a situation in which the constitutionality issue may again
arise with respect to another F5AA, the resolution of which may not be achieved until after it
has become too late for our mining industry to grow out of its infancy. 5hey also
recall Salonga v. *ru@ Pa-o9
B-.C
in which this Court declared that ?CtEhe *ourt also has the
dut! to formulate guiding and controlling constitutional principles9 precepts9 doctrines or
rules. "t has the s!mbolic function of educating the bench and bar on the e5tent of protection
given b! constitutional guarantees. 5 5 5.A
5he mootness of the case in relation to the ?/C, F5AA led the
undersigned ponente to state in his dissent to the 8ecision that there was no more justiciable
controversy and the plea to nullify the /ining "aw has become a virtual petition for
declaratory relief.
B-&C
5he entry of the Chamber of /ines of the ,hilippines, :nc., however, has
put into focus the seriousness of the allegations of unconstitutionality of 7A $*1- and 8A9
*&-1; which converts the case to one for prohibition
B-$C
in the enforcement of the said law and
regulations.
:ndeed, this C/, entry brings to fore that the real issue in this case is whether paragraph
1 of ection - of Article K:: of the Constitution is contravened by 7A $*1- and 8A9 *&-1;,
not whether it was violated by specific acts implementing 7A $*1- and 8A9 *&-1;. SB?Chen
an act of the legislative department is seriously alleged to have infringed the Constitution,
settling the controversy becomes the duty of this Court. 3y the mere enactment of the
!uestioned law or the approval of the challenged action, the dispute is said to have ripened
into a judicial controversy even without any other overt act.T
B-%C
5his ruling can be traced
from $a-ada v. %ngara,
B-*C
in which the Court saidA
S:n see(ing to nullify an act of the ,hilippine enate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. (here an action of the
legislative branch is seriousl! alleged to have infringed the *onstitution9 it becomes not onl!
the right but in fact the dut! of the 'udiciar! to settle the dispute.
2 2 2 2 2 2 2 2 2
SAs this Court has repeatedly and firmly emphasiFed in many cases, it will not shir(, digress
from or abandon its sacred duty and authority to uphold the Constitution in matters that
involve grave abuse of discretion brought before it in appropriate cases, committed by any
officer, agency, instrumentality or department of the government.T
B#;C
Additionally, the entry of C/, into this case has also effectively forestalled any
possible objections arising from the standing or legal interest of the original parties.
For all the foregoing reasons, we believe that the Court should proceed to a resolution of
the constitutional issues in this case.
T.3r- I11ue%
#he (roper $nterpretation of the +onstitutional (hrase
G*greements $nvolving )ither #echnical or Financial *ssistanceH
5he constitutional provision at the nucleus of the controversy is paragraph 1 of ection -
of Article K:: of the )*%$ Constitution. :n order to appreciate its conte2t, ection - is
reproduced in fullA
?Sec. <. %ll lands of the public domain9 waters9 minerals9 coal9 petroleum9 and other mineral
oils9 all forces of potential energ!9 fisheries9 forests or timber9 wildlife9 flora and fauna9 and
other natural resources are owned b! the State. (ith the e5ception of agricultural lands9 all
other natural resources shall not be alienated. $he e5ploration9 development and utili@ation
of natural resources shall be under the full control and supervision of the State. $he State
ma! directl! underta2e such activities9 or it ma! enter into co8production9 'oint venture or
production8sharing agreements with 0ilipino citi@ens or corporations or associations at least
si5t! per centum of whose capital is owned b! such citi@ens. Such agreements ma! be for a
period not e5ceeding twent!8five !ears9 renewable for not more than twent!8five !ears9 and
under such terms and conditions as ma! be provided b! law. "n cases of water rights for
irrigation9 water suppl!9 fisheries9 or industrial uses other than the development of water
power9 beneficial use ma! be the measure and limit of the grant.
?$he State shall protect the nationFs marine wealth in its archipelagic waters9 territorial sea9
and e5clusive economic @one9 and reserve its use and en'o!ment e5clusivel! to 0ilipino
citi@ens.
?$he *ongress ma!9 b! law9 allow small8scale utili@ation of natural resources b! 0ilipino
citi@ens9 as well as cooperative fish farming9 with priorit! to subsistence fishermen and fish8
wor2ers in rivers9 la2es9 ba!s and lagoons.
?$he President ma! enter into agreements with foreign8owned corporations involving either
technical or financial assistance for large%scale e'ploration. development. and utili,ation of
minerals. petroleum. and other mineral oils according to the general terms and conditions
provided b! law9 based on real contributions to the economic growth and general welfare of
the countr!. "n such agreements9 the State shall promote the development and use of local
scientific and technical resources.
?$he President shall notif! the *ongress of ever! contract entered into in accordance with
this provision9 within thirt! da!s from its e5ecution.A
B#)C
;o 4estriction of eaning by
a Verba Le431 $nterpretation
5o interpret the foregoing provision, petitioners adamantly assert that the language of
the Constitution should prevail@ that the primary method of interpreting it is to see( the
ordinary meaning of the words used in its provisions. 5hey rely on rulings of this Court, such
as the followingA
?$he fundamental principle in constitutional construction however is that the primar! source
from which to ascertain constitutional intent or purpose is the language of the provision itself.
$he presumption is that the words in which the constitutional provisions are couched e5press
the ob'ective sought to be attained. "n other words9 verba legis prevails. &nl! when the
meaning of the words used is unclear and e#uivocal should resort be made to e5traneous aids
of construction and interpretation9 such as the proceedings of the *onstitutional *ommission
or *onvention to shed light on and ascertain the true intent or purpose of the provision being
construed.A
B#-C
4ery recently, in 0rancisco v. $he 1ouse of Representatives9
B##C
this Court indeed had
the occasion to reiterate the well-settled principles of constitutional constructionA
?0irst9 verba legis9 that is9 wherever possible9 the words used in the *onstitution must be
given their ordinar! meaning e5cept where technical terms are emplo!ed. 5 5 5.
5 5 5 5 5 5 5 5 5
?Second9 where there is ambiguit!9 ratio legis est anima. $he words of the *onstitution
should be interpreted in accordance with the intent of its framers. 5 5 5.
5 5 5 5 5 5 5 5 5
?0inall!9 ut magis valeat !uam pereat. $he *onstitution is to be interpreted as a whole.A
B#1C
For ease of reference and in consonance with verba legis, we reconstruct and stratify the
afore!uoted ection - as followsA
). All natural resources are owned by the tate. E2cept for agricultural lands, natural
resources cannot be alienated by the tate.
-. 5he e2ploration, development and utiliFation 'E8E+ of natural resources shall be under the
full control and supervision of the tate.
#. 5he tate may underta(e these E8E activities through either of the followingA
'a+ 3y itself directly and solely
'b+ 3y 'i+ co-production@ 'ii+ joint venture@ or 'iii+ production sharing agreements with Filipino
citiFens or corporations, at least &; percent of the capital of which is owned by such citiFens
1. Small8scale utiliFation of natural resources may be allowed by law in favor of Filipino
citiFens.
.. For large8scale E8E of minerals, petroleum and other mineral oils, the ,resident may enter
into Sagreements with foreign-owned corporations involving either technical or financial
assistance according to the general terms and conditions provided by law 2 2 2.T
Note that in all the three foregoing mining activities -- e5ploration9 development and
utili@ation -- the tate may underta(e such E8E activities by itself or in tandem with Filipinos
or Filipino corporations, e2cept in two instancesA first, in small-scale utiliFation of natural
resources, which Filipinos may be allowed by law to underta(e@ and second, in large-scale
E8E of minerals, petroleum and mineral oils, which may be underta(en by the tate via
Sagreements with foreign8owned corporations involving either technical or financial
assistanceT as provided by law.
,etitioners claim that the phrase ?agreements 5 5 5 involving either technical or
financial assistanceA simply means technical assistance or financial assistance agreements,
nothing more and nothing else. 5hey insist that there is no ambiguity in the phrase, and that a
plain reading of paragraph 1 !uoted above leads to the inescapable conclusion that what a
foreign-owned corporation may enter into with the government is merely an agreement
for either financial or technical assistance onl!, for the large-scale e2ploration, development
and utiliFation of minerals, petroleum and other mineral oils@ such a limitation, they argue,
e2cludes foreign management and operation of a mining enterprise.
B#.C
5his restrictive interpretation, petitioners believe, is in line with the general policy
enunciated by the Constitution reserving to Filipino citiFens and corporations the use and
enjoyment of the countryRs natural resources. 5hey maintain that this CourtRs 8ecision
B#&C
of
0anuary -$, -;;1 correctly declared the ?/C, F5AA, along with pertinent provisions of 7A
$*1-, void for allowing a foreign contractor to have direct and e2clusive management of a
mining enterprise. Allowing such a privilege not only runs counter to the Sfull control and
supervisionT that the tate is constitutionally mandated to e2ercise over the e2ploration,
development and utiliFation of the countryRs natural resources@ doing so also vests in the
foreign company Sbeneficial ownershipT of our mineral resources. :t will be recalled that the
8ecision of 0anuary -$, -;;1 Feroed in on Smanagement or other forms of assistanceT or other
activities associated with the Sservice contractsT of the martial law regime, since ?the
management or operation of mining activities b! foreign contractors9 which is the primar!
feature of service contracts9 was precisel! the evil that the drafters of the 19G; *onstitution
sought to eradicate.A
9n the other hand, the intervenor
B#$C
and public respondents argue that the F5AA
allowed by paragraph 1 is not merely an agreement for supplying limited and specific financial
or technical services to the tate. 7ather, such F5AA is a comprehensive agreement for the
foreign-owned corporationRs integrated e2ploration, development and utiliFation of mineral,
petroleum or other mineral oils on a large-scale basis. 5he agreement, therefore, authoriFes
the foreign contractorRs rendition of a whole range of integrated and comprehensive services,
ranging from the discovery to the development, utiliFation and production of minerals or
petroleum products.
?e do not see how applying a strictly literal or verba legis interpretation of paragraph 1
could ine2orably lead to the conclusions arrived at in the ponencia. 0irst, the draftersR choice
of words -- their use of the phrase agreements 5 5 5 involving either technical or financial
assistance -- does not indicate the intent to e5clude other modes of assistance. 5he drafters
opted to use involving when they could have simply said agreements for financial or technical
assistance9 if that was their intention to begin with. :n this case, the limitation would be very
clear and no further debate would ensue.
:n contrast, the use of the word SinvolvingT signifies the 7o113b3)30y oE 0.e 3,/)u13o, oE
o0.er Eor<1 oE a11310a,/e or a/03F303e1 having to do with, otherwise related to or compatible
with financial or technical assistance. 5he word SinvolvingT as used in this conte2t has three
connotations that can be differentiated thusA one9 the sense of Sconcerning,T Shaving to do
with,T or SaffectingT@ two, Sentailing,T Sre!uiring,T SimplyingT or SnecessitatingT@ and three,
Sincluding,T ScontainingT or Scomprising.T
B#%C
,lainly, none of the three connotations convey a sense of e2clusivity. /oreover, the
word Sinvolving,T when understood in the sense of Sincluding,T as in including technical or
financial assistance9necessarily implies that there are activities other than those that are being
included. :n other words, if an agreement includes technical or financial assistance, there is
apart from such assistance -- something else already in, and covered or may be covered by, the
said agreement.
:n short, it allows for the possibility that matters, other than those e2plicitly mentioned,
could be made part of the agreement. 5hus, we are now led to the conclusion that the use of
the word SinvolvingT implies that these agreements with foreign corporations are not limited
to mere financial or technical assistance. 5he difference in sense becomes very apparent when
we ju2tapose Sagreements fortechnical or financial assistanceT against
Sagreements including technical or financial assistance.T 5his much is unalterably clear in
a verba legis approach.
Second, if the real intention of the drafters was to confine foreign corporations to
financial or technical assistance and nothing more, their language would have certainly been
so u,<310aHab)y re10r3/03Fe a,- 10r3,4e,0 as to leave no doubt in anyoneRs mind about their
true intent. For e2ample, they would have used the sentence foreign corporations
are absolutely prohibited from involvement in the management or operation of mining or
similar ventures or words of similar import. A search for such stringent wording yields
negative results. #hus. we come to the inevitable conclusion that there was a conscious and
deliberate decision to avoid the use of restrictive wording that bespeaBs an intent not to use
the e'pression Gagreements ' ' ' involving either technical or financial assistanceH in an
e'clusionary and limiting manner.
5eletion of G&ervice +ontractsH to
*void (itfalls of (revious +onstitutions.
;ot to !an &ervice +ontracts (er &e
5hird, we do not see how a verba legis approach leads to the conclusion that ?the
management or operation of mining activities b! foreign contractors9 which is the primar!
feature of service contracts9 was precisel! the evil that the drafters of the 19G; *onstitution
sought to eradicate.A Nowhere in the above-!uoted ection can be discerned the objective to
(eep out of foreign hands the management or operation of mining activities or the plan to
eradicate service contracts as these were understood in the )*$# Constitution. till, petitioners
maintain that the deletion or omission from the )*%$ Constitution of the term Sservice
contractsT found in the )*$# Constitution sufficiently proves the draftersR intent to e2clude
foreigners from the management of the affected enterprises.
5o our mind, however, such intent cannot be definitively and conclusively
established from the mere failure to carry the same e2pression or term over to the new
Constitution, absent a more specific, e2plicit and une!uivocal statement to that effect. ?hat
petitioners see( 'a complete ban on foreign participation in the management of mining
operations, as previously allowed by the earlier Constitutions+ is nothing short of bringing
about a momentous sea change in the economic and developmental policies@ and the
fundamentally capitalist, free-enterprise philosophy of our government. ?e cannot imagine
such a radical shift being underta(en by our government, to the great prejudice of the mining
sector in particular and our economy in general, merely on the basis of the omission of the
terms service contract from or the failure to carry them over to the new Constitution. 5here
has to be a much more definite and even unarguable basis for such a drastic reversal of
policies.
0ourth9 a literal and restrictive interpretation of paragraph 1, such as that proposed by
petitioners, suffers from certain internal logical inconsistencies that generate ambiguities in the
understanding of the provision. As the intervenor pointed out, there has never been any
constitutional or statutory provision that reserved to Filipino citiFens or corporations, at least
&; percent of which is Filipino-owned, the rendition of financial or technical assistance to
companies engaged in mining or the development of any other natural resource. 5he ta(ing
out of foreign-currency or peso-denominated loans or any other (ind of financial assistance, as
well as the rendition of technical assistance -- whether to the tate or to any other entity in the
,hilippines -- has never been restricted in favor of Filipino citiFens or corporations having a
certain minimum percentage of Filipino e!uity. uch a restriction would certainly be
preposterous and unnecessary. As a matter of fact, financial, and even technical
assistance,regardless of the nationality of its source, would be welcomed in the mining
industry anytime with open arms, on account of the dearth of local capital and the need to
continually update technological (now-how and improve technical s(ills.
5here was therefore no need for a constitutional provision specifically allowing foreign-
owned corporations to render financial or technical assistance, whether in respect of mining or
some other resource development or commercial activity in the ,hilippines. T.e )a10 7o3,0
,ee-1 0o be e<7.a136e-% 3E <ere)y E3,a,/3a) or 0e/.,3/a) a11310a,/e a4ree<e,01 are
a))oIe-, 0.ere Iou)- be ,o ,ee- 0o )3<30 0.e< 0o large%scale mining operations. a1 0.ere
Iou)- be Ear 4rea0er ,ee- Eor 0.e< 3, 0.e 1<a))er-1/a)e <3,3,4 a/03F303e1 Ca,- eFe, 3,
,o,-<3,3,4 area1D. ObF3ou1)y, 0.e 7roF313o, 3, Jue103o, Ia1 3,0e,-e- 0o reEer 0o
a4ree<e,01 o0.er 0.a, 0.o1e Eor <ere E3,a,/3a) or 0e/.,3/a) a11310a,/e.
:n li(e manner, there would be no need to re!uire the ,resident of the 7epublic to report
to Congress, if only financial or technical assistance agreements are involved. uch
agreements are in the nature of foreign loans that -- pursuant to ection -; of Article 4::
B#*C
of
the )*%$ Constitution -- the ,resident may contract or guarantee, merely with the prior
concurrence of the /onetary 3oard. :n turn, the 3oard is re!uired to report to
Congress within thirt! da!s from the end of ever! #uarter of the calendar !ear9 not thirty days
after the agreement is entered into.
And if paragraph 1 permits only agreements for loans and other forms of financial, or
technical assistance, what is the point of re!uiring that they be based on real contributions to
the economic growth and general welfare of the countr!O For instance, how is one to measure
and assess the Sreal contributionsT to the Seconomic growthT and Sgeneral welfareT of the
country that may ensue from a foreign-currency loan agreement or a technical-assistance
agreement for, say, the refurbishing of an e2isting power generating plant for a mining
operation somewhere in /indanaoO uch a criterion would ma(e more sense when applied to
a major business investment in a principal sector of the industry.
5he conclusion is clear and inescapable -- a verba legis construction shows that
paragraph 1 is not to be understood as one limited only to foreign loans 'or other forms of
financial support+ and to technical assistance. 5here is definitely more to it than that. T.e1e
are 7roF313o,1 7er<3003,4 7ar03/37a03o, by Eore34, /o<7a,3e1? reJu3r3,4 0.e !re13-e,0>1
re7or0 0o o,4re11? a,- u13,4, a1 yar-103/H, /o,0r3bu03o,1 ba1e- o, e/o,o<3/ 4roI0.
a,- 4e,era) Ie)Eare. T.e1e Iere ,e30.er a//3-e,0a))y 3,1er0e- 3,0o 0.e o,1030u03o, ,or
/are)e11)y /obb)e- 0o4e0.er by 0.e -raE0er1 3, )37 1erF3/e 0o 1.a))oI ,a03o,a)31<. 5he
provisions patently have significance and usefulness in a conte2t that allows agreements with
foreign companies to include more than mere financial or technical assistance.
0ifth, it is argued that ection - of Article K:: authoriFes nothing more than a rendition
of specific and limited financial service or technical assistance by a foreign company. 5his
argument begs the !uestion S5o whom or for whom would it be renderedTO or ?ho is being
assistedO :f the answer is S5he tate,T then it necessarily implies that the tate itself is the
one directl! and solel! underta(ing the large-scale e2ploration, development and utiliFation of
a mineral resource, so it follows that the tate must itself bear the liability and cost of repaying
the financing sourced from the foreign lender and6or of paying compensation to the foreign
entity rendering technical assistance.
=owever, it is of common (nowledge, and of judicial notice as well, that the
government is and has for many many years been financially strapped, to the point that even
the most essential services have suffered serious curtailments -- education and health care, for
instance, not to mention judicial services -- have had to ma(e do with inade!uate budgetary
allocations. 5hus, government has had to resort to build-operate-transfer and similar
arrangements with the private sector, in order to get vital infrastructure projects built without
any governmental outlay.
5he very recent brouhaha over the gargantuan Sfiscal crisisT or Sbudget deficitT merely
confirms what the ordinary citiFen has suspected all along. After the reality chec(, one will
have to admit the implausibility of a direct underta(ing -- by the tate itself -- of large8
scale e2ploration, development and utiliFation of minerals, petroleum and other mineral oils.
uch an underta(ing entails not only humongous capital re!uirements, but also the attendant
ris( of never finding and developing economically viable !uantities of minerals, petroleum
and other mineral oils.
B1;C
:t is e!ually difficult to imagine that such a provision restricting foreign companies to
the rendition of only financial or technical assistance to the government was deliberately
crafted by the drafters of the Constitution, who were all well aware of the capital-intensive and
technology-oriented nature of large-scale mineral or petroleum e2traction and the countryRs
deficiency in precisely those areas.
B1)C
5o say so would be tantamount to asserting that the
provision was purposely designed to ladle the large-scale development and utiliFation of
mineral, petroleum and related resources with impossible conditions@ and to remain forever
and permanently SreservedT for future generations of Filipinos.
* ore 4easonable 6ooB
at the +harterIs (lain 6anguage
Si5th9 we shall now loo( closer at the plain language of the Charter and e2amining the
logical inferences. 5he drafters chose to emphasiFe and highlight agreements 5 5 5 involving
either technical or financial assistance in relation to foreign corporationsR participation in
large-scale E8E. 5he inclusion of this clause on Stechnical or financial assistanceT recogniFes
the fact that foreign business entities and multinational corporations are the ones with the
resources and (now-how to provide technical and6or financial assistance of the magnitude and
type re!uired for large-scale e2ploration, development and utiliFation of these resources.
5he drafters -- whose ran(s included many academicians, economists, businessmen,
lawyers, politicians and government officials -- were not unfamiliar with the practices of
foreign corporations and multinationals.
Neither were they so naVve as to believe that these entities would provide SassistanceT
without conditionalities or some #uid pro #uo. 8efinitely, as business persons well (now and
as a matter of judicial notice, this matter is not just a !uestion of signing a promissory note or
e2ecuting a technology transfer agreement. Foreign corporations usually re!uire that they be
given a say in the management, for instance, of day-to-day operations of the joint venture.
5hey would demand the appointment of their own men as, for e2ample, operations managers,
technical e2perts, !uality control heads, internal auditors or comptrollers. Furthermore, they
would probably re!uire seats on the 3oard of 8irectors -- all these to ensure the success of the
enterprise and the repayment of the loans and other financial assistance and to ma(e certain
that the funding and the technology they supply would not go to waste. Eltimately, they
would also want to protect their business reputation and bottom lines.
B1-C
:n short, the drafters will have to be credited with enough pragmatism and savvy to
(now that these foreign entities will not enter into such Sagreements involving assistanceT
without re!uiring arrangements for the protection of their investments, gains and benefits.
5hus, by specifying such Sagreements involving assistance,T the drafters necessarily
gave implied assent to everything that these agreements necessarily entailed@ or that could
reasonably be deemed necessary to ma(e them tenable and effective, including management
authority with respect to the day-to-day operations of the enterprise and measures for the
protection of the interests of the foreign corporation, ,794:8E8 5=A5 ,hilippine
sovereignty over natural resources and full control over the enterprise underta(ing the E8E
activities remain firmly in the tate.
(etitionersI #heory 5eflated by the
*bsence of +losing%1ut 4ules or -uidelines
Seventh and final point regarding the plain-language approach, one of the practical
difficulties that results from it is the fact that there is nothing by way of transitory provisions
that would serve to confirm the theory that the omission of the term Sservice contractT from
the )*%$ Constitution signaled the demise of service contracts.
5he framers (new at the time they were deliberating that there were various service
contracts e2tant and in force and effect, including those in the petroleum industry. /any of
these service contracts were long-term '-. years+ and had several more years to run. "f the!
had meant to ban service contracts altogether9 the! would have had to provide for the
termination or pretermination of the e5isting contracts. %ccordingl!9 the! would have supplied
the specifics and the when and how of effecting the e5tinguishment of these e5isting contracts
Cor at least the mechanics for determining themEH and of putting in place the means to address
the 'ust claims of the contractors for compensation for their investments9 lost opportunities9
and so on9 if not for the recover! thereof.
:f the framers had intended to put an end to service contracts, they would have at least
left specific instructions to Congress to deal with these closing-out issues, perhaps by way of
general guidelines and a timeline within which to carry them out. 5he following are some
e2tant e2amples of such transitory guidelines set forth in Article K4::: of our ConstitutionA
?Section <D. %dvertising entities affected b! paragraph C<E9 Section 11 of %rticle IJ" of this
*onstitution shall have five !ears from its ratification to compl! on a graduated and
proportionate basis with the minimum 0ilipino ownership re#uirement therein.
2 2 2 2 2 2 2 2 2
?Section <K. %fter the e5piration in 1991 of the %greement between the Republic of the
Philippines and the +nited States of %merica concerning militar! bases9 foreign militar!
bases9 troops9 or facilities shall not be allowed in the Philippines e5cept under a treat! dul!
concurred in b! the Senate and9 when the *ongress so re#uires9 ratified b! a ma'orit! of the
votes cast b! the people in a national referendum held for that purpose9 and recogni@ed as a
treat! b! the other contracting State.
?Section <=. $he authorit! to issue se#uestration or free@e orders under Proclamation ,o. D
dated March <K9 19G= in relation to the recover! of ill8gotten wealth shall remain operative
for not more than eighteen months after the ratification of this *onstitution. 1owever9 in the
national interest9 as certified b! the President9 the *ongress ma! e5tend such period.
% se#uestration or free@e order shall be issued onl! upon showing of a prima facie case. $he
order and the list of the se#uestered or fro@en properties shall forthwith be registered with the
proper court. 0or orders issued before the ratification of this *onstitution9 the corresponding
'udicial action or proceeding shall be filed within si5 months from its ratification. 0or those
issued after such ratification9 the 'udicial action or proceeding shall be commenced within si5
months from the issuance thereof.
$he se#uestration or free@e order is deemed automaticall! lifted if no 'udicial action or
proceeding is commenced as herein provided.A
C<3D
:t is inconceivable that the drafters of the Constitution would leave such an important
matter -- an e2pression of sovereignty as it were -- indefinitely hanging in the air in a formless
and ineffective state. :ndeed, the complete absence of even a general framewor( only serves
to further deflate petitionersR theory, li(e a childRs balloon losing its air.
Ender the circumstances, the logical inconsistencies resulting from petitionersR literal
and purely verba legis approach to paragraph 1 of ection - of Article K:: compel a resort to
other aids to interpretation.
(etitionersI (osture *lso ;egated
by Ra03o Le431 E0 A,3<a
5hus9 in order to resolve the inconsistencies9 incongruities and ambiguities encountered
and to suppl! the deficiencies of the plain8language approach9 there is a need for recourse to
the proceedings of the 19G= *onstitutional *ommission. 5here is a need for ratio legis et
anima.
&ervice +ontracts ;ot
G5econstitutionali,edH
,ertinent portions of the deliberations of the members of the Constitutional Commission
'ConCom+ conclusively show that they discussed agreements involving either technical or
financial assistancein the same breadth as service contracts and used the terms
interchangeably. 5he following e2change between Commissioner 0amir 'sponsor of the
provision+ and Commissioner uareF irrefutably proves that the Sagreements involving
technical or financial assistanceT were none other than service contracts.
5=E ,7E:8EN5. Commissioner 0amir is recogniFed. ?e are still on ection #.
/7. 0A/:7. Ies, /adam ,resident. ?ith respect to the second paragraph of
ection #, my amendment by substitution readsA 5=E ,7E:8EN5 /AI
EN5E7 :N59 AD7EE/EN5 ?:5= F97E:DN-9?NE8
C97,97A5:9N :N49"4:ND E:5=E7 5EC=N:CA" 97 F:NANC:A"
A:5ANCE F97 "A7DE-CA"E EK,"97A5:9N, 8E4E"9,/EN5
AN8 E5:":JA5:9N 9F NA5E7A" 7E9E7CE ACC978:ND 59
5=E 5E7/ AN8 C9N8:5:9N ,794:8E8 3I "A?.
/7. 4:""EDA. 5he Committee accepts the amendment. Commissioner uareF
will give the bac(ground.
/7. 0A/:7. 5han( you.
5=E ,7E:8EN5. Commissioner uareF is recogniFed.
/7. EA7EJ. 5han( you, /adam ,resident.
?ill Commissioner 0amir answer a few clarificatory !uestionsO
/7. 0A/:7. Ies, /adam ,resident.
/7. EA7EJ. 5his particular portion of the section has reference to I.a0 Ia1
7o7u)ar)y H,oI, beEore a1 1erF3/e /o,0ra/01, among other things, is that
correctO
/7. 0A/:7. Ies, /adam ,resident.
/7. EA7EJ. As it is formulated, the ,resident may enter into 1erF3/e
/o,0ra/01 but subject to the guidelines that may be promulgated by
CongressO
/7. 0A/:7. 5hat is correct.
/7. EA7EJ. 5herefore, that aspect of negotiation and consummation will fall
on the ,resident, not upon CongressO
/7. 0A/:7. 5hat is also correct, /adam ,resident.
/7. EA7EJ. E2cept that all of 0.e1e /o,0ra/01, 1erF3/e or o0.erI31e, must be
made strictly in accordance with guidelines prescribed by CongressO
/7. 0A/:7. 5hat is also correct.
/7. EA7EJ. And the Dentleman is thin(ing in terms of a law that uniformly
covers situations of the same natureO
/7. 0A/:7. 5hat is );; percent correct.
/7. EA7EJ. : than( the Commissioner.
/7. 0A/:7. 5han( you very much.
B11C
5he following e2change leaves no doubt that the commissioners (new e2actly what they
were dealing withA service contracts.
5=E ,7E:8EN5. Commissioner Dascon is recogniFed.
/7. DAC9N. Commissioner 0amir had proposed an amendment with regard to
special 1erF3/e /o,0ra/01 which was accepted by the Committee. ince the
Committee has accepted it, : would li(e to as( some !uestions.
5=E ,7E:8EN5. Commissioner Dascon may proceed.
/7. DAC9N. As it is proposed now, such 1erF3/e /o,0ra/01 will be entered
into by the ,resident with the guidelines of a general law on 1erF3/e
/o,0ra/0 to be enacted by Congress. :s that correctO
/7. 4:""EDA. 5he Commissioner is right, /adam ,resident.
/7. DAC9N. According to the original proposal, if the ,resident were to enter
into a particular agreement, he would need the concurrence of Congress.
Now that it has been changed by the proposal of Commissioner 0amir in that
Congress will set the general law to which the ,resident shall comply, the
,resident will, therefore, not need the concurrence of Congress every time
he enters into 1erF3/e /o,0ra/01. :s that correctO
/7. 4:""EDA. 5hat is right.
/7. DAC9N. 5he proposed amendment of Commissioner 0amir is in indirect
contrast to my proposed amendment, so : would li(e to object and present
my proposed amendment to the body.
2 2 2 2 2 2 2 2 2
/7. DAC9N. Ies, it will be up to the body.
: feel that the general law to be set by Congress as regard 1erF3/e /o,0ra/0
a4ree<e,01 which the ,resident will enter into might be too general or since
we do not (now the content yet of such a law, it might be that certain
agreements will be detrimental to the interest of the Filipinos. 5his is in
direct contrast to my proposal which provides that there be effective
constraints in the implementation of 1erF3/e /o,0ra/01.
o instead of a general law to be passed by Congress to serve as a guideline to the
,resident when entering into 1erF3/e /o,0ra/0 a4ree<e,01, : propose that
every 1erF3/e /o,0ra/0 entered into by the ,resident would need the
concurrence of Congress, so as to assure the Filipinos of their interests with
regard to the issue in ection # on all lands of the public domain. /y
alternative amendment, which we will discuss later, readsA 5=A5 5=E
,7E:8EN5 =A"" EN5E7 :N59 EC= AD7EE/EN5 9N"I ?:5=
5=E C9NCE77ENCE 9F 5?9-5=:78 495E 9F A"" 5=E
/E/3E7 9F C9ND7E :55:ND E,A7A5E"I.
2 2 2 2 2 2 2 2 2
/7. 3ENDJ9N. 5he reason we made that shift is that we realiFed the original
proposal could breed corruption. 3y the way, this is not just confined
to 1erF3/e /o,0ra/01 but also to E3,a,/3a) a11310a,/e. :f we are going to
ma(e every single contract subject to the concurrence of Congress N which,
according to the CommissionerRs amendment is the concurrence of two-
thirds of Congress voting separately N then ')+ there is a very great chance
that each contract will be different from another@ and '-+ there is a great
temptation that it would breed corruption because of the great lobbying that
is going to happen. And we do not want to subject our legislature to that.
Now, to answer the CommissionerRs apprehension, by Sgeneral law,T we do not mean
statements of motherhood. Congress can build all the restrictions that it wishes into that
general law so that every contract entered into by the ,resident under that specific area will
have to be uniform. 5he ,resident has no choice but to follow all the guidelines that will be
provided by law.
/7. DAC9N. 3ut my basic problem is that we do not (now as of yet the
contents of such a general law as to how much constraints there will be in it.
And to my mind, although the CommitteeRs contention that the regular
concurrence from Congress would subject Congress to e2tensive lobbying, :
thin( that is a ris( we will have to ta(e since Congress is a body of
representatives of the people whose membership will be changing regularly
as there will be changing circumstances every time certain agreements are
made. :t would be best then to (eep in tab and attuned to the interest of the
Filipino people, whenever the ,resident enters into any agreement with
regard to such an important matter as 0e/.,3/a) or E3,a,/3a) a11310a,/e Eor
)ar4e-1/a)e eG7)ora03o,, -eFe)o7<e,0 a,- u03)36a03o, oE ,a0ura)
re1our/e1 or 1erF3/e /o,0ra/01, the peopleRs elected representatives should
be on top of it.
2 2 2 2 2 2 2 2 2
/7. 9,"E. /adam ,resident, we do not need to suspend the session. :f
Commissioner Dascon needs a few minutes, : can fill up the remaining time
while he completes his proposed amendment. : just wanted to as(
Commissioner 0amir whether he would entertain a minor amendment to his
amendment, and it reads as followsA 5=E ,7E:8EN5 =A""
E3ELEEN5"I N95:FI C9ND7E 9F E4E7I SERVIE
ONTRAT EN5E7E8 :N59 :N ACC978ANCE ?:5= 5=E
DENE7A" "A?. : thin( the reason is, if : may state it briefly, as
Commissioner 3engFon said, Congress can always change the general law
later on to conform to new perceptions of standards that should be built
into 1erF3/e /o,0ra/01. 3ut the only way Congress can do this is if there
were a notification re!uirement from the 9ffice of the ,resident that
such 1erF3/e /o,0ra/01 had been entered into, subject then to the scrutiny of
the /embers of Congress. 5his pertains to a situation where the 1erF3/e
/o,0ra/01 are already entered into, and all that this amendment see(s is the
reporting re!uirement from the 9ffice of the ,resident. ?ill Commissioner
0amir entertain thatO
/7. 0A/:7. : will gladly do so, if it is still within my power.
/7. 4:""EDA. Ies, the Committee accepts the amendment.
2 2 2 2 2 2 2 2 2
7. 5AN. /adam ,resident, may : as( a !uestionO
5=E ,7E:8EN5. Commissioner 5an is recogniFed.
7. 5AN. Am : correct in thin(ing that the only difference between these
future 1erF3/e /o,0ra/01 and the past 1erF3/e /o,0ra/01 under /r. /arcos is
the general law to be enacted by the legislature and the notification of
Congress by the ,residentO 5hat is the only difference, is it notO
/7. 4:""EDA. 5hat is right.
7. 5AN. o those are the safeguards.
/7. 4:""EDA. Ies. 5here was no law at all governing 1erF3/e
/o,0ra/01 before.
7. 5AN. 5han( you, /adam ,resident.
B1.C
ore #han ere Financial
and #echnical *ssistance
)ntailed by the *greements
5he clear words of Commissioner 0ose N. Nolledo !uoted below e2plicitly and
elo!uently demonstrate that the drafters (new that the agreements with foreign corporations
were going to entail not mere technical or financial assistance but, rather, foreign investment
in and management of an enterprise involved in large8scale e5ploration, development and
utili@ation of minerals9 petroleum9 and other mineral oils.
5=E ,7E:8EN5. Commissioner Nolledo is recogniFed.
/7. N9""E89. /adam ,resident, : have the permission of the Acting Floor
"eader to spea( for only two minutes in favor of the amendment of
Commissioner Dascon.
5=E ,7E:8EN5. Commissioner Nolledo may proceed.
/7. N9""E89. ?ith due respect to the members of the Committee and
Commissioner 0amir, : am in favor of the objection of Commissioner
Dascon.
/adam ,resident, : was one of those who refused to sign the )*$# Constitution, and one of
the reasons is that there were many provisions in the 5ransitory ,rovisions therein that favored
aliens. : was shoc(ed when : read a provision authoriFing 1erF3/e /o,0ra/01 while we, in this
Constitutional Commission, provided for Filipino control of the economy. ?e are, therefore,
providing for e2ceptional instances where aliens may circumvent Filipino control of our
economy. And one way of circumventing the rule in favor of Filipino control of the economy
is to recogniFe 1erF3/e /o,0ra/01.
As far as : am concerned, if : should have my own way, : am for the complete deletion of this
provision. *oIeFer, Ie are 7re1e,03,4 a /o<7ro<31e in the sense that we are re!uiring a
two-thirds vote of all the /embers of Congress as a safeguard. : thin( we should not mistrust
the future /embers of Congress by saying that the purpose of this provision is to avoid
corruption. ?e cannot claim that they are less patriotic than we are. : thin( the /embers of
this Commission should (now that entering into 1erF3/e /o,0ra/01 is an e2ception to the rule
on protection of natural resources for the interest of the nation, and therefore, being an
e2ception it should be subject, whenever possible, to stringent rules. :t seems to me that we
are liberaliFing the rules in favor of aliens.
: say these things with a heavy heart, /adam ,resident. : do not claim to be a nationalist, but
: love my country. A)0.ou4. Ie ,ee- 3,Fe10<e,01, Ie <u10 a-o70 1aEe4uar-1 that are truly
reflective of the sentiments of the people and not mere cosmetic safeguards as they now
appear in the 0amir amendment. 'Applause+
5han( you, /adam ,resident.
B1&C
Another e2cerpt, featuring then Commissioner 'now Chief 0ustice+ =ilario D. 8avide
0r., indicates the limitations of the scope of such service contracts -- the! are valid onl! in
regard to minerals9 petroleum and other mineral oils9 not to all natural resources.
5=E ,7E:8EN5. Commissioner 8avide is recogniFed.
/7. 8A4:8E. 5han( you, /adam ,resident. 5his is an amendment to the 0amir
amendment and also to the 9ple amendment. : propose to delete
SNA5E7A" 7E9E7CET and substitute it with the followingA
/:NE7A", ,E579"EE/ AN8 95=E7 /:NE7A" 9:". 9n the 9ple
amendment, : propose to addA 5=E N95:F:CA5:9N 59 C9ND7E
=A"" 3E ?:5=:N 5=:75I 8AI F79/ 5=E EKECE5:9N 9F 5=E
E74:CE C9N57AC5.
5=E ,7E:8EN5. ?hat does the Committee say with respect to the first
amendment in lieu of SNA5E7A" 7E9E7CETO
/7. 4:""EDA. Could Commissioner 8avide e2plain thatO
/7. 8A4:8E. /adam ,resident, with the use of SNA5E7A" 7E9E7CET
here, it would necessarily include all lands of the public domain, our marine
resources, forests, par(s and so on. o we would li(e to limit the scope of
these 1erF3/e /o,0ra/01 to those areas really where these may be needed, the
e2ploitation, development and e2ploration of minerals, petroleum and other
mineral oils. And so, we believe that we should really, if we want to
grant 1erF3/e /o,0ra/01 at all, limit the same to o,)y 0.o1e 7ar03/u)ar area1
I.ere F3)373,o /a730a) <ay ,o0 be 1uEE3/3e,0, and not to all natural
resources.
/7. EA7EJ. 0ust a point of clarification again, /adam ,resident. ?hen the
Commissioner made those enumerations and specifications, : suppose he
deliberately did not include Sagricultural landTO
/7. 8A4:8E. 5hat is precisely the reason we have to enumerate what these
resources are into which 1erF3/e /o,0ra/01 may enter. o, beyond the reach
of any 1erF3/e /o,0ra/0 will be lands of the public domain, timberlands,
forests, marine resources, fauna and flora, wildlife and national par(s.
B1$C
After the 0amir amendment was voted upon and approved by a vote of -) to ); with -
abstentions, Commissioner 8avide made the following statement, which is very relevant to
our !uestA
5=E ,7E:8EN5. Commissioner 8avide is recogniFed.
/7. 8A4:8E. : am very glad that Commissioner ,adilla emphasiFed minerals,
petroleum and mineral oils. 5he Commission has just approved the possible
foreign entry into the development, e2ploration and utiliFation of these
minerals, petroleum and other mineral oils by virtue of the 0amir
amendment. : voted in favor of the 0amir amendment because it will
eventually give way to vesting in e2clusively Filipino citiFens and
corporations wholly owned by Filipino citiFens the right to utiliFe the other
natural resources. 5his means that as a matter of policy, natural resources
should be utiliFed and e2ploited only by Filipino citiFens or corporations
wholly owned by such citiFens. 3ut by virtue of the 0amir amendment,
since we feel that Filipino capital may not be enough for the development
and utiliFation of minerals, petroleum and other mineral oils, the ,resident
can enter into 1erF3/e /o,0ra/01 with foreign corporations precisely for the
development and utiliFation of such resources. And so, there is nothing to
fear that we will stagnate in the development of minerals, petroleum and
mineral oils be/au1e Ie ,oI a))oI 1erF3/e /o,0ra/01. 2 2 2.T
B1%C
5he foregoing are mere fragments of the framersR lengthy discussions of the provision
dealing with agreements 5 5 5 involving either technical or financial assistance9 which
ultimately became paragraph 1 of ection - of Article K:: of the Constitution. 3eyond any
doubt, the members of the ConCom were actually debating about the martial-law-era 1erF3/e
/o,0ra/01 for which the! were craftinga77ro7r3a0e 1aEe4uar-1.
:n the voting that led to the approval of Article K:: by the ConCom, the e2planations
given by Commissioners Dascon, Darcia and 5adeo indicated that they had voted to reject this
provision on account of their objections to the SconstitutionaliFationT of the Sservice contractT
concept.
/r. Dascon said, ?" felt that if we would constitutionali@e an! provision on service
contracts9 this should alwa!s be with the concurrence of *ongress and not guided onl! b! a
general law to be promulgated b! *ongress.A
B1*C
/r. Darcia e2plained, ?&ervice contracts are
given constitutional legitimi@ation in Sec. D9 even when the! have been proven to be inimical
to the interests of the nation9 providing9 as the! do9 the legal loophole for the e5ploitation of
our natural resources for the benefit of foreign interests.A
B.;C
"i(ewise, /r. 5adeo cited inter
alia the fact that service contracts continued to subsist, enabling foreign interests to benefit
from our natural resources.
B.)C
I0 Ia1 .ar-)y )3He)y 0.a0 0.e1e 4e,0)e<e, Iou)- .aFe
obKe/0e- 1o 10re,uou1)y, .a- 0.e 7roF313o, /a))e- Eor <ere 0e/.,3/a) or E3,a,/3a)
a11310a,/e a,- ,o0.3,4 <ore.
5he deliberations of the ConCom and some commissionersR e2planation of their votes
leave no room for doubt that the service contract concept precisely underpinned the
commissionersR understanding of the Sagreements involving either technical or financial
assistance.T
&ummation of the
+oncom 5eliberations
At this point, we sum up the matters established, based on a careful reading of the
ConCom deliberations, as followsA
W :n their deliberations on what was to become paragraph 1, the framers
used the term service contracts in referring to agreements 5 5 5
involving either technical or financial assistance.
W 5hey spo(e of service contracts as the concept was understood in the
)*$# Constitution.
W :t was obvious from their discussions that they were not about to ban or
eradicate service contracts.
W :nstead, the! were plainl! crafting provisions to put in place
safeguards that would eliminate or minimi@e the abuses prevalent
during the marital law regime. :n brief, they were going to permit
service contracts with foreign corporations as contractors, but with
safety measures to prevent abuses, as an e2ception to the general norm
established in the first paragraph of ection - of Article K::. 5his
provision reserves or limits to Filipino citiFens -- and corporations at
least &; percent of which is owned by such citiFens -- the e2ploration,
development and utiliFation of natural resources.
W 5his provision was prompted by the perceived insufficiency of Filipino
capital and the felt need for foreign investments in the E8E of minerals
and petroleum resources.
W 5he framers for the most part debated about the sort of safeguards that
would be considered ade!uate and reasonable. 3ut some of them,
having more SradicalT leanings, wanted to ban service contracts
altogether@ for them, the provision would permit aliens to e2ploit and
benefit from the nationRs natural resources, which they felt should be
reserved only for Filipinos.
W :n the e2planation of their votes, the individual commissioners were
heard by the entire body. 5hey sounded off their individual opinions,
openly enunciated their philosophies, and supported or attac(ed the
provisions with fervor. EveryoneRs viewpoint was heard.
W :n the final voting, the Article on the National Economy and ,atrimony
-- including paragraph 1 allowing service contracts with foreign
corporations as an e2ception to the general norm in paragraph ) of
ection - of the same article -- was resoundingly approved by a vote of
#- to $, with - abstentions.
*greements $nvolving #echnical
or Financial *ssistance *re
&ervice +ontracts 7ith &afeguards
From the foregoing, we are impelled to conclude that the phrase agreements involving
either technical or financial assistance9 referred to in paragraph 1, are in fact service
contracts. 3ut unli(e those of the )*$# variety, the new ones are between foreign
corporations acting as contractors on the one hand@ and on the other, the government as
principal or SownerT of the wor(s. :n the new service contracts, the foreign contractors
provide capital, technology and technical (now-how, and managerial e2pertise in the creation
and operation of large-scale mining6e2tractive enterprises@ and the government, through its
agencies '8EN7, /D3+, actively e2ercises control and supervision over the entire operation.
uch service contracts may be entered into onl! with respect to minerals9 petroleum and
other mineral oils. 5he grant thereof is subject to several safeguards, among which are these
re!uirementsA
')+ 5he service contract shall be crafted in accordance with a general law that will set
standard or uniform terms, conditions and re!uirements, presumably to attain a certain
uniformity in provisions and avoid the possible insertion of terms disadvantageous to the
country.
'-+ 5he ,resident shall be the signatory for the government because, supposedly before an
agreement is presented to the ,resident for signature, it will have been vetted several times
over at different levels to ensure that it conforms to law and can withstand public scrutiny.
'#+ ?ithin thirty days of the e2ecuted agreement, the ,resident shall report it to Congress to
give that branch of government an opportunity to loo( over the agreement and interpose
timely objections, if any.
Jse of the 4ecord of the
+on+om to *scertain $ntent
At this juncture, we shall address, rather than gloss over, the use of the SframersR intentT
approach, and the criticism hurled by petitioners who !uote a ruling of this CourtA
?(hile it is permissible in this 'urisdiction to consult the debates and proceedings of the
constitutional convention in order to arrive at the reason and purpose of the resulting
*onstitution9 resort thereto ma! be had onl! when other guides fail as said proceedings are
powerless to var! the terms of the *onstitution when the meaning is clear. ebates in the
constitutional convention Lare of value as showing the views of the individual members, and
as indicating the reason for their votes, but they give us no light as to the views of the large
majority who did not tal(, much less the mass of our fellow citiFens whose votes at the polls
gave that instrument the force of fundamental law. ?e thin( it safer to construe the
constitution from what appears upon its face.R $he proper interpretation therefore depends
more on how it was understood b! the people adopting it than in the framersF understanding
thereof.A
B.-C
5he notion that the deliberations reflect only the views of those members who spo(e out
and not the views of the majority who remained silent should be clarified. ?e must never
forget that those who spo(e out were heard by those who remained silent and did not react. :f
the latter were silent because they happened not to be present at the time, they are presumed to
have read the minutes and (ept abreast of the deliberations. 3y remaining silent, they are
deemed to have signified their assent to and6or conformity with at least some of the views
propounded or their lac( of objections thereto. :t was incumbent upon them, as
representatives of the entire Filipino people, to follow the deliberations closely and to spea(
their minds on the matter if they did not see eye to eye with the proponents of the draft
provisions.
:n any event, each and every one of the commissioners had the opportunity to spea( out
and to vote on the matter. /oreover, the individual e2planations of votes are on record, and
they show where each delegate stood on the issues. I, 1u<, Ie /a,,o0 /o<7)e0e)y -e,34ra0e
0.e Fa)ue or u1eEu),e11 oE 0.e re/or- oE 0.e o,o<, 13<7)y be/au1e /er0a3, <e<ber1
/.o1e ,o0 0o 17eaH ou0.
:t is contended that the deliberations therein did not necessarily reflect the thin(ing of
the voting population that participated in the referendum and ratified the Constitution. 4erily,
whether we li(e it or not, it is a bit too much to assume that every one of those who voted to
ratify the proposed Charter did so only after carefully reading and mulling over it, provision
by provision.
"i(ewise, it appears rather e2travagant to assume that every one of those who did in fact
bother to read the draft Charter actually understood the import of its provisions, much less
analyFed it vis-X-vis the previous Constitutions. ?e believe that in reality, a good percentage
of those who voted in favor of it did so more out of faith and trust. For them, it was the
product of the hard wor( and careful deliberation of a group of intelligent, dedicated and
trustworthy men and women of integrity and conviction, whose love of country and fidelity to
duty could not be !uestioned.
:n short, a large proportion of the voters voted SyesT because the drafters, or a majority
of them, endorsed the proposed Constitution. ?hat this fact translates to is the inescapable
conclusion that many of the voters in the referendum did not form their own isolated judgment
about the draft Charter, much less about particular provisions therein. 5hey only relied or fell
bac( and acted upon the favorable endorsement or recommendation of the framers as a group.
:n other words, by voting !es, they may be deemed to have signified their voluntary adoption
of the understanding and interpretation of the delegates with respect to the proposed Charter
and its particular provisions. S:f itRs good enough for them, itRs good enough for me@T or, in
many instances, S:f itRs good enough for ,resident Cory A!uino, itRs good enough for me.T
And even for those who voted based on their own individual assessment of the proposed
Charter, there is no evidence available to indicate that their assessment or understanding of its
provisions was in fact different from that of the drafters. 5his unwritten assumption seems to
be petitionersR as well. For all we (now, this segment of voters must have read and
understood the provisions of the Constitution in the same way the framers had, an assumption
that would account for the favorable votes.
Fundamentally spea(ing, in the process of rewriting the Charter, the members of the
ConCom as a group were supposed to represent the entire Filipino people. 5hus, we cannot
but regard their views as being very much indicative of the thin(ing of the people with respect
to the matters deliberated upon and to the Charter as a whole.
I0 31 0.ereEore rea1o,ab)e a,- u,aFo3-ab)e 0o <aHe 0.e Eo))oI3,4 /o,/)u13o,, ba1e-
o, 0.e aboFe ar4u<e,01. A1 Ir300e, by 0.e Era<er1 a,- ra03E3e- a,- a-o70e- by 0.e
7eo7)e, 0.e o,1030u03o, a))oI1 0.e /o,03,ue- u1e oE 1erF3/e /o,0ra/01 I30. Eore34,
/or7ora03o,1 -- a1 /o,0ra/0or1 I.o Iou)- 3,Fe10 3, a,- o7era0e a,- <a,a4e eG0ra/03Fe
e,0er7r31e1, 1ubKe/0 0o 0.e Eu)) /o,0ro) a,- 1u7erF313o, oE 0.e S0a0e -- 1a,1 0.e abu1e1 oE
0.e 7a10 re43<e. T.e 7ur7o1e 31 /)ear% 0o -eFe)o7 a,- u03)36e our <3,era), 7e0ro)eu< a,-
o0.er re1our/e1 o, a )ar4e 1/a)e Eor 0.e 3<<e-3a0e a,- 0a,43b)e be,eE30 oE 0.e F3)373,o
7eo7)e.
:n view of the foregoing discussion, we should reverse the 8ecision of 0anuary -$, -;;1,
and in fact now hold a view different from that of the 8ecision, which had these findingsA 'a+
paragraph 1 of ection - of Article K:: limits foreign involvement in the local mining industry
to agreements strictly for either financial or technical assistance only@ 'b+ the same paragraph
precludes agreements that grant to foreign corporations the management of local mining
operations, as such agreements are purportedly in the nature of service contracts as these were
understood under the )*$# Constitution@ 'c+ these service contracts were supposedly Sde-
constitutionaliFedT and proscribed by the omission of the term service contracts from the )*%$
Constitution@ 'd+ since the ?/C, F5AA contains provisions permitting the foreign contractor
to manage the concern, the said F5AA is invalid for being a prohibited service contract@ and
'e+ provisions of 7A $*1- and 8A9 *&-1;, which li(ewise grant managerial authority to the
foreign contractor, are also invalid and unconstitutional.
Jltimate #est: &tateIs G+ontrolH
5eterminative of +onstitutionality
3ut we are not yet at the end of our !uest. Far from it. :t seems that we are confronted
with a possible collision of constitutional provisions. 9n the one hand, paragraph ) of ection
- of Article K:: e2plicitly mandates the tate to e2ercise Sfull control and supervisionT over
the e2ploration, development and utiliFation of natural resources. 9n the other hand,
paragraph 1 permits safeguarded service contracts with foreign contractors. Normally,
pursuant thereto, the contractors e2ercise management prerogatives over the mining operations
and the enterprise as a whole. 5here is thus a legitimate ground to be concerned that either the
tateRs full control and supervision may rule out any e2ercise of management authority by the
foreign contractor@ or, the other way around, allowing the foreign contractor full management
prerogatives may ultimately negate the tateRs full control and supervision.
"0 Ma431 Va)ea0
Aua< !erea0
Ender the third principle of constitutional construction laid down in 0rancisco -- ut
magis valeat #uam pereat 88 every part of the Constitution is to be given effect, and the
Constitution is to be read and understood as a harmonious whole. 5hus, ?full control and
supervisionA b! the State must be understood as one that does not preclude the legitimate
e5ercise of management prerogatives b! the foreign contractor. 3efore any further
discussion, we must stress the primacy and supremacy of the principle of sovereignty and
tate control and supervision over all aspects of e2ploration, development and utiliFation of
the countryRs natural resources, as mandated in the first paragraph of ection - of Article K::.
3ut in the ne2t breadth we have to point out that Sfull control and supervisionT cannot be
ta(en literally to mean that the tate controls and supervises ever!thing involved9 down to the
minutest details, and ma(es all decisions re!uired in the mining operations. 5his strained
concept of control and supervision over the mining enterprise would render impossible the
legitimate e2ercise by the contractors of a reasonable degree of management prerogative and
authority necessary and indispensable to their proper functioning.
For one thing, such an interpretation would discourage foreign entry into large-scale
e2ploration, development and utiliFation activities@ and result in the unmitigated stagnation of
this sector, to the detriment of our nationRs development. 5his scenario renders paragraph 1
inoperative and useless. And as respondents have correctly pointed out, the government does
not have to micro-manage the mining operations and dip its hands into the day-to-day affairs
of the enterprise in order for it to be considered as having full control and supervision.
5he concept of control
B.#C
adopted in ection - of Article K:: must be ta(en to mean less
than dictatorial, all-encompassing control@ but nevertheless sufficient to give the tate the
power to direct, restrain, regulate and govern the affairs of the e2tractive enterprises. Control
by the tate may be on a macro level, through the establishment of policies, guidelines,
regulations, industry standards and similar measures that would enable the government to
control the conduct of affairs in various enterprises and restrain activities deemed not desirable
or beneficial.
5he end in view is ensuring that these enterprises contribute to the economic
development and general welfare of the country, conserve the environment, and uplift the
well-being of the affected local communities. uch a concept of control would be compatible
with permitting the foreign contractor sufficient and reasonable management authority over
the enterprise it invested in, in order to ensure that it is operating efficiently and profitably, to
protect its investments and to enable it to succeed.
T.e Jue103o, 0o be a,1Iere-, 0.e,, 31 I.e0.er RA 7982 a,- 301 I<7)e<e,03,4 Ru)e1
e,ab)e 0.e 4oFer,<e,0 0o eGer/31e 0.a0 -e4ree oE /o,0ro) 1uEE3/3e,0 0o -3re/0 a,- re4u)a0e
0.e /o,-u/0 oE aEEa3r1 oE 3,-3F3-ua) e,0er7r31e1 a,- re10ra3, u,-e13rab)e a/03F303e1.
9n the resolution of these !uestions will depend the validity and constitutionality of
certain provisions of the ,hilippine /ining Act of )**. '7A $*1-+ and its :mplementing
7ules and 7egulations '8A9 *&-1;+, as well as the ?/C, F5AA.
:ndeed, petitioners charge
B.1C
that 7A $*1-, as well as its :mplementing 7ules and
7egulations, ma(es it possible for F5AA contracts to cede full control and management of
mining enterprises over to fully foreign-owned corporations, with the result that the tate is
allegedly reduced to a passive regulator dependent on submitted plans and reports, with wea(
review and audit powers. 5he tate does not supposedly act as the owner of the natural
resources for and on behalf of the Filipino people@ it practically has little effective say in the
decisions made by the enterprise. ,etitioners then conclude that the law, the implementing
regulations, and the ?/C, F5AA cede Sbeneficial ownershipT of the mineral resources to the
foreign contractor.
A careful scrutiny of the provisions of 7A $*1- and its :mplementing 7ules belies
petitionersR claims. ,araphrasing the Constitution, ection 1 of the statute clearly affirms the
tateRs control thusA
?Sec. 4. &wnership of Mineral Resources. M Mineral resources are owned b! the State and
the e5ploration9 development9 utili@ation and processing thereof shall be under its full control
and supervision. $he State ma! directl! underta2e such activities or it ma! enter into mineral
agreements with contractors.
?$he State shall recogni@e and protect the rights of the indigenous cultural communities to
their ancestral lands as provided for b! the *onstitution.A
5he afore!uoted provision is substantively reiterated in ection - of 8A9 *&-1; as
followsA
?Sec. <. eclaration of Polic!. %ll mineral resources in public and private lands within the
territor! and e5clusive economic @one of the Republic of the Philippines are owned b! the
State. "t shall be the responsibilit! of the State to promote their rational e5ploration9
development9 utili@ation and conservation through the combined efforts of the 3overnment
and private sector in order to enhance national growth in a wa! that effectivel! safeguards the
environment and protects the rights of affected communities.A
&ufficient +ontrol 1ver ining
1perations /ested in the &tate
by 4* 7:<= and 5*1 :6%<A
7A $*1- provides for the tateRs control and supervision over mining operations. 5he
following provisions thereof establish the mechanism of inspection and visitorial rights over
mining operations and institute reportorial re!uirements in this mannerA
). ec. % which provides for the 8EN7Rs power of over-all supervision and
periodic review for Sthe conservation, management, development and
proper use of the tateRs mineral resourcesT@
-. ec. * which authoriFes the /ines and Deosciences 3ureau '/D3+ under
the 8EN7 to e2ercise Sdirect charge in the administration and disposition
of mineral resourcesT, and empowers the /D3 to Smonitor the
compliance by the contractor of the terms and conditions of the mineral
agreementsT, Sconfiscate surety and performance bondsT, and deputiFe
whenever necessary any member or unit of the ,hil. National ,olice,
barangay, duly registered non-governmental organiFation 'ND9+ or any
!ualified person to police mining activities@
#. ec. && which vests in the 7egional 8irector Te2clusive jurisdiction over
safety inspections of all installations, whether surface or undergroundT,
utiliFed in mining operations.
1. ec. #., which incorporates into all F5AAs the following terms, conditions
and warrantiesA
S'g+ /ining operations shall be conducted in accordance with
the provisions of the Act and its :77.
S'h+ ?or( programs and minimum e2penditures commitments.
2 2 2 2 2 2 2 2 2
S'(+ 7e!uiring proponent to effectively use appropriate anti-
pollution technology and facilities to protect the
environment and restore or rehabilitate mined-out areas.
S'l+ 5he contractors shall furnish the Dovernment records of
geologic, accounting and other relevant data for its
mining operation, and that boo(s of accounts and records
shall be open for inspection by the government. 2 2 2.
S'm+ 7e!uiring the proponent to dispose of the minerals at the
highest price and more advantageous terms and
conditions.
S'n+ 2 2 2 2 2 2 2 2 2
S'o+ uch other terms and conditions consistent with the
Constitution and with this Act as the ecretary may
deem to be for the best interest of the tate and the
welfare of the Filipino people.T
5he foregoing provisions of ection #. of 7A $*1- are also reflected and implemented
in ection .& 'g+, 'h+, 'l+, 'm+ and 'n+ of the :mplementing 7ules, 8A9 *&-1;.
/oreover, 7A $*1- and 8A9 *&-1; also provide various stipulations confirming the
governmentRs control over mining enterprisesA
W 5he contractor is to relin!uish to the government those portions of the
contract area not needed for mining operations and not covered by any
declaration of mining feasibility 'ection #.-e, 7A $*1-@ ection &;, 8A9
*&-1;+.
W 5he contractor must comply with the provisions pertaining to mine safety,
health and environmental protection 'Chapter K:, 7A $*1-@ Chapters K4 and
K4:, 8A9 *&-1;+.
W For violation of any of its terms and conditions, government may cancel an
F5AA. 'Chapter K4::, 7A $*1-@ Chapter KK:4, 8A9 *&-1;+.
W An F5AA contractor is obliged to open its boo(s of accounts and records for
inspection by the government 'ection .&-m, 8A9 *&-1;+.
W An F5AA contractor has to dispose of the minerals and by-products at the
highest mar(et price and register with the /D3 a copy of the sales agreement
'ection .&-n, 8A9 *&-1;+.
W /D3 is mandated to monitor the contractorRs compliance with the terms and
conditions of the F5AA@ and to deputiFe, when necessary, any member or unit
of the ,hilippine National ,olice, the barangay or a 8EN7-accredited
nongovernmental organiFation to police mining activities 'ection $-d and -f,
8A9 *&-1;+.
W An F5AA cannot be transferred or assigned without prior approval by the
,resident 'ection 1;, 7A $*1-@ ection &&, 8A9 *&-1;+.
W A mining project under an F5AA cannot proceed to the
construction6development6utiliFation stage, unless its 8eclaration of /ining
,roject Feasibility has been approved by government 'ection -1, 7A $*1-+.
W 5he 8eclaration of /ining ,roject Feasibility filed by the contractor cannot
be approved without submission of the following documentsA
). Approved mining project feasibility study 'ection
.#-d, 8A9 *&-1;+
-. Approved three-year wor( program 'ection .#-a-1,
8A9 *&-1;+
#. Environmental compliance certificate 'ection $;,
7A $*1-+
1. Approved environmental protection and enhancement
program 'ection &*, 7A $*1-+
.. Approval by the angguniang
,anlalawigan63ayan63arangay 'ection $;, 7A
$*1-@ ection -$, 7A $)&;+
&. Free and prior informed consent by the indigenous
peoples concerned, including payment of royalties
through a /emorandum of Agreement 'ection )&,
7A $*1-@ ection .*, 7A %#$)+
W 5he F5AA contractor is obliged to assist in the
development of its mining community, promotion of the general welfare of its
inhabitants, and development of science and mining technology 'ection .$,
7A $*1-+.
W 5he F5AA contractor is obliged to submit
reports 'on !uarterly, semi-annual or annual basis as the case may be@ per
ection -$;, 8A9 *&-1;+, pertaining to the followingA
). E2ploration
-. 8rilling
#. /ineral resources and reserves
1. Energy consumption
.. ,roduction
&. ales and mar(eting
$. Employment
%. ,ayment of ta2es, royalties, fees and other
Dovernment hares
*. /ine safety, health and environment
);. "and use
)). ocial development
)-. E2plosives consumption
W An F5AA pertaining to areas within
government reservations cannot be granted without a written clearance from
the government agencies concerned 'ection )*, 7A $*1-@ ection .1, 8A9
*&-1;+.
W An F5AA contractor is re!uired to post a
financial guarantee bond in favor of the government in an amount e!uivalent
to its e2penditures obligations for any particular year. 5his re!uirement is
apart from the representations and warranties of the contractor that it has
access to all the financing, managerial and technical e2pertise and
technology necessary to carry out the objectives of the F5AA 'ection #.-b,
-e, and -f, 7A $*1-+.
W 9ther reports to be submitted by the contractor,
as re!uired under 8A9 *&-1;, are as followsA an environmental report on the
rehabilitation of the mined-out area and6or mine waste6tailing covered area,
and anti-pollution measures underta(en 'ection #.-a--+@ annual reports of
the mining operations and records of geologic accounting 'ection .&-m+@
annual progress reports and final report of e2ploration activities 'ection .&-
-+.
W 9ther programs re!uired to be submitted by
the contractor, pursuant to 8A9 *&-1;, are the followingA a safety and health
program 'ection )11+@ an environmental wor( program 'ection )&%+@ an
annual environmental protection and enhancement program 'ection )$)+.
5he foregoing gamut of re!uirements, regulations, restrictions and limitations imposed
upon the F5AA contractor by the statute and regulations easily overturns petitionersR
contention. 5he setup under 7A $*1- and 8A9 *&-1; hardly relegates the tate to the role of
a Spassive regulatorT dependent on submitted plans and reports. 9n the contrary, the
government agencies concerned are empowered to approve or disapprove -- hence, to
influence, direct and change -- the various wor( programs and the corresponding minimum
e2penditure commitments for each of the e2ploration, development and utiliFation phases of
the mining enterprise.
9nce these plans and reports are approved, the contractor is bound to comply with its
commitments therein. Figures for mineral production and sales are regularly monitored and
subjected to government review, in order to ensure that the products and by-products are
disposed of at the best prices possible@ even copies of sales agreements have to be submitted to
and registered with /D3. And the contractor is mandated to open its boo(s of accounts and
records for scrutiny, so as to enable the tate to determine if the government share has been
fully paid.
5he tate may li(ewise compel the contractorRs compliance with mandatory
re!uirements on mine safety, health and environmental protection, and the use of anti-
pollution technology and facilities. /oreover, the contractor is also obligated to assist in the
development of the mining community and to pay royalties to the indigenous peoples
concerned.
Cancellation of the F5AA may be the penalty for violation of any of its terms and
conditions and6or noncompliance with statutes or regulations. 5his general, all-around,
multipurpose sanction is no trifling matter, especially to a contractor who may have yet to
recover the tens or hundreds of millions of dollars sun( into a mining project.
9verall, considering the provisions of the statute and the regulations just discussed, we
believe that the tate definitely possesses the means by which it can have the ultimate word in
the operation of the enterprise, set directions and objectives, and detect deviations and
noncompliance by the contractor@ li(ewise, it has the capability to enforce compliance and to
impose sanctions, should the occasion therefor arise.
I, o0.er Ior-1, 0.e FTAA /o,0ra/0or 31 ,o0 Eree 0o -o I.a0eFer 30 7)ea1e1 a,- 4e0
aIay I30. 30? o, 0.e /o,0rary, 30 I3)) .aFe 0o Eo))oI 0.e 4oFer,<e,0 )3,e 3E 30 Ia,01 0o 10ay
3, 0.e e,0er7r31e. I,e)u/0ab)y 0.e,, RA 7982 a,- DAO 96-8' Fe10 3, 0.e 4oFer,<e,0
<ore 0.a, a 1uEE3/3e,0 -e4ree oE /o,0ro) a,- 1u7erF313o, oFer 0.e /o,-u/0 oE <3,3,4
o7era03o,1.
&ection 3>aq? of 4* 7:<=
;ot Jnconstitutional
An objection has been e2pressed that ection #'a!+
B..C
of 7A $*1- -- which allows a
foreign contractor to apply for and hold an e5ploration permit 88 is unconstitutional. 5he
reasoning is that ection - of Article K:: of the Constitution does not allow foreign-owned
corporations to underta(e mining operations directly. 5hey may act only as contractors of the
tate under an F5AA@ and the tate, as the party directly underta(ing e2ploitation of its
natural resources, must hold through the government all e2ploration permits and similar
authoriFations. =ence, ection #'a!+, in permitting foreign-owned corporations to hold
e2ploration permits, is unconstitutional.
5he objection, however, is not well-founded. ?hile the Constitution mandates the tate
to e2ercise full control and supervision over the e2ploitation of mineral resources, nowhere
does it re#uire the government to hold all e5ploration permits and similar authori@ations. :n
fact, there is no prohibition at all against foreign or local corporations or contractors holding
e2ploration permits. 5he reason is not hard to see.
,ursuant to ection -; of 7A $*1-, an e2ploration permit merely grants to a !ualified
person the right to conduct e5ploration for all minerals in specified areas. Such a permit does
not amount to an authori@ation to e5tract and carr! off the mineral resources that ma! be
discovered. 5his phase involves nothing but e2penditures for e2ploring the contract area and
locating the mineral bodies. As no e2traction is involved, there are no revenues or incomes to
spea( of. :n short, the e2ploration permit is an authoriFation for the grantee to spend its own
funds on e2ploration programs that are pre-approved by the government, without any right to
recover anything should no minerals in commercial !uantities be discovered. 5he tate ris(s
nothing and loses nothing by granting these permits to local or foreign firms@ in fact, it stands
to gain in the form of data generated by the e2ploration activities.
,ursuant to ection -1 of 7A $*1-, an e2ploration permit grantee who determines the
commercial viability of a mining area may, within the term of the permit, file with the /D3 a
declaration of mining project feasibility accompanied by a wor( program for development.
5he approval of the mining project feasibility and compliance with other re!uirements of 7A
$*1- vests in the grantee the e2clusive right to an /,A or any other mineral agreement, or to
an F5AA.
5hus, the permit grantee may apply for an /,A, a joint venture agreement, a co-
production agreement, or an F5AA over the permit area, and the application shall be approved
if the permit grantee meets the necessary !ualifications and the terms and conditions of any
such agreement. 5herefore, the contractor will be in a position to e2tract minerals and earn
revenues only when the /,A or another mineral agreement, or an F5AA, is granted. At that
point, the contractorRs rights and obligations will be covered by an F5AA or a mineral
agreement.
3ut prior to the issuance of such F5AA or mineral agreement, the e2ploration permit
grantee 'or prospective contractor+ cannot yet be deemed to have entered into any contract or
agreement with the tate, and the grantee would definitely need to have some document or
instrument as evidence of its right to conduct e2ploration wor(s within the specified area.
5his need is met by the e2ploration permit issued pursuant to ections #'a!+, -; and -# of 7A
$*1-.
I, br3eE, 0.e eG7)ora03o, 7er<30 1erFe1 a 7ra/03/a) a,- )e4303<a0e 7ur7o1e 3, 0.a0 30
7ro0e/01 0.e 3,0ere101 a,- 7re1erFe1 0.e r34.01 oE 0.e eG7)ora03o, 7er<30 4ra,0ee C0.e
Iou)--be /o,0ra/0orD -- Eore34, or )o/a) -- -ur3,4 0.e 7er3o- oE 03<e 0.a0 30 31 17e,-3,4
.eaF3)y o, eG7)ora03o, IorH1, I30.ou0 ye0 be3,4 ab)e 0o ear, reFe,ue1 0o re/ou7 a,y oE
301 3,Fe10<e,01 a,- eG7e,-30ure1. /inus this permit and the protection it affords, the
e2ploration wor(s and e2penditures may end up benefiting only claim-jumpers. uch a
possibility tends to discourage investors and contractors. 5hus, ection #'a!+ of 7A $*1- may
not be deemed unconstitutional.
#he #erms of the 7+( F#**
* 5eference to &tate +ontrol
A perusal of the ?/C, F5AA also reveals a slew of stipulations providing for tate
control and supervisionA
). 5he contractor is obligated to account for the value of production and sale of
minerals 'Clause ).1+.
-. 5he contractorRs wor( program, activities and budgets must be approved
by6on behalf of the tate 'Clause -.)+.
#. 5he 8EN7 secretary has the power to e2tend the e2ploration period 'Clause
#.--a+.
1. Approval by the tate is necessary for incorporating lands into the F5AA
contract area 'Clause 1.#-c+.
.. 5he 3ureau of Forest 8evelopment is vested with discretion in regard to
approving the inclusion of forest reserves as part of the F5AA contract area
'Clause 1..+.
&. 5he contractor is obliged to relin!uish periodically parts of the contract area
not needed for e2ploration and development 'Clause 1.&+.
$. A 8eclaration of /ining Feasibility must be submitted for approval by the
tate 'Clause 1.&-b+.
%. 5he contractor is obligated to report to the tate its e2ploration activities
'Clause 1.*+.
*. 5he contractor is re!uired to obtain tate approval of its wor( programs for
the succeeding two-year periods, containing the proposed wor( activities
and e2penditures budget related to e2ploration 'Clause ..)+.
);. 5he contractor is re!uired to obtain tate approval for its proposed
e2penditures for e2ploration activities 'Clause ..-+.
)). 5he contractor is re!uired to submit an annual report on geological,
geophysical, geochemical and other information relating to its e2plorations
within the F5AA area 'Clause ..#-a+.
)-. 5he contractor is to submit within si2 months after e2piration of e2ploration
period a final report on all its findings in the contract area 'Clause ..#-b+.
)#. 5he contractor, after conducting feasibility studies, shall submit a declaration
of mining feasibility, along with a description of the area to be developed
and mined, a description of the proposed mining operations and the
technology to be employed, and a proposed wor( program for the
development phase, for approval by the 8EN7 secretary 'Clause ..1+.
)1. 5he contractor is obliged to complete the development of the mine, including
construction of the production facilities, within the period stated in the
approved wor( program 'Clause &.)+.
).. 5he contractor is obligated to submit for approval of the 8EN7 secretary a
wor( program covering each period of three fiscal years 'Clause &.-+.
)&. 5he contractor is to submit reports to the 8EN7 secretary on the production,
ore reserves, wor( accomplished and wor( in progress, profile of its wor(
force and management staff, and other technical information 'Clause &.#+.
)$. Any e2pansions, modifications, improvements and replacements of mining
facilities shall be subject to the approval of the secretary 'Clause &.1+.
)%. 5he tate has control with respect to the amount of funds that the contractor
may borrow within the ,hilippines 'Clause $.-+.
)*. 5he tate has supervisory power with respect to technical, financial and
mar(eting issues 'Clause );.)-a+.
-;. 5he contractor is re!uired to ensure &; percent Filipino e!uity in the
contractor, within ten years of recovering specified e2penditures, unless not
so re!uired by subse!uent legislation 'Clause );.)+.
-). 5he tate has the right to terminate the F5AA for the contractorRs
unremedied substantial breach thereof 'Clause )#.-+@
--. 5he tateRs approval is needed for any assignment of the F5AA by the
contractor to an entity other than an affiliate 'Clause )1.)+.
?e should elaborate a little on the wor( programs and budgets, and what they mean
with respect to the tateRs ability to e2ercise full control and effective supervision over the
enterprise. For instance, throughout the initial five-year e5ploration and feasibilit! phase of
the project, the contractor is mandated by Clause ..) of the ?/C, F5AA to submit a series
of wor( programs 'copy furnished the director of /D3+ to the 8EN7 secretary for approval.
5he programs will detail the contractorRs proposed e5ploration activities and budget covering
each subse!uent period of two fiscal years.
:n other words, the concerned government officials will be informed beforehand of the
proposed e2ploration activities and e2penditures of the contractor for each succeeding two-
year period, with the right to approve6disapprove them or re!uire changes or adjustments
therein if deemed necessary.
"i(ewise, under Clause ..-'a+, the amount that the contractor was supposed to spend for
e2ploration activities during the first contract year of the e2ploration period was fi2ed at not
less than ,-1 million@ and then for the succeeding years, the amount shall be as agreed
between the 8EN7 secretary and the contractor prior to the commencement of each
subse!uent fiscal year. :f no such agreement is arrived upon, the previous yearRs e2penditure
commitment shall apply.
5his provision alone grants the government through the 8EN7 secretary a very big say
in the e2ploration phase of the project. 5his fact is not something to be ta(en lightly,
considering that thegovernment has absolutel! no contribution to the e5ploration e5penditures
or wor2 activities and !et is given veto power over such a critical aspect of the pro'ect. ?e
cannot but construe as very significant such a degree of control over the project and,
resultantly, over the mining enterprise itself.
Following its e2ploration activities or feasibility studies, if the contractor believes that
any part of the contract area is li(ely to contain an economic mineral resource, it shall submit
to the 8EN7 secretary a declaration of mining feasibility 'per Clause ..1 of the F5AA+,
together with a technical description of the area delineated for development and production,
a description of the proposed mining operations including the technolog! to be used9 a wor2
program for development9 an environmental impact statement9 and a description of the
contributions to the economic and general welfare of the country to be generated by the
mining operations 'pursuant to Clause ...+.
5he wor2 program for development is subject to the approval of the :,R secretar!.
Epon its approval, the contractor must comply with it and complete the development of the
mine, including the construction of production facilities and installation of machinery and
e!uipment, within the period provided in the approved wor( program for development 'per
Clause &.)+.
5hus, notably, the development phase of the project is li(ewise subject to the control and
supervision of the government. :t cannot be emphasiFed enough that the proper and timely
construction and deployment of the production facilities and the development of the mine are
of pivotal significance to the success of the mining venture. Any missteps here will
potentially be very costly to remedy. =ence, the submission of the wor( program for
development to the 8EN7 secretary for approval is particularly noteworthy, considering that
so many millions of dollars worth of investments -- courtesy of the contractor -- are made to
depend on the tateRs consideration and action.
5hroughout the operating period, the contractor is re!uired to submit to the 8EN7
secretary for approval, copy furnished the director of /D3, wor( programs covering each
period of three fiscal years 'per Clause &.-+. 8uring the same period 'per Clause &.#+, the
contractor is mandated to submit various !uarterly and annual reports to the 8EN7 secretary,
copy furnished the director of /D3, on the tonnages of production in terms of ores and
concentrates, with corresponding grades, values and destinations@ reports of sales@ total ore
reserves, total tonnage of ores, wor( accomplished and wor( in progress 'installations and
facilities related to mining operations+, investments made or committed, and so on and so
forth.
Ender ection 4:::, during the period of mining operations, the contractor is also
re!uired to submit to the 8EN7 secretary 'copy furnished the director of /D3+ the wor(
program and corresponding budget for the contract area, describing the mining operations that
are proposed to be carried out during the period covered. 5he secretary is, of course, entitled
to grant or deny approval of any wor( program or budget and6or propose revisions thereto.
9nce the program6budget has been approved, the contractor shall comply therewith.
"n sum9 the above provisions of the (M*P 0$%% ta2en together9 far from constituting a
surrender of control and a grant of beneficial ownership of mineral resources to the
contractor in #uestion9be10oI u7o, 0.e S0a0e <ore 0.a, a-eJua0e /o,0ro) a,- 1u7erF313o,
oFer 0.e a/03F303e1 oE 0.e /o,0ra/0or a,- 0.e e,0er7r31e.
;o &urrender of +ontrol
Jnder the 7+( F#**
,etitioners, however, ta(e aim at Clause %.-, %.#, and %.. of the ?/C, F5AA which,
they say, amount to a relin!uishment of control by the tate, since it Scannot truly impose its
own discretionT in respect of the submitted wor( programs.
?G.<. $he Secretar! shall be deemed to have approved an! (or2 Programme or
6udget or variation thereof submitted b! the *ontractor unless within
si5t! C=>E da!s after submission b! the *ontractor the Secretar! gives
notice declining such approval or proposing a revision of certain
features and specif!ing its reasons therefor CLthe Re'ection ,oticeFE.
G.D. "f the Secretar! gives a Re'ection ,otice9 the Parties shall promptl! meet
and endeavor to agree on amendments to the (or2 Programme or
6udget. "f the Secretar! and the *ontractor fail to agree on the proposed
revision within D> da!s from deliver! of the Re'ection ,otice then
the (or2 Programme or 6udget or variation thereof proposed b! the
*ontractor shall be deemed approved9 so as not to unnecessaril! dela!
the performance of the %greement.
G.4. 5 5 5 5 5 5 5 5 5
G.K. So far as is practicable9 the *ontractor shall compl! with an! approved
(or2 Programme and 6udget. "t is recogni@ed b! the Secretar! and the
*ontractor that the details of an! (or2 Programmes or 6udgets ma!
re#uire changes in the light of changing circumstances. $he *ontractor
ma! ma2e such changes without approval of the Secretar! provided the!
do not change the general ob'ective of an! (or2 Programme9 nor entail
a downward variance of more than twent! per centum C<>percentE of the
relevant 6udget. %ll other variations to an approved (or2 Programme
or 6udget shall be submitted for approval of the Secretar!.A
From the provisions !uoted above, petitioners generaliFe by asserting that the
government does not participate in ma(ing critical decisions regarding the operations of the
mining firm. Furthermore, while the tate can re!uire the submission of wor( programs and
budgets, the decision of the contractor will still prevail, if the parties have a difference of
opinion with regard to matters affecting operations and management.
?e hold, however, that the foregoing provisions do not manifest a relin!uishment of
control. For instance, Clause %.- merely provides a mechanism for preventing the business or
mining operations from grinding to a complete halt as a result of possibly over-long and
unjustified delays in the governmentRs handling, processing and approval of submitted wor(
programs and budgets. Anyway, the provision does give the 8EN7 secretary more than
sufficient time '&; days+ to react to submitted wor( programs and budgets. :t cannot be
supposed that proper grounds for objecting thereto, if any e2ist, cannot be discovered within a
period of two months.
9n the other hand, Clause %.# see(s to provide a temporary, stop-gap solution in the
event a disagreement over the submitted wor( program or budget arises between the tate and
the contractor and results in a stalemate or impasse, in order that there will be no unreasonably
long delays in the performance of the wor(s.
5hese temporary or stop-gap solutions are not necessarily evil or wrong. Neither does it
follow that the government will ine2orably be aggrieved if and when these temporary
remedies come into play. 0irst, avoidance of long delays in these situations will undoubtedly
redound to the benefit of the tate as well as the contractor. Second, who is to say that the
wor( program or budget proposed by the contractor and deemed approved under Clause %.#
would not be the better or more reasonable or more effective alternativeO 5he contractor,
being the Sinsider,T as it were, may be said to be in a better position than the tate -- an
outsider loo(ing in -- to determine what wor( program or budget would be appropriate, more
effective, or more suitable under the circumstances.
All things considered, we ta(e e2ception to the characteriFation of the 8EN7 secretary
as a subservient nonentity whom the contractor can overrule at will, on account of Clause %.#.
And neither is it true that under the same clause, the 8EN7 secretary has no authority
whatsoever to disapprove the wor( program. As 7espondent ?/C, reasoned in its 7eply-
/emorandum, the tate -- despite Clause %.# -- still has control over the contract area and it
may, as sovereign authority, prohibit wor( thereon until the dispute is resolved. And
ultimately, the tate may terminate the agreement, pursuant to Clause )#.- of the same F5AA,
citing substantial breach thereof. =ence, it clearly retains full and effective control of the
e2ploitation of the mineral resources.
9n the other hand, Clause %.. is merely an ac(nowledgment of the partiesR need for
fle2ibility, given that no one can accurately forecast under all circumstances, or predict how
situations may change. =ence, while approved wor( programs and budgets are to be followed
and complied with as far as practicable, there may be instances in which changes will have to
be effected, and effected rapidly, since events may ta(e shape and unfold with suddenness and
urgency. 5hus, Clause %.. allows the contractor to move ahead and ma(e changes without the
e2press or implicit approval of the 8EN7 secretary. uch changes are, however, subject to
certain conditions that will serve to limit or restrict the variance and prevent the contractor
from straying very far from what has been approved.
Clause %.. provides the contractor a certain amount of fle2ibility to meet une2pected
situations, while still guaranteeing that the approved wor( programs and budgets are not
abandoned altogether. Clause %.. does not constitute proof that the tate has relin!uished
control. And ultimately, should there be disagreement with the actions ta(en by the contractor
in this instance as well as under Clause %.# discussed above, the 8EN7 secretary may resort to
cancellation6termination of the F5AA as the ultimate sanction.
5iscretion to &elect +ontract
*rea ;ot an *bdication of +ontrol
Ne2t, petitioners complain that the contractor has full discretion to select -- and the
government has no say whatsoever as to -- the parts of the contract area to be relin!uished
pursuant to Clause 1.& of the ?/C, F5AA.
B.&C
5his clause, however, does not constitute
abdication of control. 7ather, it is a mere ac(nowledgment of the fact that the contractor will
have determined, after appropriate e2ploration wor(s, which portions of the contract area do
not contain minerals in commercial !uantities sufficient to justify developing the same and
ought therefore to be relin!uished. 5he tate cannot just substitute its judgment for that of the
contractor and dictate upon the latter which areas to give up.
/oreover, we can be certain that the contractorRs self-interest will propel proper and efficient
relin!uishment. According to private respondent,
B.$C
a mining company tries to relin!uish as much
non-mineral areas as soon as possible, because the annual occupation fees paid to the government
are based on the total hectarage of the contract area, net of the areas relin!uished. 5hus, the larger
the remaining area, the heftier the amount of occupation fees to be paid by the contractor.
Accordingly, relin!uishment is not an issue, given that the contractor will not want to pay the
annual occupation fees on the non-mineral parts of its contract area. Neither will it want to
relin!uish promising sites, which other contractors may subse!uently pic( up.
-overnment ;ot
a &ubcontractor
,etitioners further maintain that the contractor can compel the government to e2ercise its
power of eminent domain to ac!uire surface areas within the contract area for the contractorRs
use. Clause );.- 'e+ of the ?/C, F5AA provides that the government agrees that the
contractor shall ?CeE have the right to re#uire the 3overnment at the *ontractorFs own cost9 to
purchase or ac#uire surface areas for and on behalf of the *ontractor at such price and terms
as ma! be acceptable to the contractor. %t the termination of this %greement such areas shall
be sold b! public auction or tender and the *ontractor shall be entitled to reimbursement of
the costs of ac#uisition and maintenance9 ad'usted for inflation9 from the proceeds of sale.A
According to petitioners, Sgovernment becomes a subcontractor to the contractorT and
may, on account of this provision, be compelled Sto ma2e use of its power of eminent domain9
not for public purposes but on behalf of a private part!9 i.e.9 the contractor.T /oreover, the
power of the courts to determine the amount corresponding to the constitutional re!uirement
of just compensation has allegedly also been contracted away by the government, on account
of the latterRs commitment that the ac!uisition shall be at such terms as may be acceptable to
the contractor.
=owever, private respondent has proffered a logical e2planation for the provision.
B.%C
ection );.-'e+ contemplates a situation applicable to foreign-owned corporations.
?/C,, at the time of the e2ecution of the F5AA, was a foreign-owned corporation and
therefore not !ualified to own land. As contractor, it has at some future date to construct the
infrastructure -- the mine processing plant, the camp site, the tailings dam, and other
infrastructure -- needed for the large-scale mining operations. :t will then have to identify and
pinpoint, within the F5AA contract area, the particular surface areas with favorable
topography deemed ideal for such infrastructure and will need to ac!uire the surface rights.
5he tate owns the mineral deposits in the earth, and is also !ualified to own land.
ection );.-'e+ sets forth the mechanism whereby the foreign-owned contractor,
dis!ualified to own land, identifies to the government the specific surface areas within the
F5AA contract area to be ac!uired for the mine infrastructure. 5he government then ac!uires
ownership of the surface land areas on behalf of the contractor, in order to enable the latter to
proceed to fully implement the F5AA.
5he contractor, of course, shoulders the purchase price of the land. =ence, the provision
allows it, after termination of the F5AA, to be reimbursed from proceeds of the sale of the
surface areas, which the government will dispose of through public bidding. :t should be
noted that this provision will not be applicable to agittarius as the present F5AA contractor,
since it is a Filipino corporation !ualified to own and hold land. As such, it may therefore
freely negotiate with the surface rights owners and ac!uire the surface property in its own
right.
Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being
aware of the rationale for the said provision. 5hat provision does not call for the e2ercise of
the power of eminent domain -- and determination of just compensation is not an issue -- as
much as it calls for a !ualified party to ac!uire the surface rights on behalf of a foreign-owned
contractor.
7ather than having the foreign contractor act through a dummy corporation, having the
tate do the purchasing is a better alternative. 5his will at least cause the government to be
aware of such transaction6s and foster transparency in the contractorRs dealings with the local
property owners. 5he government, then, will not act as a subcontractor of the
contractor@ rather9 it will facilitate the transaction and enable the parties to avoid a technical
violation of the %nti8umm! )aw.
*bsence of (rovision
4equiring &ale at (osted
(rices ;ot (roblematic
5he supposed absence of any provision in the ?/C, F5AA directly and e2plicitly
re!uiring the contractor to sell the mineral products at posted or mar2et prices is not a
problem. Apart from Clause ).1 of the F5AA obligating the contractor to account for the total
value of mineral production and the sale of minerals, we can also loo( to ection #. of 7A
$*1-, which incorporates into all F5AAs certain terms, conditions and warranties, including
the followingA
?ClE $he contractors shall furnish the 3overnment records of geologic9
accounting and other relevant data for its mining operation9 and that boo2s
of accounts and records shall be open for inspection b! the government. 5
5 5
CmE Re#uiring the proponent to dispose of the minerals at the highest price and
more advantageous terms and conditions.A
For that matter, ection .&'n+ of 8A9 **-.& specifically obligates an F5AA contractor
to dispose of the minerals and by-products at the highest mar(et price and to register with the
/D3 a copy of the sales agreement. After all, the provisions of prevailing statutes as well as
rules and regulations are deemed written into contracts.
+ontractorIs 4ight to ortgage
;ot 1b"ectionable (er &e
,etitioners also !uestion the absolute right of the contractor under Clause );.- 'l+ to
mortgage and encumber not only its rights and interests in the F5AA and the infrastructure
and improvements introduced, but also the mineral products e5tracted. ,rivate respondents do
not touch on this matter, but we believe that this provision may have to do with the conditions
imposed by the creditor-ban(s of the then foreign contractor ?/C, to secure the lendings
made or to be made to the latter. 9rdinarily, ban(s lend not only on the security of mortgages
on fi2ed assets, but also on encumbrances of goods produced that can easily be sold and
converted into cash that can be applied to the repayment of loans. 3an(s even lend on the
security of accounts receivable that are collectible within *; days.
B.*C
:t is not uncommon to find that a debtor corporation has e2ecuted deeds of assignment
Sby way of securityT over the production for the ne2t twelve months and6or the proceeds of the
sale thereof -- or the corresponding accounts receivable, if sold on terms -- in favor of its
creditor-ban(s. uch deeds may include authoriFing the creditors to sell the products
themselves and to collect the sales proceeds and6or the accounts receivable.
een in this conte2t, Clause );.-'l+ is not something out of the ordinary or
objectionable. :n any case, as will be e2plained below, even if it is allowed to mortgage or
encumber the mineral end-products themselves, the contractor is not freed of its obligation to
pay the government its basic and additional shares in the net mining revenue, which is the
essential thing to consider.
:n brief, the alarum raised over the contractorRs right to mortgage the minerals is simply
unwarranted. 0ust the same, the contractor must account for the value of mineral production
and the sales proceeds therefrom. "i(ewise, under the ?/C, F5AA, the government
remains entitled to its si2ty percent share in the net mining revenues of the contractor. 5he
latterRs right to mortgage the minerals does not negate the tateRs right to receive its share of
net mining revenues.
&hareholders Free
to &ell #heir &tocBs
,etitioners li(ewise criticiFe Clause );.-'(+, which gives the contractor authority Sto
change its e!uity structure at any time.T 5his provision may seem somewhat unusual, but
considering that ?/C, then was );; percent foreign-owned, any change would mean that
such percentage would either stay unaltered or be decreased in favor of Filipino ownership.
/oreover, the foreign-held shares may change hands freely. uch eventuality is as it should
be.
?e believe it is not necessary for government to attempt to limit or restrict the freedom
of the shareholders in the contractor to freely transfer, dispose of or encumber their
shareholdings, consonant with the unfettered e2ercise of their business judgment and
discretion. 7ather, what is critical is that9 regardless of the identit!9 nationalit! and
percentage ownership of the various shareholders of the contractor 88 and regardless of
whether these shareholders decide to ta2e the compan! public9 float bonds and other fi5ed8
income instruments9 or allow the creditor8ban2s to ta2e an e#uit! position in the compan! 88
the foreign8owned contractor is alwa!s in a position to render the services re#uired under the
0$%%9 under the direction and control of the government.
+ontractorIs 4ight to *sB
For *mendment ;ot *bsolute
?ith respect to Clauses );.1'e+ and 'i+, petitioners complain that these provisions bind
government to allow amendments to the F5AA if re!uired by ban(s and other financial
institutions as part of the conditions for new lendings. =owever, we do not find anything
wrong with Clause );.1'e+, which only states that ?if the *ontractor see2s to obtain financing
contemplated herein from ban2s or other financial institutions9 Cthe 3overnment shallE
cooperate with the *ontractor in such efforts provided that such financing arrangements will
in no event reduce the *ontractorFs obligations or the 3overnmentFs rights hereunder.A
5he colatilla obviously safeguards the tateRs interests@ if breached, it will give the
government cause to object to the proposed amendments.
9n the other hand, Clause );.1'i+ provides that ?the 3overnment shall favourabl!
consider an! re#uest from NtheO *ontractor for amendments of this %greement which are
necessar! in order for the *ontractor to successfull! obtain the financing.A ,etitioners see in
this provision a complete renunciation of control. ?e disagree.
5he proviso does not say that the government shall grant any re!uest for amendment.
Clause );.1'i+ only obliges the tate to favorably consider any such re!uest, which is not at all
unreasonable, as it is not e!uivalent to saying that the government must automatically consent
to it. 5his provision should be read together with the rest of the F5AA provisions instituting
government control and supervision over the mining enterprise. 5he clause should not be
given an interpretation that enables the contractor to wiggle out of the restrictions imposed
upon it by merely suggesting that certain amendments are re!uested by the lenders.
7ather, it is up to the contractor to prove to the government that the re!uested changes to
the F5AA are indispensable, as they enable the contractor to obtain the needed financing@ that
without such contract changes, the funders would absolutely refuse to e2tend the loan@ that
there are no other sources of financing available to the contractor 'a very unli(ely scenario+@
and that without the needed financing, the e2ecution of the wor( programs will not proceed.
3ut the bottom line is, in the e2ercise of its power of control, the government has the final
sa! on whether to approve or disapprove such re!uested amendments to the F5AA. "n short9
approval thereof is not mandator! on the part of the government.
I, E3,e, 0.e Eore4o3,4 eFa)ua03o, a,- a,a)y131 oE 0.e aEore<e,03o,e- FTAA
7roF313o,1 1uEE3/3e,0)y oFer0ur,1 7e0303o,er1> )30a,y oE obKe/03o,1 0o a,- /r303/31<1 oE 0.e
S0a0e>1 a))e4e- )a/H oE /o,0ro).
Financial !enefits ;ot
&urrendered to the +ontractor
9ne of the main reasons certain provisions of 7A $*1- were struc( down was the
finding mentioned in the 8ecision that beneficial ownership of the mineral resources had been
conveyed to the contractor. 5his finding was based on the underlying assumption, common to
the said provisions, that the foreign contractor manages the mineral resources in the same way
that foreign contractors in service contracts used to. ?6! allowing foreign contractors to
manage or operate all the aspects of the mining operation9 the above8cited provisions of R.%.
,o. ;94< have in effect conveyed beneficial ownership over the nationFs mineral resources to
these contractors9 leaving the State with nothing but bare title thereto.A
B&;C
As the ?/C,
F5AA contained similar provisions deemed by the ponente to be abhorrent to the Constitution,
the 8ecision struc( down the Contract as well.
3eneficial ownership has been defined as ownership recogniFed by law and capable of
being enforced in the courts at the suit of the beneficial owner.
B&)C
3lac(Rs )aw
ictionar! indicates that the term is used in two sensesA first, to indicate the interest of a
beneficiary in trust property 'also called Se!uitable ownershipT+@ and second, to refer to the
power of a corporate shareholder to buy or sell the shares, though the shareholder is not
registered in the corporationRs boo(s as the owner.
B&-C
Esually, beneficial ownership is
distinguished from na(ed ownership, which is the enjoyment of all the benefits and privileges
of ownership, as against possession of the bare title to property.
An assiduous e2amination of the ?/C, F5AA uncovers no indication that it confers
upon ?/C, ownership, beneficial or otherwise, of the mining property it is to develop, the
minerals to be produced, or the proceeds of their sale, which can be legally asserted and
enforced as against the tate.
As public respondents correctly point out, any interest the contractor may have in the
proceeds of the mining operation is merely the e!uivalent of the consideration the government
has underta(en to pay for its services. All lawful contracts re!uire such mutual prestations,
and the ?/C, F5AA is no different. 5he contractor commits to perform certain services for
the government in respect of the mining operation, and in turn it is to be compensated out of
the net mining revenues generated from the sale of mineral products. ?hat would be
objectionable is a contractual provision that unduly benefits the contractor far in e2cess of the
service rendered or value delivered, if any, in e2change therefor.
A careful perusal of the statute itself and its implementing rules reveals that neither 7A
$*1- nor 8A9 **-.& can be said to convey beneficial ownership of any mineral resource or
product to any foreign F5AA contractor.
)quitable &haring
of Financial !enefits
9n the contrary, 8A9 **-.&, entitled ?3uidelines :stablishing the 0iscal Regime of
0inancial or $echnical %ssistance %greementsA aims to ensure an e!uitable sharing of the
benefits derived from mineral resources. 5hese benefits are to be e!uitably shared among the
government 'national and local+, the F5AA contractor, and the affected communities. 5he
purpose is to ensure sustainable mineral resources development@ and a fair, e!uitable,
competitive and stable investment regime for the large-scale e2ploration, development and
commercial utiliFation of minerals. $he general framewor2 or concept followed in crafting
the fiscal regime of the 0$%% is based on the principle that the government e5pects real
contributions to the economic growth and general welfare of the countr!9 while the contractor
e5pects a reasonable return on its investments in the pro'ect.
B&#C
pecifically, under the fiscal regime, the governmentRs e2pectation is, inter alia9 the
receipt of its share from the ta2es and fees normally paid by a mining enterprise. 9n the other
hand, the F5AA contractor is granted by the government certain fiscal and non-fiscal
incentives
B&1C
to help support the formerRs cash flow during the most critical phase 'cost
recovery+ and to ma(e the ,hilippines competitive with other mineral-producing countries.
After the contractor has recovered its initial investment, it will pay all the normal ta2es and
fees comprising the basic share of the government, plus an additional share for the government
based on the options and formulae set forth in 8A9 **-.&.
5he said 8A9 spells out the financial benefits the government will receive from an
F5AA, referred to as Sthe Dovernment hare,T composed of a basic government share a,-
a, additional government share.
5he ba13/ 4oFer,<e,0 1.are is comprised of all direct ta2es, fees and royalties, as well
as other payments made by the contractor during the term of the F5AA. 5hese are amounts
paid directly to 'i+ the national government 'through the 3ureau of :nternal 7evenue, 3ureau
of Customs, /ines Y Deosciences 3ureau and other national government agencies imposing
ta2es or fees+, 'ii+ the local government units where the mining activity is conducted, and 'iii+
persons and communities directly affected by the mining project. 5he major ta2es and other
payments constituting the basic government share are enumerated belowA
B&.C
,ayments to the National DovernmentA
W E2cise ta2 on minerals - - percent of the gross output of mining
operations
W ContractorR income ta2 - ma2imum of #- percent of ta2able income for
corporations
W Customs duties and fees on imported capital e!uipment -the rate is set
by the 5ariff and Customs Code '#-$ percent for chemicals@ #-); percent
for e2plosives@ #-). percent for mechanical and electrical e!uipment@
and #-); percent for vehicles, aircraft and vessels
W 4A5 on imported e!uipment, goods and services N ); percent of value
W 7oyalties due the government on minerals e2tracted from mineral
reservations, if applicable N . percent of the actual mar(et value of the
minerals produced
W 8ocumentary stamp ta2 - the rate depends on the type of transaction
W Capital gains ta2 on traded stoc(s - . to ); percent of the value of the
shares
W ?ithholding ta2 on interest payments on foreign loans -). percent of
the amount of interest
W ?ithholding ta2 on dividend payments to foreign stoc(holders N ).
percent of the dividend
W ?harfage and port fees
W "icensing fees 'for e2ample, radio permit, firearms permit, professional
fees+
W 9ther national ta2es and fees.
,ayments to "ocal DovernmentsA
W "ocal business ta2 - a ma2imum of - percent of gross sales or receipts
'the rate varies among local government units+
W 7eal property ta2 - - percent of the fair mar(et value of the property,
based on an assessment level set by the local government
W pecial education levy - ) percent of the basis used for the real
property ta2
W 9ccupation fees - ,h,.; per hectare per year@ ,h,);; per hectare per
year if located in a mineral reservation
W Community ta2 - ma2imum of ,h,);,.;; per year
W All other local government ta2es, fees and imposts as of the effective
date of the F5AA - the rate and the type depend on the local government
9ther ,aymentsA
W 7oyalty to indigenous cultural communities, if any N ) percent of gross
output from mining operations
W pecial allowance - payment to claim owners and surface rights
holders
Apart from the basic share, an a--303o,a) 4oFer,<e,0 1.are is also collected from the
F5AA contractor in accordance with the second paragraph of ection %) of 7A $*1-, which
provides that the government share shall be comprised of, among other things9 certain ta2es,
duties and fees. 5he subject proviso readsA
?$he 3overnment share in a financial or technical assistance agreement shall consist
of9 among other things9 the contractorFs corporate income ta59 e5cise ta59 special allowance9
withholding ta5 due from the contractorFs foreign stoc2holders arising from dividend or
interest pa!ments to the said foreign stoc2holder in case of a foreign national9 and all such
other ta5es9 duties and fees as provided for under e5isting laws.A'3old types supplied.+
5he government, through the 8EN7 and the /D3, has interpreted the insertion of the
phrase among other things as signifying that the government is entitled to an Sadditional
government shareT to be paid by the contractor apart from the Sbasic share,T in order to attain
a fifty-fifty sharing of net benefits from mining.
5he a--303o,a) 4oFer,<e,0 1.are is computed by using one of three options or
schemes presented in 8A9 **-.&A ')+ a fifty-fifty sharing in the cumulative present value of
cash flows@ '-+ the share based on e2cess profits@ and '#+ the sharing based on the cumulative
net mining revenue. 5he particular formula to be applied will be selected by the contractor,
with a written notice to the government prior to the commencement of the development and
construction phase of the mining project.
B&&C
,roceeds from the government shares arising from an F5AA contract are distributed to
and received by the different levels of government in the following proportionsA
National Dovernment .; percent
,rovincial Dovernment ); percent
/unicipal Dovernment -; percent
Affected 3arangays -; percent
5he portion of revenues remaining after the deduction of the basic and additional
government shares is what goes to the contractor.
-overnmentIs &hare in an
F#** ;ot +onsisting &olely
of #a'es. 5uties and Fees
:n connection with the foregoing discussion on the ba13/ a,- a--303o,a)
4oFer,<e,0 shares, it is pertinent at this juncture to mention the criticism leveled at the
second paragraph of ection %) of 7A $*1-, !uoted earlier. 5he said proviso has been
denounced, because, allegedly, the tateRs share in F5AAs with foreign contractors has been
limited to ta2es, fees and duties only@ in effect, the tate has been deprived of a share in the
after8ta5 income of the enterprise. :n the face of this allegation, one has to consider that the
law does not define the term among other thingsH and the 9ffice of the olicitor Deneral, in its
/otion for 7econsideration, appears to have erroneously claimed that the phrase refers
to indirect ta5es.
5he law provides no definition of the term among other things9 for the reason that
Congress deliberately avoided setting unnecessary limitations as to what may constitute
compensation to the tate for the e2ploitation and use of mineral resources. 3ut the inclusion
of that phrase clearly and unmista(ably reveals the legislative intent to have the State collect
more than 'ust the usual ta5es9 duties and fees. Certainly, there is nothing in that phrase -- or
in the second paragraph of ection %) -- that would suggest that such phrase should be
interpreted as referring only to ta2es, duties, fees and the li(e.
,recisely for that reason, to fulfill the legislative intent behind the inclusion of the
phrase among other things in the second paragraph of ection %),
B&$C
the 8EN7 structured and
formulated in 8A9 **-.& the said a--303o,a) 4oFer,<e,0 1.are. uch a share was to consist
not of ta2es, but of a 1.are 3, 0.e ear,3,41 or /a1. E)oI1 oE 0.e <3,3,4 e,0er7r31e. 5he
additional government share was to be paid by the contractor on top of the basic share, so as to
achieve a fift!8fift! sharing 88 between the government and the contractor -- of net benefits
from mining. "n the Ramos8eJera paper9 the e5planation of the 0.ree o703o,1 or
Eor<u)a1
B&%C
-- presented in %& 998K= for the computation of the additional government
share 88 serves to debun2 the claim that the governmentFs ta2e from an 0$%% consists solel!
of ta5es9 fees and duties.
Enfortunately, the 9ffice of the olicitor Deneral -- although in possession of the
relevant data -- failed to fully replicate or echo the pertinent elucidation in the 7amos-8e4era
paper regarding the three schemes or options for computing the additional government share
presented in 8A9 **-.&. =ad due care been ta(en by the 9D, the Court would have been duly
apprised of the real nature and particulars of the additional share.
3ut, perhaps, on account of the esoteric discussion in the 7amos-8e4era paper, and the
even more abstruse mathematical jargon employed in 8A9 **-.&, the 9D omitted any
mention of the three options. :nstead, the 9D s(ipped to a side discussion of the effect
of indirect ta5es9 which had nothing at all to do with the additional government share9 to
begin with. Enfortunately, this move created the wrong impression, pointed out in 0ustice
Antonio 5. CarpioRs 9pinion, that the 9D had ta(en the position that the additional
government share consisted of indirect ta2es.
:n any event, what is !uite evident is the fact that the a--303o,a) 4oFer,<e,0 1.are, as
formulated, has nothing to do with ta2es -- direct or indirect -- or with duties, fees or charges.
5o repeat, it is over and above the basic government share composed of ta2es and duties.
imply put, the additional share may be 'a+ an amount that will result in a .;-.; sharing of the
cumulative present value of the cash flows
B&*C
of the enterprise@ 'b+ an amount e!uivalent to -.
percent of the additional or e5cess profits of the enterprise, rec(oned against a benchmar(
return on investments@ or 'c+ an amount that will result in a fifty-fifty sharing of the
cumulative net mining revenue from the end of the recovery period up to the ta2able year in
!uestion. 5he contractor is re!uired to select one of the three options or formulae for
computing the additional share, an option it will apply to all of its mining operations.
As used above, Snet mining revenueT is defined as the gross output from mining
operations for a calendar year, less deductible e2penses 'inclusive of ta2es, duties and fees+.
uch revenue would roughly be e!uivalent to Sta2able incomeT or income before income ta5.
8efinitely, as compared with, say, calculating the a--303o,a) 4oFer,<e,0 1.are on the basis
of net income 'after income ta2+, the net mining revenue is a better and much more reasonable
basis for such computation, as it gives a truer picture of the profitability of the company.
5o demonstrate that the three options or formulations will operate as intended, /essrs.
7amos and de 4era also performed some !uantifications of the government share via a
financial modeling of each of the three options discussed above. 5hey found that the
government would get the highest share from the option that is based on the net mining
revenue, as compared with the other two options, considering only the basic and the additional
shares@ and that, even though production rate decreases, the government share will actually
increase when the net mining revenue and the additional profit-based options are used.
Furthermore, it should be noted that the three options or formulae do not !et ta2e into
account the indirect ta5es
B$;C
and other financial contributions
B$)C
of mining pro'ects. 5hese
indirect ta2es and other contributions are real and actual benefits enjoyed by the Filipino
people and6or government. Now, if some of the !uantifiable items are ta(en into account in
the computations, the financial modeling would show that the total government share
increases to &; percent or higher -- in one instance, as much as $$ percent and even %* percent
-- of the net present value of total benefits from the project. As noted in the 7amos-8e4era
paper, these results are not at all shabby, considering that the contractor puts in all the capital
re!uirements and assumes all the ris(s, without the government having to contribute or ris(
anything.
8espite the foregoing e2planation, 0ustice Carpio still insisted during the CourtRs
deliberations that the phrase among other things refers only to ta2es, duties and fees. ?e are
bewildered by his position. 9n the one hand, he condemns the /ining "aw for allegedly
limiting the governmentRs benefits only to ta2es, duties and fees@ and on the other, he refuses
to allow the tate to benefit from the correct and proper interpretation of the 8EN76/D3. 5o
remove all doubts then, we hold that the tateRs share is not limited to ta2es, duties and fees
only and that the 8EN76/D3 interpretation of the phrase among other things is correct.
8efinitely, this 8EN76/D3 interpretation is not only legally sound, but also greatly
advantageous to the government.
9ne last point on the subject. 5he legislature acted judiciously in not defining the
terms among other things and, instead, leaving it to the agencies concerned to devise and
develop the various modes of arriving at a reasonable and fair amount for the a--303o,a)
4oFer,<e,0 1.are. As can be seen from 8A9 **-.&, the agencies concerned did an
admirable job of conceiving and developing not just one formula, but three different formulae
for arriving at the additional government share. Each of these options is !uite fair and
reasonable@ and, as /essrs. 7amos and 8e 4era stated, other alternatives or schemes for a
possible improvement of the fiscal regime for F5AAs are also being studied by the
government.
3esides, not loc(ing into a fi2ed definition of the term among other things will
ultimately be more beneficial to the government, as it will have that innate fle2ibility to adjust
to and cope with rapidly changing circumstances, particularly those in the international
mar(ets. uch fle2ibility is especially significant for the government in terms of helping our
mining enterprises remain competitive in world mar(ets despite challenging and shifting
economic scenarios.
I, /o,/)u13o,, Ie 10re11 0.a0 Ie -o ,o0 1.are 0.e F3eI 0.a0 3, FTAA1 I30. Eore34,
/o,0ra/0or1 u,-er RA 7982, 0.e 4oFer,<e,0>1 1.are 31 )3<30e- 0o 0aGe1, Eee1 a,- -u03e1.
o,1eJue,0)y, Ie E3,- 0.e a00a/H1 o, 0.e 1e/o,- 7ara4ra7. oE Se/03o, ;1 oE RA 7982
0o0a))y u,Iarra,0e-.
+ollections ;ot ade Jncertain
by the #hird (aragraph of &ection 98
5he third or last paragraph of ection %)
B$-C
provides that the government share in
F5AAs shall be collected when the contractor shall have recovered its pre-operating e2penses
and e2ploration and development e2penditures. 5he objection has been advanced that, on
account of the proviso, the collection of the tateRs share is not even certain, as there is no
time limit in 7A $*1- for this grace period or recovery period.
?e believe that Congress did not set any time limit for the grace period, preferring to
leave it to the concerned agencies, which are, on account of their technical e2pertise and
training, in a better position to determine the appropriate durations for such recovery periods.
After all, these recovery periods are determined, to a great e2tent, by technical and
technological factors peculiar to the mining industry. 3esides, with developments and
advances in technology and in the geosciences, we cannot discount the possibility of shorter
recovery periods. At any rate, the concerned agencies have not been remiss in this area. 5he
)**. and )**& :mplementing 7ules and 7egulations of 7A $*1- specify that the period of
recovery, rec(oned from the date of commercial operation, shall be for a period not e5ceeding
five !ears9 or until the date of actual recover!9 whichever comes earlier.
*pproval of (re%1perating
)'penses 4equired by 4* 7:<=
till, 7A $*1- is criticiFed for allegedly not re!uiring government approval of pre-
operating, e2ploration and development e2penses of the foreign contractors, who are in effect
given unfettered discretion to determine the amounts of such e2penses. upposedly, nothing
prevents the contractors from recording such e2penses in amounts e!ual to the mining
revenues anticipated for the first ); or ). years of commercial production, with the result that
the share of the tate will be Fero for the first ); or ). years. /oreover, under the
circumstances, the government would be unable to say when it would start to receive its share
under the F5AA.
?e believe that the argument is based on incorrect information as well as speculation.
9bviously, certain crucial provisions in the /ining "aw were overloo(ed. ection -#, dealing
with the rights and obligations of the e2ploration permit grantee, statesA ?$he permittee shall
underta2e e5ploration wor2 on the area as specified b! its permit based on an approved wor2
program.A 5he ne2t proviso readsA?%n! e5penditure in e5cess of the !earl! budget of
the approved wor2 program ma! be carried forward and credited to the succeeding !ears
covering the duration of the permit. 5 5 5.A 'underscoring supplied+
Clearly, even at the stage of application for an e2ploration permit, the applicant is
re!uired to submit -- for approval by the government -- a proposed wor( program for
e2ploration, containing a yearly budget of proposed e2penditures. 5he tate has the
opportunity to pass upon 'and approve or reject+ such proposed e2penditures, with the
fore(nowledge that -- if approved -- these will subse!uently be recorded as pre-operating
e2penses that the contractor will have to recoup over the grace period. 5hat is not all.
Ender ection -1, an e2ploration permit holder who determines the commercial viability
of a project covering a mining area may, within the term of the permit, file with the /ines and
Deosciences 3ureau a declaration of mining pro'ect feasibilit!. 5his declaration is to be
accompanied by a wor2 program for development for the 3ureauRs approval, the necessary
prelude for entering into an F5AA, a mineral production sharing agreement '/,A+, or some
other mineral agreement. At this stage, too, the government obviously has the opportunity to
approve or reject the proposed wor( program and budgeted e2penditures for development
wor2s on the project. uch e2penditures will ultimately become the pre-operating and
development costs that will have to be recovered by the contractor.
Naturally, with the submission of approved wor( programs and budgets for the
e2ploration and the development6construction phases, the government will be able to
scrutiniFe and approve or re'ect such e2penditures. :t will be well-informed as to the amounts
of pre-operating and other e2penses that the contractor may legitimately recover and the
appro2imate period of time needed to effect such a recovery. 5here is therefore no way the
contractor can just randomly post any amount of pre-operating e2penses and e2pect to recover
the same.
5he aforecited provisions on approved wor( programs and budgets have counterparts in
ection #., which deals with the terms and conditions e2clusively applicable to F5AAs. 5he
said provision re!uires certain terms and conditions to be incorporated into F5AAs@ among
them, ?a firm commitment 5 5 5 of an amount corresponding to the e5penditure obligation
that will be invested in the contract areaA and ?representations and warranties 5 5 5 to timel!
deplo! these Bfinancing, managerial and technical e2pertise and technologicalC resources
under its supervision pursuant to the periodic wor2 programs and related budgets 5 5 59A as
well as ?wor2 programs and minimum e5penditures commitments.A 'underscoring supplied+
Enarguably, given the provisions of ection #., the tate has every opportunity to pass
upon the proposed e2penditures under an F5AA and approve or re'ect them. :t has access to
all the information it may need in order to determine in advance the amounts of pre-operating
and developmental e2penses that will have to be recovered by the contractor and the amount
of time needed for such recovery.
I, 1u<<ary, Ie /a,,o0 a4ree 0.a0 0.e 0.3r- or )a10 7ara4ra7. oE Se/03o, ;1 oE RA
7982 31 3, a,y <a,,er u,/o,1030u03o,a).
;o 5eprivation of
!eneficial 4ights
:t is also claimed that aside from the second and the third paragraphs of ection %)
'discussed above+, ections %;, %1 and ))- of 7A $*1- also operate to deprive the tate of
beneficial rights of ownership over mineral resources@ and give them away for free to private
business enterprises 'including foreign owned corporations+. "i(ewise, the said provisions
have been construed as constituting, together with ection %), an ingenious attempt to
resurrect the old and discredited system of Slicense, concession or lease.T
pecifically, ection %; is condemned for limiting the tateRs share in a mineral
production-sharing agreement '/,A+ to just the e2cise ta2 on the mineral product. Ender
ection ).)'A+ of the 5a2 Code, such ta2 is only - percent of the mar(et value of the gross
output of the minerals. 5he colatilla in ection %1, the portion considered offensive to the
Constitution, reiterates the same limitation made in ection %;.
B$#C
:t should be pointed out that ection %; and the colatilla in ection %1 pertain onl! to
MPS%s and have no application to 0$%%s. 5hese particular statutory provisions do not come
within the issues that were defined and delineated by this Court during the 9ral Argument --
particularly the third issue, which pertained e2clusively to F5AAs. Neither did the parties
argue upon them in their pleadings. =ence, this Court cannot ma(e any pronouncement in
this case regarding the constitutionality of ections %; and %1 without violating the
fundamental rules of due process. :ndeed, the two provisos will have to await another case
specifically placing them in issue.
9n the other hand, ection ))-
B$1C
is disparaged for allegedly reverting F5AAs and all
mineral agreements to the old and discredited Slicense, concession or leaseT system. 5his
ection states in relevant part that ?the provisions of *hapter I"J Bwhich includes ections %;
to %-C on government share in mineral production8sharing agreement 5 5 5 shall immediatel!
govern and appl! to a mining lessee or contractor.A 'underscoring supplied+ 5his provision is
construed as signifying that the - percent e2cise ta2 which, pursuant to ection %;, comprises
the government share in /,As shall now also constitute the government share in F5AAs --
as well as in co-production agreements and joint venture agreements -- to the e2clusion of
revenues of any other nature or from any other source.
Apart from the fact that ection ))- li(ewise does not come within the issues delineated
by this Court during the 9ral Argument, and was never touched upon by the parties in their
pleadings, it must also be noted that the criticism hurled against this ection is rooted in
unwarranted conclusions made without considering other relevant provisions in the statute.
?hether ection ))- may properly apply to co-production or joint venture agreements, the
fact of the matter is that it cannot be made to appl! to 0$%%s.
0irst, ection ))- does not specifically mention or refer to F5AAs@ the only reason it is
being applied to them at all is the fact that it happens to use the word Scontractor.T =ence, it is
a bit of a stretch to insist that it covers F5AAs as well. Second, mineral agreements, of which
there are three types -- /,As, co-production agreements, and joint venture agreements -- are
covered by Chapter 4 of 7A $*1-. 9n the other hand, F5AAs are covered by and in fact are
the subject of Chapter 4:, an entirely different chapter altogether. 5he law obviously intends
to treat them as a breed apart from mineral agreements, since ection #. 'found in Chapter 4:+
creates a long list of specific terms, conditions, commitments, representations and warranties
-- which have not been made applicable to mineral agreements -- to be incorporated into
F5AAs.
$hird, under ection #*, the F5AA contractor is given the option to SdowngradeT -- to
convert the F5AA into a mineral agreement at any time during the term if the economic
viability of the contract area is inade!uate to sustain large-scale mining operations. 5hus,
there is no reason to thin( that the law through ection ))- intends to e2act from F5AA
contractors merely the same government share 'a - percent e2cise ta2+ that it apparently
demands from contractors under the three forms of mineral agreements. I, br3eE, Se/03o, 112
-oe1 ,o0 a77)y 0o FTAA1.
Notwithstanding the foregoing e2planation, 0ustices Carpio and /orales maintain that
the Court must rule now on the constitutionality of ections %;, %1 and ))-, allegedly because
the ?/C, F5AA contains a provision which grants the contractor unbridled and SautomaticT
authority to convert the F5AA into an /,A@ and should such conversion happen, the tate
would be prejudiced since its share would be limited to the - percent e2cise ta2. 0ustice
Carpio adds that there are five /,As already signed just awaiting the judgment of this Court
on respondentsR and intervenorRs /otions for 7econsideration. ?e hold however that, at this
point, this argument is based on pure speculation. 5he Court cannot rule on mere surmises
and hypothetical assumptions, without firm factual anchor. ?e repeatA basic due process
re!uires that we hear the parties who have a real legal interest in the /,As 'i.e. the parties
who e2ecuted them+ before these /,As can be reviewed, or worse, struc( down by the
Court. Anything less than that re!uirement would be arbitrary and capricious.
:n any event, the conversion of the present F5AA into an /,A is
problematic. 0irst9 the contractor must comply with the law, particularly ection #* of 7A
$*1-@ inter alia9 it must convincingly show that the Seconomic viability of the contract is
found to be inade!uate to justify large-scale mining operations@T second9 it must contend with
the ,residentRs e2ercise of the power of tate control over the E8E of natural resources@
and third9 it will have to ris( a possible declaration of the unconstitutionality 'in a proper case+
of ections %;, %1 and ))-.
5he first re!uirement is not as simple as it loo(s. ection #* contemplates a situation
in which an F5AA has already been e2ecuted and entered into, and is presumably being
implemented, when the contractor SdiscoversT that the mineral ore reserves in the contract area are
not sufficient to justify large-scale mining, and thus the contractor re!uests the conversion of
the F5AA into an /,A. 5he contractor in effect needs to e2plain why, despite its
e2ploration activities, including the conduct of various geologic and other scientific tests and
procedures in the contract area, it was unable to determine correctly the mineral ore reserves
and the economic viability of the area. 5he contractor must e2plain why, after conducting
such e2ploration activities, it decided to file a declaration of mining feasibility, and to apply
for an F5AA, thereby leading the tate to believe that the area could sustain large-scale
mining. 5he contractor must justify fully why its earlier findings, based on scientific
procedures, tests and data, turned out to be wrong, or were way off. :t must li(ewise prove
that its new findings, also based on scientific tests and procedures, are correct. 7ight away,
this puts the contractorRs technical capabilities and e2pertise into serious doubt. ?e wonder if
anyone would relish being in this situation. 5he tate could even !uestion and challenge the
contractorRs !ualification and competence to continue the activity under an /,A.
A)) 3, a)), I.3)e 0.ere <ay be /o4e,0 4rou,-1 0o a11a3) 0.e aEore/30e- Se/03o,1, 0.31
our0 -- o, /o,13-era03o,1 oE -ue 7ro/e11 -- /a,,o0 ru)e u7o, 0.e< .ere. A,yIay, 3E
)a0er o, 0.e1e Se/03o,1 are -e/)are- u,/o,1030u03o,a), 1u/. -e/)ara03o, I3)) ,o0 aEEe/0 0.e
o0.er 7or03o,1 13,/e 0.ey are /)ear)y 1e7arab)e Ero< 0.e re10.
1ur ineral 4esources ;ot
-iven *way for Free by 4* 7:<=
Nevertheless, if only to disabuse our minds, we should address the contention that our
mineral resources are effectively given away for free by the law '7A $*1-+ in general and by
ections %;, %), %1 and ))- in particular.
Foreign contractors do not just waltF into town one day and leave the ne2t, ta(ing away
mineral resources without pa!ing an!thing. :n order to get at the minerals, they have to invest
huge sums of money 'tens or hundreds of millions of dollars+ in e2ploration wor(s first. :f the
e2ploration proves unsuccessful, all the cash spent thereon will not be returned to the foreign
investors@ rather, those funds will have been infused into the local economy, to remain there
permanently. 5he benefits therefrom cannot be simply ignored. And assuming that the
foreign contractors are successful in finding ore bodies that are viable for commercial
e2ploitation, they do not just pluc( out the minerals and cart them off. 5hey have first to build
camp sites and roadways@ dig mine shafts and connecting tunnels@ prepare tailing ponds,
storage areas and vehicle depots@ install their machinery and e!uipment, generator sets,
pumps, water tan(s and sewer systems, and so on.
:n short, they need to e2pend a great deal more of their funds for facilities, e!uipment
and supplies, fuel, salaries of local labor and technical staff, and other operating e2penses. :n
the meantime, they also have to pay ta2es,
B$.C
duties, fees, and royalties. All told, the
e2ploration, pre-feasibility, feasibility, development and construction phases together add up
to as many as eleven years.
B$&C
5he contractors have to continually shell out funds for the
duration of over a decade, before they can commence commercial production from which they
would eventually derive revenues. All that money translates into a lot of Spump-primingT for
the local economy.
Dranted that the contractors are allowed subse!uently to recover their pre-operating
e2penses, still, that eventuality will happen only after they shall have first put out the cash and
fueled the economy. /oreover, in the process of recouping their investments and costs, the
foreign contractors do not actuall! pull out the mone! from the econom!. 7ather, they recover
or recoup their investments out of actual commercial production by not paying a portion of the
basic government share corresponding to national ta2es, along with the additional government
share, for a period of not more than five years
B$$C
counted from the commencement of
commercial production.
:t must be noted that there can be no recover! without commencing actual commercial
production. :n the meantime that the contractors are recouping costs, they need to continue
operating@ in order to do so, they have to disburse money to meet their various needs. :n short,
money is continually infused into the economy.
5he foregoing discussion should serve to rid us of the mista(en belief that, since the
foreign contractors are allowed to recover their investments and costs, the end result is that
they practically get the minerals for free, which leaves the Filipino people none the better for
it.
*ll !usinesses )ntitled
to +ost 4ecovery
)et it be put on record that not onl! foreign contractors9 but all businessmen and all
business entities in general9 have to recoup their investments and costs. 5hat is one of the first
things a student learns in business school. 7egardless of its nationality, and whether or not a
business entity has a five-year cost recovery period, it will -- must -- have to recoup its
investments, one way or another. 5his is just common business sense. 7ecovery of
investments is absolutely indispensable for business survival@ and business survival ensures
soundness of the economy, which is critical and contributory to the general welfare of the
people. :ven government corporations must recoup their investments in order to survive and
continue in operation. And, as the preceding discussion has shown, there is no business that
gets ahead or earns profits without any cost to it.
:t must also be stressed that, though the tate owns vast mineral wealth, such wealth is
not readily accessible or transformable into usable and negotiable currency without the
intervention of the credible mining companies. 5hose untapped mineral resources, hidden
beneath tons of earth and roc(, may as well not be there for all the good they do us right now.
5hey have first to be e2tracted and converted into mar(etable form, and the country needs the
foreign contractorRs funds, technology and (now-how for that.
After about eleven years of pre-operation and another five years for cost recovery, the
foreign contractors will have just bro(en even. :s it li(ely that they would at that point stop
their operations and leaveO Certainly not. 5hey have yet to ma(e profits. 5hus, for the
remainder of the contract term, they must strive to maintain profitability. 8uring this period,
they pay the whole of the basic government share and the additional government share which9
ta2en together with indirect ta5es and other contributions9 amount to appro5imatel! =>
percent or more of the entire financial benefits generated b! the mining venture.
:n sum, we can hardly tal( about foreign contractors ta(ing our mineral resources for
free. :t ta(es a lot of hard cash to even begin to do what they do. %nd what the! do in this
countr! ultimatel! benefits the local econom!9 grows businesses9 generates emplo!ment9 and
creates infrastructure, as discussed above. =ence, we definitely disagree with the sweeping
claim that no F5AA under ection %) will ever ma(e any real contribution to the growth of
the economy or to the general welfare of the country. 5his is not a plea for foreign
contractors. Rather9 this is a #uestion of focusing the 'udicial spotlight s#uarel! on all the
pertinent facts as the! bear upon the issue at hand9 in order to avoid leaping precipitatel! to
ill8conceived conclusions not solidl! grounded upon fact.
4epatriation of
*fter%#a' $ncome
Another objection points to the alleged failure of the /ining "aw to ensure real
contributions to the economic growth and general welfare of the country, as mandated by
ection - of Article K:: of the Constitution. ,ursuant to ection %) of the law, the entire after-
ta2 income arising from the e2ploitation of mineral resources owned by the tate supposedly
belongs to the foreign contractors, which will naturally repatriate the said after-ta2 income to
their home countries, thereby resulting in no real contribution to the economic growth of this
country. Clearly, this contention is premised on erroneous assumptions.
0irst, as already discussed in detail hereinabove, the concerned agencies have correctly
interpreted the second paragraph of ection %) of 7A $*1- to mean that the government is
entitled to an additional share, to be computed based on any one of the following factorsA net
mining revenues, the present value of the cash flows, or e2cess profits rec(oned against a
benchmar( rate of return on investments. o it is not correct to say that all of the after-ta2
income will accrue to the foreign F5AA contractor, as the government effectivel! receives a
significant portion thereof.
Second, the foreign contractors can hardly ?repatriate the entire after8ta5 income to
their home countries.A Even a bit of (nowledge of corporate finance will show that it will be
impossible to maintain a business as a Sgoing concernT if the entire Snet profitT earned in any
particular year will be ta(en out and repatriated. 5he Snet incomeT figure reflected in the
bottom line is a mere accounting figure not necessarily corresponding to cash in the ban(, or
other !uic( assets. :n order to produce and set aside cash in an amount e!uivalent to the
bottom line figure, one may need to sell off assets or immediately collect receivables or
li!uidate short-term investments@ but doing so may very li(ely disrupt normal business
operations.
:n terms of cash flows, the funds corresponding to the net income as of a particular point
in time are actuall! in use in the normal course of business operations. ,ulling out such net
income disrupts the cash flows and cash position of the enterprise and, depending on the
amount being ta(en out, could seriously cripple or endanger the normal operations and
financial health of the business enterprise. I, 1.or0, ,o 1a,e bu13,e11 7er1o,, /o,/er,e-
I30. <a3,0a3,3,4 0.e <3,3,4 e,0er7r31e a1 a 4o3,4 /o,/er, a,- Hee73,4 a Eoo0.o)- 3, 301
<arHe0, /a, aEEor- 0o re7a0r3a0e 0.e e,03re aE0er-0aG 3,/o<e 0o 0.e .o<e /ou,0ry.
#he &tateIs 4eceipt of &i'ty
(ercent of an F#** +ontractorIs
*fter%#a' $ncome ;ot andatory
?e now come to the ne2t objection which runs this wayA :n F5AAs with a foreign
contractor, the tate must receive at least &; percent of the after-ta2 income from the
e2ploitation of its mineral resources. 5his share is the e!uivalent of the constitutional
re!uirement that at least &; percent of the capital, and hence &; percent of the income, of
mining companies should remain in Filipino hands.
0irst, we fail to see how we can properly conclude that the Constitution mandates the
tate to e2tract at least &; percent of the after-ta2 income from a mining company run by a
foreign contractor. 5he argument is that the Charter re!uires the tateRs partner in a co-
production agreement, joint venture agreement or /,A to be a Filipino corporation 'at least
&; percent owned by Filipino citiFens+.
?e !uestion the logic of this reasoning, premised on a supposedly parallel or analogous
situation. ?e are, after all, dealing with an essentiall! different e#uation, one that involves
different elements. T.e .ar0er -3- ,o0 3,0e,- 0o E3G a, 3ro,-/)a- ru)e o, 0.e 6' 7er/e,0
1.are, a77)3/ab)e 0o a)) 130ua03o,1 a0 a)) 03<e1 a,- 3, a)) /3r/u<10a,/e1. :f ever such was
the intention of the framers, they would have spelt it out in blac( and white. Jerba legis will
serve to dispel unwarranted and untenable conclusions.
Second9 if we would bother to do the math, we might better appreciate the impact 'and
reasonableness+ of what we are demanding of the foreign contractor. "et us use
a simplified illustration. "et us base it on gross revenues of, say, ,.;;. After deducting
operating e2penses, but prior to income ta2, suppose a mining firm ma(es a ta5able
income of ,);;. A corporate income ta2 of #- percent results in ,#- of ta2able income going
to the government, leaving the mining firm with ,&%. Dovernment then ta(es => percent
thereof, e!uivalent to ,1;.%;, leaving only ,-$.-; for the mining firm.
At this point the government has poc(eted ,#-.;; plus ,1;.%;, or a total of ,$-.%; for
every ,);; of ta2able income, leaving the mining firm with only ,-$.-;. 3ut that is not all.
5he government has also ta(en - percent e2cise ta2 Soff the top,T e!uivalent to another ,);.
Ender the minimum &; percent proposal, the government nets around ,%-.%; 'not counting
other ta2es, duties, fees and charges+ from a ta2able income of ,);; 'assuming gross revenues
of ,.;;, for purposes of illustration+. 9n the other hand, the foreign contractor, which
provided all the capital9 e#uipment and labor9 and too2 all the entrepreneurial ris2s
88 receives ,-$.-;. 9ne cannot but wonder whether such a distribution is even remotely
e!uitable and reasonable, considering the nature of the mining business. 5he amount of,%-.%;
out of ,);;.;; is really a lot N it does not matter that we call part of it e5cise ta5 or income ta5,
and another portion thereof income from e5ploitation of mineral resources. ome might thin(
it wonderful to be able to ta(e the lionRs share of the benefits. 3ut we have to as( ourselves if
we are really serious in attracting the investments that are the indispensable and (ey element
in generating the monetary benefits of which we wish to ta(e the lionRs share. Fa3r,e11 31 a
/re-o ,o0 o,)y 3, )aI, bu0 a)1o 3, bu13,e11.
$hird9 the &; percent rule in the petroleum industry cannot be insisted upon at all times
in the mining business. 5he reason happens to be the fact that in petroleum operations, the
bul( of e2penditures is in e2ploration, but once the contractor has found and tapped into the
deposit, subse!uent investments and e2penditures are relatively minimal. 5he crude 'or gas+
(eeps gushing out, and the wor( entailed is just a matter of piping, transporting and storing.
Not so in mineral mining. 5he ore body does not pop out on its own. Even after it has been
located, the contractor must continually invest in machineries and e2pend funds to dig and
build tunnels in order to access and e2tract the minerals from underneath hundreds of tons of
earth and roc(.
As already stated, the numerous intrinsic differences involved in their respective
operations and re!uirements, cost structures and investment needs render it highly
inappropriate to use petroleum operations F5AAs as benchmar(s for mining F5AAs. 4erily,
we cannot just ignore the realities of the distinctl! different situations and stubbornly insist on
the Sminimum &; percent.T
#he ining and the 1il $ndustries
5ifferent From )ach 1ther
5o stress, there is no independent showing that the ta(ing of at least a &; percent share in
the after-ta2 income of a mining company operated by a foreign contractor is fair and
reasonable under most if not all circumstances. 5he fact that some petroleum companies li(e
hell acceded to such percentage of sharing does not ipso facto mean that it is per se
reasonable and applicable to non8petroleum situations Cthat is9 mining companiesE as well.
?e can ta(e judicial notice of the fact that there are, after all, numerous intrinsic differences
involved in their respective operations and e#uipment or technological re#uirements9 costs
structures and capital investment needs9 and product pricing and mar2ets.
5here is no showing, for instance, that mining companies can readily cope with a &;
percent government share in the same way petroleum companies apparently can. ?hat we
have is a suggestion to enforce the &; percent !uota on the basis of a disjointed analogy. 5he
only factor common to the two disparate situations is the e2traction of natural resources.
:ndeed, we should ta(e note of the fact that Congress made a distinction between mining
firms and petroleum companies. :n 7epublic Act No. $$-* -- ?%n %ct Reducing the :5cise
$a5 Rates on Metallic and ,on8Metallic Minerals and Puarr! Resources9 %mending for the
Purpose Section 1K1CaE of the ,ational "nternal Revenue *ode9 as amendedA 88 the lawma(ers
fi2ed the e2cise ta2 rate on metallic and non-metallic minerals at two percent of the actual
mar(et value of the annual gross output at the time of removal. =owever, in the case of
petroleum, the lawma(ers set the e2cise ta2 rate for the first ta2able sale at fifteen percent of
the fair international mar(et price thereof.
5here must have been a ver! sound reason that impelled Congress to impose two very
dissimilar e2cise ta2 rate. ?e cannot assume, without proof, that our honorable legislators
acted arbitrarily, capriciously and whimsically in this instance. ?e cannot just ignore the
reality of two distinctly different situations and stubbornly insist on going Sminimum &;
percent.T
5o repeat, the mere fact that gas and oil e2ploration contracts grant the tate &; percent
of the net revenues does not necessarily imply that mining contracts should li(ewise yield a
minimum of &; percent for the tate. Jumping to that erroneous conclusion is li2e comparing
apples with oranges. $he e5ploration9 development and utili@ation of gas and oil are simpl!
different from those of mineral resources.
5o stress again, the main ris( in gas and oil is in the e2ploration. 3ut once oil in
commercial !uantities is struc( and the wells are put in place, the ris( is relatively over and
blac( gold simply flows out continuously with comparativel! less need for fresh investments
and technology.
9n the other hand, even if minerals are found in viable !uantities, there is still need
for continuous fresh capital and e2pertise to dig the mineral ores from the mines. 0ust because
deposits of mineral ores are found in one area is no guarantee that an e!ual amount can be
found in the adjacent areas. 5here are simply continuing ris(s and need for more capital,
e2pertise and industry all the time.
Note, however, that the indirect benefits -- apart from the cash revenues -- are much
more in the mineral industry. As mines are e2plored and e2tracted, vast employment is
created, roads and other infrastructure are built, and other multiplier effects arise. 9n the other
hand, once oil wells start producing, there is less need for employment. 7oads and other
public wor(s need not be constructed continuously. :n fine, there is no basis for saying that
government revenues from the oil industry and from the mineral industries are to be identical
all the time.
0ourth9 to our mind, the proffered Sminimum &; percentT suggestion tends to limit the
fle5ibilit! and tie the hands of government, ultimately hampering the countryRs
competitiveness in the international mar(et, to the detriment of the Filipino people. 5his
Syou-have-to-give-us-&;-percent-of-after-ta2-income-or-we-donRt-do- business-with-youT
approach is !uite perilous. 5rue, this situation may not seem too unpalatable to the foreign
contractor during good years, when international mar(et prices are up and the mining firm
manages to (eep its costs in chec(. =owever, under unfavorable economic and business
conditions, with costs spiraling s(ywards and minerals prices plummeting, a mining firm may
consider itself luc(y to ma(e just minimal profits.
5he infle2ible, carved-in-granite demand for a &; percent government share may spell
the end of the mining venture, scare away potential investors, and thereby further worsen the
already dismal economic scenario. /oreover, such an unbending or unyielding policy
prevents the government from responding appropriately to changing economic conditions and
shifting mar(et forces. $his infle5ibilit! further renders our countr! less attractive as an
investment option compared with other countries.
And fifth9 for this Court to decree imperiously that the governmentRs share should be not
less than &; percent of the after-ta2 income of F5AA contractors at all times is nothing short
of dictating upon the government. 5he result, ironically, is that the State ends up losing
control. 5o avoid compromising the tateRs full control and supervision over the e2ploitation
of mineral resources, this Court must bac( off from insisting upon a Sminimum &; percentT
rule. :t is sufficient that the tate has the power and means, should it so decide, to get a &;
percent share 'or more+ in the contractorRs net mining revenues or after-ta2 income, or
whatever other basis the government may decide to use in rec(oning its share. "t is not
necessar! for it to do so in ever! case9 regardless of circumstances.
:n fact, the government must be trusted, must be accorded the liberty and the utmost
fle2ibility to deal, negotiate and transact with contractors and third parties as it sees fit@ and
upon terms that it ascertains to be most favorable or most acceptable under the circumstances,
even if it means agreeing to less than &; percent. Nothing must prevent the tate from
agreeing to a share less than that, should it be deemed fit@ otherwise the tate will be deprived
of full control over mineral e2ploitation that the Charter has vested in it.
5o stress again, there is simpl! no constitutional or legal provision fi5ing the minimum
share of the government in an F#** at &; percent of the net profit. For this Court to decree
such minimum is to wade into judicial legislation, and thereby inordinately impinge on
the control power of the tate. "et it be clearA the Court is not against the grant of more
benefits to the tate@ in fact, the more the better. :f during the F5AA negotiations, the
,resident can secure &; percent,
B$%C
or even *; percent, then all the better for our people. 3ut,
if under the peculiar circumstances of a specific contract, the ,resident could secure only .;
percent or .. percent, so be it. Needless to say, the ,resident will have to report 'and be
responsible for+ the specific F5AA to Congress, and eventually to the people.
Finally, if it should later be found that the share agreed to is grossl! disadvantageous to
the government, the officials responsible for entering into such a contract on its behalf will
have to answer to the courts for their malfeasance. And the contract provision voided. 3ut
this Court would abuse its own authority should it force the governmentRs hand to adopt the &;
percent demand of some of our esteemed colleagues.
+apital and )'pertise (rovided.
2et *ll 4isBs *ssumed by +ontractor
=ere, we will repeat what has not been emphasiFed and appreciated enoughA the fact
that the contractor in an 0$%% provides all the needed capital9 technical and managerial
e5pertise9 and technolog! re#uired to underta2e the pro'ect.
:n regard to the ?/C, F5AA, the then foreign-owned ?/C, as contractor
committed, at the very outset, to ma(e capital investments of up to EU.; million in that
single mining project. ?/C, claims to have already poured in well over ,%;; million into
the country as of February )**%, with more in the pipeline. 5hese resources, valued in the
tens or hundreds of millions of dollars, are invested in a mining project that provides no
assurance whatsoever that any part of the investment will be ultimately recouped.
At the same time, the contractor must comply with legally imposed environmental
standards and the social obligations, for which it also commits to ma(e significant
e2penditures of funds. 5hroughout, the contractor assumes all the ris(s
B$*C
of the business, as
mentioned earlier. 5hese ris(s are indeed very high, considering that the rate of success in
e2ploration is e2tremely low. 5he probability of finding any mineral or petroleum in
commercially viable !uantities is estimated to be about )A),;;; only. 9n that slim chance
rides the contractorRs hope of recouping investments and generating profits. And when the
contractor has recouped its initial investments in the project, the government share increases to
si2ty percent of net benefits -- without the tate ever being in peril of incurring costs, e2penses
and losses.
And even in the worst possible scenario -- an absence of commercial !uantities of
minerals to justify development -- the contractor would already have spent several million
pesos for e2ploration wor(s, before arriving at the point in which it can ma(e that
determination and decide to cut its losses. :n fact, during the first year alone of the e2ploration
period, the contractor was already committed to spend not less than ,-1 million. 5he F5AA
therefore clearly ensures benefits for the local economy, courtesy of the contractor.
A)) 3, a)), 0.31 1e0u7 /a,,o0 be re4ar-e- a1 -31a-Fa,0a4eou1 0o 0.e S0a0e or 0.e
F3)373,o 7eo7)e? 30 /er0a3,)y /a,,o0 be 1a3- 0o /o,Fey be,eE3/3a) oI,er1.37 oE our <3,era)
re1our/e1 0o Eore34, /o,0ra/0or1.
5eductions *llowed by the
7+( F#** 4easonable
,etitioners !uestion whether the tateRs wea( control might render the sharing
arrangements ineffective. 5hey cite the so-called SsuspiciousT deductions allowed by the
?/C, F5AA in arriving at the net mining revenue, which is the basis for computing the
government share. 5he ?/C, F5AA, for instance, allows e2penditures for Sdevelopment
within and outside the *ontract %rea relating to the /ining 9perations,T
B%;C
Sconsulting fees
incurred both inside and outside the Philippines for wor( related directly to the /ining
9perations,T
B%)C
and Sthe establishment and administration of field offices including
administrative overheads incurred within and outside the Philippines which are properly
allocatable to the /ining 9perations and reasonably related to the performance of the
ContractorRs obligations and e2ercise of its rights under this Agreement.T
B%-C
:t is !uite well (nown, however, that mining companies do perform some mar(eting
activities abroad in respect of selling their mineral products and by-products. =ence, it would
not be improper to allow the deduction of reasonable consulting fees incurred abroad, as well
as administrative e2penses and overheads related to mar(eting offices also located abroad --
provided that these deductions are directly related or properly allocatable to the mining
operations and reasonably related to the performance of the contractorRs obligations and
e2ercise of its rights. :n any event, more facts are needed. Entil we see how these provisions
actually operate, mere SsuspicionsT will not suffice to propel this Court into ta(ing action.
&ection 7.: of the 7+( F#**
$nvalid and 5isadvantageous
=aving defended the ?/C, F5AA, we shall now turn to two defective provisos. "et
us start with ection $.* of the ?/C, F5AA. ?hile ection $.$ gives the government a &;
percent share in the net mining revenues of ?/C, from the commencement of commercial
production, ection $.* deprives the government of part or all of the said &; percent. Ender
the latter provision, should ?/C,Rs foreign shareholders -- who originally owned );;
percent of the e!uity -- sell &; percent or more of its outstanding capital stoc( to a Filipino
citiFen or corporation, the tate loses its right to receive its &; percent share in net mining
revenues under ection $.$.
ection $.* providesA
$he percentage of ,et Mining Revenues pa!able to the 3overnment pursuant to *lause ;.;
shall be reduced b! 1percent of ,et Mining Revenues for ever! 1percent ownership interest in
the *ontractor Ci.e.9 (M*PE held b! a Pualified :ntit!.
B%#C
Evidently, what ection $.$ grants to the tate is ta(en away in the ne2t breath by
ection $.* without an! offsetting compensation to the State. 5hus, in reality, the tate has no
vested right to receive any income from the F5AA for the e2ploitation of its mineral
resources. ?orse, it would seem that what is given to the tate in ection $.$ is b! mere
tolerance of (M*PFs foreign stoc2holders9 who can at any time cut off the governmentRs
entire &; percent share. 5hey can do so by simply selling &; percent of ?/C,Rs outstanding
capital stoc( to a ,hilippine citiFen or corporation. /oreover, the proceeds of such sale will
of course accrue to the foreign stoc(holders of ?/C,, not to the tate.
5he sale of &; percent of ?/C,Rs outstanding e!uity to a corporation that is &; percent
Filipino-owned and 1; percent foreign-owned will still trigger the operation of ection $.*.
Effectively, the tate will lose its right to receive all &; percent of the net mining revenues of
?/C,@ and foreign stoc2holders will own beneficiall! up to =4 percent of (M*P, consisting
of the remaining 1; percent foreign e!uity therein, plus the -1 percent pro-rata share in the
buyer-corporation.
B%1C
:n fact, the 0anuary -#, -;;) sale by ?/C,Rs foreign stoc(holder of the entire
outstanding e!uity in ?/C, to agittarius /ines, :nc. -- a domestic corporation at least &;
percent Filipino owned -- may be deemed to have automatically triggered the operation of
ection $.*, without need of further action by any party, and removed the tateRs right to
receive the &; percent share in net mining revenues.
At bottom, ection $.* has the effect of depriving the tate of its &; percent share in the
net mining revenues of ?/C, without an! offset or compensation whatsoever. :t is possible
that the inclusion of the offending provision was initially prompted by the desire to provide
some form of incentive for the principal foreign stoc(holder in ?/C, to eventually reduce its
e!uity position and ultimately divest in favor of Filipino citiFens and corporations. =owever,
as finally structured, ection $.* has the deleterious effect of depriving government of the
entire &; percent share in ?/C,Rs net mining revenues, without any form of compensation
whatsoever. uch an outcome is completely unacceptable.
5he whole point of developing the nationRs natural resources is to benefit the Filipino
people, future generations included. And the tate as sovereign and custodian of the nationRs
natural wealth is mandated to protect, conserve, preserve and develop that part of the national
patrimony for their benefit. =ence, the Charter lays great emphasis on Sreal contributions to
the economic growth and general welfare of the countryT
B%.C
as essential guiding principles to
be (ept in mind when negotiating the terms and conditions of F5AAs.
Earlier, we held ')+ that the tate must be accorded the liberty and the utmost fle2ibility
to deal, negotiate and transact with contractors and third parties as it sees fit, and upon terms
that it ascertains to be most favorable or most acceptable under the circumstances, even if that
should mean agreeing to less than &; percent@ '-+ that it is not necessary for the tate to e2tract
a &; percent share in every case and regardless of circumstances@ and '#+ that should the tate
be prevented from agreeing to a share less than &; percent as it deems fit, it will be deprived of
the full control over mineral e2ploitation that the Charter has vested in it.
5hat full control is obviously not an end in itself@ it e2ists and subsists precisely because
of the need to serve and protect the national interest. :n this instance, national interest finds
particular application in the protection of the national patrimony and the development and
e2ploitation of the countryRs mineral resources for the benefit of the Filipino people and the
enhancement of economic growth and the general welfare of the country. ",-oub0e-)y, 1u/.
Eu)) /o,0ro) /a, be <31u1e- a,- abu1e-, a1 Ie ,oI I30,e11.
ection $.* of the ?/C, F5AA effectivel! gives awa! the StateFs share of net mining
revenues Cprovided for in Section ;.;E without an!thing in e5change. /oreover, this outcome
constitutes un'ust enrichment on the part of the local and foreign stoc(holders of ?/C,. 3y
their mere divestment of up to &; percent e!uity in ?/C, in favor of Filipino citiFens and6or
corporations, the local and foreign stoc(holders get a windfall. 5heir share in the net mining
revenues of ?/C, is automatically increased, without their having to pay the government
anything for it. :n short, the provision in !uestion is without a doubt grossl! disadvantageous
to the government9 detrimental to the interests of the 0ilipino people9 and violative of public
polic!.
/oreover, it has been reiterated in numerous decisions
B%&C
that the parties to a contract
may establish any agreements, terms and conditions that they deem convenient@ but these
should not be contrary to law, morals, good customs, public order or public policy.
B%$C
3eing
precisely violative of anti-graft provisions and contrary to public policy, ection $.* must
therefore be stric(en off as invalid.
?hether the government officials concerned acceded to that provision by sheer mista(e
or with full awareness of the ill conse!uences, is of no moment. :t is hornboo( doctrine that
the principle of estoppel does not operate against the government for the act of its agents,
B%%C
and that it is never estopped by any mista(e or error on their part.
B%*C
:t is therefore possible
and proper to rectify the situation at this time. /oreover, we may also say that the F5AA in
!uestion does not involve mere contractual rights@ being impressed as it is with public interest,
the contractual provisions and stipulations must yield to the common good and the national
interest.
ince the offending provision is very much separable
B*;C
from ection $.$ and the rest of
the F5AA, the deletion of ection $.* can be done without affecting or re!uiring the
invalidation of the ?/C, F5AA itself. uch a deletion will preserve for the government its
due share of the benefits. 5his way, the mandates of the Constitution are complied with and
the interests of the government fully protected, while the business operations of the contractor
are not needlessly disrupted.
&ection 7.9>e? of the 7+( F#**
*lso $nvalid and 5isadvantageous
ection $.%'e+ of the ?/C, F5AA is li(ewise invalid. :t provides thusA
?;.G $he 3overnment Share shall be deemed to include all of the following sumsB
?CaE all 3overnment ta5es9 fees9 levies9 costs9 imposts9
duties and ro!alties including e5cise ta59 corporate
income ta59 customs dut!9 sales ta59 value added ta59
occupation and regulator! fees9 3overnment
controlled price stabili@ation schemes9 an! other
form of 3overnment bac2ed schemes9 an! ta5 on
dividend pa!ments b! the *ontractor or its %ffiliates
in respect of revenues from the Mining &perations
and an! ta5 on interest on domestic and foreign
loans or other financial arrangements or
accommodations9 including loans e5tended to the
*ontractor b! its stoc2holdersH
?CbE an! pa!ments to local and regional government9
including ta5es9 fees9 levies9 costs9 imposts9 duties9
ro!alties9 occupation and regulator! fees and
infrastructure contributionsH
?CcE an! pa!ments to landowners9 surface rights holders9
occupiers9 indigenous people or *laimownersH
?CdE costs and e5penses of fulfilling the *ontractorFs
obligations to contribute to national development in
accordance with *lause 1>.1CiE C1E and 1>.1CiE C<EH
?CeE an amount e#uivalent to whatever benefits that ma! be
e5tended in the future b! the 3overnment to the
*ontractor or to financial or technical assistance
agreement contractors in generalH
?CfE all of the foregoing items which have not previousl!
been offset against the 3overnment Share in an
earlier 0iscal Qear9 ad'usted for inflation.A
Cunderscoring suppliedE
ection $.%'e+ is out of place in the F5AA. :t ma(es no sense why, for instance, money
spent by the government for the benefit of the contractor in building roads leading to the mine
site should still be deductible from the tateRs share in net mining revenues. Allowing this
deduction results in benefiting the contractor twice over. :t constitutes unjust enrichment on
the part of the contractor at the e2pense of the government, since the latter is effectively being
made to pay twice for the same item.
B*)C
For being grossly disadvantageous and prejudicial to
the government and contrary to public policy, ection $.%'e+ is undoubtedly invalid and must
be declared to be without effect. Fortunately, this provision can also easily be stric(en off
without affecting the rest of the F5AA.
;othing 6eft 1ver
*fter 5eductionsF
:n connection with ection $.%, an objection has been raisedA pecified in ection $.%
are numerous items of deduction from the tateRs &; percent share. After ta(ing these into
account, will the tate ever receive anything for its ownership of the mineral resourcesO
?e are confident that under normal circumstances, the answer will be ye1. :f we
e2amine the various items of SdeductionT listed in ection $.% of the ?/C, F5AA, we will
find that they correspond closely to the components or elements of the ba13/ 4oFer,<e,0
1.are established in 8A9 **-.&, as discussed in the earlier part of this 9pinion.
"i(ewise, the balance of the governmentRs &; percent share -- after netting out the items
of deduction listed in ection $.% --corresponds closely to the a--303o,a) 4oFer,<e,0
1.are provided for in 8A9 **-.& which, we once again stress, has nothing at all to do with
indirect ta2es. 5he 7amos-8e4era paper
B*-C
concisely presents the fiscal contribution of an
F5AA under 8A9 **-.& in this e!uationA
7eceipts from an F5AA Z basic govRt share [ addRl govRt share
5ransposed into a similar e!uation, the fiscal payments system from the ?/C, F5AA
assumes the following formulationA
DovernmentRs &; percent share in net mining revenues of ?/C, Z items listed in ec. $.%
of the F5AA [ balance of DovRt share, payable 1 months from the end of the fiscal year
:t should become apparent that the fiscal arrangement under the ?/C, F5AA is very
similar to that under 8A9 **-.&, with the Sbalance of government share payable 1 months
from end of fiscal yearT being the e!uivalent of the a--303o,a) 4oFer,<e,0 1.are computed
in accordance with the Snet-mining-revenue-based optionT under 8A9 **-.&, as discussed
above. As we have emphasiFed earlier, we find each of the three options for computing
the a--303o,a) 4oFer,<e,0 1.are -- as presented in 8A9 **-.& -- to be sound and
reasonable.
9e 0.ereEore /o,/)u-e 0.a0 0.ere 31 ,o0.3,4 3,.ere,0)y Iro,4 3, 0.e fiscal regime oE
0.e 9M! FTAA, a,- /er0a3,)y ,o0.3,4 0o Iarra,0 0.e 3,Fa)3-a03o, oE 0.e FTAA 3, 301
e,03re0y.
&ection 3.3 of the 7+(
F#** +onstitutional
ection #.# of the ?/C, F5AA is assailed for violating supposed constitutional
restrictions on the term of F5AAs. 5he provision in !uestion readsA
?D.D $his %greement shall be renewed b! the 3overnment for a further period of
twent!8five C<KE !ears under the same terms and conditions provided that
the *ontractor lodges a re#uest for renewal with the 3overnment not less
than si5t! C=>E da!s prior to the e5pir! of the initial term of this
%greement and provided that the *ontractor is not in breach of an! of the
re#uirements of this %greement.A
Allegedly, the above provision runs afoul of ection - of Article K:: of the )*%$
Constitution, which statesA
?Sec. <. %ll lands of the public domain9 waters9 minerals9 coal9 petroleum9 and other mineral
oils9 all forces of potential energ!9 fisheries9 forests or timber9 wildlife9 flora and fauna9 and
other natural resources are owned b! the State. (ith the e5ception of agricultural lands9 all
other natural resources shall not be alienated. $he e5ploration9 development and utili@ation
of natural resources shall be under the full control and supervision of the State. $he State
ma! directl! underta2e such activities9 or it ma! enter into co8production9 'oint venture or
production8sharing agreements with 0ilipino citi@ens or corporations or associations at least
si5t! per centum of whose capital is owned b! such citi@ens. &uch agreements may be for a
period not e'ceeding twenty%five years. renewable for not more than twenty%five years. and
under such terms and conditions as may be provided by law. "n cases of water rights for
irrigation9 water suppl!9 fisheries9 or industrial uses other than the development of water
power9 beneficial use ma! be the measure and limit of the grant.
?$he State shall protect the nationFs marine wealth in its archipelagic waters9 territorial sea9
and e5clusive economic @one9 and reserve its use and en'o!ment e5clusivel! to 0ilipino
citi@ens.
?$he *ongress ma!9 b! law9 allow small8scale utili@ation of natural resources b! 0ilipino
citi@ens9 as well as cooperative fish farming9 with priorit! to subsistence fishermen and fish8
wor2ers in rivers9 la2es9 ba!s and lagoons.
?$he President ma! enter into agreements with foreign8owned corporations involving either
technical or financial assistance for large8scale e5ploration9 development9 and utili@ation of
minerals9 petroleum9 and other mineral oils according to the general terms and conditions
provided b! law9 based on real contributions to the economic growth and general welfare of
the countr!. "n such agreements9 the State shall promote the development and use of local
scientific and technical resources.
?$he President shall notif! the *ongress of ever! contract entered into in accordance with
this provision9 within thirt! da!s from its e5ecution.A
B*#C
?e hold that the term limitation of twenty-five years does not apply to F5AAs. 5he
reason is that the above provision is found within paragraph ) of ection - of Article K::,
which refers to mineral agreements -- co-production agreements, joint venture agreements and
mineral production-sharing agreements -- which the government may enter into with Filipino
citiFens and corporations, at least &; percent owned by Filipino citiFens. 5he word SsuchT
clearly refers to these three mineral agreements -- C,As, 04As and /,As -- not to F5AAs.
pecifically, F5AAs are covered by paragraphs 1 and . of ection - of Article K:: of
the Constitution. :t will be noted that there are no term limitations provided for in the said
paragraphs dealing with F5AAs. 5his shows that F5AAs are sui generis, in a class of their
own. 5his omission was obviously a deliberate move on the part of the framers. 5hey
probably realiFed that F5AAs would be different in many ways from /,As, 04As and
C,As. 5he reason the framers did not fi2 term limitations applicable to F5AAs is that they
preferred to leave the matter to the discretion of the legislature and6or the agencies involved in
implementing the laws pertaining to F5AAs, in order to give the latter enough fle2ibility and
elbow room to meet changing circumstances.
Note also that, as previously stated, the e2ploratory phrases of an F5AA lasts up to
eleven years. 5hereafter, a few more years would be gobbled up in start-up operations. :t may
ta(e fifteen years before an F5AA contractor can start earning profits. And thus, the period of
-. years may really be short for an F5AA. Consider too that in this (ind of agreement, the
contractor assumes all entrepreneurial ris(s. :f no commercial !uantities of minerals are
found, the contractor bears all financial losses. 5o compensate for this long gestation period
and e2tra business ris(s, it would not be totally unreasonable to allow it to continue E8E
activities for another twenty five years.
:n any event, the complaint is that, in essence, ection #.# gives the contractor the power
to compel the government to renew the ?/C, F5AA for another -. years and deprives the
tate of any say on whether to renew the contract.
?hile we agree that ection #.# could have been worded so as to prevent it from
favoring the contractor, this provision does not violate any constitutional limits, since the said
term limitation does not apply at all to F5AAs. Neither can the provision be deemed in any
manner to be illegal, as no law is being violated thereby. :t is certainly not illegal for the
government to waive its option to refuse the renewal of a commercial contract.
4erily, the government did not have to agree to ection #.#. :t could have said SNoT to
the stipulation, but it did not. :t appears that, in the process of negotiations, the other
contracting party was able to convince the government to agree to the renewal terms. Ender
the circumstances, it does not seem proper for this Court to intervene and step in to undo what
might have perhaps been a possible miscalculation on the part of the tate. :f government
believes that it is or will be aggrieved by the effects of ection #.#, the remedy is the
renegotiation of the provision in order to provide the tate the option to not renew the F5AA.
Financial !enefits for Foreigners
;ot Forbidden by the +onstitution
3efore leaving this subject matter, we find it necessary for us to rid ourselves of the
false belief that the Constitution somehow forbids foreign-owned corporations from deriving
financial benefits from the development of our natural or mineral resources.
5he Constitution has never prohibited foreign corporations from ac!uiring and enjoying
Sbeneficial interestT in the development of ,hilippine natural resources. 5he tate itself need
not directly underta(e e2ploration, development, and utiliFation activities. Alternatively, the
Constitution authoriFes the government to enter into joint venture agreements '04As+, co-
production agreements 'C,As+ and mineral production sharing agreements '/,As+ with
contractors who are Filipino citiFens or corporations that are at least &; percent Filipino-
owned. 5hey may do the actual Sdirty wor(T -- the mining operations.
:n the case of a &; percent Filipino-owned corporation, the 1; percent individual and6or
corporate non80ilipino sta2eholders obviously participate in the beneficial interest derived
from the development and utiliFation of our natural resources. 5hey may receive by way of
dividends, up to 1; percent of the contractorRs earnings from the mining project. "i(ewise,
they may have a say in the decisions of the board of directors, since they are entitled to
representation therein to the e2tent of their e!uity participation, which the Constitution permits
to be up to 1; percent of the contractorRs e!uity. =ence, the non-Filipino sta(eholders may in
that manner also participate in the management of the contractorRs natural resource
development wor(. All of this is permitted by our Constitution, for any natural resource, and
without limitation even in regard to the magnitude of the mining project or operations 'see
paragraph ) of ection - of Article K::+.
:t is clear, then, that there is nothing inherentl! wrong with or constitutionall!
ob'ectionable about the idea of foreign individuals and entities having or en'o!ing ?beneficial
interestA in 88 and participating in the management of operations relative to 88 the
e5ploration9 development and utili@ation of our natural resources.
F#** ore *dvantageous
#han 1ther &chemes
6iBe +(*. J/* and (&*
A final point on the subject of beneficial interest. ?e believe the F5AA is a more
advantageous proposition for the government as compared with other agreements permitted by
the Constitution. :n a C,A that the government enters into with one or more contractors, the
government shall provide inputs to the mining operations other than the mineral resource
itself.
B*1C
:n a 04A, a 04 company is organiFed by the government and the contractor, with both
parties having e!uity shares 'investments+@ and the contractor is granted the e2clusive right to
conduct mining operations and to e2tract minerals found in the area.
B*.C
9n the other hand, in
an /,A, the government grants the contractor the e2clusive right to conduct mining
operations within the contract area andshares in the gross output@ and the contractor provides
the necessary financing, technology, management and manpower.
5he point being made here is that, in two of the three types of agreements under
consideration, the government has to ante up some ris2 capital for the enterprise. :n other
words, government funds 'public moneys+ are withdrawn from other possible uses, put to
wor( in the venture and placed at ris2 in case the venture fails. 5his notwithstanding,
management and control of the operations of the enterprise are -- in all three arrangements
-- in the hands of the contractor, with the government being mainly a silent partner. 5he three
types of agreement mentioned above apply to any natural resource, without limitation and
regardless of the siFe or magnitude of the project or operations.
:n contrast to the foregoing arrangements, and pursuant to paragraph 1 of ection - of
Article K::, the F5AA is limited to large-scale projects and only for minerals, petroleum and
other mineral oils. =ere, the Constitution removes the 1; percent cap on foreign ownership
and allows the foreign corporation to own up to );; percent of the e!uity. Filipino capital
may not be sufficient on account of the siFe of the project, so the foreign entity may have to
ante up all the ris( capital.
Correlatively, the foreign sta(eholder bears up to );; percent of the ris( of loss if the
project fails. :n respect of the particular F5AA granted to it, ?/C, 'then );; percent foreign
owned+ was responsible, as contractor, for providing the entire e!uity, including all the inputs
for the project. :t was to bear );; percent of the ris( of loss if the project failed, but its
ma2imum potential Sbeneficial interestT consisted only of 1; percent of the net beneficial
interest, because the other &; percent is the share of the government, which will never be
e2posed to any ris( of loss whatsoever.
:n consonance with the degree of ris( assumed, the F5AA vested in ?/C, the da!8to8
da! management of the mining operations. till such management is subject to the overall
control and supervision of the tate in terms of regular reporting, approvals of wor( programs
and budgets, and so on.
o, one needs to consider in relative terms, the costs of inputs for, degree of ris(
attendant to, and benefits derived or to be derived from a C,A, a 04A or an /,A vis-X-vis
those pertaining to an F5AA. :t may not be realistically asserted that the foreign grantee of an
F5AA is being unduly favored or benefited as compared with a foreign sta(eholder in a
corporation holding a C,A, a 04A or an /,A. een the other way around, the government
is definitely better off with an F5AA than a C,A, a 04A or an /,A.
5evelopmental (olicy
on the ining $ndustry
8uring the 9ral Argument and in their Final /emorandum9 petitioners repeatedly urged
the Court to consider whether mining as an industry and economic activity deserved to be
accorded priority, preference and government support as against, say, agriculture and other
activities in which Filipinos and the ,hilippines may have an Seconomic advantage.T For
instance, a recent E study
B*&C
reportedly e2amined the economic performance of all local E
counties that were dependent on mining and -; percent of whose labor earnings between )*$;
and -;;; came from mining enterprises.
5he study -- covering );; E counties in -. states dependent on mining -- showed that
per capita income grew about #; percent less in mining-dependent communities in the )*%;s
and -. percent less for the entire period )*%; to -;;;@ the level of per capita income was also
lower. 5herefore, given the slower rate of growth, the gap between these and other local
counties increased.
,etitioners invite attention to the 9KFA/ %merica ReportFs warning to developing
nations that mining brings with it serious economic problems, including increased regional
ine!uality, unemployment and poverty. 5hey also cite the final report
B*$C
of the E2tractive
:ndustries 7eview project commissioned by the ?orld 3an( 'the ?3-E:7 7eport+, which
warns of environmental degradation, social disruption, conflict, and uneven sharing of benefits
with local communities that bear the negative social and environmental impact. 5he 7eport
suggests that countries need to decide on the best way to e2ploit their natural resources, in
order to ma2imiFe the value added from the development of their resources and ensure that
they are on the path to sustainable development once the resources run out.
?hatever priority or preference may be given to mining vis-X-vis other economic or
non-economic activities is a !uestion of policy that the ,resident and Congress will have to
address@ it is not for this Court to decide. $his *ourt declares what the *onstitution and the
laws sa!9 interprets onl! when necessar!9 and refrains from delving into matters of polic!.
uffice it to say that the tate control accorded by the Constitution over mining
activities assures a proper balancing of interests. /ore pointedly, such control will enable the
,resident to demand the best mining practices and the use of the best available technologies to
protect the environment and to rehabilitate mined-out areas. :ndeed, under the /ining "aw,
the government can ensure the protection of the environment during and after mining. :t can
li(ewise provide for the mechanisms to protect the rights of indigenous communities, and
thereby mold a more socially-responsive, culturally-sensitive and sustainable mining industry.
Early on during the launching of the ,residential /ineral :ndustry Environmental
Awards on February &, )**$, then ,resident Fidel 4. 7amos captured the essence of balanced
and sustainable mining in these wordsA
?)ong term9 high profit mining translates into higher revenues for government9 more decent
'obs for the population9 more raw materials to feed the engines of downstream and allied
industries9 and improved chances of human resource and countr!side development b!
creating self8reliant communities awa! from urban centers.
5 5 5 5 5 5 5 5 5
?%gainst a fragile and finite environment9 it is sustainabilit! that holds the 2e!. "n sustainable
mining9 we ta2e a middle ground where both production and protection goals are balanced9
and where parties8in8interest come to terms.A
Neither has the present leadership been remiss in addressing the concerns of sustainable
mining operations. 7ecently, on 0anuary )&, -;;1 and April -;, -;;1, ,resident Dloria
/acapagal Arroyo issued E2ecutive 9rders Nos. -$; and -$;-A, respectively, Sto
promote responsible mineral resources e2ploration, development and utiliFation, in order to
enhance economic growth, in a manner that adheres to the principles of sustainable
development and with due regard for justice and e!uity, sensitivity to the culture of the
Filipino people and respect for ,hilippine sovereignty.T
B*%C
REF"TATION OF DISSENTS
5he Court will now ta(e up a number of other specific points raised in the dissents of
0ustices Carpio and /orales.
). 0ustice /orales introduced us to =ugh /organ, former president and chief e2ecutive
officer of ?estern /ining Corporation '?/C+ and former president of the Australian /ining
:ndustry Council, who spearheaded the vociferous opposition to the filing by aboriginal
peoples of native title claims against mining companies in Australia in the aftermath of the
landmar( Mabo decision by the Australian =igh Court. According to sources !uoted by our
esteemed colleague, /organ was also a ra/310 and a b34o0. :n the course of
protesting Mabo9 /organ allegedly uttered derogatory remar(s belittling the aboriginal culture
and race.
An unwritten caveat of this introduction is that this Court should be careful not to permit
the entry of the li(es of =ugh /organ and his hordes of alleged racist-bigots at ?/C. ?ith
all due respect, such scare tactics should have no place in the discussion of this case. ?e are
deliberating on the constitutionality of 7A $*1-, 8A9 *&-1; and the F5AA originally granted
to ?/C,, which had been transferred to agittarius /ining, a Filipino corporation. ?e are
not discussing the apparition of white Anglo-a2on racists6bigots massing at our gates.
-. 9n the proper interpretation of the phrase agreements involving either technical or
financial assistance9 0ustice /orales points out that at times we Sconveniently omittedT the
use of the disjunctiveeitherRor9 which according to her denotes restriction@ hence the phrase
must be deemed to connote restriction and limitation.
3ut, as 0ustice Carpio himself pointed out during the 9ral Argument, the disjunctive
phrase either technical or financial assistance would, strictly spea(ing, literally mean that a
foreign contractor mayprovide only one or the other, but not both. And if both technical and
financial assistance were re!uired for a project, the tate would have to deal with at least two
different foreign contractors -- one for financial and the other for technical assistance. And
following on that, a foreign contractor, though very much !ualified to provide both (inds of
assistance, would nevertheless be prohibited from providing one (ind as soon as it shall have
agreed to provide the other.
3ut if the Court should follow this restrictive and literal construction, can we really find
two 'or more+ contractors who are willing to participate in one single project -- one to provide
the Sfinancial assistanceT only and the other the Stechnical assistanceT e2clusively@ it would be
e2cellent if these two or more contractors happen to be willing and are able to cooperate and
wor( closely together on the same project 'even if they are otherwise competitors+. And it
would be superb if no conflicts would arise between or among them in the entire course of the
contract. 3ut what are the chances things will turn out this way in the real worldO 5o thin(
that the framers deliberately imposed this (ind of restriction is to say that they were either
e2ceedingly optimistic, or incredibly naVve. 5his begs the !uestion -- ?hat laudable objective
or purpose could possibly be served by such strict and restrictive literal interpretationO
#. Citing &posa v. 0actoran Jr.9 0ustice /orales claims that a service contract is not a
contract or propert! right which merits protection b! the due process clause of the
*onstitution9 but merely a license or privilege which may be validly revo(ed, rescinded or
withdrawn by e2ecutive action whenever dictated by public interest or public welfare.
&posa cites $an v. irector of 0orestr! and Qsmael v. eput! :5ecutive Secretar! as
authority. 5he latter cases dealt specifically with 03<ber )3/e,1e1 o,)y. &posa allegedly
reiterated that a license is merel! a permit or privilege to do what otherwise would be
unlawful9 and is not a contract between the authorit!9 federal9 state or municipal9 granting it
and the person to whom it is grantedH neither is it propert! or a propert! right9 nor does it
create a vested rightH nor is it ta5ation. $hus this *ourt held that the granting of license does
not create irrevocable rights9 neither is it propert! or propert! rights.
hould &posa be deemed applicable to the case at bar, on the argument that natural
resources are also involved in this situationO ?e do not thin( so. A grantee of a timber
license, permit or license agreement gets to cut the timber already growing on the surface@ it
need not dig up tons of earth to get at the logs. :n a logging concession, the investment of the
licensee is not as substantial as the investment of a large-scale mining contractor. :f a timber
license were revo(ed, the licensee pac(s up its gear and moves to a new area applied for, and
starts over@ what it leaves behind are mainly the trails leading to the logging site.
:n contrast, the mining contractor will have sun( a great deal of money 'tens of millions
of dollars+ into the ground, so to spea(, for e2ploration activities, for development of the mine
site and infrastructure, and for the actual e2cavation and e2traction of minerals, including the
e2tensive tunneling wor( to reach the ore body. 5he cancellation of the mining contract will
utterly deprive the contractor of its investments 'i.e., prevent recovery of investments+, most of
which cannot be pulled out.
5o say that an F5AA is just li(e a mere timber license or permit and does not involve
contract or property rights which merit protection by the due process clause of the
Constitution, and may therefore be revo(ed or cancelled in the blin( of an eye, is to adopt a
well-nigh confiscatory stance@ at the very least, it is downright dismissive of the property
rights of businesspersons and corporate entities that have investments in the mining industry,
whose investments, operations and e2penditures do contribute to the general welfare of the
people, the coffers of government, and the strength of the economy. uch a pronouncement
will surely discourage investments 'local and foreign+ which are critically needed to fuel the
engine of economic growth and move this country out of the rut of poverty. :n sum, &posa is
not applicable.
1. 0ustice /orales adverts to the supposedly Sclear intentionT of the framers of the
Constitution to reserve our natural resources e2clusively for the Filipino people. he then
!uoted from the records of the ConCom deliberations a passage in which then Commissioner
8avide e2plained his vote, arguing in the process that aliens ought not be allowed to
participate in the enjoyment of our natural resources. 9ne passage does not suffice to capture
the tenor or substance of the entire e2tensive deliberations of the commissioners, or to reveal
the clear intention of the framers as a group. A re-reading of the entire deliberations '!uoted
here earlier+ is necessary if we are to understand the true intent of the framers.
.. ince )*#., the Filipino people, through their Constitution, have decided that the
retardation or delay in the e2ploration, development or utiliFation of the nationRs natural
resources is merely secondary to the protection and preservation of their ownership of the
natural resources, so says 0ustice /orales, citing Aruego. :f it is true that the framers of the
)*%$ Constitution did not care much about alleviating the retardation or delay in the
development and utiliFation of our natural resources, why did they bother to write paragraph 1
at allO ?ere they merely paying lip service to large-scale e2ploration, development and
utiliFationO 5hey could have just completely ignored the subject matter and left it to be dealt
with through a future constitutional amendment. 3ut we have to harmoniFe every part of the
Constitution and to interpret each provision in a manner that would give life and meaning to it
and to the rest of the provisions. :t is obvious that a literal interpretation of paragraph 1 will
render it utterly inutile and inoperative.
&. According to 0ustice /orales, the deliberations of the Constitutional Commission do
not support our contention that the framers, by specifying such agreements involving financial
or technical assistance, necessarily gave implied assent to everything that these agreements
implicitly entailed, or that could reasonably be deemed necessary to ma(e them tenable and
effective, including management authority in the day-to-day operations. As proof thereof, she
!uotes one single passage from the ConCom deliberations, consisting of an e2change among
Commissioners 5ingson, Darcia and /onsod.
=owever, the !uoted e2change does not serve to contradict our argument@ it even
bolsters it. Comm. Christian /onsod was !uoted as sayingA ?555 " thin2 we have to ma2e a
distinction that it is not reall! realistic to sa! that we will borrow on our own terms. Ma!be
we can sa! that we inherited un'ust loans9 and we would li2e to repa! these on terms that are
not pre'udicial to our own growth. 6ut the general statement that we should onl! borrow on
our own terms is a bit unrealistic.A Comm. /onsod is one who (new whereof he spo(e.
$. 0ustice /orales also declares that the optimal time for the conversion of an F5AA
into an /,A is after completion of the e2ploration phase and just before underta(ing the
development and construction phase, on account of the fact that the re!uirement for a
minimum investment of U.; million is applicable only during the development, construction
and utiliFation phase, but not during the e2ploration phase, when the foreign contractor need
merely comply with minimum ground e2penditures. 5hus by converting, the foreign
contractor ma2imiFes its profits by avoiding its obligation to ma(e the minimum investment of
U.; million.
5his argument forgets that the foreign contractor is in the game precisely to ma(e
money. :n order to come anywhere near profitability, the contractor must first e2tract and sell
the mineral ore. :n order to do that, it must also develop and construct the mining facilities,
set up its machineries and e!uipment and dig the tunnels to get to the deposit. 5he contractor
is thus compelled to e2pend funds in order to ma(e profits. :f it decides to cut bac( on
investments and e2penditures, it will necessarily sacrifice the pace of development and
utiliFation@ it will necessarily sacrifice the amount of profits it can ma(e from the mining
operations. :n fact, at certain less-than-optimal levels of operation, the stream of revenues
generated may not even be enough to cover variable e2penses, let alone overhead e2penses@
this is a dismal situation anyone would want to avoid. :n order to ma(e money, one has to
spend money. 5his truism applies to the mining industry as well.
%. /ortgaging the minerals to secure a foreign F5AA contractorRs obligations is
anomalous, according to 0ustice /orales since the contractor was from the beginning obliged
to provide all financing needed for the mining operations. =owever, the mortgaging of
minerals by the contractor does not necessarily signify that the contractor is unable to provide
all financing re!uired for the project, or that it does not have the financial capability to
underta(e large-scale operations. /ortgaging of mineral products, just li(e the assignment 'by
way of security+ of manufactured goods and goods in inventory, and the assignment of
receivables, is an ordinary re!uirement of ban(s, even in the case of clients with more than
sufficient financial resources. And nowadays, even the richest and best managed corporations
ma(e use of ban( credit facilities -- it does not necessarily signify that they do not have the
financial resources or are unable to provide the financing on their own@ it is just a manner of
ma2imiFing the use of their funds.
*. 8oes the contractor in reality ac!uire the surface rights Sfor free,T by virtue of the fact
that it is entitled to reimbursement for the costs of ac!uisition and maintenance, adjusted for
inflationO ?e thin( not. 5he SreimbursementT is possible only at the end of the term of the
contract, when the surface rights will no longer be needed, and the land previously ac!uired
will have to be disposed of, in which case the contractor gets reimbursement from the sales
proceeds. 5he contractor has to pay out the ac!uisition price for the land. 5hat money will
belong to the seller of the land. 9nly if and when the land is finally sold off will the
contractor get any reimbursement. :n other words, the contractor will have been cash-out for
the entire duration of the term of the contract -- -. or .; years, depending. :f we calculate the
cost of money at say )- percent per annum, that is the cost or opportunity loss to the
contractor, in addition to the amount of the ac!uisition price. )- percent per annum for .;
years is &;; percent@ this, without any compounding yet. 5he cost of money is therefore at
least &;; percent of the original ac!uisition cost@ it is in addition to the ac!uisition cost. SFor
freeTO Not by a long shot.
);. 5he contractor will ac!uire and hold up to .,;;; hectaresO ?e doubt it. 5he
ac!uisition by the tate of land for the contractor is just to enable the contractor to establish its
mine site, build its facilities, establish a tailings pond, set up its machinery and e!uipment, and
dig mine shafts and tunnels, etc. :t is impossible that the surface re!uirement will aggregate
.,;;; hectares. /uch of the operations will consist of the tunneling and digging underground,
which will not re!uire possessing or using any land surface. .,;;; hectares is way too much
for the needs of a mining operator. :t simply will not spend its cash to ac!uire property that it
will not need@ the cash may be better employed for the actual mining operations, to yield a
profit.
)). 0ustice Carpio claims that the phrase among other things 'found in the second
paragraph of ection %) of the /ining Act+ is being incorrectly treated as a delegation of
legislative power to the 8EN7 secretary to issue 8A9 **-.& and prescribe the formulae
therein on the tateRs share from mining operations. =e adds that the phrase among other
things was not intended as a delegation of legislative power to the 8EN7 secretary, much less
could it be deemed a valid delegation of legislative power, since there is nothing in the second
paragraph of ection %) which can be said to grant any delegated legislative power to the
8EN7 secretary. And even if there were, such delegation would be void, for lac( of any
standards by which the delegated power shall be e2ercised.
?hile there is nothing in the second paragraph of ection %) which can directly be
construed as a delegation of legislative power to the 8EN7 secretary, it does not mean that
8A9 **-.& is invalid per se, or that the secretary acted without any authority or jurisdiction in
issuing 8A9 **-.&. As we stated earlier in our ,rologue, ?(ho or what organ of
government actuall! e5ercises this power of control on behalf of the StateS $he *onstitution is
cr!stal clearB the (resident. "ndeed9 the *hief :5ecutive is the official constitutionall!
mandated to Lenter into agreements with foreign owned corporations.F &n the other hand9
*ongress ma! review the action of the President once it is notified of Lever! contract entered
into in accordance with this NconstitutionalO provision within thirt! da!s from its e5ecution.FA
:t is the ,resident who is constitutionally mandated 0o e,0er 3,0o FTAA1 with foreign
corporations, and in doing so, it is within the ,residentRs prerogative 0o 17e/3Ey /er0a3, 0er<1
a,- /o,-303o,1 of the F5AAs, for e2ample, the fiscal regime of F5AAs -- i.e., the sharing of
the net mining revenues between the contractor and the tate.
3eing the ,residentRs alter ego with respect to the control and supervision of the mining
industry, the 8EN7 secretary, acting for the ,resident, is necessarily clothed with the re!uisite
authority and power to draw up guidelines delineating certain terms and conditions, and
specifying therein the terms of sharing of benefits from mining, to be applicable to F5AAs in
general. :t is important to remember that 8A9 **-.& has been in e2istence for almost si2
years, and has not been amended or revo(ed by the ,resident.
$he issuance of %& 998K= did not involve the e5ercise of delegated legislative
power. 5he legislature did not delegate the power to determine the nature, e2tent and
composition of the items that would come under the phrase among other things. 5he
legislatureRs power pertains to the imposition of ta2es, duties and fees. 5his power was not
delegated to the 8EN7 secretary. 3ut the power to negotiate and enter into F5AAs was
withheld from Congress, and reserved for the ,resident. :n determining the sharing of mining
benefits, i.e., in specifying what the phrase among other things include, the ,resident 'through
the secretary acting in his6her behalf+ was not determining the amount or rate of ta2es, duties
and fees, but rather the amount of :NC9/E to be derived from minerals to be e2tracted and
sold, income which belongs to the tate as owner of the mineral resources. ?e may say that,
in the second paragraph of ection %), the legislature in a sense intruded partially into the
,residentRs sphere of authority when the former provided that
?$he 3overnment share in financial or technical assistance agreement shall consist of9 among
other things9 the contractorFs corporate income ta59 e5cise ta59 special allowance9 withholding
ta5 due from the contractorFs foreign stoc2holders arising from dividend or interest pa!ments
to the said foreign stoc2holder in case of a foreign national and all such other ta5es9 duties
and fees as provided for under e5isting laws.A':talics supplied+
3ut it did not usurp the ,residentRs authority since the provision merely included the
enumerated items as part of the government share, without foreclosing or in any way
preventing 'as in fact Congress could not validly prevent+ the ,resident from determining what
constitutes the tateRs compensation derived from F5AAs. :n this case, the ,resident in effect
directed the inclusion or addition of Sother things,T vi@.9 :NC9/E for the owner of the
resources, in the governmentRs share, while adopting the items enumerated by Congress
as part of the government share also.
)-. 0ustice CarpioRs insistence on applying the e'usdem generis rule of statutory
construction to the phrase among other things is therefore useless, and must fall by the
wayside. 5here is no point trying to construe that phrase in relation to the enumeration of
ta2es, duties and fees found in paragraph - of ection %), precisely because Gthe
constitutional power to prescribe the sharing of mining income between the &tate and
mining companies.H to !uote 0ustice Carpio pursuant to an F5AA is /o,1030u03o,a))y )o-4e-
I30. 0.e !re13-e,0, ,o0 I30. o,4re11. :t thus ma(es no sense to persist in giving the
phrase among other things a restricted meaning referring only to ta2es, duties and fees.
)#. trangely, 0ustice Carpio claims that the 8EN7 secretary can change the formulae in
8A9 **-.& any time even without the approval of the ,resident, and the secretary is the sole
authority to determine the amount of consideration that the tate shall receive in an F5AA,
because ection . of the 8A9 states that ?555 an! amendment of an 0$%% other than the
provision on fiscal regime shall re#uire the negotiation with the ,egotiation Panel and the
recommendation of the Secretar! for approval of the President 555A. Allegedly, because of
that provision, if an amendment in the F5AA involves non-fiscal matters, the amendment
re!uires approval of the ,resident, but if the amendment involves a change in the fiscal
regime, the 8EN7 secretary has the final authority, and approval of the ,resident may be
dispensed with@ hence the secretary is more powerful than the ,resident.
?e believe there is some distortion resulting from the !uoted provision being ta(en out
of conte2t. ection . of 8A9 **-.& reads as followsA
Section .. tatus of E2isting F5AAs. All F5AAs approved prior to the effectivity of this
Administrative 9rder shall remain valid and be recogniFed by the DovernmentA ,rovided, 5hat
should a Contractor desire to amend its F5AA, it shall do so by filing a "etter of :ntent '"9:+
to the ecretary thru the 8irector. ,rovided, further, 5hat if the Contractor desires to amend
the fiscal regime of its F5AA, it may do so by see(ing for the amendment of its F5AARs
whole fiscal regime by adopting the fiscal regime provided hereofA ,rovided, finally, 5hat any
amendment of an F5AA other than the provision on fiscal regime shall re!uire the negotiation
with the Negotiating ,anel and the recommendation of the ecretary for approval of the
,resident of the 7epublic of the ,hilippines.T 'underscoring supplied+
:t loo(s li(e another case of misapprehension. 5he proviso being objected to by 0ustice
Carpio is actually preceded by a phrase that re!uires a contractor desiring to amend the fiscal
regime of its F5AA, to amend the same by adopting the fiscal regime prescribed in 8A9 **-
.& -- i.e., solely in that manner, and in no other . ObF3ou1)y, 13,/e DAO 99-56 Ia1 311ue- by
0.e 1e/re0ary u,-er 0.e au0.or30y a,- I30. 0.e 7re1u<e- a77roFa) oE 0.e !re13-e,0, 0.e
a<e,-<e,0 oE a, FTAA by <ere)y a-o703,4 0.e E31/a) re43<e 7re1/r3be- 3, 1a3- DAO 99-
56 Ca,- ,o0.3,4 <oreD ,ee- ,o0 .aFe 0.e eG7re11 /)eara,/e oE 0.e !re13-e,0 a,y<ore. :t is
as if the same had been pre-approved. ?e cannot fathom the complaint that that ma(es the
secretary more powerful than the ,resident, or that the former is trying to hide things from the
,resident or Congress.
)1. 3ased on the first sentence of ection . of 8A9 **-.&, which states SBACll F5AAs
approved prior to the effectivity of this Administrative 9rder shall remain valid and be
recogniFed by the DovernmentT, 0ustice Carpio concludes that said Administrative 9rder
allegedly eGe<701 F5AAs approved prior to its effectivity -- li(e the ?/C, F5AA -- from
having to pay the tate any share from their mining income, apart from ta2es, duties and fees.
?e disagree. ?hat we see in blac( and white is the statement that the F5AAs approved
before the 8A9 came into effect are to continue to be valid and will be recogniFed by the
tate. ,othing is said about their fiscal regimes. Certainly, there is no basis to claim that the
contractors under said F5AAs were being e2empted from paying the government a share in
their mining incomes.
For the record, the ?/C, F5AA is N95 and has never been e2empt from paying the
government share. T.e 9M! FTAA .a1 301 oI, E31/a) re43<e -- Se/03o, 7.7 -- I.3/.
43Fe1 0.e 4oFer,<e,0 a 6' 7er/e,0 1.are 3, 0.e ,e0 <3,3,4 reFe,ue1 oE 9M! Ero< 0.e
/o<<e,/e<e,0 oE /o<<er/3a) 7ro-u/03o,.
For that very reason, we have never said that 8A9 **-.& is the basis for claiming that
the ?/C, F5AA has a consideration. =ence, we find !uite out of place 0ustice CarpioRs
statement that ironicall!9 %& 998K=9 the ver! authorit! cited to support the claim that the
(M*P 0$%% has a consideration9 does not appl! to the (M*P 0$%%. 6! its own e5press
terms9 %& 998K= does not appl! to 0$%%s e5ecuted before the issuance of %& 998K=9 li2e
the (M*P 0$%%. $he ma'orit!Fs position has allegedl! no leg to stand on since even %&
998K=9 assuming it is valid9 cannot save the (M*P 0$%% from want of consideration. Even
assuming arguendo that 8A9 **-.& does not apply to the ?/C, F5AA, nevertheless, the
?/C, F5AA has its own fiscal regime, found in ection $.$ thereof. =ence, there is no such
thing as Swant of considerationT here.
till more startling is this claimA $he ma'orit! supposedl! agrees that the provisions of
the (M*P 0$%%9 which grant a sham consideration to the State9 are void. Since the ma'orit!
agrees that the (M*P 0$%% has a sham consideration9 the (M*P 0$%% thus lac2s the third
element of a valid contract. $he ecision should declare the (M*P 0$%% void for want of
consideration unless it treats the contract as an MPS% under Section G>. "ndeed the onl!
recourse of (M*P to save the validit! of its contract is to convert it into an MPS%.
5o clarify, we said that ections $.* and $.%'e+ of the ?/C, F5AA are provisions
grossly disadvantageous to government and detrimental to the interests of the Filipino people,
as well as violative of public policy, and must therefore be stric(en off as invalid. ince the
offending provisions are very much separable from ection $.$ and the rest of the F5AA, the
deletion of ections $.* and $.%'e+ can be done without affecting or re!uiring the invalidation
of the ?/C, F5AA itself, and such deletion will preserve for government its due share of the
&; percent benefits. 5herefore, the ?/C, F5AA is N95 bereft of a valid
consideration 'assuming for the nonce that indeed this is the SconsiderationT of the F5AA+.
S"MMATION
5o conclude, a summary of the (ey points discussed above is now in order.
#he eaning of G*greements $nvolving
)ither #echnical or Financial *ssistanceH
Applying familiar principles of constitutional construction to the phrase agreements
involving either technical or financial assistance, the framersR choice of words does not
indicate the intent to e2clude other modes of assistance, but rather implies that there are other
things being included or possibly being made part of the agreement, apart from financial or
technical assistance. 5he drafters avoided the use of restrictive and stringent phraseology@
a verba legis scrutiny of ection - of Article K:: of the Constitution discloses not even a hint
of a desire to prohibit foreign involvement in the management or operation of mining
activities, or to eradicate service contracts. uch moves would necessarily imply an
underlying drastic shift in fundamental economic and developmental policies of the tate.
5hat change re!uires a much more definite and irrefutable basis than mere omission of the
words Sservice contractT from the new Constitution.
Furthermore, a literal and restrictive interpretation of this paragraph leads to logical
inconsistencies. A constitutional provision specifically allowing foreign-owned corporations
to render financial or technical assistance in respect of mining or any other commercial
activity was clearly unnecessary@ the provision was meant to refer to more than mere financial
or technical assistance.
Also, if paragraph 1 permits only agreements for financial or technical assistance, there
would be no point in re!uiring that they be ?based on real contributions to the economic
growth and general welfare of the countr!.A And considering that there were various long-
term service contracts still in force and effect at the time the new Charter was being drafted,
the absence of any transitory provisions to govern the termination and closing-out of the then
e2isting service contracts strongly militates against the theory that the mere omission of
Sservice contractsT signaled their prohibition by the new Constitution.
7esort to the deliberations of the Constitutional Commission is therefore unavoidable,
and a careful scrutiny thereof conclusively shows that the ConCom members
discussed agreements involving either technical or financial assistance in the same sense
as service contracts and used the terms interchangeably. 5he drafters in fact (new that the
agreements with foreign corporations were going to entail not mere technical or financial
assistance but, rather, foreign investment in and management of an enterprise for large8
scale e2ploration, development and utiliFation of minerals.
5he framers spo(e about service contracts as the concept was understood in the )*$#
Constitution. :t is obvious from their discussions that they did not intend to ban or eradicate service
contracts. :nstead, they were intent on crafting provisions to put in place safeguards that would
eliminate or minimiFe the abuses prevalent during the martial law regime. I, br3eE, 0.ey Iere
4o3,4 0o 7er<30 1erF3/e /o,0ra/01 I30. Eore34, /or7ora03o,1 a1 /o,0ra/0or1, bu0 I30. 1aEe0y
<ea1ure1 0o 7reFe,0 abu1e1, a1 a, eG/e703o, 0o 0.e 4e,era) ,or< e10ab)31.e- 3, 0.e E3r10
7ara4ra7. oE Se/03o, 2 oE Ar03/)e LII, I.3/. re1erFe1 or )3<301 0o F3)373,o /3036e,1 a,-
/or7ora03o,1 a0 )ea10 6' 7er/e,0 oI,e- by 1u/. /3036e,1 0.e eG7)ora03o,, -eFe)o7<e,0 a,-
u03)36a03o, oE <3,era) or 7e0ro)eu< re1our/e1. 5his was prompted by the
perceived insufficiency of Filipino capital and the felt need for foreign e2pertise in the E8E of
mineral resources.
8espite strong opposition from some ConCom members during the final voting, the
Article on the National Economy and ,atrimony -- including paragraph 1 allowing service
contracts with foreign corporations as an e2ception to the general norm in paragraph ) of
ection - of the same Article -- was resoundingly and overwhelmingly approved.
5he drafters, many of whom were economists, academicians, lawyers, businesspersons
and politicians (new that foreign entities will not enter into agreements involving assistance
without re!uiring measures of protection to ensure the success of the venture and repayment of
their investments, loans and other financial assistance, and ultimately to protect the business
reputation of the foreign corporations. 5he drafters, by specifying such agreements involving
assistance, necessarily gave implied assent to everything that these agreements entailed or that
could reasonably be deemed necessary to ma(e them tenable and effective -- including
management authority with respect to the day-to-day operations of the enterprise, and
measures for the protection of the interests of the foreign corporation, at least to the e2tent that
they are consistent with ,hilippine sovereignty over natural resources, the constitutional
re!uirement of tate control, and beneficial ownership of natural resources remaining vested
in the tate.
From the foregoing, it is clear that agreements involving either technical or financial
assistance referred to in paragraph 1 are in fact service contracts, but such new service
contracts are between foreign corporations acting as contractors on the one hand, and on the
other hand government as principal or SownerT 'of the wor(s+, whereby the foreign contractor
provides the capital, technology and technical (now-how, and managerial e2pertise in the
creation and operation of the large-scale mining6e2tractive enterprise, and government through
its agencies '8EN7, /D3+ actively e2ercises full control and supervision over the entire
enterprise.
uch service contracts may be entered into onl! with respect to minerals, petroleum and
other mineral oils. 5he grant of such service contracts is subject to several safeguards, among
themA ')+ that the service contract be crafted in accordance with a general law setting standard
or uniform terms, conditions and re!uirements@ '-+ the ,resident be the signatory for the
government@ and '#+ the ,resident report the e2ecuted agreement to Congress within thirty
days.
Jltimate #est:
Full &tate +ontrol
5o repeat, the primacy of the principle of the tateRs sovereign ownership of all mineral
resources, and its full control and supervision over all aspects of e2ploration, development and
utiliFation of natural resources must be upheld. 3ut Sfull control and supervisionT cannot be
ta(en literally to mean that the tate controls and supervises ever!thing down to the minutest
details and ma2es all re#uired actions, as this would render impossible the legitimate e2ercise
by the contractor of a reasonable degree of management prerogative and authority,
indispensable to the proper functioning of the mining enterprise. Also, government need not
micro-manage mining operations and day-to-day affairs of the enterprise in order to be
considered as e2ercising full control and supervision.
*ontrol9 as utiliFed in ection - of Article K::, must be ta(en to mean a degree of
control sufficient to enable the tate to direct, restrain, regulate and govern the affairs of the
e2tractive enterprises. Control by the tate may be on a macro level, through the
establishment of policies, guidelines, regulations, industry standards and similar measures that
would enable government to regulate the conduct of affairs in various enterprises, and restrain
activities deemed not desirable or beneficial, with the end in view of ensuring that these
enterprises contribute to the economic development and general welfare of the country,
conserve the environment, and uplift the well-being of the local affected communities. uch a
degree of control would be compatible with permitting the foreign contractor sufficient and
reasonable management authority over the enterprise it has invested in, to ensure efficient and
profitable operation.
-overnment -ranted Full +ontrol
by 4* 7:<= and 5*1 :6%<A
3aseless are petitionersR sweeping claims that 7A $*1- and its :mplementing 7ules and
7egulations ma(e it possible for F5AA contracts to cede full control and management of
mining enterprises over to fully foreign owned corporations. E!ually wobbly is the assertion
that the tate is reduced to a passive regulator dependent on submitted plans and reports, with
wea( review and audit powers and little say in the decision-ma(ing of the enterprise, for
which reasons Sbeneficial ownershipT of the mineral resources is allegedly ceded to the
foreign contractor.
As discussed hereinabove, the tateRs full control and supervision over mining
operations are ensured through the following provisions in 7A $*1-A ections %, *, )&, )*, -1,
#.B'b+, 'e+, 'f+, 'g+, 'h+, '(+, 'l+, 'm+ and 'o+C, 1;, .$, &&, &*, $;, and Chapters K: and K4::@ as
well as the following provisions of 8A9 *&-1;A ections$B'd+ and 'f+C, #.'a--+, .#B'a-1+ and
'd+C, .1, .&B'g+, 'h+, 'l+, 'm+ and 'n+C, .&'-+, &;, &&, )11, )&%, )$) and -$;, and also Chapters
K4, K4: and KK:4.
5hrough the foregoing provisions, the government agencies concerned are empowered
to approve or disapprove -- hence, in a position to influence, direct, and change -- the various
wor( programs and the corresponding minimum e2penditure commitments for each of the
e2ploration, development and utiliFation phases of the enterprise. 9nce they have been
approved, the contractorRs compliance with its commitments therein will be monitored.
Figures for mineral production and sales are regularly monitored and subjected to government
review, to ensure that the products and by-products are disposed of at the best prices@ copies of
sales agreements have to be submitted to and registered with /D3.
5he contractor is mandated to open its boo(s of accounts and records for scrutiny, to
enable the tate to determine that the government share has been fully paid. 5he tate may
li(ewise compel compliance by the contractor with mandatory re!uirements on mine safety,
health and environmental protection, and the use of anti-pollution technology and facilities.
5he contractor is also obligated to assist the development of the mining community, and pay
royalties to the indigenous peoples concerned. And violation of any of the F5AARs terms and
conditions, and6or non-compliance with statutes or regulations, may be penaliFed by
cancellation of the F5AA. uch sanction is significant to a contractor who may have yet to
recover the tens or hundreds of millions of dollars sun( into a mining project.
9verall, the tate definitely has a pivotal say in the operation of the individual
enterprises, and can set directions and objectives, detect deviations and non-compliances by
the contractor, and enforce compliance and impose sanctions should the occasion arise.
=ence, 7A $*1- and 8A9 *&-1; vest in government more than a sufficient degree of control
and supervision over the conduct of mining operations.
ection #'a!+ of 7A $*1- was objected to as being unconstitutional for allowing a
foreign contractor to apply for and hold an e2ploration permit. 8uring the e2ploration phase,
the permit grantee 'and prospective contractor+ is spending and investing heavily in
e2ploration activities without yet being able to e2tract minerals and generate revenues. 5he
e2ploration permit issued under ections #'a!+, -; and -# of 7A $*1-, which allows
e2ploration but not e2traction, serves to protect the interests and rights of the e2ploration
permit grantee 'and would-be contractor+, foreign or local. 9therwise, the e2ploration wor(s
already conducted, and e2penditures already made, may end up only benefiting claim-
jumpers. 5hus, ection #'a!+ of 7A $*1- is not unconstitutional.
7+( F#** 6iBewise -ives the
&tate Full +ontrol and &upervision
5he ?/C, F5AA obligates the contractor to account for the value of production and
sale of minerals 'Clause ).1+@ re!uires that the contractorRs wor( program, activities and
budgets be approved by the tate 'Clause -.)+@ gives the 8EN7 secretary power to e2tend the
e2ploration period 'Clause #.--a+@ re!uires approval by the tate for incorporation of lands
into the contract area 'Clause 1.#-c+@ re!uires 3ureau of Forest 8evelopment approval for
inclusion of forest reserves as part of the F5AA contract area 'Clause 1..+@ obligates the
contractor to periodically relin!uish parts of the contract area not needed for e2ploration and
development 'Clause 1.&+@ re!uires submission of a declaration of mining feasibility for
approval by the tate 'Clause 1.&-b+@ obligates the contractor to report to the tate the results
of its e2ploration activities 'Clause 1.*+@ re!uires the contractor to obtain tate approval for its
wor( programs for the succeeding two year periods, containing the proposed wor( activities
and e2penditures budget related to e2ploration 'Clause ..)+@ re!uires the contractor to obtain
tate approval for its proposed e2penditures for e2ploration activities 'Clause ..-+@ re!uires
the contractor to submit an annual report on geological, geophysical, geochemical and other
information relating to its e2plorations within the F5AA area 'Clause ..#-a+@ re!uires the
contractor to submit within si2 months after e2piration of e2ploration period a final report on
all its findings in the contract area 'Clause ..#-b+@ re!uires the contractor after conducting
feasibility studies to submit a declaration of mining feasibility, along with a description of the
area to be developed and mined, a description of the proposed mining operations and the
technology to be employed, and the proposed wor( program for the development phase, for
approval by the 8EN7 secretary 'Clause ..1+@ obligates the contractor to complete the
development of the mine, including construction of the production facilities, within the period
stated in the approved wor( program 'Clause &.)+@ re!uires the contractor to submit for
approval a wor( program covering each period of three fiscal years 'Clause &.-+@ re!uires the
contractor to submit reports to the secretary on the production, ore reserves, wor(
accomplished and wor( in progress, profile of its wor( force and management staff, and other
technical information 'Clause &.#+@ subjects any e2pansions, modifications, improvements and
replacements of mining facilities to the approval of the secretary 'Clause &.1+@ subjects to tate
control the amount of funds that the contractor may borrow within the ,hilippines 'Clause
$.-+@ subjects to tate supervisory power any technical, financial and mar(eting issues 'Clause
);.)-a+@ obligates the contractor to ensure &; percent Filipino e!uity in the contractor within
ten years of recovering specified e2penditures unless not so re!uired by subse!uent legislation
'Clause );.)+@ gives the tate the right to terminate the F5AA for unremedied substantial
breach thereof by the contractor 'Clause )#.-+@ re!uires tate approval for any assignment of
the F5AA by the contractor to an entity other than an affiliate 'Clause )1.)+.
:n short, the aforementioned provisions of the ?/C, F5AA, far from constituting a
surrender of control and a grant of beneficial ownership of mineral resources to the contractor
in !uestion, vest the tate with control and supervision over practically all aspects of the
operations of the F5AA contractor, including the charging of pre-operating and operating
e2penses, and the disposition of mineral products.
5here is li(ewise no relin!uishment of control on account of specific provisions of the
?/C, F5AA. Clause %.- provides a mechanism to prevent the mining operations from
grinding to a complete halt as a result of possible delays of more than &; days in the
governmentRs processing and approval of submitted wor( programs and budgets. Clause %.#
see(s to provide a temporary, stop-gap solution in case a disagreement between the tate and
the contractor 'over the proposed wor( program or budget submitted by the contractor+ should
result in a deadloc( or impasse, to avoid unreasonably long delays in the performance of the
wor(s.
5he tate, despite Clause %.#, still has control over the contract area, and it may, as
sovereign authority, prohibit wor( thereon until the dispute is resolved, or it may terminate the
F5AA, citing substantial breach thereof. =ence, the tate clearly retains full and effective
control.
Clause %.., which allows the contractor to ma(e changes to approved wor( programs
and budgets without the prior approval of the 8EN7 secretary, subject to certain limitations
with respect to the variance6s, merely provides the contractor a certain amount of fle2ibility to
meet une2pected situations, while still guaranteeing that the approved wor( programs and
budgets are not abandoned altogether. And if the secretary disagrees with the actions ta(en by
the contractor in this instance, he may also resort to cancellation6termination of the F5AA as
the ultimate sanction.
Clause 1.& of the ?/C, F5AA gives the contractor discretion to select parts of the
contract area to be relin!uished. 5he tate is not in a position to substitute its judgment for
that of the contractor, who (nows e2actly which portions of the contract area do not contain
minerals in commercial !uantities and should be relin!uished. Also, since the annual
occupation fees paid to government are based on the total hectarage of the contract area, net of
the areas relin!uished, the contractorRs self-interest will assure proper and efficient
relin!uishment.
Clause );.-'e+ of the ?/C, F5AA does not mean that the contractor can compel
government to use its power of eminent domain. :t contemplates a situation in which the
contractor is a foreign-owned corporation, hence, not !ualified to own land. 5he contractor
identifies the surface areas needed for it to construct the infrastructure for mining operations,
and the tate then ac!uires the surface rights on behalf of the former. 5he provision does not
call for the e2ercise of the power of eminent domain 'or determination of just compensation+@
it see(s to avoid a violation of the anti-dummy law.
Clause );.-'l+ of the ?/C, F5AA giving the contractor the right to mortgage and
encumber the mineral products e2tracted may have been a result of conditions imposed by
creditor-ban(s to secure the loan obligations of ?/C,. 3an(s lend also upon the security of
encumbrances on goods produced, which can be easily sold and converted into cash and
applied to the repayment of loans. 5hus, Clause );.-'l+ is not something out of the ordinary.
Neither is it objectionable, because even though the contractor is allowed to mortgage or
encumber the mineral end-products themselves, the contractor is not thereby relieved of its
obligation to pay the government its basic and additional shares in the net mining revenue.
5he contractorRs ability to mortgage the minerals does not negate the tateRs right to receive
its share of net mining revenues.
Clause );.-'(+ which gives the contractor authority Sto change its e!uity structure at any
time,T means that ?/C,, which was then );; percent foreign owned, could permit Filipino
e!uity ownership. /oreover, what is important is that the contractor, regardless of its
ownership, is always in a position to render the services re!uired under the F5AA, under the
direction and control of the government.
Clauses );.1'e+ and 'i+ bind government to allow amendments to the F5AA if re!uired
by ban(s and other financial institutions as part of the conditions of new lendings. 5here is
nothing objectionable here, since Clause );.1'e+ also provides that such financing
arrangements should in no event reduce the contractorRs obligations or the governmentRs rights
under the F5AA. Clause );.1'i+ provides that government shall Sfavourably considerT any
re!uest for amendments of this agreement necessary for the contractor to successfully obtain
financing. 5here is no renunciation of control, as the proviso does not say that government
shall automatically grant any such re!uest. Also, it is up to the contractor to prove the need
for the re!uested changes. 5he government always has the final say on whether to approve or
disapprove such re!uests.
I, E3,e, 0.e FTAA 7roF313o,1 -o ,o0 re-u/e or ab-3/a0e S0a0e /o,0ro).
;o &urrender of
Financial !enefits
5he second paragraph of ection %) of 7A $*1- has been denounced for allegedly
limiting the tateRs share in F5AAs with foreign contractors to just ta2es, fees and duties, and
depriving the tate of ashare in the after-ta2 income of the enterprise. =owever, the inclusion
of the phrase ?among other thingsA in the second paragraph of ection %) clearly and
unmista(ably reveals the legislative intent to have the tate collect more than 'ust the usual
ta5es9 duties and fees.
5hus, 8A9 **-.&, the ?3uidelines :stablishing the 0iscal Regime of 0inancial or
$echnical %ssistance %greements9A spells out the financial benefits government will receive
from an F5AA, as consisting of not only a ba13/ 4oFer,<e,0 1.are, comprised of all direct
ta2es, fees and royalties, as well as other payments made by the contractor during the term of
the F5AA, but also an a--303o,a) 4oFer,<e,0 1.are, being a 1.are 3, 0.e ear,3,41 or /a1.
E)oI1 oE 0.e <3,3,4 e,0er7r31e, so as to achieve a fifty-fifty sharing of net benefits from
mining between the government and the contractor.
5he a--303o,a) 4oFer,<e,0 1.are is computed using one of three '#+ options or
schemes detailed in 8A9 **-.&, vi@.9 ')+ the fifty-fifty sharing of cumulative present value of
cash flows@ '-+ the e2cess profit-related additional government share@ and '#+ the additional
sharing based on the cumulative net mining revenue. ?hichever option or computation is
used, the additional government share has nothing to do with ta2es, duties, fees or charges.
5he portion of revenues remaining after the deduction of the basic and additional government
shares is what goes to the contractor.
5he basic government share and the additional government share do not yet ta(e into
account the indirect ta2es and other financial contributions of mining projects, which are real
and actual benefits enjoyed by the Filipino people@ if these are ta(en into account, total
government share increases to &; percent or higher 'as much as $$ percent, and %* percent in
one instance+ of the net present value of total benefits from the project.
5he third or last paragraph of ection %) of 7A $*1- is slammed for deferring the
payment of the government share in F5AAs until after the contractor shall have recovered its
pre-operating e2penses, e2ploration and development e2penditures. Allegedly, the collection
of the tateRs share is rendered uncertain, as there is no time limit in 7A $*1- for this grace
period or recovery period. 3ut although 7A $*1- did not limit the grace period, the concerned
agencies '8EN7 and /D3+ in formulating the )**. and )**& :mplementing 7ules and
7egulations provided that the period of recovery, rec(oned from the date of commercial
operation, shall be for a period not e2ceeding five years, or until the date of actual recovery,
whichever comes earlier.
And since 7A $*1- allegedly does not re!uire government approval for the pre-
operating, e2ploration and development e2penses of the foreign contractors, it is feared that
such e2penses could be bloated to wipe out mining revenues anticipated for ); years, with the
result that the tateRs share is Fero for the first ); years. =owever, the argument is based on
incorrect information.
Ender ection -# of 7A $*1-, the applicant for e2ploration permit is re!uired to submit
a proposed wor( program for e2ploration, containing a yearly budget of proposed
e2penditures, which the tate passes upon and either approves or rejects@ if approved, the same
will subse!uently be recorded as pre-operating e2penses that the contractor will have to
recoup over the grace period.
Ender ection -1, when an e2ploration permittee files with the /D3 a declaration of
mining project feasibility, it must submit a wor( program for development, with
corresponding budget, for approval by the 3ureau, before government may grant an F5AA or
/,A or other mineral agreements@ again, government has the opportunity to approve or
reject the proposed wor( program and budgeted e2penditures for development wor(s, which
will become the pre-operating and development costs that will have to be recovered.
Dovernment is able to (now ahead of time the amounts of pre-operating and other e2penses to
be recovered, and the appro2imate period of time needed therefor. 5he aforecited provisions
have counterparts in ection #., which deals with the terms and conditions e2clusively
applicable to F5AAs. "n sum9 the third or last paragraph of Section G1 of R% ;94< cannot be
deemed defective.
ection %; of 7A $*1- allegedly limits the tateRs share in a mineral production-sharing
agreement '/,A+ to just the e2cise ta2 on the mineral product, i.e., only - percent of mar(et
value of the minerals. 5he colatilla in ection %1 reiterates the same limitation in ection
%;. *oIeFer, 0.e1e 0Io 7roF313o,1 7er0a3, o,)y 0o M!SA1, a,- .aFe ,o a77)3/a03o, 0o
FTAA1. T.e1e 7ar03/u)ar 7roF313o,1 -o ,o0 /o<e I30.3, 0.e 311ue1 -eE3,e- by 0.31
our0. *e,/e, o, -ue 7ro/e11 4rou,-1, ,o 7ro,ou,/e<e,0 /a, be <a-e 3, 0.31 /a1e 3,
re17e/0 oE 0.e /o,1030u03o,a)30y oE Se/03o,1 ;' a,- ;8.
ection ))- is disparaged for reverting F5AAs and all mineral agreements to the old
Slicense, concession or leaseT system, because it allegedly effectively reduces the government
share in F5AAs to just the - percent e2cise ta2 which pursuant to ection %; comprises the
government share in /,As. =owever, ection ))- li(ewise does not come within the issues
delineated by this Court, and was never touched upon by the parties in their pleadings.
/oreover, ection ))- may not properly apply to F5AAs. $he mining law obviousl! meant to
treat 0$%%s as a breed apart from mineral agreements. 5here is absolutely no basis to
believe that the law intends to e2act from F5AA contractors merely the same government
share 'i.e., the - percent e2cise ta2+ that it apparently demands from contractors under the
three forms of mineral agreements.
?hile there is ground to believe that ections %;, %1 and ))- are indeed
unconstitutional, they cannot be ruled upon here. :n any event, they are separable@ thus, a later
finding of nullity will not affect the rest of 7A $*1-.
I, E3,e, 0.e /.a))e,4e- 7roF313o,1 oE RA 7982 /a,,o0 be 1a3- 0o 1urre,-er E3,a,/3a)
be,eE301 Ero< a, FTAA 0o 0.e Eore34, /o,0ra/0or1.
/oreover, there is no concrete basis for the view that, in F5AAs with a foreign
contractor, the tate must receive at least &; percent of the after-ta2 income from the
e2ploitation of its mineral resources, and that such share is the e!uivalent of the constitutional
re!uirement that at least &; percent of the capital, and hence &; percent of the income, of
mining companies should remain in Filipino hands. Even if the tate is entitled to a &;
percent share from other mineral agreements 'C,A, 04A and /,A+, that would not create a
parallel or analogous situation for F5AAs. ?e are dealing with an essentially different
e!uation. =ere we have the old apples and oranges syndrome.
5he Charter did not intend to fi2 an iron-clad rule of &; percent share, applicable to all
situations, regardless of circumstances. 5here is no indication of such an intention on the part
of the framers. /oreover, the terms and conditions of petroleum F5AAs cannot serve as
standards for mineral mining F5AAs, because 0.e 0e/.,3/a) a,- o7era03o,a) reJu3re<e,01,
/o10 10ru/0ure1 a,- 3,Fe10<e,0 ,ee-1 oE oEE-1.ore 7e0ro)eu< eG7)ora03o, a,- -r3))3,4
/o<7a,3e1 -o ,o0 .aFe 0.e re<o0e10 re1e<b)a,/e 0o 0.o1e oE o,-1.ore <3,3,4 /o<7a,3e1.
5o ta(e the position that governmentRs share must be not less than &; percent of after-
ta2 income of F5AA contractors is nothing short of this Court dictating upon the
government. $he State resultantl! ends up losing control. 5o avoid compromising the tateRs
full control and supervision over the e2ploitation of mineral resources, there must be no
attempt to impose a Sminimum &; percentT rule. :t is sufficient that the tate has the power
and means, should it so decide, to get a &; percent share 'or greater+@ and it is not necessary
that the tate does so in ever! case.
$nvalid (rovisions of
the 7+( F#**
ection $.* of the ?/C, F5AA clearly renders illusory the tateRs &; percent share of
?/C,Rs revenues. Ender ection $.*, should ?/C,Rs foreign stoc(holders 'who originally
owned );; percent of the e!uity+ sell &; percent or more of their e!uity to a Filipino citiFen or
corporation, the tate loses its right to receive its share in net mining revenues under ection
$.$, without any offsetting compensation to the tate. And what is given to the tate in
ection $.$ is by mere tolerance of ?/C,Rs foreign stoc(holders, who can at any time cut off
the governmentRs entire share by simply selling &; percent of ?/C,Rs e!uity to a ,hilippine
citiFen or corporation.
:n fact, the sale by ?/C,Rs foreign stoc(holder on 0anuary -#, -;;) of the entire
outstanding e!uity in ?/C, to agittarius /ines, :nc., a domestic corporation at least &;
percent Filipino owned, can be deemed to have automatically triggered the operation of
ection $.* and removed the tateRs right to receive its &; percent share. ection $.* of the
?/C, F5AA has effectively given away the tateRs share without anything in e2change.
/oreover, it constitutes unjust enrichment on the part of the local and foreign
stoc(holders in ?/C,, because by the mere act of divestment, the local and foreign
stoc(holders get a windfall, as their share in the net mining revenues of ?/C, is
automatically increased, without having to pay anything for it.
3eing grossly disadvantageous to government and detrimental to the Filipino people, as
well as violative of public policy, ection $.* must therefore be stric(en off as invalid. 5he
F5AA in !uestion does not involve mere contractual rights but, being impressed as it is with
public interest, the contractual provisions and stipulations must yield to the common good and
the national interest. ince the offending provision is very much separable from the rest of the
F5AA, the deletion of ection $.* can be done without affecting or re!uiring the invalidation
of the entire ?/C, F5AA itself.
ection $.%'e+ of the ?/C, F5AA li(ewise is invalid, since by allowing the sums spent
by government for the benefit of the contractor to be deductible from the tateRs share in net
mining revenues, it results in benefiting the contractor twice over. 5his constitutes unjust
enrichment on the part of the contractor, at the e2pense of government. For being grossly
disadvantageous and prejudicial to government and contrary to public policy, ection $.%'e+
must also be declared without effect. :t may li(ewise be stric(en off without affecting the rest
of the F5AA.
E!ILOG"E
AF5E7 A"" : A:8 AN8 89NE, it is clear that there is unanimous agreement in the
Court upon the (ey principle that the tate must e2ercise full control and supervision over the
e2ploration, development and utiliFation of mineral resources.
$he cru5 of the controvers! is the amount of discretion to be accorded the :5ecutive
epartment9 particularl! the President of the Republic9 in respect of negotiations over the
terms of 0$%%s9 particularl! when it comes to the government share of financial benefits from
0$%%s. 5he Court believes that it is not unconstitutional to allow a wide degree of discretion to
the Chief E2ecutive, given the nature and comple2ity of such agreements, the humongous
amounts of capital and financing re!uired for large-scale mining operations, the complicated
technology needed, and the intricacies of international trade, coupled with the tateRs need to
maintain fle2ibility in its dealings, in order to preserve and enhance our countryRs
competitiveness in world mar(ets.
?e are all, in one way or another, sorely affected by the recently reported scandals
involving corruption in high places, duplicity in the negotiation of multi-billion peso
government contracts, huge payoffs to government officials, and other malfeasances@ and
perhaps, there is the desire to see some measures put in place to prevent further
abuse. *oIeFer, -3/0a03,4 u7o, 0.e !re13-e,0 I.a0 <3,3<u< 1.are 0o 4e0 Ero< a,
FTAA 31 ,o0 0.e 1o)u03o,. :t sets a bad precedent since such a move institutionaliFes the very
reduction if not deprivation of the tateRs control. 5he remedy may be worse than the problem
it was meant to address. :n any event, provisions in such future agreements which may be
suspected to be grossly disadvantageous or detrimental to government may be challenged in
court, and the culprits haled before the bar of justice.
4erily, under the doctrine of separation of powers and due respect for co-e!ual and
coordinate branches of government, this Court must restrain itself from intruding into policy
matters and must allow the ,resident and Congress ma2imum discretion in using the resources
of our country and in securing the assistance of foreign groups to eradicate the grinding
poverty of our people and answer their cry for viable employment opportunities in the country.
S$he 'udiciar! is loath to interfere with the due e5ercise b! coe#ual branches of
government of their official functions.T
B**C
As aptly spelled out seven decades ago by 0ustice
Deorge /alcolm, SJust as the Supreme *ourt9 as the guardian of constitutional rights9 should
not sanction usurpations b! an! other department of government9 so should it as strictl!
confine its own sphere of influence to the powers e5pressl! or b! implication conferred on it
b! the &rganic %ct.T
B);;C
"et the development of the mining industry be the responsibility of
the political branches of government. And let not this Court interfere inordinately and
unnecessarily.
5he Constitution of the ,hilippines is the supreme law of the land. :t is the repository of
all the aspirations and hopes of a)) the people. ?e fully sympathiFe with the plight of
,etitioner "a 3ugal 3Rlaan and other tribal groups, and commend their efforts to uplift their
communities. =owever, we cannot justify the invalidation of an otherwise constitutional
statute along with its implementing rules, or the nullification of an otherwise legal and binding
F5AA contract.
?e must never forget that it is not only our less privileged brethren in tribal and cultural
communities who deserve the attention of this Court@ rather, all parties concerned -- including
the tate itself, the contractor 'whether Filipino or foreign+, and the vast majority of our
citiFens -- e!ually deserve the protection of the law and of this Court. 5o stress, the benefits to
be derived by the tate from mining activities must ultimately serve the great majority of our
fellow citiFens. 5hey have as much right and interest in the proper and well-ordered
development and utiliFation of the countryRs mineral resources as the petitioners.
?hether we consider the near term or ta(e the longer view, we cannot overemphasiFe
the need for an a77ro7r3a0e ba)a,/3,4 oE 3,0ere101 a,- ,ee-1 -- the need to develop our
stagnating mining industry and e2tract what NE8A ecretary 7omulo Neri estimates is some
EU%1; billion 'appro2. ,h,1$.;1 trillion+ worth of mineral wealth lying hidden in the
ground, in order to jumpstart our floundering economy on the one hand, and on the other, the
need to enhance our nationalistic aspirations, protect our indigenous communities, and prevent
irreversible ecological damage.
5his Court cannot but be mindful that any decision rendered in this case will ultimately
impact not only the cultural communities which lodged the instant ,etition, and not only the
larger community of the Filipino people now struggling to survive amidst a fiscal6budgetary
deficit, ever increasing prices of fuel, food, and essential commodities and services, the
shrin(ing value of the local currency, and a government hamstrung in its delivery of basic
services by a severe lac( of resources, but also countless future generations of 0ilipinos.
For this latter group of Filipinos yet to be born, their eventual access to education, health
care and basic services, their overall level of well-being, the very shape of their lives are even
now being determined and affected partly by the policies and directions being adopted and
implemented by government today. %nd in part b! the this Resolution rendered b! this *ourt
toda!.
4erily, the mineral wealth and natural resources of this country are meant to benefit not
merely a select group of people living in the areas locally affected by mining activities, but the
entire Filipino nation,present and future, to whom the mineral wealth really belong. 5his
Court has therefore weighed carefully the rights and interests of all concerned, and decided for
the greater good of the greatest number. 0E5:CE F97 A"", not just for some@ 0E5:CE
F97 5=E ,7EEN5 AN8 5=E FE5E7E, not just for the here and now.
9*EREFORE, the Court R:S&)J:S to 3R%,$ the respondentsR and the intervenorsR
/otions for 7econsideration@ to R:J:RS: and S:$ %S": this CourtRs 0anuary -$, -;;1
8ecision@ to"SM"SS the ,etition@ and to issue this new judgment
declaring *&,S$"$+$"&,%) ')+ 7epublic Act No. $*1- 'the ,hilippine /ining "aw+, '-+ its
:mplementing 7ules and 7egulations contained in 8EN7 Administrative 9rder '8A9+ No.
*&1; -- insofar as they relate to financial and technical assistance agreements referred to in
paragraph 1 of ection - of Article K:: of the Constitution@ and '#+ the Financial and
5echnical Assistance Agreement 'F5AA+ dated /arch #;, )**. e2ecuted by the government
and ?estern /ining Corporation ,hilippines :nc. '?/C,+, e2cept ections $.% and $.* of the
subject F5AA which are hereby :N4A":8A5E8 for being contrary to public policy and for
being grossly disadvantageous to the government.
SO ORDERED.
G.R. No. L-8&9&; A7r3) 15, 19;;
RE!"#LI OF T*E !*ILI!!INES CDIRETOR OF FOREST
DEVELO!MENTD, petitioner,
vs.
*ON. O"RT OF A!!EALS CT*IRD DIVISIOND a,- (OSE +. DE LA
ROSA, respondents.
G.R. No. L-88';1 A7r3) 15, 19;;
#ENG"ET ONSOLIDATED, IN., petitioner,
vs.
*ON. O"RT OF A!!EALS, (OSE +. DE LA ROSA, VITORIA, #EN(AMIN a,-
ED"ARDO, a)) 1ur,a<e- DE LA ROSA, re7re1e,0e- by 0.e3r Ea0.er (OSE +. DE LA
ROSA, respondents.
G.R. No. L-88'92 A7r3) 15, 19;;
ATOB-#IG 9EDGE MINING OM!AN+, petitioner,
vs.
*ON. O"RT OF A!!EALS, (OSE +. DE LA ROSA, VITOR)A, #EN(AMIN a,-
ED"ARDO, a)) 1ur,a<e- DE LA ROSA, re7re1e,0e- by 0.e3r Ea0.er, (OSE +. DE LA
ROSA, respondents.

R"$, J.:
5he 7egalian doctrine reserves to the tate all natural wealth that may be found in the bowels
of the earth even if the land where the discovery is made be private.
1
:n the cases at bar, which
have been consolidated because they pose a common issue, this doctrine was not correctly
applied.
5hese cases arose from the application for registration of a parcel of land filed on February )),
)*&., by 0ose de la 7osa on his own behalf and on behalf of his three children, 4ictoria,
3enjamin and Eduardo. 5he land, situated in 5uding, :togon, 3enguet ,rovince, was divided
into * lots and covered by plan ,su---.;;*. According to the application, "ots )-. were sold
to 0ose de la 7osa and "ots &-* to his children by /amaya 3albalio and 0aime Alberto,
respectively, in )*&1.
2
5he application was separately opposed by 3enguet Consolidated, :nc. as to "ots )-., Ato(
3ig ?edge Corporation, as to ,ortions of "ots )-. and all of "ots &-*, and by the 7epublic of
the ,hilippines, through the 3ureau of Forestry 8evelopment, as to lots )-*.
&
:n support of the application, both 3albalio and Alberto testified that they had ac!uired the
subject land by virtue of prescription 3albalio claimed to have received "ots )-. from her
father shortly after the "iberation. he testified she was born in the land, which was possessed
by her parents under claim of ownership.
8
Alberto said he received "ots &-* in )*&) from his
mother, 3ella Alberto, who declared that the land was planted by 0aime and his predecessors-
in-interest to bananas, avocado, nang(a and camote, and was enclosed with a barbed-wire
fence. he was corroborated by Feli2 /arcos, &$ years old at the time, who recalled the earlier
possession of the land by Alberto<s father.
5
3albalio presented her ta2 declaration in )*.& and
the realty ta2 receipts from that year to )*&1,
6
Alberto his ta2 declaration in )*&) and the
realty ta2 receipts from that year to )*&1.
7
3enguet opposed on the ground that the 0une 3ug mineral claim covering "ots )-. was sold to
it on eptember --, )*#1, by the successors-in-interest of 0ames Helly, who located the claim
in eptember )*;* and recorded it on 9ctober )1, )*;*. From the date of its purchase,
3enguet had been in actual, continuous and e2clusive possession of the land in concept of
owner, as evidenced by its construction of adits, its affidavits of annual assessment, its
geological mappings, geological samplings and trench side cuts, and its payment of ta2es on
the land.
;
For its part, Ato( alleged that a portion of "ots )-. and all of "ots &-* were covered by the
Emma and Fredia mineral claims located by =arrison and 7eynolds on 8ecember -., )*#;,
and recorded on 0anuary -, )*#), in the office of the mining recorder of 3aguio. 5hese claims
were purchased from these locators on November -, )*#), by Ato(, which has since then been
in open, continuous and e2clusive possession of the said lots as evidenced by its annual
assessment wor( on the claims, such as the boring of tunnels, and its payment of annual ta2es
thereon.
9
5he location of the mineral claims was made in accordance with ection -) of the ,hilippine
3ill of )*;- which provided thatA
EC. -). All valuable mineral deposits in public lands in the philippine
:slands both surveyed and unsurveyed are hereby declared to be free and
open to e2ploration, occupation and purchase and the land in which they
are found to occupation and purchase by the citiFens of the Enited tates,
or of said islands.
5he 3ureau of Forestry 8evelopment also interposed its objection, arguing that the land
sought to be registered was covered by the Central Cordillera Forest 7eserve under
,roclamation No. -)$ dated February )&, )*-*. /oreover, by reason of its nature, it was not
subject to alienation under the Constitutions of )*#. and )*$#.
1'
5he trial court M denied the application, holding that the applicants had failed to prove their
claim of possession and ownership of the land sought to be registered.
11
5he applicants
appealed to the respondent court, M which reversed the trial court and recogniFed the claims of
the applicant, but subject to the rights of 3enguet and Ato( respecting their mining
claims.
12
:n other words, the Court of Appeals affirmed the surface rights of the de la 7osas
over the land while at the same time reserving the sub-surface rights of 3enguet and Ato( by
virtue of their mining claims.
3oth 3enguet and Ato( have appealed to this Court, invo(ing their superior right of
ownership. 5he 7epublic has filed its own petition for review and reiterates its argument that
neither the private respondents nor the two mining companies have any valid claim to the land
because it is not alienable and registerable.
:t is true that the subject property was considered forest land and included in the Central
Cordillera Forest 7eserve, but this did not impair the rights already vested in 3enguet and
Ato( at that time. 5he Court of Appeals correctly declared thatA
5here is no !uestion that the * lots applied for are within the 0une 3ug
mineral claims of 3enguet and the >Fredia and Emma> mineral claims of
Ato(. 5he 0une 3ug mineral claim of plaintiff 3enguet was one of the )&
mining claims of 0ames E. Helly, American and mining locator. =e filed
his declaration of the location of the 0une 3ug mineral and the same was
recorded in the /ining 7ecorder<s 9ffice on 9ctober )1, )*;*. All of the
Helly claims ha subse!uently been ac!uired by 3enguet Consolidated, :nc.
3enguet<s evidence is that it had made improvements on the 0une 3ug
mineral claim consisting of mine tunnels prior to )*#.. :t had submitted
the re!uired affidavit of annual assessment. After ?orld ?ar ::, 3enguet
introduced improvements on mineral claim 0une 3ug, and also conducted
geological mappings, geological sampling and trench side cuts. :n )*1%,
3enguet redeclared the >0une 3ug> for ta2ation and had religiously paid
the ta2es.
5he Emma and Fredia claims were two of the several claims of =arrison
registered in )*#), and which Ato( representatives ac!uired. ,ortions of
"ots ) to . and all of "ots & to * are within the Emma and Fredia mineral
claims of Ato( 3ig ?edge /ining Company.
5he 0une 3ug mineral claim of 3enguet and the Fredia and Emma mineral
claims of Ato( having been perfected prior to the approval of the
Constitution of the ,hilippines of )*#., they were removed from the
public domain and had become private properties of 3enguet and Ato(.
:t is not disputed that the location of the mining claim
under consideration was perfected prior to November
)., )*#., when the Dovernment of the
Commonwealth was inaugurated@ and according to the
laws e2isting at that time, as construed and applied by
this court in Mcaniel v. %pacible and *uisia '1-
,hil. $1*+, a valid location of a mining claim
segregated the area from the public domain. aid the
court in that caseA 5he moment the locator discovered
a valuable mineral deposit on the lands located, and
perfected his location in accordance with law, the
power of the Enited tates Dovernment to deprive him
of the e2clusive right to the possession and enjoyment
of the located claim was gone, the lands had become
mineral lands and they were e2empted from lands that
could be granted to any other person. 5he reservations
of public lands cannot be made so as to include prior
mineral perfected locations@ and, of course, if a valid
mining location is made upon public lands afterwards
included in a reservation, such inclusion or reservation
does not affect the validity of the former location. 3y
such location and perfection, the land located is
segregated from the public domain even as against the
Dovernment. 'Enion 9il Co. v. mith, -1* E.. ##$@
4an /ess v. 7oonet, )&; Cal. )#)@ -$ Cyc. .1&+.
>5he legal effect of a valid location of a mining claim
is not only to segregate the area from the public
domain, but to grant to the locator the beneficial
ownership of the claim and the right to a patent
therefor upon compliance with the terms and
conditions prescribed by law. ?here there is a valid
location of a mining claim, the area becomes
segregated from the public domain and the property of
the locator.> 't. "ouis /ining Y /illing Co. v.
/ontana /ining Co., )$) E.. &.;@ &..@ 1# "aw ed.,
#-;, #--.+ >?hen a location of a mining claim is
perfected it has the effect of a grant by the Enited
tates of the right of present and e2clusive
possession, with the right to the e5clusive en'o!ment
of all the surface ground as well as of all the minerals
within the lines of the claim, e2cept as limited by the
e2tralateral right of adjoining locators@ and this is the
locator<s right before as well as after the issuance of
the patent. ?hile a lode locator ac!uires a vested
property right by virtue of his location made in
compliance with the mining laws, the fee remains in
the government until patent issues.>')% 7.C.". )).-+
'Dold Cree( /ining Corporation v. =on. Eulogio
7odrigueF, ec. of Agriculture and Commerce, and
Luirico Abadilla, 8irector of the 3ureau of /ines, &&
,hil. -.*, -&.--&&+
:t is of no importance whether 3enguet and Ato( had secured a patent for
as held in the Dold Cree( /ining Corp. Case, for all physical purposes of
ownership, the owner is not re!uired to secure a patent as long as he
complies with the provisions of the mining laws@ his possessory right, for
all practical purposes of ownership, is as good as though secured by
patent.
?e agree li(ewise with the oppositors that having complied with all the
re!uirements of the mining laws, the claims were removed from the public
domain, and not even the government of the ,hilippines can ta(e away
this right from them. 5he reason is obvious. =aving become the private
properties of the oppositors, they cannot be deprived thereof without due
process of law.
1&
uch rights were not affected either by the stricture in the Commonwealth Constitution against
the alienation of all lands of the public domain e2cept those agricultural in nature for this was
made subject to e2isting rights. 5hus, in its Article K:::, ection ), it was categorically
provided thatA
EC. ). All agricultural, timber and mineral lands of the public domain,
waters, minerals, coal, petroleum and other mineral oils, all forces of
potential energy and other natural resources of the ,hilipppines belong to
the tate, and their disposition, e2ploitation, development, or utiliFation
shall be limited to citiFens of the ,hilippines or to corporations or
associations at least &;Q of the capital of which is owned by such citiFens,
subject to any e2isting right, grant, lease or concession at the time of the
inauguration of the government established under this Constitution.
Natural resources with the e2ception of public agricultural lands, shall not
be alienated, and no license, concession, or lease for the e2ploitation,
development or utiliFation of any of the natural resources shall be granted
for a period e2ceeding -. years, e2cept as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of
water power, in which case beneficial use may be the measure and the
limit of the grant.
:mplementing this provision, Act No. 1-&%, approved on November %, )*#., declaredA
Any provision of e2isting laws, e2ecutive order, proclamation to the
contrary notwithstanding, all locations of mining claim made prior to
February %, )*#. within lands set apart as forest reserve under ec. )%-&
of the 7evised Administrative Code which would be valid and subsisting
location e2cept to the e2istence of said reserve are hereby declared to be
valid and subsisting locations as of the date of their respective locations.
5he perfection of the mining claim converted the property to mineral land and under the laws
then in force removed it from the public domain.
18
3y such act, the locators ac!uired
e2clusive rights over the land, against even the government, without need of any further act
such as the purchase of the land or the obtention of a patent over it.
15
As the land had become
the private property of the locators, they had the right to transfer the same, as they did, to
3enguet and Ato(.
:t is true, as the Court of Appeals observed, that such private property was subject to the
>vicissitudes of ownership,> or even to forfeiture by non-user or abandonment or, as the
private respondents aver, by ac!uisitive prescription. =owever, the method invo(ed by the de
la 7osas is not available in the case at bar, for two reasons.
First, the trial court found that the evidence of open, continuous, adverse and e2clusive
possession submitted by the applicants was insufficient to support their claim of ownership.
5hey themselves had ac!uired the land only in )*&1 and applied for its registration in )*&.,
relying on the earlier alleged possession of their predecessors-in-interest.
16
5he trial judge,
who had the opportunity to consider the evidence first-hand and observe the demeanor of the
witnesses and test their credibility was not convinced. ?e defer to his judgment in the absence
of a showing that it was reached with grave abuse of discretion or without sufficient basis.
17
econd, even if it be assumed that the predecessors-in-interest of the de la 7osas had really
been in possession of the subject property, their possession was not in the concept of owner of
the mining claim but of the property asagricultural land, which it was not. 5he property was
mineral land, and they were claiming it as agricultural land. 5hey were not disputing the lights
of the mining locators nor were they see(ing to oust them as such and to replace them in the
mining of the land. :n fact, 3albalio testified that she was aware of the diggings being
underta(en >down below>
1;
but she did not mind, much less protest, the same although she
claimed to be the owner of the said land.
5he Court of Appeals justified this by saying there is >no conflict of interest> between the
owners of the surface rights and the owners of the sub-surface rights. 5his is rather doctrine,
for it is a well-(nown principle that the owner of piece of land has rights not only to its surface
but also to everything underneath and the airspace above it up to a reasonable height.
19
Ender
the aforesaid ruling, the land is classified as mineral underneath and agricultural on the
surface, subject to separate claims of title. 5his is also difficult to understand, especially in its
practical application.
Ender the theory of the respondent court, the surface owner will be planting on the land while
the mining locator will be boring tunnels underneath. 5he farmer cannot dig a well because he
may interfere with the operations below and the miner cannot blast a tunnel lest he destroy the
crops above. =ow deep can the farmer, and how high can the miner, go without encroaching
on each other<s rightsO ?here is the dividing line between the surface and the sub-surface
rightsO
5he Court feels that the rights over the land are indivisible and that the land itself cannot be
half agricultural and half mineral. 5he classification must be categorical@ the land must be
either completely mineral or completely agricultural. :n the instant case, as already observed,
the land which was originally classified as forest land ceased to be so and became mineral M
and completely mineral M once the mining claims were perfected.
2'
As long as mining
operations were being underta(en thereon, or underneath, it did not cease to be so and become
agricultural, even if only partly so, because it was enclosed with a fence and was cultivated by
those who were unlawfully occupying the surface.
?hat must have misled the respondent court is Commonwealth Act No. )#$, providing as
followsA
ec. #. All mineral lands of the public domain and minerals belong to the
tate, and their disposition, e2ploitation, development or utiliFation, shall
be limited to citiFens of the ,hilippines, or to corporations, or associations,
at least &;Q of the capital of which is owned by such citiFens, subject to
any e2isting right, grant, lease or concession at the time of the
inauguration of government established under the Constitution.
EC. 1. 5he ownership of, and the right to the use of land for agricultural,
industrial, commercial, residential, or for any purpose other than mining
does not include the ownership of, nor the right to e2tract or utiliFe, the
minerals which may be found on or under the surface.
EC. .. 5he ownership of, and the right to e2tract and utiliFe, the minerals
included within all areas for which public agricultural land patents are
granted are e2cluded and e2cepted from all such patents.
EC. &. 5he ownership of, and the right to e2tract and utiliFe, the minerals
included within all areas for which 5orrens titles are granted are e2cluded
and e2cepted from all such titles.
5his is an application of the 7egalian doctrine which, as its name implies, is intended for the
benefit of the tate, not of private persons. 5he rule simply reserves to the tate all minerals
that may be found in public and even private land devoted to >agricultural, industrial,
commercial, residential or 'for+ any purpose other than mining.> 5hus, if a person is the owner
of agricultural land in which minerals are discovered, his ownership of such land does not give
him the right to e2tract or utiliFe the said minerals without the permission of the tate to which
such minerals belong.
5he flaw in the reasoning of the respondent court is in supposing that the rights over the land
could be used for both mining and non-mining purposes simultaneousl!. 5he correct
interpretation is that once minerals are discovered in the land, whatever the use to which it is
being devoted at the time, such use may be discontinued by the tate to enable it to e2tract the
minerals therein in the e2ercise of its sovereign prerogative. 5he land is thus converted to
mineral land and may not be used by any private party, including the registered owner thereof,
for any other purpose that will impede the mining operations to be underta(en therein, For the
loss sustained by such owner, he is of course entitled to just compensation under the /ining
"aws or in appropriate e2propriation proceedings.
21
9ur holding is that 3enguet and Ato( have e2clusive rights to the property in !uestion by
virtue of their respective mining claims which they validly ac!uired before the Constitution of
)*#. prohibited the alienation of all lands of the public domain e2cept agricultural lands,
subject to vested rights e2isting at the time of its adoption. 5he land was not and could not
have been transferred to the private respondents by virtue of ac!uisitive prescription, nor could
its use be shared simultaneously by them and the mining companies for agricultural and
mineral purposes.
?=E7EF97E, the decision of the respondent court dated April #;, )*$&, is E5 A:8E and
that of the trial court dated /arch )), )*&*, is 7E:N5A5E8, without any pronouncement as
to costs.
9 978E7E8.
:G.R. No. &78&5. NoFe<ber 2;, 19&8.=
N"MERIANO !ADILLA, a77)3/a,0-a77e))ee, F. !A#LO RE+ES a,- T*E DIRETOR
OF LANDS,1ppositors%*ppellants.
A00or,ey-Ge,era) (ara,3))a a,- (o1e NaFa Eor *ppellants.
S31o, N S34u3o, Eor *ppellee.
S+LLA#"S
). 5977EN 7ED:57A5:9N@ 7ED:57A3"E 5:5"E. M :n order that land may be
registered under the 5orrens system, the applicant must show, even though there is no
opposition to his application, that he is the absolute owner, in fee simple, of such land. :n other
words, the burden is upon him to show that he is the real and absolute owner, in fee simple, of
such land. '7oman Catholic 3ishop of "ipa v. /unicipality of 5aal, #% ,hil., #&$, #$., #$&.+
-. :8.@ :8. M :t is well-settled that no public land can be ac!uired by private persons without
any grant, e2press or implied, from the government. A grant is conclusively presumed by law
when the claimant, by himself or through his predecessors in interest, has occupied the land
openly, continuously, e2clusively, and under a claim of title since 0uly -&, )%*1, or prior
thereto. '9ngsiaco v. /agsilang, .; ,hil., #%;.+
D E I S I O N
A#AD SANTOS, J.%
Appellee applied for the registration in his name of a parcel of land containing a little over )&)
hectares located in 3oGgabong, Nueva Ecija. 5he application was opposed by the 8irector of
"ands and by nine homesteaders, on the ground that the property sought to be registered was
public land. 9ne ,ablo 7eyes, who claimed to be the e2clusive owner of the land, also filed an
opposition. After due hearing, the court below dismissed all the oppositions and decreed the
registration of the land in the name of the appellee. From this judgment all the parties who
opposed the application appealed, although ,ablo 7eyesR appeal was dismissed for failure to
file his brief on time.
:n support of this appeal the following errors have been assignedA ')+ 5hat the lower court
erred in holding that the appellee has established his title to the property sought to be
registered, and '-+ that the lower court erred in decreeing the registration of the property in the
name of the appellee.
Appellee presented no valid and sufficient title deed showing his ownership of the land in
!uestion. =e, however, tried to prove that he inherited the same from his ancestors, who had
been in possession of the land for many years dating bac( to the panish regime@ that he as
well as his predecessors in interest had partly cultivated the land and partly used it as a
pasture@ that various improvements had been made on the land ever since the panish regime@
and that upon the death of their father, ,ablo ,adilla, he and his sister Alejandra too(
possession of the land. 9n the other hand, the appellants introduced evidence tending to show
that the land in !uestion was never occupied by ,ablo ,adilla during the panish regime@ that
when the several homesteaders settled upon the land during )*)- to )*)%, the same was
unoccupied, unclaimed, and without any sign of previous cultivation or occupation@ that the
homesteaders were not molested in their possession of portions of the land in !uestion until
)*-$, after they had cleared their holdings and put the same in cultivation.
:n 7oman Catholic 3ishop of "ipa v. /unicipality of 5aal '#% ,hil., #&$, #$., #$&+, this court
saidAjgcAchanrobles.com.ph
>\. . . :n order, however, that the petitioner for registration of his land under the 5orrens
system shall be permitted to have the same registered and to have the benefit resulting from
the certificate of title finally issued, the burden is upon him to show that he is the real and
absolute owner, in fee simple, of the lands which he is attempting to have registered. 5he
petitioner is not entitled to have his lands registered under the 5orrens system simply because
no one appears to oppose his title and to oppose the registration of his lands. :n order that land
may be registered under the 5orrens system, the petitioner must show, even though there is no
opposition, that he is the absolute owner, in fee simple, of the same. . . .>cralaw virtua)aw
library
9n the other hand, it is well-settled that no public land can be ac!uired by private persons
without any grant, e2press or implied, from the government. A grant is conclusively presumed
by law when the claimant, by himself or through his predecessors in interest, has occupied the
land openly, continuously, e2clusively, and under a claim of title since 0uly -&, )%*1, or prior
thereto. '9ngsiaco v. /agsilang, .; ,hil., #%;.+ :n the case before us, appellee has failed to
prove any e2press grant from the government@ neither has he succeeded in proving possession
from which a constructive grant can be predicated.
:t results that the judgment appealed from must be reversed, and it is hereby decreed and
adjudged that the property sought to be registered in this case is public land. ?ithout any
special pronouncement as to costs in this instance. o ordered.
treet, 3utte, Doddard and 8iaF, JJ., concur.
:G.R. No. 156117. May 26, 2''5=
RE!"#LI OF T*E !*ILI!!INES, petitioner. vs. (EREMIAS AND DAVID
*ER#IETO, respondents.
D E I S I O N
*IO-NA$ARIO, J.%
3efore this Court is a ,etition for 7eview on *ertiorari, under 7ule 1. of the )**$
7ules of Civil ,rocedure, see(ing the reversal of the 8ecision of the Court of Appeals in CA-
D.7. C4 No. &$&-., dated -- November -;;-,
B)C
which affirmed the 0udgment of the
/unicipal 5rial Court '/5C+ of Consolacion, Cebu, dated -) 8ecember )***,
B-C
granting the
application for land registration of the respondents.
7espondents in the present ,etition are the =erbieto brothers, 0eremias and 8avid, who
filed with the /5C, on -# eptember )**%, a single application for registration of two parcels
of land, "ots No. %1-- and %1-#, located in Cabangahan, Consolacion, Cebu 'ubject "ots+.
5hey claimed to be owners in fee simple of the ubject "ots, which they purchased from their
parents, spouses Dregorio =erbieto and :sabel 9watan, on -. 0une )*$&.
B#C
5ogether with their
application for registration, respondents submitted the following set of documentsA
'a+ Advance urvey ,lan of "ot No. %1--, in the name of respondent 0eremias@
and Advance urvey ,lan of "ot No. %1-#, in the name of respondent
8avid@
B1C
'b+ 5he technical descriptions of the ubject "ots@
B.C
'c+ Certifications by the 8epartment of Environment and Natural 7esources
'8EN7+ dispensing with the need for urveyorRs Certificates for the
ubject "ots@
B&C
'd+ Certifications by the 7egister of 8eeds of Cebu City on the absence of
certificates of title covering the ubject "ots@
B$C
'e+ Certifications by the Community Environment and Natural 7esources 9ffice
'CEN79+ of the 8EN7 on its finding that the ubject "ots are alienable
and disposable, by virtue of Forestry Administrative 9rder No. 1-);&#,
dated -. 0une )*&#@
B%C
'f+ Certified 5rue Copies of Assessment of 7eal ,roperty 'A7,+ No.
*1)%;;#;)%#), in the name of 0eremias, covering "ot No. %1--, issued in
)**1@ and A7, No. *1)%;;#;)%##, in the name of 8avid, covering "ot
No. %1-#, also issued in )**1@
B*C
and
'g+ 8eed of 8efinite ale e2ecuted on -. 0une )*$& by spouses Dregorio
=erbieto and :sabel 9watan selling the ubject "ots and the improvements
thereon to their sons and respondents herein, 0eremias and 8avid,
for,),;;;. "ot No. %1-- was sold to 0eremias, while "ot No. %1-# was
sold to 8avid.
B);C
9n )) 8ecember )**%, the petitioner 7epublic of the ,hilippines '7epublic+ filed an
9pposition to the respondentsR application for registration of the ubject "ots arguing thatA ')+
7espondents failed to comply with the period of adverse possession of the ubject "ots
re!uired by law@ '-+ 7espondentsR muniments of title were not genuine and did not constitute
competent and sufficient evidence of bona fideac!uisition of the ubject "ots@ and '#+ 5he
ubject "ots were part of the public domain belonging to the 7epublic and were not subject to
private appropriation.
B))C
5he /5C set the initial hearing on ;# eptember )*** at %A#; a.m.
B)-C
All owners of the
land adjoining the ubject "ots were sent copies of the Notice of :nitial =earing.
B)#C
A copy of
the Notice was also posted on -$ 0uly )*** in a conspicuous place on the ubject "ots, as well
as on the bulletin board of the municipal building of Consolacion, Cebu, where the ubject
"ots were located.
B)1C
Finally, the Notice was also published in the 9fficial DaFette on ;-
August )***
B).C
and $he 0reeman 6anat ,ews on )* 8ecember )***.
B)&C
8uring the initial hearing on ;# eptember )***, the /5C issued an 9rder of pecial
8efault,
B)$C
with only petitioner 7epublic opposing the application for registration of the
ubject "ots. 5he respondents, through their counsel, proceeded to offer and mar(
documentary evidence to prove jurisdictional facts. 5he /5C commissioned the Cler( of
Court to receive further evidence from the respondents and to submit a 7eport to the /5C
after #; days.
9n -) 8ecember )***, the /5C promulgated its 0udgment ordering the registration and
confirmation of the title of respondent 0eremias over "ot No. %1-- and of respondent 8avid
over "ot No. %1-#. :t subse!uently issued an 9rder on ;- February -;;; declaring its
0udgment, dated -) 8ecember )***, final and e2ecutory, and directing the Administrator of
the "and 7egistration Authority '"7A+ to issue a decree of registration for the ubject "ots.
B)%C
,etitioner 7epublic appealed the /5C 0udgment, dated -) 8ecember )***, to the Court
of Appeals.
B)*C
5he Court of Appeals, in its 8ecision, dated -- November -;;-, affirmed the
appealed /5C 0udgment reasoning thusA
:n the case at bar, there can be no !uestion that the land sought to be registered has been
classified as within the alienable and disposable Fone since 0une -., )*&#. Article )))# in
relation to Article ))#$ of the Civil Code, respectively provides that SAll things which are
within the commerce of men are susceptible of prescription, unless otherwise provided.
,roperty of the tate or any of its subdivisions of patrimonial character shall not be the object
of prescriptionT and that S9wnership and other real rights over immovables also prescribe
through uninterrupted adverse possession thereof for thirty years, without need of title or of
good faith.T
As testified to by the appellees in the case at bench, their parents already ac!uired the subject
parcels of lands, subject matter of this application, since )*.; and that they cultivated the
same and planted it with jac(fruits, bamboos, coconuts, and other trees '0udgment dated
8ecember -), )***, p. &+. :n short, it is undisputed that herein appellees or their predecessors-
in-interest had occupied and possessed the subject land openly, continuously, e2clusively, and
adversely since )*.;. Conse!uently, even assuming arguendo that appelleesR possession can
be rec(oned only from 0une -., )*&# or from the time the subject lots had been classified as
within the alienable and disposable Fone, still the argument of the appellant does not hold
water.
As earlier stressed, the subject property, being alienable since )*&# as shown by CEN79
7eport dated 0une -#, )*&#, may now be the object of prescription, thus susceptible of private
ownership. 3y e2press provision of Article ))#$, appellees are, with much greater right,
entitled to apply for its registration, as provided by ection )1'1+ of ,.8. ).-* which allows
individuals to own land in any manner provided by law. Again, even considering that
possession of appelless should only be rec(oned from )*&#, the year when CEN79 declared
the subject lands alienable, herein appellees have been possessing the subject parcels of land
in open, continuous, and in the concept of an owner, for #. years already when they filed the
instant application for registration of title to the land in )**%. As such, this court finds no
reason to disturb the finding of the court a #uo.
B-;C
5he 7epublic filed the present ,etition for the review and reversal of the 8ecision of the
Court of Appeals, dated -- November -;;-, on the basis of the following argumentsA
0irst9 respondents failed to establish that they and their predecessors-in-interest had been
in open, continuous, and adverse possession of the ubject "ots in the concept of owners since
)- 0une )*1. or earlier. According to the petitioner 7epublic, possession of the ubject "ots
prior to -. 0une )*&# cannot be considered in determining compliance with the periods of
possession re!uired by law. 5he ubject "ots were classified as alienable and disposable only
on -. 0une )*&#, per CEN79Rs certification. :t also alleges that the Court of Appeals, in
applying the #;-year ac!uisitive prescription period, had overloo(ed the ruling in 7epublic
v. 8oldol,
B-)C
where this Court declared that Commonwealth Act No. )1), otherwise (nown
as the ,ublic "and Act, as amended and as it is presently phrased, re!uires that possession of
land of the public domain must be from )- 0une )*1. or earlier, for the same to be ac!uired
through judicial confirmation of imperfect title.
Second9 the application for registration suffers from fatal infirmity as the subject of the
application consisted of two parcels of land individually and separately owned by two
applicants. ,etitioner 7epublic contends that it is implicit in the provisions of ,residential
8ecree No. ).-*, otherwise (nown as the ,roperty 7egistration 8ecree, as amended, that the
application for registration of title to land shall be filed by a single applicant@ multiple
applicants may file a single application only in case they are co-owners. ?hile an application
may cover two parcels of land, it is allowed only when the subject parcels of land belong to
the same applicant or applicants 'in case the subject parcels of land are co-owned+ and are
situated within the same province. ?here the authority of the courts to proceed is conferred
by a statute and when the manner of obtaining jurisdiction is mandatory, it must be strictly
complied with or the proceedings will be utterly void. ince the respondents failed to comply
with the procedure for land registration under the ,roperty 7egistration 8ecree, the
proceedings held before the /5C is void, as the latter did not ac!uire jurisdiction over it.
$
Jurisdiction
Addressing first the issue of jurisdiction, this Court finds that the /5C had no
jurisdiction to proceed with and hear the application for registration filed by the respondents
but for reasons different from those presented by petitioner 7epublic.
%. $he mis'oinder of causes of action and parties does not affect the 'urisdiction of the M$*
to hear and proceed with respondentsF application for registration.
7espondents filed a single application for registration of the ubject "ots even though
they were not co-owners. 7espondents 0eremias and 8avid were actually see(ing the
individual and separate registration of "ots No. %1-- and %1-#, respectively.
,etitioner 7epublic believes that the procedural irregularity committed by the
respondents was fatal to their case, depriving the /5C of jurisdiction to proceed with and hear
their application for registration of the ubject "ots, based on this CourtRs pronouncement
in irector of )ands v. *ourt of %ppeals,
B--C
to witA
. . . :n view of these multiple omissions which constitute non-compliance with the above-cited
sections of the Act, ?e rule that said defects have not invested the Court with the authority or
jurisdiction to proceed with the case because the manner or mode of obtaining jurisdiction as
prescribed by the statute which is mandatory has not been strictly followed, thereby rendering
all proceedings utterly null and void.
5his Court, however, disagrees with petitioner 7epublic in this regard. 5his procedural
lapse committed by the respondents should not affect the jurisdiction of the /5C to proceed
with and hear their application for registration of the ubject "ots.
5he ,roperty 7egistration 8ecree
B-#C
recogniFes and e2pressly allows the following
situationsA ')+ the filing of a single application by several applicants for as long as they are co-
owners of the parcel of land sought to be registered@
B-1C
and '-+ the filing of a single application
for registration of several parcels of land provided that the same are located within the same
province.
B-.C
5he ,roperty 7egistration 8ecree is silent, however, as to the present situation
wherein two applicants filed a single application for two parcels of land, but are see(ing the
separate and individual registration of the parcels of land in their respective names.
ince the ,roperty 7egistration 8ecree failed to provide for such a situation, then this
Court refers to the 7ules of Court to determine the proper course of action. ection #1 of the
,roperty 7egistration 8ecree itself provides that, SBtChe 7ules of Court shall, insofar as not
inconsistent with the provisions of this 8ecree, be applicable to land registration and cadastral
cases by analogy or in a suppletory character and whenever practicable and convenient.T
Considering every application for land registration filed in strict accordance with the
,roperty 7egistration 8ecree as a single cause of action, then the defect in the joint application
for registration filed by the respondents with the /5C constitutes a misjoinder of causes of
action and parties. :nstead of a single or joint application for registration, respondents
0eremias and 8avid, more appropriately, should have filed separate applications for
registration of "ots No. %1-- and %1-#, respectively.
/isjoinder of causes of action and parties do not involve a !uestion of jurisdiction of
the court to hear and proceed with the case.
B-&C
5hey are not even accepted grounds for
dismissal thereof.
B-$C
:nstead, under the 7ules of Court, the misjoinder of causes of action and
parties involve an implied admission of the courtRs jurisdiction. :t ac(nowledges the power of
the court, acting upon the motion of a party to the case or on its own initiative, to order the
severance of the misjoined cause of action, to be proceeded with separately 'in case of
misjoinder of causes of action+@ and6or the dropping of a party and the severance of any claim
against said misjoined party, also to be proceeded with separately 'in case of misjoinder of
parties+.
5he misjoinder of causes of action and parties in the present ,etition may have been
corrected by the /5C motu propio or on motion of the petitioner 7epublic. :t is regrettable,
however, that the /5C failed to detect the misjoinder when the application for registration
was still pending before it@ and more regrettable that the petitioner 7epublic did not call the
attention of the /5C to the fact by filing a motion for severance of the causes of action and
parties, raising the issue of misjoinder only before this Court.
6. Respondents9 however9 failed to compl! with the publication re#uirements mandated b!
the Propert! Registration ecree9 thus9 the M$* was not invested with 'urisdiction as
a land registration court.
Although the misjoinder of causes of action and parties in the present ,etition did not
affect the jurisdiction of the /5C over the land registration proceeding, this Court,
nonetheless, has discovered a defect in the publication of the Notice of :nitial =earing, which
bars the /5C from assuming jurisdiction to hear and proceed with respondentsR application
for registration.
A land registration case is a proceeding in rem,
B-%C
and jurisdiction in rem cannot be
ac!uired unless there be constructive seiFure of the land through publication and service of
notice.
B-*C
ection -# of the ,roperty 7egistration 8ecree re!uires that the public be given Notice
of the :nitial =earing of the application for land registration by means of ')+ publication@ '-+
mailing@ and '#+ posting. ,ublication of the Notice of :nitial =earing shall be made in the
following mannerA
). 3y publication. N
Epon receipt of the order of the court setting the time for initial hearing, the Commissioner of
"and 7egistration shall cause a notice of initial hearing to be published once in the 9fficial
DaFette and once in a newspaper of general circulation in the ,hilippinesA Provided, however,
that the publication in the 9fficial DaFette shall be sufficient to confer jurisdiction upon the
court. aid notice shall be addressed to all persons appearing to have an interest in the land
involved including the adjoining owners so far as (nown, and Sto all whom it may concern.T
aid notice shall also re!uire all persons concerned to appear in court at a certain date and
time to show cause why the prayer of said application shall not be granted.
Even as this Court concedes that the afore!uoted ection -#')+ of the ,roperty
7egistration 8ecree e2pressly provides that publication in the 9fficial DaFette shall be
sufficient to confer jurisdiction upon the land registration court, it still affirms its declaration
in 8irector of "ands v. Court of Appeals
B#;C
that publication in a newspaper of
general circulation is mandatory for the land registration court to validly confirm and register
the title of the applicant or applicants. 5hat ection -# of the ,roperty 7egistration 8ecree
enumerated and described in detail the re!uirements of publication, mailing, and posting of the
Notice of :nitial =earing, then all such re!uirements, including publication of the Notice in a
newspaper of general circulation, is essential and imperative, and must be strictly complied
with. :n the same case, this Court e2pounded on the reason behind the compulsory publication
of the Notice of :nitial =earing in a newspaper of general circulation, thus N
:t may be as(ed why publication in a newspaper of general circulation should be deemed
mandatory when the law already re!uires notice by publication in the 9fficial DaFette as well
as by mailing and posting, all of which have already been complied with in the case at hand.
5he reason is due process and the reality that the 9fficial DaFette is not as widely read and
circulated as newspaper and is oftentimes delayed in its circulation, such that the notices
published therein may not reach the interested parties on time, if at all. Additionally, such
parties may not be owners of neighboring properties, and may in fact not own any other real
estate. :n sum, the all encompassing in rem nature of land registration cases, the conse!uences
of default orders issued against the whole world and the objective of disseminating the notice
in as wide a manner as possible demand a mandatory construction of the re!uirements for
publication, mailing and posting.
B#)C
:n the instant ,etition, the initial hearing was set by the /5C, and was in fact held, on
;# eptember )*** at %A#; a.m. ?hile the Notice thereof was printed in the issue of the
9fficial DaFette, dated ;- August )***, and officially released on ); August )***, it was
published in $he 0reeman 6anat ,ews, a daily newspaper printed in Cebu City and circulated
in the province and cities of Cebu and in the rest of 4isayas and /indanao, only on )*
8ecember )***, more than three months after the initial hearing.
:ndubitably, such publication of the Notice, way after the date of the initial hearing,
would already be worthless and ineffective. ?hoever read the Notice as it was published
in $he 0reeman 6anat ,ewsand had a claim to the ubject "ots was deprived of due process
for it was already too late for him to appear before the /5C on the day of the initial hearing to
oppose respondentsR application for registration, and to present his claim and evidence in
support of such claim. ?orse, as the Notice itself states, should the claimant-oppositor fail to
appear before the /5C on the date of initial hearing, he would be in default and would forever
be barred from contesting respondentsR application for registration and even the registration
decree that may be issued pursuant thereto. :n fact, the /5C did issue an 9rder of pecial
8efault on ;# eptember )***.
5he late publication of the Notice of :nitial =earing in the newspaper of general
circulation is tantamount to no publication at all, having the same ultimate result. 9wing to
such defect in the publication of the Notice, the /5C failed to constructively seiFe the ubject
"ots and to ac!uire jurisdiction over respondentsR application for registration thereof.
5herefore, the /5C 0udgment, dated -) 8ecember )***, ordering the registration and
confirmation of the title of respondents 0eremias and 8avid over "ots No. %1-- and %1-#,
respectively@ as well as the /5C 9rder, dated ;- February -;;;, declaring its 0udgment of -)
8ecember )*** final and e2ecutory, and directing the "7A Administrator to issue a decree of
registration for the ubject "ots, are both null and void for having been issued by the /5C
without jurisdiction.
$$
Period of Possession
Respondents failed to compl! with the re#uired period of possession of the Sub'ect )ots for the
'udicial confirmation or legali@ation of imperfect or incomplete title.
?hile this Court has already found that the /5C did not have jurisdiction to hear and
proceed with respondentsR application for registration, this Court nevertheless deems it
necessary to resolve the legal issue on the re!uired period of possession for ac!uiring title to
public land.
7espondentsR application filed with the /5C did not state the statutory basis for their
title to the ubject "ots. 5hey only alleged therein that they obtained title to the ubject "ots
by purchase from their parents, spouses Dregorio =erbieto and :sabel 9watan, on -. 0une
)*$&. 7espondent 0eremias, in his testimony, claimed that his parents had been in possession
of the ubject "ots in the concept of an owner since )*.;.
B#-C
Iet, according to the 8EN7-CEN79 Certification, submitted by respondents
themselves, the ubject "ots are Swithin Alienable and 8isposable, 3loc( :, ,roject No. -% per
"C /ap No. -.1. of Consolacion, Cebu certified under Forestry Administrative 9rder No. 1-
);&#, dated 0une -., )*&#. "i(ewise, it is outside Hot(ot-"usaran /ananga ?atershed Forest
7eservation per ,residential ,roclamation No. *#- dated 0une -*, )**-.T
B##C
5he ubject "ots
are thus clearly part of the public domain, classified as alienable and disposable as of -. 0une
)*&#.
As already well-settled in jurisprudence, no public land can be ac!uired by private
persons without any grant, e2press or implied, from the government@
B#1C
and it is indispensable
that the person claiming title to public land should show that his title was ac!uired from the
tate or any other mode of ac!uisition recogniFed by law.
B#.C
5he ,ublic "and Act, as amended, governs lands of the public domain, e2cept timber
and mineral lands, friar lands, and privately-owned lands which reverted to the tate.
B#&C
:t
e2plicitly enumerates the means by which public lands may be disposed, as followsA
')+ For homestead settlement@
'-+ 3y sale@
'#+ 3y lease@
'1+ 3y confirmation of imperfect or incomplete titles@
'a+ 3y judicial legaliFation@ or
'b+ 3y administrative legaliFation 'free patent+.
B#$C
Each mode of disposition is appropriately covered by separate chapters of the ,ublic "and Act
because there are specific re!uirements and application procedure for every mode.
B#%C
ince
respondents herein filed their application before the /5C,
B#*C
then it can be reasonably inferred
that they are see(ing the judicial confirmation or legaliFation of their imperfect or incomplete
title over the ubject "ots.
0udicial confirmation or legaliFation of imperfect or incomplete title to land, not
e2ceeding )11 hectares,
B1;C
may be availed of by persons identified under ection 1% of the
,ublic "and Act, as amended by ,residential 8ecree No. );$#, which reads N
ection 1%. 5he following-described citiFens of the ,hilippines, occupying lands of the public
domain or claiming to own any such lands or an interest therein, but whose titles have not
been perfected or completed, may apply to the Court of First :nstance of the province where
the land is located for confirmation of their claims and the issuance of a certificate of title
thereafter, under the "and 7egistration Act, to witA
'a+ B7epealed by ,residential 8ecree No. );$#C.
'b+ 5hose who by themselves or through their predecessors-in-interest have been
in open, continuous, e2clusive, and notorious possession and occupation of
agricultural lands of the public domain, under a bona fide claim of
ac!uisition of ownership, since 0une )-, )*1., or earlier, immediately
preceding the filing of the applications for confirmation of title, e2cept when
prevented by war or force ma'eure. 5hese shall be conclusively presumed to
have performed all the conditions essential to a Dovernment grant and shall
be entitled to a certificate of title under the provisions of this chapter.
'c+ /embers of the national cultural minorities who by themselves or through
their predecessors-in-interest have been in open, continuous, e2clusive and
notorious possession and occupation of lands of the public domain suitable
to agriculture whether disposable or not, under a bona fide claim of
ownership since 0une )-, )*1. shall be entitled to the rights granted in
subsection 'b+ hereof.
Not being members of any national cultural minorities, respondents may only be entitled
to judicial confirmation or legaliFation of their imperfect or incomplete title under ection
1%'b+ of the ,ublic "and Act, as amended. ection 1%'b+, as amended, now re!uires adverse
possession of the land since )- 0une )*1. or earlier. :n the present ,etition, the ubject "ots
became alienable and disposable only on -. 0une )*&#. Any period of possession prior to the
date when the ubject "ots were classified as alienable and disposable is inconse!uential and
should be e2cluded from the computation of the period of possession@ such possession can
never ripen into ownership and unless the land had been classified as alienable and disposable,
the rules on confirmation of imperfect title shall not apply thereto.
B1)C
:t is very apparent then
that respondents could not have complied with the period of possession re!uired by ection
1%'b+ of the ,ublic "and Act, as amended, to ac!uire imperfect or incomplete title to the
ubject "ots that may be judicially confirmed or legaliFed.
5he confirmation of respondentsR title by the Court of Appeals was based on the
erroneous supposition that respondents were claiming title to the ubject "ots under the
,roperty 7egistration 8ecree. According to the 8ecision of the Court of Appeals, dated --
November -;;-, ection )1'1+ of the ,roperty 7egistration 8ecree allows individuals to own
land in any other manner provided by law. :t then ruled that the respondents, having
possessed the ubject "ots, by themselves and through their predecessors-in-interest, since -.
0une )*&# to -# eptember )**%, when they filed their application, have ac!uired title to the
ubject "ots by e2traordinary prescription under Article )))#, in relation to Article ))#$, both
of the Civil Code.
B1-C
5he Court of Appeals overloo(ed the difference between the ,roperty 7egistration
8ecree and the ,ublic "and Act. Ender the ,roperty 7egistration 8ecree, there already e2ists
a title which is confirmed by the court@ while under the ,ublic "and Act, the presumption
always is that the land applied for pertains to the tate, and that the occupants and possessors
only claim an interest in the same by virtue of their imperfect title or continuous, open, and
notorious possession.
B1#C
As established by this Court in the preceding paragraphs, the ubject
"ots respondents wish to register are undoubtedly alienable and disposable lands of the public
domain and respondents may have ac!uired title thereto only under the provisions of the
,ublic "and Act.
=owever, it must be clarified herein that even though respondents may ac!uire
imperfect or incomplete title to the ubject "ots under the ,ublic "and Act, their application
for judicial confirmation or legaliFation thereof must be in accordance with the ,roperty
7egistration 8ecree, for ection .; of the ,ublic "and Act reads N
EC. .;. Any person or persons, or their legal representatives or successors in right, claiming
any lands or interest in lands under the provisions of this chapter, must in every case present
an application to the proper Court of First :nstance, praying that the validity of the alleged title
or claim be in!uired into and that a certificate of title be issued to them under the provisions of
the "and 7egistration Act.
B11C
=ence, respondentsR application for registration of the ubject "ots must have complied
with the substantial re!uirements under ection 1%'b+ of the ,ublic "and Act and the
procedural re!uirements under the ,roperty 7egistration 8ecree.
/oreover, provisions of the Civil Code on prescription of ownership and other real
rights apply in general to all types of land, while the ,ublic "and Act specifically governs
lands of the public domain. 7elative to one another, the ,ublic "and Act may be considered a
special law
B1.C
that must ta(e precedence over the Civil Code, a general law. :t is an
established rule of statutory construction that between a general law and a special law, the
special law prevails N 3eneralia specialibus non derogant.B1&C
9*EREFORE, based on the foregoing, the instant ,etition is D7AN5E8. 5he
8ecision of the Court of Appeals in CA-D.7. C4 No. &$&-., dated -- November -;;-, is
7E4E7E8. 5he 0udgment of the /5C of Consolacion, Cebu in "7C Case No. N-$., dated
-) 8ecember )***, and its 9rder, dated ;- February -;;; are declared NE"" AN8 49:8.
7espondentsR application for registration is 8:/:E8.
SO ORDERED.
:G.R. No. 1&5&;5. De/e<ber 6, 2'''=
ISAGANI R"$ a,- ESAR E"RO!A, petitioners. vs. SERETAR+ OF
ENVIRONMENT AND NAT"RAL RESO"RES, SERETAR+ OF
#"DGET AND MANAGEMENT a,- *AIRMAN a,- OMMISSIONERS
OF T*E NATIONAL OMMISSION ON INDIGENO"S
!EO!LES, respondents.
*ON. ("AN M .FLAVIER, *ON. !ONIANO #ENNAGEN, #A+ANI ASARRAGA,
EDTAMI MANSA+ANGAN, #ASILIO 9ANDAG, EVEL+N D"N"AN,
+AOM T"GAS, ALFREMO AR!IANO, LI#ERATO A. GA#IN,
MATERNIDAD M. OLAS, NARISA M. DAL"!INES, #AI BIRAM-
ONNIE SAT"RNO, #AE MLOMO-#EATRI$ T. A#ASALA, DAT"
#ALIT"NGT"NG-ANTONIO D. L"MANDONG, DAT" MANT"M"BA9
TEOFISTO SA#ASALES, DAT" ED"AARDO #ANDA, DAT" (OEL "NAD,
DAT" RAMON #A+AAN, TIM"A+ (OSE ANO+, TIM"A+ MAARIO D.
SALAAO, TIM"A+ ED9IN #. ENDING, DAT" SA*AM!ONG
MALANA9 VI, DAT" #EN !ENDAO A#IGON, #AI NANA!NA+-LI$A
SA9A+, #A+ INA+ DA+A-MELINDA S. RE+M"NDO, #AI
TINANG*AGA *ELINITA T. !ANGAN, DAT" MABA!"BA9 ADOLINO
L. SA9A+, DAT" MA"DA+A9-RIS!EN SA9A+, VIB+ MABA+,
LO"RDES D. AMOS, GIL#ERT !. *OGGANG, TERESA GAS!AR,
MAN"EL S. ONALAN, MIA GRAE L. GIRON, ROSEMARIE G. !E,
#ENITO ARINO, (OSE!* ("DE ARANTES, L+NETTE ARANTES-
VIVAL, LANGLE+ SEG"NDO, SAT"R S. #"GNA+, ARLING
DOM"LOT, ANDRES MENDIOGRIN, LEO!OLDO A#"GAN, VIRGILIO
A+ETANO, ON*ITA G. DESAGA, LEV+ ESTEVES, ODETTE G.
ESTEVE$, RODOLFO . AG"ILAR, MA"RO VALONES, !E!E *.
ATONG, OFELIA T. DAVI, !ERFETO #. G"INOSAO, 9ALTER N.
TIMOL, MAN"EL T. SELEN, OSAR DAL"N*A+, RIO O. S"LATAN,
RAFF+ MALINDA, ALFREDO A#ILLANOS, (ESSIE ANDILA#,
MIRLANDO *. MANGB"LINTAS, SAMIE SAT"RNO, ROMEO A.
LINDA*A+, ROEL S. MANSANG-AGAN, !AA"ITO S. LIESES, FILI!E
G. SA9A+, *ERMINIA S. SA9A+, ("LI"S S. SA9A+, LEONARDA
SA9A+, (IMM+ "G+"#, SALVADOR TIONGSON, VENANIO A!ANG,
MADION MALID, S"BIM MALID, NENENG MALID, MANGBATADONG
A"G"STO DIANO, (OSE!*INE M. AL#ESO, MORENO MALID, MARIO
MANGAL, FELA+ DIAMILING, SALOME !. SAR$A, FELI!E !.
#AGON, SAMM+ SALN"NGAN, ANTONIO D. EM#A, NORMA
MA!ANSAGONOS, ROMEO SALIGA, SR., (ERSON !. GERADA,
RENATO T. #AGON, (R., SARING MASALONG, SOLEDAD M.
GERARDA, ELI$A#ET* L. MENDI, MORANTE S. TI9AN, DANILO M.
MAL"DAO, MINORS MARIEL MALID, re7re1e,0e- by .er Ea0.er
ORNELIO MALID, MARELINO M. LADRA, re7re1e,0e- by .er Ea0.er
MONIO D. LADRA, (ENN+L+N MALID, re7re1e,0e- by .er Ea0.er TON+
MALID, ARIEL M. EVANGELISTA, re7re1e,0e- by .er <o0.er LINA+
#AL#"ENA, ED9ARD M. EM"+, SR., S"SAN #OLANIO, OND, !"LA
#ATO #>LAAN TRI#AL FARMER>S ASSOIATION, INTER-!EO!LE>S
EL*ANGE, IN. a,- GREEN FOR"M-9ESTERN VISA+AS, intervenors.
OMMISSION ON *"MAN RIG*TS, intervenor.
IBALA*AN INDIGENO"S !EO!LE a,- *ARI#ON FO"NDATION FOR T*E
ONSERVATION OF NAT"RAL RESO"RES, IN., intervenor.
R E S O L " T I O N
()4 +J4$*%
,etitioners :sagani CruF and Cesar Europa brought this suit for prohibition and
mandamus as citiFens and ta2payers, assailing the constitutionality of certain provisions of
7epublic Act No. %#$) '7.A. %#$)+, otherwise (nown as the :ndigenous ,eoples 7ights Act of
)**$ ':,7A+, and its :mplementing 7ules and 7egulations ':mplementing 7ules+.
:n its resolution of eptember -*, )**%, the Court re!uired respondents to comment.
B)C
:n
compliance, respondents Chairperson and Commissioners of the National Commission on
:ndigenous ,eoples 'NC:,+, the government agency created under the :,7A to implement its
provisions, filed on 9ctober )#, )**% their Comment to the ,etition, in which they defend the
constitutionality of the :,7A and pray that the petition be dismissed for lac( of merit.
9n 9ctober )*, )**%, respondents ecretary of the 8epartment of Environment and
Natural 7esources '8EN7+ and ecretary of the 8epartment of 3udget and /anagement
'83/+ filed through the olicitor Deneral a consolidated Comment. 5he olicitor Deneral is
of the view that the :,7A is partly unconstitutional on the ground that it grants ownership over
natural resources to indigenous peoples and prays that the petition be granted in part.
9n November );, )**%, a group of intervenors, composed of en. 0uan Flavier, one of
the authors of the :,7A, /r. ,onciano 3ennagen, a member of the )*%& Constitutional
Commission, and the leaders and members of ))- groups of indigenous peoples 'Flavier, et.
al+, filed their /otion for "eave to :ntervene. 5hey join the NC:, in defending the
constitutionality of :,7A and praying for the dismissal of the petition.
9n /arch --, )***, the Commission on =uman 7ights 'C=7+ li(ewise filed a /otion
to :ntervene and6or to Appear as Amicus Curiae. 5he C=7 asserts that :,7A is an e2pression
of the principle of parens patriae and that the tate has the responsibility to protect and
guarantee the rights of those who are at a serious disadvantage li(e indigenous peoples. For
this reason it prays that the petition be dismissed.
9n /arch -#, )***, another group, composed of the :(alahan :ndigenous ,eople and the
=aribon Foundation for the Conservation of Natural 7esources, :nc. '=aribon, et al.+, filed a
motion to :ntervene with attached Comment-in-:ntervention. 5hey agree with the NC:, and
Flavier, et al. that :,7A is consistent with the Constitution and pray that the petition for
prohibition and mandamus be dismissed.
5he motions for intervention of the aforesaid groups and organiFations were granted.
9ral arguments were heard on April )#, )***. 5hereafter, the parties and intervenors
filed their respective memoranda in which they reiterate the arguments adduced in their earlier
pleadings and during the hearing.
,etitioners assail the constitutionality of the following provisions of the :,7A and its
:mplementing 7ules on the ground that they amount to an unlawful deprivation of the tateRs
ownership over lands of the public domain as well as minerals and other natural resources
therein, in violation of the regalian doctrine embodied in ection -, Article K:: of the
ConstitutionA
S')+ ection #'a+ which defines the e2tent and coverage of ancestral domains, and
ection #'b+ which, in turn, defines ancestral lands@
S'-+ ection ., in relation to section #'a+, which provides that ancestral domains
including inalienable public lands, bodies of water, mineral and other
resources found within ancestral domains are private but community property
of the indigenous peoples@
S'#+ ection & in relation to section #'a+ and #'b+ which defines the composition of
ancestral domains and ancestral lands@
S'1+ ection $ which recogniFes and enumerates the rights of the indigenous
peoples over the ancestral domains@
'.+ ection % which recogniFes and enumerates the rights of the indigenous
peoples over the ancestral lands@
S'&+ ection .$ which provides for priority rights of the indigenous peoples in the
harvesting, e2traction, development or e2ploration of minerals and other
natural resources within the areas claimed to be their ancestral domains, and
the right to enter into agreements with nonindigenous peoples for the
development and utiliFation of natural resources therein for a period not
e2ceeding -. years, renewable for not more than -. years@ and
S'$+ ection .% which gives the indigenous peoples the responsibility to maintain,
develop, protect and conserve the ancestral domains and portions thereof
which are found to be necessary for critical watersheds, mangroves, wildlife
sanctuaries, wilderness, protected areas, forest cover or reforestation.T
B-C
,etitioners also content that, by providing for an all-encompassing definition of
Sancestral domainsT and Sancestral landsT which might even include private lands found
within said areas, ections #'a+ and #'b+ violate the rights of private landowners.
B#C
:n addition, petitioners !uestion the provisions of the :,7A defining the powers and
jurisdiction of the NC:, and ma(ing customary law applicable to the settlement of disputes
involving ancestral domains and ancestral lands on the ground that these provisions violate the
due process clause of the Constitution.
B1C
5hese provisions areA
S')+ sections .) to .# and .* which detail the process of delineation and
recognition of ancestral domains and which vest on the NC:, the sole
authority to delineate ancestral domains and ancestral lands@
S'-+ ection .-BiC which provides that upon certification by the NC:, that a
particular area is an ancestral domain and upon notification to the following
officials, namely, the ecretary of Environment and Natural 7esources,
ecretary of :nterior and "ocal Dovernments, ecretary of 0ustice and
Commissioner of the National 8evelopment Corporation, the jurisdiction of
said officials over said area terminates@
S'#+ ection &# which provides the customary law, traditions and practices of
indigenous peoples shall be applied first with respect to property rights, claims
of ownership, hereditary succession and settlement of land disputes, and that
any doubt or ambiguity in the interpretation thereof shall be resolved in favor
of the indigenous peoples@
S'1+ ection &. which states that customary laws and practices shall be used to
resolve disputes involving indigenous peoples@ and
S'.+ ection && which vests on the NC:, the jurisdiction over all claims and
disputes involving rights of the indigenous peoples.T
B.C
Finally, petitioners assail the validity of 7ule 4::, ,art ::, ection ) of the NC:,
Administrative 9rder No. ), series of )**%, which provides that Sthe administrative
relationship of the NC:, to the 9ffice of the ,resident is characteriFed as a lateral but
autonomous relationship for purposes of policy and program coordination.T 5hey contend that
said 7ule infringes upon the ,residentRs power of control over e2ecutive departments under
ection )$, Article 4:: of the Constitution.
B&C
,etitioners pray for the followingA
S')+ A declaration that ections #, ., &, $, %, .-B:C, .$, .%, .*, &#, &. and && and
other related provisions of 7.A. %#$) are unconstitutional and invalid@
S'-+ 5he issuance of a writ of prohibition directing the Chairperson and
Commissioners of the NC:, to cease and desist from implementing the
assailed provisions of 7.A. %#$) and its :mplementing 7ules@
S'#+ 5he issuance of a writ of prohibition directing the ecretary of the
8epartment of Environment and Natural 7esources to cease and desist from
implementing 8epartment of Environment and Natural 7esources Circular
No. -, series of )**%@
S'1+ 5he issuance of a writ of prohibition directing the ecretary of 3udget and
/anagement to cease and desist from disbursing public funds for the
implementation of the assailed provisions of 7.A. %#$)@ and
S'.+ 5he issuance of a writ of mandamus commanding the ecretary of
Environment and Natural 7esources to comply with his duty of carrying out
the tateRs constitutional mandate to control and supervise the e2ploration,
development, utiliFation and conservation of ,hilippine natural resources.T
B$C
After due deliberation on the petition, the members of the Court voted as followsA
even '$+ voted to dismiss the petition. 0ustice Hapunan filed an opinion, which the
Chief 0ustice and 0ustices 3ellosillo, Luisumbing, and antiago join, sustaining the validity of
the challenged provisions of 7.A. %#$). 0ustice ,uno also filed a separate opinion sustaining
all challenged provisions of the law with the e2ception of ection ), ,art ::, 7ule ::: of NC:,
Administrative 9rder No. ), series of )**%, the 7ules and 7egulations :mplementing the
:,7A, and ection .$ of the :,7A which he contends should be interpreted as dealing with the
large-scale e2ploitation of natural resources and should be read in conjunction with ection -,
Article K:: of the )*%$ Constitution. 9n the other hand, 0ustice /endoFa voted to dismiss the
petition solely on the ground that it does not raise a justiciable controversy and petitioners do
not have standing to !uestion the constitutionality of 7.A. %#$).
even '$+ other members of the Court voted to grant the petition. 0ustice ,anganiban
filed a separate opinion e2pressing the view that ections # 'a+'b+, ., &, $ 'a+'b+, %, and related
provisions of 7.A. %#$) are unconstitutional. =e reserves judgment on the constitutionality of
ections .%, .*, &., and && of the law, which he believes must await the filing of specific
cases by those whose rights may have been violated by the :,7A. 0ustice 4itug also filed a
separate opinion e2pressing the view that ections #'a+, $, and .$ of 7.A. %#$) are
unconstitutional. 0ustices /elo, ,ardo, 3uena, DonFaga-7eyes, and 8e "eon join in the
separate opinions of 0ustices ,anganiban and 4itug.
As the votes were e!ually divided '$ to $+ and the necessary majority was not obtained,
the case was redeliberated upon. =owever, after redeliberation, the voting remained the
same. Accordingly, pursuant to 7ule .&, ection $ of the 7ules of Civil ,rocedure, the
petition is 8:/:E8.
Attached hereto and made integral parts thereof are the separate opinions of 0ustices
,uno, 4itug, Hapunan, /endoFa, and ,anganiban.
SO ORDERED.
G.R. No. ;1568 A7r3) 26, 199'
ATING REGISTRARS OF LAND TITLES AND DEEDS OF !ASA+ IT+, !ASIG
AND MABATI, METRO MANILA,petitioners,
vs.
T*E REGIONAL TRIAL O"RT, #RAN* 57, IN MABATI, METRO MANILA
!RESIDED OVER #+ T*E *ONORA#LE ("DGE FRANISO L. VELE$, AND
T*E INTESTATE ESTATE OF T*E LATE DELFIN ASAL, re7re1e,0e- by
DOMINGO . !ALOMARES, ADMINISTRATOR, respondents.
G.R. No. 9'176 A7r3) 26, 199'
T*E INTESTATE ESTATE OF T*E LATE DELFIN ASAL, re7re1e,0e- by
DOMINGO . !ALOMARES, ADMINISTRATOR, petitioner,
vs.
*ONORA#LE ONRADO VASA"E$, (R., !re13-3,4 (u-4e, #RAN* 11;, RT,
RIARDO !. SANTIAGO, ET AL., respondents.
$a-ada9 Jivo T $an for the "ntestate :state of the )ate elfin *asal.
%ntonio J. alangpan for himself and the heirs of elfin *asal.
Pedro S. Ravelo for 3erardo *asal.
0ilomeno Peralta9 Jr. for omingo *. Palomares.

SARMIENTO, J.:
5he petitioners MM charge =is =onor, 0udge Francisco 4eleF, of the 7egional 5rial Court,
3ranch .$, /a(ati, /etro /anila, with grave abuse of discretion in issuing an order
authoriFing the private respondent, through 8omingo ,alomares, to perform acts of ownership
over a -,.$1-hectare parcel of land (nown as 1acienda de Maricaban spread out in various
parts of /a(ati, ,asig, 5aguig, ,asay City, and ,araGa!ue. 5here is no controversy as to the
facts.
9n November ., )*%., the private respondent, 8omingo ,alomares, as administrator of the
heirs of 8elfin Casal, commenced suit with the 7egional 5rial Court, 3ranch )#-, /a(ati,
/etro /anila for declaratory relief, !uieting of title, cancellation of 5ransfer Certificate of
5itle No. )*-, and cancellation of entries upon 9riginal Certificate of 5itle No. -*).
,alomares had earlier come to this Court 'February -$, )*%.+ on a similar petition, and in
addition, to direct the 7egister of 8eeds to issue a duplicate owner<s copy of 9riginal
Certificate of 5itle No. -*), embracing allegedly =acienda de /aricaban, in lieu of the
'alleged+ lost one. 9n eptember *, )*%., the Court denied the petition for lac( of merit. 'D.7.
No. &*%#1+.
9n 8ecember )*, )*%., the petitioners filed their answer.
9n 0une -, )*%&, the private respondent filed a motion to admit amended complaint
impleading the 7epublic of the ,hilippines and the 7egisters of 8eeds of ,asig, /a(ati, and
,asay City as parties-respondents, and alleging, among other things, thatA ')+ on 9ctober ),
)*;&, the Court of "and 7egistration '0ames 9strand, ,residing 0udge+ confirmed the title of
8olores ,ascual Casal y 9choa, a native of /adrid, pain, over the -,.$1-hectare parcel
above-mentioned@ '-+ on 9ctober )$, )*;&, the 7egister of 8eeds of 7iFal issued 9C5 No.
-*) in her name@ '#+ upon her death, and successive deaths of her heirs, the property devolved
on Derardo, 7eynaldo, "olita, and Erlinda, all surnamed Casal, great grandchildren of
8olores@ '1+ no conveyances or dispositions of any (ind have been allegedly made upon the
parcel@ '.+ 5C5 No. )*-, which covers the same landholding, is allegedly spurious and
ine2istent@ '&+ the tate itself, by placing -$,-)#,-.. s!uare meters thereof under a military
reservation 'Fort /cHinley now Fort 3onifacio+, by ,roclamation No. 1-#, and fifty hectares
thereof pursuant to ,roclamation No. )*-, had been guilty of landgrabbing@ '$+ any and all
holders of any and all 5C5s emanating therefrom or from 5C5 No. )*-, are null, void, and of
no force and effect@ and '%+ as a conse!uence thereof, the heirs of 8olores Casal suffered
various damages and attorney<s fees.
9n 0une -&, )*%&, the petitioners filed an answer, stating, among other things, thatA ')+ the
estate of 8olores Casal 'or 8elfin Casal, her grandchild+ is not a juridical person authoriFed by
law to bring suit@ '-+ the 7egisters of 8eeds of /a(ati, ,asig, and ,asay City are not the real
parties in interest, but rather, the registered owners over which the court had not ac!uired
jurisdiction@ '#+ the non-joinder of the real parties in interest is fatal@ '1+ 9C5 No. -*) has
long been cancelled@ '.+ 0udge Dregorio ,ineda of the then Court of First :nstance of 7iFal,
3ranch KK:, ,asig, had earlier denied prayers for the issuance of duplicate owner<s copy of
9C5 No. -*) because the land embraced therein had been validly delivered to the
Dovernment@ '&+ the upreme Court itself had denied the Casals< appeal@ MMM '$+ as a
conse!uence, res 'udicata is a bar@ '%+ prescription has also set in@ and '*+ the Casal<s claims
can not validly override the titles of innocent purchasers for value.
9n August -*, )*%&, the respondent judge issued a temporary restraining order, directing the
petitioners to cease and desist from performing the acts complained of.
:n a subse!uent memorandum, the petitioners alleged that 8olores Casal had conveyed the
property to the Dovernment of the Enited tates in )*;& and the /anila 7ailroad Company on
which 0udge 9strand, the ,residing 0udge of the Court of "and 7egistration, later 0ustice of
this Court, had stamped his imprimatur.
9n 9ctober )-, )*%$, the respondent court issued an order in the tenor, as followsA
No other opposition having been registered, this Court hereby resolves to
grant the plaintiffs< prayer in the 9/N:3E /95:9N in order to
safeguard the integrity of the land embraced in 9C5 -*), hereby
authoriFing for this purpose the plaintiff 8omingo C. ,alomaresA
). 5o order such subdivision and6or individual survey
or surveys within ,arcel ::, ,arcel ::: and ,arcel :4
under urvey ,lan ,su--;#) by a licensed geodetic
engineer or engineers at plaintiffs< e2pense in order to
facilitate and simplify the efficient administration of
the property described in 9C5 -*)@ and
-. 5o sell, e2change, lease or otherwise dispose 'of+
any area or areas or portion or portions thereof, subject
to the approval of the :ntestate Estate Court, to cover
e2penses for the payment of ta2es to which the
property is subject, as well as e2penses of
administration and for the protection of the integrity of
the said lands.
9 978E7E8.
1
Eleven days later, or on 9ctober -#, )*%$ to be precise, it issued another order, as followsA
Acting on the plaintiffs /95:9N dated 9ctober )., )*%$ praying for the
issuance of a ?rit of E2ecution implementing the 9rder of this Court
dated 9ctober )-, )*%$ before the e2piration of the time to appeal, and
after in!uiring from the plaintiff<s counsel for their reason in see(ing the
same, the Court hereby issues this clarificatory order affirming the power
of the plaintiff 8omingo C. ,alomares to e2ecute and perform the acts
authoriFed in the said 9rder of 9ctober )-, )*%$ without the need of a
?rit of E2ecution, where no relief has been sought therefrom by any
party, said 9rder being implementable at the instance of the said plaintiff
8omingo C. ,alomares, anytime when the said 9rder becomes final ).
days after the said plaintiff received copy of the same 'see ection #*,
Chapter :4, 3.,. 3lg. )-*+. ,laintiff 8omingo C. ,alomares may therefore
ta(e whatever steps he considers appropriate for the implementation of the
said 9rder without need of further 9rders or additional authority from this
Court.
9 978E7E8.
2
5he petitioners filed a notice of appeal@ the respondent court, however, denied it>
&
>it being
directed against . . . an interlocutory order. . .
8
=ence, this recourse.
5he petitioners interpose the following !uestionsA
A. ?hether or not respondent Court can validly decide before trial in
favor of private respondent the ownership and possession of the
-.,$1#,.)1 s!uare meters 'of+ land (nown as >=acienda de /aricaban>,
which is the main issue in this case@
3. ?hether or not respondent Court can validly allow private respondent
to e2ercise and perform all acts of ownership and possession over the said
land before trial
C. ?hether or not respondent Court has ac!uired jurisdiction to hear and
decide this action@
8. ?hether of not respondent Court committed grave abuse of discretion
amounting to lac( of jurisdiction in not dismissing this action or allowing
petitioners to appeal from the orders in !uestion.
5
:n their comment, the private respondent averred, among other things, thatA ')+ the respondent
court, contrary to the petitioners< claim, did not decide the case >before trial>@ '-+ 9C5 No.
-*) had not been validly cancelled and that the rubber stamp impression thereon,
>CANCE""E8> is a forgery@ '#+ the act of 0udge ,ineda, in denying issuance of 9C5 No.
-*), duplicate owner<s copy, can not be considered res 'udicata because that case involved
purportedly a mere petition for issuance of duplicate owner<s copy@ '1+ non-joinder of proper
parties is not a jurisdictional defect@ '.+ the 5C5s issued thereafter are a nullity because 9C5
No. -*) had not been shown to have been duly cancelled@ '&+ 9C5 No. -*) has become
imprescriptible@ and '$+ the private respondent has a valid right of dominion over the property.
:n the meantime, the private respondent came to this Court on certiorari 'D.7. No. *;)$&+
alleging that on 8ecember )., )*%$, in connection with p. ,roc. No. ,--**# of the 7egional
5rial Court, 3ranch ))%, ,asay City, entitled >:n the matter of the :ntestate Estate of the "ate
Fortunato antiago and /ariano ,antanilla Crisanta ,. antiago, et al., ,etitioners,> 0udge
Conrado 4as!ueF, 0r. issued an order disposing of certain parcels which the private respondent
claims as forming part and parcel of 1acienda de Maricaban.
9n 0une -;, )*%%, the respondent judge in D.7. No. %).&1 filed his own comment, asserting,
among other things, thatA ')+ what he had sought to bar, by virtue of injunction, was incursions
and forcible entries of trespassers and s!uatters@ '-+ the petitioners can not rightly claim that
he had prematurely adjudicated the case, because there was allegedly no decision to begin
with@ '#+ that he issued the writ of preliminary injunction in order only to maintain the status
#uo ante bellum that is, to re-place the private respondent, which had been allegedly in prior
possession, in possession@ '1+ he did not allegedly authoriFe unbridled >acts of ownership> to
be e2ercised on the property@ '.+ all rights of dominion given thereon were subject to the
approval of the intestate estate court@ '&+ he denied the notice of appeal because the order
dated 9ctober )-, )*%$, was interlocutory in nature from which no appeal lies@ '$+ as to
jurisdiction, the various motions filed by petitioners, allegedly accepting the court<s
jurisdiction, have clothed the court with jurisdiction, and that besides, the jurisdictional
!uestion was never raised e2cept now.
9n 0uly $, )*%%, the petitioners filed a reply traversing the respondent judge<s allegations.
9n August -&, )*%%, the respondent judge filed a supplemental comment. =e reiterated that
the writ of injunction was directed only on such spaces not occupied by the Dovernment 'Fort
3onifacio, "ibingan ng mga 3ayani, Ninoy A!uino :nternational Airport, Nayong ,ilipino,
,opulation Commission, National cience and 8evelopment 3oard, and National =ousing
Authority+.
/eanwhile, Atty. Antonio 0. 8alangpan for and on behalf purportedly of the >=eirs of 8elfin
Casal> and the private respondent, 8omingo ,alomares, file a Comment69pposition in
:ntervention>, dated 8ecember -#, )*%% as(ing for the outright dismissal of the petition.
9n 8ecember )1, )*%*, the private respondent filed a manifestation, stating, among other
things, that assuming 9C5 No. -*) had been cancelled, there was still basis for the respondent
judge to prevent landgrabbers from entering into vacant portions of the state embraced
thereby.
5he Court finds the issues, !uintessentially, to beA
')+ :s 9C5 No. -*) still valid and subsistingO
'-+ 8id the respondent judge, in issuing the orders, dated 9ctober )- and 9ctober -#, )*%$,
commit a grave abuse of discretion e!uivalent to lac( or e2cess of jurisdictionO
:.
"s &*$ ,o. <91 still valid and subsistingS
5he Court ta(es judicial notice of the fact that the hectarage embraced by
5C5 No. )*- '9C5 No. -*)+ consists of Dovernment property. 5hree
things persuade the CourtA ')+ the decrees of ,roclamations Nos. )*- and
1#.@ '-+ the incontrovertible fact that 9C5 No. -*) has been duly
cancelled@ and '#+ the division of the Court of Appeals in AC-D.7. C4
No. ;;-*#, affirming the decision of =on. Dregorio ,ineda, 0udge of the
then Court of First :nstance of 7iFal, 3ranch KK:, in "7C 'D"79+ 7ec.
No. -1%1, Case No. 7-)1&$ thereof, entitled >:n 7eA :ssuance of 9wner<s
8uplicate of Certificate of 5itle No. -*),> as well as our own 7esolution,
in D.7. No. &*%#1, entitled >8omingo ,alomares, et al., v. :ntermediate
Appellate Court>.
'a+
,roclamation No. )*- '>7EE74:ND F97 5=E 4E5E7AN CEN5E7 :5E ,E7,9E
CE75A:N ,A7CE" 9F "AN8 9F 5=E ,E3":C 89/A:N :5EA5E8 :N 5=E
,794:NCE 9F 7:JA", :"AN8 9F "EJ9N>+ and ,roclamation No. 1-# '>7EE74:ND
F97 /:":5A7I ,E7,9E CE75A:N ,A7CE" 9F 5=E ,E3":C 89/A:N
:5EA5E8 :N 5=E /EN:C:,A":5I 9F ,A:D, 5ADE:D, AN8 ,A7A]ALEE
,794:NCE 9F 7:JA", AN8 ,AAI C:5I>+ have the character of official assertions of
ownership, and the presumption is that they have been issued by right of sovereignty and in
the e2ercise of the tate<s dominical authority. ?e ta(e not only judicial notice thereof
6
but
accept the same as a valid asseveration of regalian light over property.
?ith respect to the premises occupied by the "ibingan ng mga 3ayani, Ninoy A!uino
:nternational Airport, Nayong ,ilipino, the ,opulation Commission, National cience and
8evelopment 3oard, and the National =ousing Authority, we do not have the slightest doubt
that they stand on Dovernment property by sheer presumption that, unless otherwise shown,
what the Dovernment occupies is what the Dovernment owns.
?hile there is no presumption that property is Dovernment property until otherwise shown,
because the law recogniFes private ownership, thusA
Art. 1-.. ,roperty of private ownership, besides the patrimonial property
of the tate, provinces, cities, and municipalities, consists of all property
belonging to private persons, either individually or collectively.
7
we find hard evidence on record thatA ')+ the property covered by 9C5 No. -*) had
been conveyed to the Enited tates of America@ '-+ it had been later ceded to the
7epublic of the ,hilippines, and '#+ as a conse!uence, 9C5 No. -*) was cancelled
upon final order of 0udge 9strand.
3e that as it may, the private respondent in D.7. No. %).&1 is pressed hard to establish the fact
that portions of the property, especially the open spaces referred to in the lower court<s writ of
injunction and the private respondent<s manifestation of 8ecember )1, )*%*, and which open
spaces it claims to be outside Maricaban9 areindeed outside Maricaban 'or 9C5 -*)+. ?ith
respect, however, to parts thereof on which Fort 3onifacio, "ibingan ng mga 3ayani, Ninoy
A!uino :nternational Airport, Nayong ,ilipino, ,opulation Commission National cience and
8evelopment 3oard, and National =ousing Authority sit, the hands of the private respondent
are tied.
Claims that 0udge 9strand<s decree was a counterfeit is not only self-serving, it finds no
support from the records. 5he presumptions is >that official duty has been regularly
performed,>
;
and the burden is on the private respondent to prove irregular performance. 5he
barren insistence that 0udge 9strands order was a forgery is not sufficient to overthrow the
presumption. 5o begin with, the act of forgery has been seasonably disputed by the petitioners.
econdly, the Acting 7egistrar of 8eeds of ,asig, who supposedly certified to the fa(e
character of 0udge 9strand<s order, has himself joined the other petitioners in opposing the
reconveyance sought.
'b+
5he decision in AC-D.7. No. ;;-*#, dismissing the private respondent<s petition for the
issuance of a new owner<s copy of 9C5 No. -*), a dismissal affirmed by this Court in D.7.
No. &*%#1, also militates against the return of the property to the heirs of 8elfin Casal. 5he
Appellate Court<s judgment, a judgment sustained by this Court, operates as, at the very least,
the law of the case between the parties, that 9C5 No. -*) has been cancelled and the land
covered has been conveyed and ceded to the National Dovernment. 5he fact that AC-D.7. C4
No. ;;-*# dealt with a petition for issuance of lost owner<s duplicate copy is no argument
because be that as it may, the private respondent can not rightfully say that the heirs of 8elfin
Casal still have title to the land. :f it can not secure a new owner<s copy, it can mean that they
have lost title thereto.
'c+
5he principle of res 'udicata is also a bar to the instant proceedings. :t should be noted that in
D.7. No. &*%#1, /r. 8omingo ,alomares prayedA
?=E7EF97E, premises considered it is most respectfully prayed to the
most =onorable upreme Court, that in the name of law, justice and fair
play, to prevent and frustrate >land-grabbing> by the government, decision
be renderedA
F:75, 5hat a thorough review of the aforementioned
resolution of the :ntermediate Appellate Court be
made@
EC9N8, 5hat after due consideration, the resolution
subject of review be set aside based on the aforestated
assignment of error@
5=:78, 5hat the 9rder of the "ower Court dated 0an.
)*, )*$$ be affirmed as the lawful and valid order@
F9E75=, 5o erase all doubts by declaring 9C5 No.
-*) as continuously and e2isting validly against the
whole world@
F:F5=, Clearing 9C5 No. -*) of all adverse claims,
since the herein petitioners are the true and legally
declared heirs@ and
:K5=, 9rdering the 7egister of 8eeds of ,asig,
7iFal to issue the 9wner<s 8uplicate Copy of 9C5
No. -*).
,etitioner-Appellant further prays for other just and e!uitable reliefs. MMMM
?hen we therefore denied that petition, we, in effect, held that reconstitution 'of lost duplicate
owner<s copy+ was not possible because the mother title '9C5 No. -*)+ had been duly
cancelled. And when we therefore declared 9C5 No. -*) to have been cancelled, we perished
all doubts as to the invalidity of /r. ,alomares< pretenses of title to Maricaban. 9ur judgment
was conclusive not only as to /r. ,alomares, but also as to the e2isting status of the property.
As we have heldA
5he lower Court correctly ruled that the present action is barred by the
final judgment rendered in the previous case of 5uason Y Co. vs. Aguila,
Civil Case No. L-1-$., of the Court of First :nstance of 7iFal. 5he reason
is plainA if the herein appellants really had a preferential right to a
conveyance of the land from 0./. 5uason Y Co., or if the certificate of
'5orrens+ title held by 5uason Y Co. were truly void and ineffective, then
these facts should have been pleaded by these appellants in the previous
case 'L-1-$.+, since such facts, if true, constituted a defense to the claim
of 5uason Y Co. for recovery of possession. :f appellants failed to plead
such defenses in that previous case, they are barred from litigating the
same in any subse!uent proceeding, for it is a well established rule that as
between the same parties and on the same subject and cause of action, a
final judgment is conclusive not only on matters directly adjudicated, but
also as to any other matter that could have been raised in relation thereto.
9
::
id the respondent 'udge9 in issuing the order9 dated &ctober 1<9 19G;9 commit a grave abuse
of discretion e#uivalent to lac2 of e5cess of 'urisdictionS
'a+
5he Court has no doubt that 0udge 4eleF is here guilty of grave abuse of discretion tantamount
to lac( or e2cess of jurisdiction to warrant certiorari. As above-stated, what he gave away, by
virtue of reconveyance, was property that inalienably belongs to the Dovernment or its
successors. ?orse, he gave away property without notice to the actual possessors, that is, the
present registered owner. :t is beyond debate, as we have indicated, that the land had been,
since the cancellation of 9C5 No. -*), parcelled out to a succession of buyers and owners. :n
the absence of notice, it ac!uired no jurisdiction to decree redelivery or reconveyance. :t is
well-established that owners of property over which reconveyance is asserted are
indispensable parties, without whom no relief is available and without whom the court can
render no valid judgment.
1'
Furthermore, the present holders of the land in !uestion are innocent purchasers for value, or
presumed to be so in the absence of contrary evidence, against whom reconveyance does not
lie.
11
'b+
5he respondent judge can not conceal his faults behind arguments that he did not intend to
convey the premises, but rather, to secure, allegedly, vacant portions thereof from interlopers.
First, this is not stated in his order. econd, that order is clear and une!uivocal that 8omingo
,alomares has the right >BtCo sell, e2change, lease or otherwise dispose of any area or areas or
portion or portions thereof . . . >
12
5hird and last, the security of the property is the loo(out of
the claimants, and not the court<s. :n case the premises the respondent judge<s injunctive writ
have been directed belong to others, let them air their plaints.
'c+
5he Court is also agreed that the challenged order was issued with no benefit of trial or
hearing. 5he private respondent can not validly rely on AC-D.7. No. ;;-*# as the >trial or
hearing> to justify the issuance of its said order, in the first place, because it is a different
proceeding. 3ut above all, the private respondent itself says that AC-D.7. C4 No. ;;-*# can
not be made a basis for denying reconveyance because >the . . . petition was merely for the
issuance of a new owner<s duplicate copy . . .
1&
Accordingly, it can not invo(e that case and
yet, repudiate its effects. :t is the height of contradiction.
'd+
:t was also grave error for the lower court to deny the olicitor Deneral<s notice of appeal. 5he
Dovernment had all the right to appeal becauseA ')+ the order of 9ctober )-, )*%$ was in the
nature of a final judgment, as >final judgment> is (nown in law 'however it is captioned+, that
is to say, one that >finally disposes of the pending action so that nothing more can be done
with it in the trial court@
18
'-+ it did not merely maintain the status #uo, but allowed /r.
8omingo ,alomares to transact on the property by near right of dominion over it.
0udge 4eleF had therefore no reason, indeed, e2cuse, to deny the Dovernment<s notice of
appeal. ?hat is plain is the fact that 0udge 4eleF was hell-bent, so to spea(, in bloc(ing the
Dovernment<s efforts to defend what rightfully belongs to it.
?hat has obviously been lost on the parties, 0udge 4eleF in particular, is the established
principle that injunction does not lie >to ta(e property out of the possession or control of one
party and place it into that of another.>
15
:n this wise it has also been heldA
222 222 222
:t is a well established doctrine in this jurisdiction that an injunction is not
the proper remedy for the recovery of possession of real estate and the
improvements thereon, as well as for the ejectments therefrom of the
actual occupants who claim to have title to or material interest therein. 5he
use of said remedy in such cases has invariably been considered
unjustified, in open violation of the legal presumption that the bona
fide possessor of a certain piece of land and improvements thereon, holds
the same under claim of ownership and with a just title, and as an
advanced concession of the remedy to which the claimant might be
entitled. 'Citations omitted+
16
222 222 222
:njunction, moreover, is an e2traordinary remedy. :t lies only in certain cases, to witA
ec. #. 3rounds for issuance of preliminar! in'unction. M A preliminary
injunction may be granted at any time after the commencement of the
action and before judgment when it is establishedA
'a+ 5hat the plaintiff is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance of
the acts complained of, or in the performance of an act or acts, either for a
limited period or perpetually@
'b+ 5hat the commission or continuance of some act complained of during
the litigation or the non-performance thereof would probably wor(
injustice to the plaintiff@ or
'c+ 5hat the defendant is doing, threatens, or is about to do, or is procuring
or suffering to be done, some act probably in violation of the plaintiffs
rights respecting the subject of the action, and tending to render the
judgment ineffectual.
17
222 222 222
5he conspicuous and unusual Feal with which 0udge Francisco 4eleF now defends his
acts
1;
has not escaped us. =is =onor should have borne in mind that in proceedings under
7ule &. of the 7ules, such as the present cases, the judge is included only as a nominal party.
Enless otherwise ordained by this Court, he is not called upon to answer or comment on the
petition, but rather, the private respondent. :t is indeed distressing to note that it is the very
judge who has ta(en the cudgels for the latter, in defending its interests, when he, the judge,
should have remained a neutral magistrate. Res ipsa lo#uitor.
19
=e must get his just deserts.
:::
5he Court thus closes the long-drawn tale of 1acienda de Maricaban. :n this connection, let
trial judges be cautioned on the indiscriminate disposition of our dwindling natural resources
to private persons. Accordingly, we grant D.7. No. %).&1 and dismiss D.7. No. *;)$&, and so
also, end what has come down as nearly a century of uncertainty, doubt, and conflict
/aricaban has left in its trail. 5he Court has finally spo(en. "et the matter rest.
?=E7EF97EA
). 5he petition in D.7. No. %).&1 is D7AN5E8A
'a+ 5he ?rit of ,reliminary :njunction issued by our 7esolution, dated
April )#, )*%%, enjoining the respondent judge from enforcing hisA 'i+
order of 9ctober )-, )*%$ and 'ii+ the follow-up order of 9ctober -#,
)*%$, is made permanent and
'b+ 9riginal Certificate of 5itle No. -*) is declared duly CANCE""E8@
-. 5he petition in D.7. No. *;)$& is 8:/:E8@ and
#. 0udge Francisco 4eleF is ordered to =9? CAEE why he should not be
administratively dealt with for giving away, by virtue of reconveyance, property that
inalienably belongs to the Dovernment, without notice to the registered owner, and
without benefit of trial or hearing@ for bloc(ing Dovernment efforts to defend what
rightfully belongs to it@ and for filing his comment of 0une )$, )*%% and
supplemental comment of August -&, )*%% without e2press leave of court.
Costs against the private respondent.
9 978E7E8.
G.R. No. L-&9919 (a,uary &', 19&8
FORT"NATO ORT"A, petitioner-appellant,
vs.
VIENTE SINGSON ENARNAION, Se/re0ary oE A4r3/u)0ure a,- o<<er/e, ET
AL., respondents-appellees.
Jillafuerte9 $ible and Jaler for appellant.
&ffice of the Solicitor83eneral 1ilado for appellees.
MALOLM, J.:
in this case the petitioner and appellant see(s the issuance of a writ of mandamus directed
against the ecretary of Agriculture and Commerce and the 8irector of "ands, for the purpose
of compelling them to give due course to his sale<s application for a tract of public land. 5he
demurrers interposed to the complaint by the respondents and appellees were sustained in the
trial court, and on the failure of the petitioner further to amend his complaint, the action was
dismissed, without costs.
5he principal facts admitted by the pleadings may be stated as followsA :n 0anuary, )*-;, the
petitioner Fortunato 9rtua filed an application with the 3ureau of "ands for the purchase of a
tract of public land situated in the municipality of an 0ose, ,rovince of Camarines ur.
Following an investigation conducted by the 3ureau of "ands, 9rtua<s application was
rejected, allowing him, however, to file a sale or lease application for the portion of the land
classified to be suitable for commercial purposes, within a period of si2ty days from the date
of the decision and upon payment of ,#,;;; for accrued rents. 5wo motions for
reconsideration of the decision were filed and denied. 9n appeal to the then ecretary of
Agriculture and Natural 7esources 'Agriculture and Commerce+, the decision was affirmed,
e2cept that the sum of ,#,;;; was reduced to ,1;;.
:t should be e2plained that one condition for the purchase of a tract of public agricultural land,
provided by the ,ublic "and "aw, Act No. -%$1, in its sections -# and %%, is that the purchaser
shall be a citiFen of lawful age of the ,hilippine :slands or of the Enited tates. Fortunato
9rtua in his application stated that he was a Filipino citiFen, but the 8irector of "ands held
that on the contrary, 9rtua was a Chinese citiFen. 9n this !uestion, the 8irector of "ands
found established the following factsA Fortunato 9rtua was born in )%%. in "agonoy,
Camarines ur, ,hilippine :slands, being the natural son of :rene 8emesa, a Filipina, and
0oa!uin 9rtua, a Chinese. :n )%*& Fortunato was sent to China to study. ?hile he was in
China his father and mother were legally married. Fortunato returned to the ,hilippines in
)*;&, that is, when he was twenty-one years of age.
:t was conceded by the 8irector of "ands that presumptively Fortunato 9rtua was a ,hilippine
citiFen, but certain acts of 9rtua were pointed to as demonstrating that he had forfeited his
,hilippine citiFenship. 5hus it was stated that 9rtua voluntarily applied for a landing
certificate of residence which was issued by the :nsular Collector of Customs and which is
only given to Chinese persons. Also, when 9rtua applied for the registration of a boat, and it
was denied by the :nsular Collector of Customs on the ground that the appellant was a Chinese
citiFen, 9rtua submitted to the ruling.
5he 8irector of "ands performs his functions pursuant to the provisions of the ,ublic "and
"aw. :n accordance with this law, the ecretary of Agriculture and Commerce is made the
e2ecutive officer charged with carrying out the provisions of the ,ublic "and "aw, and he
performs this duty through the 8irector of "ands 'sec. #+. ubject to the control of the
e2ecutive head, the 8irector of "ands is by law vested with direct e2ecutive control over land
matters, >and his decisions as to !uestions of fact shall be conclusive when approved by the
ecretary of Agriculture and Commerce.> 'ec. 1+.
5he foregoing analysis of the pertinent provisions of the ,ublic "and "aw will show why in
the opening paragraphs of this decision, we accepted the decision of the 8irector of "ands on
!uestions of facts as conclusive. ?e would even go farther and would hold that the 8irector of
"ands has been made by law a !uasi-judicial officer. As such officer he ma(es findings of
fact, even passes upon !uestions of mi2ed fact and law, and considers and decides the
!ualifications of applicants for the purchase of public lands. A discretion is lodged by law in
the 8irector of "ands which should not be interfered with. 5he decisions of the 8irector of
"ands on the construction of the ,ublic "and "aw are entitled to great respect by the courts.
Accordingly, to paraphrase the authorities and decisions coming principally from the Enited
tates upreme Court, we deduce the rule on the subject to be, that a decision rendered by the
8irector of "ands and approved by the ecretary of Agriculture and Commerce, upon a
!uestion of fact is conclusive and not subject to be reviewed by the courts, in the absence of a
showing that such decision was rendered in conse!uence of fraud, imposition, or mista(e,
other than error of judgment in estimating the value or effect of evidence, regardless of
whether or not it is consistent with the preponderance of the evidence, so long as there is some
evidence upon which the finding in !uestion could be made. '4argas and /aGalac, 5he
,hilippine "and 7egistration "aw, pp. $#%-$1;@ 0ulian vs. Apostol B)*-%C, .- ,hil., 1--@ .; C.
0., );%* et se#.@ 0ohnson vs. 7iddle B)*)&C, -1; E.., 1&$.+
5here is, however, another side to the case. :t certainly was not intended by the legislative
body to remove from the jurisdiction of courts all right to review decisions of the 3ureau of
"ands, for to do so would be to attempt something which could not be done legally. Diving
force to all possible intendments regarding the facts as found by the 8irector of "ands, yet so
much of the decision of the 8irector of "ands as relates to a !uestion of law is in no sense
conclusive upon the courts, but is subject to review. :n other words, any action of the 8irector
of "ands which is based upon a misconstruction of the law can be corrected by the courts.
'hepley vs. Cowan B)%$&C, *) E.., ##;@ /oore vs. 7obbins B)%$%C, *& E.., .#;@
/ar!ueF vs. Frisbie B)%$*C, );) E.., 1$#@ 3lac( vs. 0ac(son B)*;;C, )$$ E.., #1*@
0ohnson vs. 7iddle, supra.+
=aving adjusted this fundamental matter, it is now for the court to determine if the !uestion of
law arising from the undisputed evidence was correctly decided by the 8irector of "ands. 5his
!uestion is, if the petitioner Fortunato 9rtua should be considered to be a ,hilippine citiFen or
a Chinese citiFen. ,resumptively it is admitted that he is a ,hilippine citiFen. /ore correctly
stated, Fortunato 9rtua had a sort of a dual citiFenship, and had it within his power either to
elect to become a ,hilippine citiFen or a Chinese citiFen. ,redicated on these assumptions, we
doubt very much if it could be found that 9rtua has by his own acts repudiated his ,hilippine
citiFenship and chosen Chinese citiFenship. 5he 8irector of "ands gave too much prominence,
we thin(, to two minor facts, susceptible of e2planation. ?hen 9rtua returned from China at
the age of twenty-one, it was the most natural thing in the world for him to land as a Chinese,
for this would facilitate entry and obviate complications. Again, when 9rtua applied for the
registration of a boat, there may have been any number of reasons why he did not care to
appeal from the decision of the :nsular Collector of Customs. 9n the other hand, some
consideration should be given to the intention of the petitioner, and he vigorously insists that it
is his desire to be considered a ,hilippine citiFen. =e has ta(en a Filipino name. =e has gone
into business and has improved the property here in !uestion to a great e2tent. 5here has been
no implied renunciation of citiFenship, because the petitioner has been domiciled in these
:slands e2cept for a short period during his infancy when he temporarily sojourned in China
for study. 9n the contrary, he states that he has always considered himself to be a Filipino, and
that he has elected to remain as a ,hilippine citiFen. 5herefore, on the facts found by the
8irector of "ands, we hold that clear error of law resulted in not considering petitioner a
,hilippine citiFen and so !ualified under the ,ublic "and "aw to purchase public agricultural
lands.
ustaining the assigned errors, the order of the trial court will be set aside, and the record will
be remanded to the court of origin for further proceedings in accordance with law. No
pronouncement as to costs in this instance.
Jilla8Real9 1ull9 "mperial9 and 3oddard9 JJ.9 concur.
G.R. No. 95698. O/0ober 9, 1997=
VIENTE VILLLAFLOR, 1ub1030u0e- by .31 .e3r1, petitioner. vs. O"RT OF
A!!EALS a,- NASI!IT L"M#ER O., IN., respondents.
D E I S I O N
!ANGANI#AN .J.%
:n this rather factually complicated case, the Court reiterates the binding force and effect
of findings of specialiFed administrative agencies as well as those of trial courts when
affirmed by the Court of Appeals@ rejects petitionerRs theory of simulation of contracts@ and
passes upon the !ualifications of private respondent corporation to ac!uire disposable public
agricultural lands prior to the effectivity of the )*$# Constitution.
T.e a1e
3efore us is a petition for review on certiorari see(ing the reversal of the 8ecision
B)C
of
the Court of Appeals, dated eptember -$, )**;, in C.A. D.7. C4 No. ;*;&-, affirming the
dismissal by the trial court of ,etitioner 4icente 4illaflorRs complaint against ,rivate
7espondent Nasipit "umber Co., :nc. 5he disposition of both the trial and the appellate courts
are !uoted in the statement of facts below.
T.e Fa/01
5he facts of this case, as narrated in detail by 7espondent Court of Appeals, are as
followsA
B-C
S5he evidence, testimonial and documentary, presented during the trial show that on 0anuary
)&, )*1;, Cirilo ,iencenaves, in a 8eed of Absolute ale 'e2h. A+, sold to BpetitionerC, a parcel
of agricultural land containing an area of .; hectares,
B#C
more or less, and particularly
described and bounded as followsA
\A certain parcel of agricultural land planted to abaca with visible concrete monuments
mar(ing the boundaries and bounded on the N975= by ,ublic "and now ,rivate 8eeds on
the East by erafin 4illaflor, on the 9E5= by ,ublic "and@ and on the ?est by land claimed
by =. ,atete, containing an area of &; hectares more or less, now under 5a2 8ec. -*1.) in the
'sic+ of said 4icente 4illaflor, the whole parcel of which this particular parcel is only a part, is
assessed at ,--,..;.;; under the above said 5a2 8ec. Number.R
5his deed statesA
\5hat the above described land was sold to the said 4:CEN5E 4:""AF"97, 222 on 0une --,
)*#$, but no formal document was then e2ecuted, and since then until the present time, the
said 4icente 4illaflor has been in possession and occupation of 'the same+@ 'and+
5hat the above described property was before the sale, of my e2clusive property having
inherited from my long dead parents and my ownership to it and that of my BsicC lasted for
more than fifty '.;+ years, possessing and occupying same peacefully, publicly and
continuously without interruption for that length of time.R
Also on 0anuary )&, )*1;, Claudio 9tero, in a 8eed of Absolute ale 'e2h. C+ sold to 4illaflor
a parcel of agricultural land, containing an area of -1 hectares, more or less, and particularly
described and bounded as followsA
\A certain land planted to corn with visible concrete measurements mar(ing the boundaries
and bounded on the North by ,ublic "and and 5ungao Cree(@ on the East by Agusan 7iver@ on
the outh by erafin 4illaflor and Cirilo ,iencenaves@ and on the ?est by land of Fermin
3acobo containing an area of -1 hectares more or less, under 5a2 8eclaration No. -*1.) in
the name already of 4icente 4illaflor, the whole parcel of which this particular land is only a
part, is assessed at ,--,..;.;; under the above said 5a2 8eclaration No. -*1.).R
5his deed statesA
\5hat the above described land was sold to the said 4:CEN5E 4:""AF"97, 222 on 0une --,
)*#$, but no sound document was then e2ecuted, however since then and until the present
time, the said 4icente 4illaflor has been in open and continuous possession and occupation of
said land@ 'and+
5hat the above described land was before the sale, my own e2clusive property, being inherited
from my deceased parents, and my ownership to it and that of my predecessors lasted more
than fifty '.;+ years, possessing and occupying the same, peacefully, openly and continuously
without interruption for that length of time.R
"i(ewise on 0anuary )&, )*1;, =ermogenes ,atete, in a 8eed of Absolute ale 'e2h. 8+, sold
to 4illaflor, a parcel of agricultural land, containing an area of -; hectares, more or less, and
particularly described and bounded as followsA
\A certain parcel of agricultural land planted to abaca and corn with visible concrete
monuments mar(ing the boundaries and bounded on the North by ,ublic "and area-private
7oad@ on the East by land claimed by Cirilo ,iencenaves@ on the outh by ,ublic "and
containing an area of -; hectares more or less, now under 5a2 8eclaration No. -*1.) in the
name of 4icente 4illaflor the whole parcel of which this particular parcel, is assessed
at ,--,..;.;; for purposes of ta2ation under the above said 5a2 8eclaration No. -*1.).R
5his deed statesA
\222 '9+n 0une --, )*#$ but the formal document was then e2ecuted, and since then until the
present time, the said 4:CEN5E 4:""AF"97 has been in continuous and open possession
and occupation of the same@ 'and+
5hat the above described property was before the sale, my own and e2clusive property, being
inherited from my deceased parents and my ownership to it and that of my predecessors lasted
more than fifty '.;+ years, possessing and occupying same, peacefully, openly and
continuously without interruption for that length of time.R
9n February )., )*1;, Fermin 3ocobo, in a 8eed of Absolute ale 'e2h. 3+, sold to 4illaflor,
a parcel of agricultural land, containing an area of )% hectares, more or less, and particularly
described and bounded as followsA
\A certain parcel of agricultural land planted with abaca with visible part mar(ing the corners
and bounded on the North by the corners and bounded on the North by ,ublic "and@ on the
East by Cirilo ,iencenaves@ on the outh by =ermogenes ,atete and ?est by ,ublic
"and, containing an area of )% hectares more or less now under 5a2 8eclaration No. -*1.) in
the name of 4icente 4illaflor. 5he whole parcel of which this particular parcel is only a part
is assessed as ,--,..;.;; for purposes of ta2ation under the above said 5a2 8eclaration
Number '8eed of Absolute ale e2ecuted by Fermin 3ocobo date Feb. )., )*1;+. 5his
document was annotated in 7egistry of 8eeds on February )&, )*1;+.R
5his deed statesA
\5hat the above described property was before the sale of my own e2clusive property, being
inherited from my deceased parents, and my ownership to it and that of my predecessors lasted
more than fifty '.;+ years, possessing and occupying the same peacefully, openly and
continuously without interruption for that length of time.R
9n November %, )*1&, 4illaflor, in a "ease Agreement 'e2h. L+,
B1C
leased to Nasipit "umber
Co., :nc. a parcel of land, containing an area of two '-+ hectares, together with all the
improvements e2isting thereon, for a period of five '.+ years from 0une ), )*1& at a rental
of ,-;;.;; per annum \to cover the annual rental of house and building sites for thirty three
'##+ houses or buildings.R 5his agreement also providesA
B.C
\#. 8uring the term of this lease, the "essee is authoriFed and empowered to build and
construct additional houses in addition to the ## houses or buildings mentioned in the ne2t
preceding paragraph, provided however, that for every additional house or building
constructed the "essee shall pay unto the "essor an amount of fifty centavos '^.;+ per month
for every house or building. 5he "essee is empowered and authoriFed by the "essor to sublot
'sic+ the premises hereby leased or assign the same or any portion of the land hereby leased to
any person, firm and corporation@ 'and+
1. 5he "essee is hereby authoriFed to ma(e any construction and6or improvement on
the premises hereby leased as he may deem necessary and proper thereon, provided however,
that any and all such improvements shall become the property of the "essor upon the
termination of this lease without obligation on the part of the latter to reimburse the "essee for
e2penses incurred in the construction of the same.R
4illaflor claimed having discovered that after the e2ecution of the lease agreement, that
Nasipit "umber \in bad faith 2 2 2 surreptitiously grabbed and occupied a big portion of
plaintiffRs property 2 2 2R@ that after a confrontation with the corporateRs 'sic+ field manager,
the latter, in a letter dated 8ecember #, )*$# 'e2h. 7+,
B&C
stated recalling having \made some
sort of agreement for the occupancy 'of the property at Acacia, an /ateo+, but : no longer
recall the details and : had forgotten whether or not we did occupy your land. 3ut if, as you
say, we did occupy it, then 'he is + sure that the company is obligated to pay the rental.R
9n 0uly $, )*1%, in an \Agreement to ellR 'e2h. -+, 4illaflor conveyed to Nasipit "umber,
two '-+ parcels of land 222 described as followsA
B$C
\,A7CE" 9NE
3ounded on the North by ,ublic "and and 5ungao Cree(@ on the East by Agusan 7iver and
erafin 4illaflor@ on the outh by ,ublic "and, on the ?est by ,ublic "and. :mprovements
thereon consist of abaca, fruit trees, coconuts and thirty houses of mi2ed materials belonging
to the Nasipit "umber Company. 8ivided into "ot Nos. .1)-, .1)#, .1%%, .1*;, .1*), .1*-,
.%.;, .%1*, .%&;, .%.., .%.), .%.1, .%.., .%.*, .%.%, .%.$, .%.#, and .%.-. 3oundaries of
this parcel of land are mar(ed by concrete monuments of the 3ureau of "ands. Containing an
area of ))-,;;; hectares. Assessed at ,)$,)&;.;; according to 5a2 8eclaration No. 4-#).
dated April )1, )*1&.
,A7CE" 5?9
3ounded on the North by ,agudasan Cree(@ on the East by Agusan 7iver@ on the outh by
5ungao Cree(@ on the ?est by ,ublic "and. Containing an area of 1%,;;; hectares more or
less. 8ivided into "ot Nos. .1)), .1);, .1;*, and .#**. :mprovements );; coconut trees,
productive, and #;; cacao trees. 3oundaries of said land are mar(ed by concrete monuments
of the 3ureau pf 'sic+ "ands. Assessed value -- ,&,-*;.;; according to 5a2 No. #)$, April
)1, )*1&.R
5his Agreement to ell providesA
\#. 5hat beginning today, the ,arty of the econd ,art shall continue to occupy the
property not anymore in concept of lessee but as prospective owners, it being the sense of the
parties hereto that the ,arty of the econd ,art shall not in any manner be under any obligation
to ma(e any compensation to the ,arty of the First ,art, for the use, and occupation of the
property herein before described in such concept of prospective owner, and it li(ewise being
the sense of the parties hereto to terminate as they do hereby terminate, effective on the date of
this present instrument, the Contract of "ease, otherwise (nown as 8oc. No. 1-;, ,age No. #&,
3oo( No. ::, eries of )*1& of Notary ,ublic Dabriel 7. 3anaag, of the ,rovince of Agusan.
1. 5hat the ,arty of the econd ,art has bound as it does hereby bind itself, its
e2ecutors and administrators, to pay unto the party of the First ,art the sum of Five 5housand
,esos ',.,;;;.;;+, ,hilippine Currency, upon presentation by the latter to the former of
satisfactory evidence thatA
'a+ 5he 3ureau of "ands will not have any objection to the obtainment by the ,arty of the
First ,art of a Certificate of 5orrens 5itle in his favor, either thru ordinary land registration
proceedings or thru administrative means procedure.
'b+ 5hat there is no other private claimant to the properties hereinbefore described.
.. 5hat the ,arty of the First ,art has bound as he does hereby bind to underta(e
immediately after the e2ecution of these presents to secure and obtain, or cause to be secured
and obtained, a Certificate of 5orrens 5itle in his favor over the properties described on ,age
'9ne+ hereof, and after obtainment of such Certificate of 5orrens 5itle, the said ,arty of the
First ,art shall e2ecute a '8+eed of Absolute ale unto and in favor of the ,arty of the econd
,art, its e2ecutors, administrators and assigns, it being the sense of the parties that the ,arty of
the econd ,art upon delivery to it of such deed of absolute sale, shall pay unto the ,arty of
the First ,art in cash, the sum of 5welve 5housand ',)-,;;;.;;+ ,esos in ,hilippine Currency,
provided, however, that the ,arty of the First ,art, shall be reimbursed by the ,arty of the
econd ,art with one half of the e2penses incurred by the ,arty of the First ,art for survey and
attorneyRs fees@ and other incidental e2penses not e2ceeding ,#;;.;;.R
9n 8ecember -, )*1%, 4illaflor filed ales Application No. 4-%;$
B%C
'e2h. )+ with the 3ureau
of "ands, /anila, \to purchase under the provisions of Chapter 4, K: or :K of Commonwealth
Act. No. )1) '5he ,ublic "ands Act+, as amended, the tract of public lands 2 2 2 and described
as followsA \North by ,ublic "and@ East by Agusan 7iver and erafin 4illaflor@ outh by
,ublic "and and ?est by public land '"ot Nos. .#$*, .1%*, .1)-, .1*;, .1*), .1*-, .%1*,
.%.;, .%.), .1)#, .1%%, .1%*, .%.-, .%.#, .%.1, .%.., .%.&, .%.$, .%.%, .%.* and .%&; 2 2
2 containing an area of )1; hectares 222.R ,aragraph & of the Application, statesA \:
understand that this application conveys no right to occupy the land prior to its approval, and :
recogniFed 'sic+ that the land covered by the same is of public domain and any and all rights :
may have with respect thereto by virtue of continuous occupation and cultivation are hereby
relin!uished to the Dovernment.R
B*C
'e2h. )-8+
9n 8ecember $, )*1%, 4illaflor and Nasipit "umber e2ecuted an \AgreementR 'e2h #+.
B);C
5his
contract providesA
\). 5hat the First ,arty is the possessor since )*#; of two '-+ parcels of land situated in
sitio 5ungao, 3arrio of an /ateo, /unicipality of 3utuan, ,rovince of Agusan@
-. 5hat the first parcel of land abovementioned and described in ,lan ,"-*$ filed in
the office of the 3ureau of "ands is made up of "ots Nos. .1)-, .1)#, .1%%, .1*;, .1*),
.1*-, .%1*, .%.;, .%.), .%.-, .%.#, .%.1, .%.., .%.&, .%.$, .%.%, .%.* and .%&; and the
second parcel of land is made of "ots Nos. .#**, .1;*, .1); and .1))@
#. 5hat on 0uly $, )*1%, a contract of Agreement to ell was e2ecuted between the
contracting parties herein, covering the said two parcels of land, copy of said Agreement to
ell is hereto attached mar(ed as Anne2 SAT and made an integral part of this document. 5he
parties hereto agree that the said Agreement to ell be maintained in full force and effect with
all its terms and conditions of this present agreement and in no way be considered as modified.
1. 5hat paragraph 1 of the Contract of Agreement to ell, mar(ed as anne2, SAT
stipulates as followsA
\,ar. 1. 5hat the ,arty of the econd ,art has bound as it does hereby bind itself, its
e2ecutors and administrators, to pay unto the ,arty of the First ,art of the sum of F:4E
5=9EAN8 ,E9 ',.,;;;.;;+ ,hilippine Currency, upon presentation by the latter to the
former of satisfactory evidence thatA
a+ 5he 3ureau of "ands will have any objection to the obtainment by ,arty of the First ,art
of a favor, either thru ordinary land registration proceedings or thru administrative means and
procedure.
b+ 5hat there is no other private claimant to the properties hereinabove described.R
5hat the First ,arty has on 8ecember -, )*1%, submitted to the 3ureau of "ands, a ales
Application for the twenty-two '--+ lots comprising the two abovementioned parcels of land,
the said ales Application was registered in the said 3ureau under No. 4-%;$@
&. 5hat in reply to the re!uest made by the First ,arty to the 3ureau of "ands, in
connection with the ales Application No. 4-%;$, the latter informed the former that action on
his re!uest will be e2pedited, as per letter of the Chief, ,ublic "and 8ivision, dated 8ecember
-, )*1%, copy of which is hereto attached mar(ed as anne2 \3R and made an integral part of
this agreementA
$. 5hat for and in consideration of the premises above stated and the amount of
5?EN5I F9E7 5=9EAN8 ',-1,;;;.;;+ ,E9 that the econd ,arty shall pay to the
First ,arty, by these presents, the First ,arty hereby sells, transfers and conveys unto the
econd ,arty, its successors and assigns, his right, interest and participation under an'd+ by
virtue of the ales Application No. 4-%;$, which he has or may have in the lots mentioned in
said ales Application No. 4-%;$@
%. 5hat the amount of 5?EN5I F9E7 5=9EAN8 ',-1,;;;.;;+ ,E9, shall be
paid by the econd ,arty to the First ,arty, as followsA
a+ 5he amount of E4EN 5=9EAN8 ',$,;;;.;;+ ,E9, has already been paid by the
econd ,arty to the First ,arty upon the e2ecution of the Agreement to ell, on 0uly $, )*1%@
b+ 5he amount of F:4E 5=9EAN8 ',.,;;;.;;+ ,E9 shall be paid upon the signing of
this present agreement@ and
c+ 5he balance of 5?E"4E 5=9EAN8 ',)-,;;;.;;+ ,E9, shall be paid upon the
e2ecution by the First ,arty of the Absolute 8eed of ale of the two parcels of land in !uestion
in favor of the econd ,arty, and upon delivery to the econd ,arty of the Certificate of
9wnership of the said two parcels of land.
*. :t is specially understood that the mortgage constituted by the First ,arty in favor of
the econd ,arty, as stated in the said contract of Agreement to ell dated 0uly $, )*1%, shall
cover not only the amount of E4EN 5=9EAN8 ',$,;;;.;;+ ,E9 as specified in said
document, but shall also cover the amount of F:4E 5=9EAN8 ',.,;;;.;;+ ,E9 to be
paid as stipulated in paragraph %, sub-paragraph 'b+ of this present agreement, if the First ,arty
should fail to comply with the obligations as provided for in paragraphs -, 1, and . of the
Agreement to ell@
);. :t is further agreed that the First ,arty obligates himself to sign, e2ecute and deliver
to and in favor of the econd ,arty, its successors and assigns, at anytime upon demand by the
econd ,arty such other instruments as may be necessary in order to give full effect to this
present agreement@R
:n the 7eport dated 8ecember #), )*1* by the public land inspector, 8istrict "and 9ffice,
3ureau of "ands, in 3utuan, the report contains an :ndorsement of the aforesaid 8istrict "and
9fficer recommending rejection of the ales Application of 4illaflor for having leased the
property to another even before he had ac!uired transmissible rights thereto.
:n a letter of 4illaflor dated 0anuary -#, )*.;, addressed to the 3ureau of "ands, he informed
the 3ureau 8irector that he was already occupying the property when the 3ureauRs Agusan
7iver 4alley ubdivision ,roject was inaugurated, that the property was formerly claimed as
private properties 'sic+, and that therefore, the property was segregated or e2cluded from
disposition because of the claim of private ownership. :n a letter of Nasipit "umber dated
February --, )*.; 'e2h. K+
B))C
addressed to the 8irector of "ands, the corporation informed the
3ureau that it recogniFed 4illaflor as the real owner, claimant and occupant of the land@ that
since 0une )*1&, 4illaflor leased two '-+ hectares inside the land to the company@ that it has no
other interest on the land@ and that the ales Application of 4illaflor should be given favorable
consideration.
222 222
222
9n 0uly -1, )*.;, the scheduled date of auction of the property covered by the ales
Application, Nasipit "umber offered the highest bid of ,1).;; per hectare, but since an
applicant under CA )1), is allowed to e!ual the bid of the highest bidder, 4illaflor tendered an
e!ual bid, deposited the e!uivalent of );Q of the bid price and then paid the assessment in
full.
222 222
222
9n August )&, )*.;, 4illaflor e2ecuted a document, denominated as a \8eed of
7elin!uishment of 7ightsR 'e2h. N+,
B)-C
pertinent portion of which readsA
\.. 5hat in view of my present business in /anila, and my change in residence from 3utuan,
Agusan to the City of /anila, : cannot, therefore, develope 'sic+ or cultivate the land applied
for as projected before@
&. 5hat the Nasipit "umber Company, :nc., a corporation duly organiFed 222 is very much
interested in ac!uiring the land covered by the aforecited application 222@
$. 5hat : believe the said company is !ualified to ac!uire public land, and has the means to
develop 'sic+ the above-mentioned land@
222 222
222
?=E7EF97E, and in consideration of the amount of F:4E 5=9EAN8 ,E9
',.,;;;.;;+ to be reimbursed to me by the aforementioned Nasipit "umber Company, :nc.,
after its receipt of the order of award, the said amount representing part of the purchase price
of the land aforesaid, the value of the improvements : introduced thereon, and the e2penses
incurred in the publication of the Notice of ale, :, the applicant, 4icente 0. 4illaflor, hereby
voluntarily renounce and relin!uish whatever rights to, and interests : have in the land covered
by my above-mentioned application in favor of the Nasipit "umber Company, :nc.R
Also on August )&, )*.;, Nasipit "umber filed a ales Application over the two '-+ parcels of
land, covering an area of )1; hectares, more or less. 5his application was also numbered 4-
%;$ 'e2h. I+.
9n August )$, )*.; the 8irector of "ands issued an \9rder of AwardR
B)#C
in favor of Nasipit
"umber Company, :nc., pertinent portion of which readsA
\1. 5hat at the auction sale of the land held on 0uly -1, )*.; the highest bid received was that
of Nasipit "umber Company, :nc. which offered ,1).;; per hectare or ,.,$1;.;; for the
whole tract, which bid was e!ualed by applicant 4icente 0. 4illaflor, who deposited the
amount of ,.$1.;; under 9fficial 7eceipt No. 3-)#$#%-& dated 0uly -1, )*.; which is
e!uivalent to );Q of the bid. ubse!uently, the said 222 4illaflor paid the amount
of ,.,)&;.;; in full payment of the purchase price of the above-mentioned land and for some
reasons stated in an instrument of relin!uishment dated August )&, )*.;, he '4icente 0.
4illaflor+ relin!uished his rights to and interest in the said land in favor of the Nasipit "umber
Company, :nc. who filed the corresponding application therefore.
:n view of the foregoing, and it appearing that the proceedings had 222 were in accordance
with law and in BsicC e2isting regulations, the land covered thereby is hereby awarded to
Nasipit "umber Company, :nc. at ,1).;; per hectare or ,.,$1;.;; for the whole tract.
5his application should be entered in the record of this 9ffice as ales Entry No. 4-1;$.R
:t is 4illaflorRs claim that he only learned of the 9rder of Award on 0anuary )&, )*$1, or after
his arrival to the ,hilippines, coming from :ndonesia, where he stayed for more than ten ');+
years@ that he went to 3utuan City in the latter part of )*$# upon the call of his brother erafin
4illaflor, who was then sic( and learned that Nasipit "umber 'had+ failed and refused to pay
the agreed rentals, although his brother was able to collect during the early years@ and that
erafin died three days after his '4icenteRs+ arrival, and so no accounting of the rentals could
be made@ that on November -$, )*$#, 4illaflor wrote a letter to /r. D.E.C. /ears of Nasipit
"umber, reminding him of their verbal agreement in )*.. 222 that /r. /ears in a 7eply dated
8ecember #, )*$#, appears to have referred the matter to /r. Noriega, the corporate general
manager, but the new set of corporate officers refused to recogniFe '4illaflorRs+ claim, for /r.
Florencio 5amesis, the general manager of Nasipit "umber, in a letter dated February )*,
)*$1, denied 4illaflorRs itemiFed claim dated 0anuary ., )*$1 'e2h. 4+ to be without valid and
legal basis. :n that .th 0anuary, )*$1 letter, 4illaflor claimed the total amount of ,1-$,;;;.;;
2 2 2.
:n a formal protest dated 0anuary #), )*$1
B)1C
which 4illaflor filed with the 3ureau of "ands,
he protested the ales Application of Nasipit "umber, claiming that the company has not paid
him ,.,;;;.;; as provided in the 8eed of 7elin!uishment of 7ights dated August )&, )*.;.
222 222
222
2 2 2 '5+hat in a 8ecision dated August %, )*$$ 'e2h. %+, the 8irector of "ands found that the
payment of the amount of ,.,;;;.;; in the 8eed 222 and the consideration in the Agreement
to ell were duly proven, and ordered the dismissal of 4illaflorRs protest and gave due course
to the ales Application of Nasipit "umber. ,ertinent portion of the 8ecision penned by
8irector of "ands, 7amon Casanova, in the /atter of , No. 4-%;$ 'C-4-1;$+ 222 readsA
\222 222
222
8uring the proceedings, 4illaflor presented another claim entirely different from his previous
claim -- this time, for recovery of rentals in arrears arising from a supposed contract of lease
by 4illaflor as lessor in favor of Nasipit as lessee, and indemnity for damages supposedly
caused improvements on his other property 222 in the staggering amount of eventeen /illion
',)$,;;;,;;;.;;+ ,esos. Earlier, he had also demanded from NA:,:5 222 ',1-$,;;;.;;+
222 also as indemnity for damages to improvements supposedly caused by NA:,:5 on his
other real property as well as for reimbursement of realty ta2es allegedly paid by him thereon.
222 222
222
:t would seem that 222 4illaflor has sought to inject so many collaterals, if not e2traneous
claims, into this case. :t is the considered opinion of this 9ffice that any claim not within the
sphere or scope of its adjudicatory authority as an administrative as well as !uasi-judicial body
or any issue which see(s to delve into the merits of incidents clearly outside of the
administrative competence of this 9ffice to decide may not be entertained.
5here is no merit in the contention of 4illaflor that owing to NasipitRs failure to pay the
amount of 222 ',.,;;;.;;+ 222 'assuming that Nasipit had failed+ the deed of relin!uishment
became null and void for lac( of consideration. 2222.
222 222
222
2 2 2 5he records clearly show, however, that since the e2ecution of the deed of
relin!uishment 222 4illaflor has always considered and recogniFed NA:,:5 as having the
juridical personality to ac!uire public lands for agricultural purposes. 2222.
222 222
222
Even this 9ffice had not failed to recogniFe the juridical personality of NA:,:5 to apply for
the purchase of public lands 222 when it awarded to it the land so relin!uished by 4illaflor
'9rder of Award dated August )$, )*.;+ and accepted its application therefor. At any rate,
the !uestion whether an applicant is !ualified to apply for the ac!uisition of public lands is a
matter between the applicant and this 9ffice to decide and which a third party li(e 4illaflor
has no personality to !uestion beyond merely calling the attention of this 9ffice thereto.
222 222
222
4illaflor offered no evidence to support his claim of non-payment beyond his own self-serving
assertions and e2pressions that he had not been paid said amount. As protestant in this case,
he has the affirmative of the issue. =e is obliged to prove his allegations, otherwise his action
will fail. For, it is a well settled principle '\+ that if plaintiff upon whom rests the burden of
proving his cause of action fails to show in a satisfactory manner the facts upon which he
bases his claim, the defendant is under no obligation to prove his e2ceptions or special
defenses '3elen vs. 3elen, )# ,hil. -;-@ /endoFa vs. Fulgencio, % ,hil. -1#+.
222 222
222
Conse!uently, 4illaflorRs claim that he had not been paid must perforce fail.
9n the other hand, there are strong and compelling reasons to presume that 4illaflor had
already been paid the amount of Five 5housand ',.,;;;.;;+ ,esos.
First, 222 ?hat is surprising, however, is not so much his claims consisting of gigantic
amounts as his having forgotten to adduce evidence to prove his claim of non-payment of the
Five 5housand ',.,;;;.;;+ ,esos during the investigation proceedings when he had all the
time and opportunity to do so. 222 5he fact that he did not adduce or even attempt to adduce
evidence in support thereof shows either that he had no evidence to offer 222 that NA:,:5
had already paid him in fact. ?hat is worse is that 4illaflor did not even bother to command
payment, orally or in writing, of the Five 5housand ',.,;;;.;;+ ,esos which was supposed to
be due him since August )$, )*.;, the date when the order of award was issued to Nasipit, and
when his cause of action to recover payment had accrued. 5he fact that he only made a
command 'sic+ for payment on 0anuary #), )*$1, when he filed his protest or twenty-four '-1+
years later is immediately nugatory of his claim for non-payment.
3ut 4illaflor maintains that he had no (nowledge or notice that the order of award had already
been issued to NA:,:5 as he had gone to :ndonesia and he had been absent from the
,hilippines during all those twenty-four '-1+ years. 5his of course ta2es credulity. 222.
econd, it should be understood that the condition that NA:,:5 should reimburse 4illaflor
the amount of Five 5housand ',.,;;;.;;+ ,esos upon its receipt of the order of award was
fulfilled as said award was issued to NA:,:5 on August )$, )*.;. 5he said deed of
relin!uishment was prepared and notariFed in /anila with 4illaflor and NA:,:5 signing the
instrument also in /anila on August )&, )*.; 'p.$$, 'sic++. 5he following day or barely a day
after that, or on August )$, )*.;, the order of award was issued by this 9ffice to
NA:,:5 also in /anila. Now, considering that 4illaflor is presumed to be more assiduous in
following up with the 3ureau of "ands the e2peditious issuance of the order of award as the
payment of the Five 5housand ',.,;;;.;;+ ,esos 'consideration+ would depend on the
issuance of said order to award NA:,:5, would it not be reasonable to believe that 4illaflor
was at hand when the award was issued to NA:,:5 on August )$, )*.;, or barely a day
which 'sic+ he e2ecuted the deed of relin!uishment on August )&, )*.;, in /anilaO 222.
5hird, on the other hand, NA:,:5 has in his possession a sort of SorderT upon itself -- 'the
deed of relin!uishment wherein he 'sic+ obligated itself to reimburse or pay 4illaflor the 222
consideration of the relin!uishment upon its receipt of the order of award+ for the payment of
the aforesaid amount the moment the order of award is issued to it. :t is reasonable to presume
that NA:,:5 has paid the Five 5housand ',.,;;;.;;+ ,esos to 4illaflor.
\A person in possession of an order on himself for the payment of money, or the delivery of
anything, has paid the money or delivered the thing accordingly. 'ection .'(+ 3-)#)-7evised
7ules of Court.R
:t should be noted that NA:,:5 did not produce direct evidence as proof of its payment of the
Five 5housand ',.,;;;.;;+ ,esos to 4illaflor. NasipitRs e2planation on this point is found
satisfactory.
\2 2 2 ':+t was virtually impossible for NA:,:5, after the lapse of the intervening -1 years, to
be able to cope up with all the records necessary to show that the consideration for the deed of
relin!uishment had been fully paid. 5o e2pect NA:,:5 to (eep intact all records pertinent to
the transaction for the whole !uarter of a century would be to re!uire what even the law does
not. :ndeed, even the applicable law itself 'ec. ##$, National :nternal 7evenue Code+
re!uires that all records of corporations be preserved for only a ma2imum of five years.
NA:,:5 may well have added that at any rate while \there are transactions where the proper
evidence is impossible or e2tremely difficult to produce after the lapse of time 222 the law
creates presumptions of regularity in favor of such transactions '-; Am. 0ur. -#-+ so that when
the basic fact is established in an action the e2istence of the presumed fact must be assumed
by force of law. '7ule )#, Eniform 7ules of Evidence@ * ?igmore, ec. -1*)+.
Anent 4illaflorRs claim that the )1;-hectare land relin!uished and awarded to NA:,:5 is his
private property, little 'need+ be said. 2222 5he trac(s of land referred to therein are not
identical to the lands awarded to NA:,:5. Even in the assumption that the lands mentioned
in the deeds of transfer are the same as the )1;-hectare area awarded to NA:,:5, their
purchase by 4illaflor 'or+ the latterRs occupation of the same did not change the character of
the land from that of public land to a private property. 5he provision of the law is specific that
public lands can only be ac!uired in the manner provided for therein and not otherwise 'ec.
)), C.A. No. )1), as amended+. 5he records show that 4illaflor had applied for the purchase
of the lands in !uestion with this 9ffice 'ales Application No. 4-%;$+ on 8ecember -, )*1%.
2222 5here is a condition in the sales application signed by 4illaflor to the effect that he
recogniFes that the land covered by the same is of public domain and any and all rights he may
have with respect thereto by virtue of continuous occupation and cultivation are relin!uished
to the Dovernment 'paragraph &, ales Application No. 4-%;$ 222+ of which 4illaflor is very
much aware. :t also appears that 4illaflor had paid for the publication fees appurtenant to the
sale of the land. =e participated in the public auction where he was declared the successful
bidder. =e had fully paid the purchase prive 'sic+ thereof 'sic+. :t would be a 'sic+ height of
absurdity for 4illaflor to be buying that which is owned by him if his claim of private
ownership thereof is to be believed. 5he most that can be said is that his possession was
merely that of a sales applicant to when it had not been awarded because he relin!uished his
interest therein in favor of NA:,:5 who 'sic+ filed a sales application therefor.
222 222
222
2 2 2 8uring the investigation proceedings, 4illaflor presented as his E2hibit \'sic+R 'which
NA:,:5 adopted as its own e2hibit and had it mar(ed in evidence as E2hibit \)R+ a duly
notariFed \agreement to ellR dated 0uly $, )*1%, by virtue of which 4illaflor undertoo( to sell
to Nasipit the tracts of land mentioned therein, for a consideration of 5wenty-Four 5housand
',-1,;;;.;;+ ,esos. aid tracts of land have been verified to be identical to the parcels of land
formerly applied for by 4illaflor and which the latter had relin!uished in favor of NA:,:5
under a deed of relin!uishment e2ecuted by him on August )&, )*.;. :n another document
e2ecuted on 8ecember $, )*1% 222 4illaflor as \F:75 ,A75IR and NA:,:5 as \EC9N8
,A75IR confirmed the \Agreement to ellR of 0uly $, )*1%, which was maintained \in full
force and effect with all its terms and conditions 2 2 2R 'E2h. \#%-AR+@ and that \for and in
consideration of 222 5?EN5I F9E7 5=9EAN8 ',-1,;;;.;;+ ,E9 that the econd
,arty shall pay to the First ,arty 222 the First ,arty hereby sells, transfers and conveys unto
the econd ,arty 222 his right interest and participation under and by virtue of the ales
Application No. 4-%;$R and, in its paragraph %, it made stipulations as to when part of the said
consideration 222 was paid and when the balance was to be paid, to witA
\a+ the amount of E4EN 5=9EAN8 222 ,E9 has already been paid by the econd
,arty to the First ,arty upon the e2ecution of the Agreement to ell, on 0uly )$, )*1%@
b+ the amount of F:4E 5=9EAN8 222 ,E9 shall be paid upon the signing of this
present agreement@ and
c+ the amount of 5?E"4E 5=9EAN8 222 ,E9, shall be paid upon the e2ecution by the
First ,arty of the Absolute ale of the 5wo parcels of land in !uestion in favor of the econd
,arty of the Certificate of 9wnership of the said two parcels of land.R 'E2h. #%-3+. 'Emphasis
ours+
:t is thus clear from this subse!uent document mar(ed E2hibit R#% ANA"C9R that of the
consideration of the \Agreement to ellR dated 0uly$, )*1%, involving the )1;-hectare area
relin!uished by 4illaflor in favor of NA:,:5, in the amount of 5wenty-Four 5housand
',-1,;;;.;;+ ,esosA
')+ the amount of even 5housand ',$,;;;.;;+ ,esos was already paid upon the
e2ecution of the \Agreement to ellR on 0uly $, )*1%, receipt of which incidentally was
admitted by 4illaflor in the document of 8ecember $, )*1%@
'-+ the amount of Five 5housand ',.,;;;.;;+ ,esos was paid when said document was
signed by 4icente 0. 4illaflor as the First ,arty and Nasipit thru its ,resident, as the econd
,arty, on 8ecember $, )*1%@ and
'#+ the balance of 5welve 5housand ',)-,;;;.;;+ ,esos to be paid upon the e2ecution
by the First ,arty of the Absolute 8eed of ale of the two parcels of land in favor of the
econd ,arty, and upon delivery to the econd ,arty of the Certificate of 9wnership of the
said two parcels of land.
4illaflor contends that NA:,:5 could not have paid 4illaflor the balance of 5welve
5housand ',)-,;;;.;;+ ,esos 2 2 2 consideration in the Agreement to ell will only be paid to
applicant-assignor 'referring to 4illaflor+ upon obtaining a 5orrens 5itle in his favor over the
)1;-hectare of land applied for and upon e2ecution by him of a 8eed of Absolute ale in favor
of Nasipit "umber Company, :nc. 2 2 2. :nasmuch as applicant-assignor was not able to
obtain a 5orrens 5itle over the land in !uestion he could not e2ecute an absolute 8eed of 'sic+
Nasipit "umber Co., :nc. =ence, the Agreement to ell was not carried out and no 5welve
5housand ',)-,;;;.;;+ ,esos was overpaid either to the applicant-assignor, much less to
=oward 0. Nell Company. 'ee /E/97AN8E/ F97 5=E A,,":CAN5-A:DN97,
dated 0anuary ., )*$$+. 222.
222 4illaflor did not adduce evidence in support of his claim that he had not been paid the 222
',)-,;;;.;;+ 222 consideration of the Agreement to ell dated 0uly $, )*1% 'E2h. \#%
NA"C9R+ beyond his mere uncorroborated assertions. 9n the other hand, there is strong
evidence to show that said 5welve 5housand ',)-,;;;.;;+ ,esos had been paid by 'private
respondent+ to Edward 0. Nell Company by virtue of the 8eed of Assignment of Credit
e2ecuted by 4illaflor 'E2h. \1) NA"C9R+ for the credit of the latter.
Atty. Dabriel 3anaag, resident counsel of NA:,:5 who is in a position to (now the facts,
testified for NA:,:5. =e described that it was he who notariFed the \Agreement to ell\
'E2h. \FR+@ that he (new about the e2ecution of the document of 8ecember $, )*1% 'E2h. \#%R+
confirming the said \Agreement to ellR having been previously consulted thereon by 0ose
FernandeF, who signed said document on behalf of NA:,:5 222 that subse!uently, in
0anuary )*1*, 4illaflor e2ecuted a 8eed of Assignment of credit in favor of Edward 0. Nell
Company 'E2h. \1) NA"C9R+ whereby 4illaflor ceded to the latter his receivable for
NA:,:5 corresponding to the remaining balance in the amount of 5welve 5housand 222
,esos of the total consideration 222 stipulated in both the \Agreement to ellR 'E2h. \FR+ and
the document dated 8ecember $, )*1% 'E2h. \#*R+@ 222. =e further testified that the said
assignment of credit was communicated to 'private respondent+ under cover letter dated
0anuary -1, )*1* 'E2h. \1)-AR+ and not long thereafter, by virtue of the said assignment of
credit, 'private respondent+ paid the balance of 5welve 5housand 222 due to 4illaflor to
Edward 0. Nell Company 222. Atty. 3anaagRs aforesaid testimony stand unrebutted@ hence,
must be given full weight and credit. 222 4illaflor and his counsel were present when Atty.
3anaagRs foregoing testimony was given. Iet, 4illaflor did not demur, nor did he rebut the
same, despite having been accorded full opportunity to do so.
222 222
222
=aving found that both the Five 5housand 222 consideration of the deed of 7elin!uishment
222 and that the remaining balance of 222 ',)-,;;;.;;+ to complete the 5wenty-Four
5housand ',-1,;;;.;;+ ,esos consideration of both the Agreement to ell dated 0uly $, )*1%,
and the document, dated 8ecember $, )*1%, e2ecuted by the former in favor of the latter, have
been paid 4illaflor the issue on prescription and laches becomes academic and needs no
further discussion.
3ut more than all the !uestions thus far raised and resolved is the !uestion whether a sales
patent can be issued to NA:,:5 for the )1;-hectare area awarded to it in the light of ection
)), Article K:4 of the new Constitution which provides in its pertinent portion to witA
\2 2 2 No private corporation or association may hold alienable land of the public domain
e2cept by lease not to e2ceed one thousand hectares in area 222.R
5he ecretary of 0ustice had previous occasion to rule on this point in his opinion No. )1;, s.
)*$1. aid the =onorable 0ustice ecretaryA
\9n the second !uestion, 'referring to the !uestions when may a public land be considered to
have been ac!uired by purchase before the effectivity of the new Constitution posed by the
8irector of "ands in his !uery on the effect on pending applications for the issuance of sales
patent in the light of ection )), Art. K:4 of the New Constitution aforecited+, you refer to
this 9fficeRs 9pinion No. &1 series of )*$# in which : statedA
9n the other hand, with respect to sales applications ready for issuance of sales patent, it is my
opinion that where the applicant had, before the Constitution too( effect, fully complied with
all this obligations under the ,ublic "and Act in order to entitle him to a ales patent, there
would be no legal or e!uitable justification for refusing to issue or release the sales patent.R
?ith respect to the point as to when the ales applicant has complied with all the terms and
conditions which would entitle him to a sales patent, the herein above ecretary of 0ustice
went onA
\5hat as to when the applicant has complied with all the terms and conditions which
would entitle him to a patent is a !uestioned 'sic+ fact which your office would be in the best
position to determine. =owever, relating this to the procedure for the processing of
applications mentioned above, : thin( that as the applicant has fulfilled the
construction6cultivation re!uirements and has fully paid the purchase price, he should be
deemed to have ac!uired by purchase the particular tract of land and 'sic+ the area 'sic+ in the
provision in !uestion of the new constitution would not apply.R
From the decision of the 8irector of "ands, 4illaflor filed a /otion for 7econsideration which
was considered as an Appeal /.N.7. Case 1#1), to the /inistry of Natural 7esources.
9n 0une &, )*$*, the /inister of Natural 7esources rendered a 8ecision 'e2h. *+,
B).C
dismissing
the appeal and affirming the decision of the 8irector of "ands, pertinent portions of which
readsA
\After a careful study of the records and the arguments of the parties, we believe that the
appeal is not well ta(en.
Firstly, the area in dispute is not the private property of appellant.
5he evidence adduced by appellant to establish his claim of ownership over the subject area
consists of deeds of absolute sale e2ecuted in his favor on 0anuary )&, and February )., )*1;,
by four '1+ different persons, namely, Cirilo ,iencenaves, Fermin 3alobo, Claudio 9tero and
=ermogenes ,atete.
=owever, an e2amination of the technical descriptions of the tracts of land subject of the deeds
of sale will disclose that said parcels are not identical to, and do not tally with, the area in
controversy.
\:t is a basic assumption of our policy that lands of whatever classification belong to the
state. Enless alienated in accordance with law, it retains its rights over the same as dominus,
'antiago vs. de los antos, "--;-1), November --, )*$1, &) C7A ).-+.
For, it is well-settled that no public land can be ac!uired by private persons without any grant,
e2press or implied from the government. :t is indispensable then that there be showing of title
from the state or any other mode of ac!uisition recogniFed by law.R '"ee =ong =o(, et al. vs.
8avid, et al., "-#;#%*, 8ecember -$, )*$-, 1% C7A #$*.+
:t is well-settled that all lands remain part of the public domain unless severed therefrom by
state grant or unless alienated in accordance with law.
?e, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing
evidence to establish that the contested area is of private ownership. =ence, the property must
be held to be public domain.
\5here being no evidence whatever that the property in !uestion was ever ac!uired by the
applicants or their ancestors either by composition title from the panish Dovernment or by
possessory information title or by any other means for the ac!uisition of public lands, the
property must be held to be public domain.R '"ee =ong =o(, et al., vs. 8avid , et al., "-#;#%*
8ecember -$, )*$-, 1% C7A #$%-#$* citing =eirs of 8atu ,endatun vs. 8irector of "ands@
see also 8irector of "ands vs. 7eyes, "--$.*1, November -%, )*$., &% C7A )$$+.
3e that as it may, appellant, by filing a sales application over the controverted land,
ac(nowledged une!uivocably BsicC that the same is not his private property.
\As such sales applicant, appellant manifestly ac(nowledged that he does not own the land and
that the same is a public land under the administration of the 3ureau of "ands, to which the
application was submitted, 222 All of its acts prior thereof, including its real estate ta2
declarations, characteriFed its possessions of the land as that of a \sales applicantR and
conse!uently, as one who e2pects to buy it, but has not as yet done so, and is not, therefore, its
owner.R ',alawan Agricultural and :ndustrial Co., :nc. vs. 8irector of "ands, "--.*)1, /arch
-), )*$-, 11 C7A -;, -)+.
econdly, appellantRs alleged failure to pay the consideration stipulated in the deed of
relin!uishment neither converts said deed into one without a cause or consideration nor ipso
facto rescinds the same. Appellant, though, has the right to demand payment with legal
interest for the delay or to demand rescission.
222 222
222
=owever, appellantRs cause of action, either for specific performance or rescission of contract,
with damages, lies within the jurisdiction of civil courts, not with administrative bodies.
222 222
222
"astly, appellee has ac!uired a vested right to the subject area and, therefore, is deemed not
affected by the new constitutional provision that no private corporation may hold alienable
land of the public domain e2cept by lease.
222 222
222
:mplementing the aforesaid 9pinion No. &1 of the ecretary of 0ustice, the then ecretary of
Agriculture and Natural 7esources issued a memorandum, dated February )%, )*$1, which
pertinently reads as followsA
\:n the implementation of the foregoing opinion, sales application of private individuals
covering areas in e2cess of -1 hectares and those of corporations, associations, or partnership
which fall under any of the following categories shall be given due course and issued patents,
to witA
). ales application for fishponds and for agricultural purposes 'FA, A and :D,A+
wherein prior to 0anuary )$, )*$#@
a. the land covered thereby was awarded@
b. cultivation re!uirements of law were complied with as shown by investigation reports
submitted prior to 0anuary )$, )*$#@
c. land was surveyed and survey returns already submitted to the 8irector of "ands for
verification and approval@ and
d. purchase price was fully paid.R
From the records, it is evident that the aforestated re!uisites have been complied with by
appellee long before 0anuary )$, )*$#, the effectivity of the New Constitution. 5o restate, the
disputed area was awarded to appellee on August )$, )*.;, the purchase price was fully paid
on 0uly -&, )*.), the cultivation re!uirements were complied with as per investigation report
dated 8ecember #), )*1*, and the land was surveyed under ,ls-*$.RT
9n 0uly &, )*$%, petitioner filed a complaint
B)&C
in the trial court for S8eclaration of
Nullity of Contract '8eed of 7elin!uishment of 7ights+, 7ecovery of ,ossession 'of two
parcels of land subject of the contract+, and 8amagesT at about the same time that he appealed
the decision of the /inister of Natural 7esources to the 9ffice of the ,resident.
9n 0anuary -%, )*%#, petitioner died. 5he trial court ordered his widow, "ourdes 8.
4illaflor, to be substituted as petitioner. After trial in due course, the then Court of First
:nstance of Agusan del Norte and 3utuan City, 3ranch :::,
B)$C
dismissed the complaint on the
grounds thatA ')+ petitioner admitted the due e2ecution and genuineness of the contract and
was estopped from proving its nullity, '-+ the verbal lease agreements were unenforceable
under Article )1;# '-+'e+ of the Civil Code, and '#+ his causes of action were barred by
e2tinctive prescription and6or laches. :t ruled that there was prescription and6or laches because
the alleged verbal lease ended in )*&&, but the action was filed only on 0anuary &, )*$%. 5he
si2-year period within which to file an action on an oral contract per Article ))1. ')+ of the
Civil Code e2pired in )*$-. 5he decretal portion
B)%C
of the trial courtRs decision readsA
S?=E7EF97E, the foregoing premises duly considered, judgment is hereby rendered in
favor of the defendant and against the plaintiff. Conse!uently, this case is hereby ordered
8:/:E8. 5he defendant is hereby declared the lawful actual physical possessor-occupant
and having a better right of possession over the two '-+ parcels of land in litigation described
in par. ).- of the complaint as ,arcel : and ,arcel ::, containing a total area of 9ne =undred
i2ty ')&;+ hectares, and was then the subject of the ales Application No. 4-%;$ of the
plaintiff 'E2hibits ), )-A, )-3, pp. 1-) to 1-)-A, 7ecord+, and now of the ales Application
No. %;$, Entry No. 4-1;$ of the defendant Nasipit "umber Company 'E2hibit I, pp. #.$-#.%,
7ecord+. 5he Agreements to ell 7eal 7ights, E2hibits - to --C, # to #-3, and the 8eed of
7elin!uishment of 7ights, E2hibits N to N-), over the two parcels of land in litigation are
hereby declared binding between the plaintiff and the defendant, their successors and assigns.
8ouble the costs against the plaintiff.T
5he heirs of petitioner appealed to 7espondent Court of Appeals
B)*C
which, however,
rendered judgment against petitioner via the assailed 8ecision dated eptember -$, )**;
finding petitionerRs prayers -- ')+ for the declaration of nullity of the deed of relin!uishment,
'-+ for the eviction of private respondent from the property and '#+ for the declaration
of petitionerRs heirs as owners N to be without basis. 5he decretal portion
B-;C
of the assailed
1*-page, single-spaced 8ecision curtly readsA
S?=E7EF97E, the 8ecision appealed from, is hereby AFF:7/E8, with costs against
plaintiff-appellants.T
Not satisfied, petitionerRs heirs filed the instant .$-page petition for review dated
8ecember $, )**;. :n a 7esolution dated 0une -#, )**), the Court denied this petition Sfor
being late.T 9n reconsideration -- upon plea of counsel that petitioners were SpoorT and that a
full decision on the merits should be rendered -- the Court reinstated the petition and re!uired
comment from private respondent. Eventually, the petition was granted due course and the
parties thus filed their respective memoranda.
T.e I11ue1
,etitioner, through his heirs, attributes the following errors to the Court of AppealsA
S:. Are the findings of the Court of Appeals conclusive and binding upon the upreme CourtO
::. Are the findings of the Court of Appeals fortified by the similar findings made by the
8irector of "ands and the /inister of Natural 7esources 'as well as by the 9ffice of the
,resident+O
:::. ?as there \forum shoppingOR
:4. Are the findings of facts of the Court of Appeals and the trial court supported by the
evidence and the lawO
4. Are the findings of the Court of Appeals supported by the very terms of the contracts
which were under consideration by the said courtO
4:. 8id the Court of Appeals, in construing the subject contracts, consider the
contemporaneous and subse!uent act of the parties pursuant to article )#$) of the Civil CodeO
4::. 8id the Court of Appeals consider the fact and the unrefuted claim of 4illaflor that he
never (new of the award in favor of NasipitO
4:::. 8id the Court of Appeals correctly apply the rules on evidence in its findings that
4illaflor was paid the ,.,;;;.;; consideration because 4illaflor did not adduce any proof that
he was not paidO
:K. :s the Court of Appeals\ conclusion that the contract is not simulated or fictitious simply
because it is genuine and duly e2ecuted by the parties, supported by logic or the lawO
K. /ay the prestations in a contract agreeing to transfer certain rights
constitute estoppel when this very contract is the subject of an action for annulment on the
ground that it is fictitiousO
K:. :s the Court of Appeals\ conclusion that the lease agreement between 4illaflor is verbal
and therefore, unenforceable supported by the evidence and the lawOT
After a review of the various submissions of the parties, particularly those of petitioner,
this Court believes and holds that the issues can be condensed into three as followsA
')+ 8id the Court of Appeals err in adopting or relying on the factual findings of the 3ureau
of "ands, especially those affirmed by the /inister 'now ecretary+ of Natural 7esources and
the trial courtO
'-+ 8id the Court of Appeals err in upholding the validity of the contracts to sell and the
deed of relin!uishmentO 9therwise stated, did the Court of Appeals err in finding the deed of
relin!uishment of rights and the contracts to sell valid, and not simulated or fictitiousO
'#+ :s the private respondent !ualified to ac!uire title over the disputed propertyO
T.e our0>1 Ru)3,4
5he petition is bereft of merit. :t basically !uestions the sufficiency of the evidence
relied upon by the Court of Appeals, alleging that public respondentRs factual findings were
based on speculations, surmises and conjectures. ,etitioner insists that a review of those
findings is in order because they were allegedly ')+ rooted, not on specific evidence, but on
conclusions and inferences of the 8irector of "ands which were, in turn, based on
misapprehension of the applicable law on simulated contracts@ '-+ arrived at whimsically --
totally ignoring the substantial and admitted fact that petitioner was not notified of the award
in favor of private respondent@ and '#+ grounded on errors and misapprehensions, particularly
those relating to the identity of the disputed area.
F3r10 I11ue: (rimary Jurisdiction of the 5irector of 6ands and Finality of Factual
Findings of the +ourt of *ppeals
Enderlying the rulings of the trial and appellate courts is the doctrine of primary
jurisdiction@ i.e.9 courts cannot and will not resolve a controversy involving a !uestion which
is within the jurisdiction of an administrative tribunal, especially where the !uestion demands
the e2ercise of sound administrative discretion re!uiring the special (nowledge, e2perience
and services of the administrative tribunal to determine technical and intricate matters of fact.
B-)C
:n recent years, it has been the jurisprudential trend to apply this doctrine to cases
involving matters that demand the special competence of administrative agencies even if the
!uestion involved is also judicial in character. :t applies Swhere a claim is originally
cogniFable in the courts, and comes into play whenever enforcement of the claim re!uires the
resolution of issues which, under a regulatory scheme, have been placed within the special
competence of an administrative body@ in such case, the judicial process is suspended pending
referral of such issues to the administrative body for its view.T
B--C
:n cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot
arrogate unto itself the authority to resolve a controversy, the jurisdiction over which is
initially lodged with an administrative body of special competence.
B-#C
:n Machete vs. *ourt of
%ppeals, the Court upheld the primary jurisdiction of the 8epartment of Agrarian 7eform
Adjudicatory 3oard '8A7A3+ in an agrarian dispute over the payment of bac( rentals under a
leasehold contract.
B-1C
:n *oncerned &fficials of the Metropolitan (aterwor2s and Sewerage
S!stem vs. Jas#ue@9
B-.C
the Court recogniFed that the /? was in the best position to
evaluate and to decide which bid for a waterwor(s project was compatible with its
development plan.
5he rationale underl!ing the doctrine of primary jurisdiction finds application in this
case, since the !uestions on the identity of the land in dispute and the factual !ualification of
private respondent as an awardee of a sales application re!uire a technical determination by
the 3ureau of "ands as the administrative agency with the e2pertise to determine such
matters. 3ecause these issues preclude prior judicial determination, it behooves the courts to
stand aside even when they apparently have statutory power to proceed, in recognition of the
primary jurisdiction of the administrative agency.
B-&C
S9ne thrust of the multiplication of administrative agencies is that the interpretation of
contracts and the determination of private rights thereunder is no longer a uni!uely judicial
function, e2ercisable only by our regular courtsT
B-$C
,etitioner initiated his action with a protest before the 3ureau of "ands and followed it
through in the /inistry of Natural 7esources and thereafter in the 9ffice of the
,resident. Consistent with the doctrine of primary jurisdiction, the trial and the appellate
courts had reason to rely on the findings of these specialiFed administrative bodies.
5he primary jurisdiction of the director of lands and the minister of natural resources
over the issues regarding the identity of the disputed land and the !ualification of an awardee
of a sales patent is established by ections # and 1 of Commonwealth Act No. )1), also
(nown as the ,ublic "and ActA
Section #. 5he ecretary of Agriculture and Commerce 'now ecretary of Natural 7esources+
shall be the e2ecutive officer charged with carrying out the provisions of this Act through the
8irector of "ands, who shall act under his immediate control.T
Section 1. ubject to said control, the 8irector of "ands shall have direct e2ecutive control of
the survey, classification, lease, sale or any other form of concession or disposition and
management of the lands of the public domain, and his decision as to !uestions of fact shall be
conclusive when approved by the ecretary of Agriculture and Commerce.T
5hus, the 8irector of "ands, in his decision, saidA
B-%C
S2 2 2 :t is merely whether or not 4illaflor has been paid the Five 5housand ',.,;;;.;;+ ,esos
stipulated consideration of the deed of relin!uishment made by him without touching on the
nature of the deed of relin!uishment. 5he administration and disposition of public lands is
primarily vested in the 8irector of "ands and ultimately with the ecretary of Agriculture and
Natural 7esources 'now ecretary of Natural 7esources+, and to this end--
\9ur upreme Court has recogniFed that the 8irector of "ands is a !uasi-judicial officer who
passes on issues of mi2ed facts and law '9rtua vs. 3ingson Encarnacion, .* ,hil
11;+. ections # and 1 of the ,ublic "and "aw thus mean that the ecretary of Agriculture
and Natural 7esources shall be the final arbiter on !uestions of fact in public land conflicts
'=eirs of 4arela vs. A!uino, $) ,hil &*@ 0ulian vs. Apostol, .- ,hil 11-+.\
5he ruling of this 9ffice in its order dated eptember );, )*$., is worth reiterating, thusA
\2 2 2 it is our opinion that in the e2ercise of his power of e2ecutive control, administrative
disposition and allegation of public land, the 8irector of "ands should entertain the protest of
4illaflor and conduct formal investigation 222 to determine the following pointsA 'a+ whether
or not the Nasipit "umber Company, :nc. paid or reimbursed to 4illaflor the consideration of
the rights in the amount of ,.,;;;.;; and what evidence the company has to prove payment,
the relin!uishment of rights being part of the administrative process in the disposition of the
land in !uestion 222.
2222 3esides, the authority of the 8irector of "ands to pass upon and determine !uestions
considered inherent in or essential to the efficient e2ercise of his powers li(e the incident at
issue, i.e. , whether 4illaflor had been paid or not, is conceded by law.\T
7eliance by the trial and the appellate courts on the factual findings of the 8irector of
"ands and the /inister of Natural 7esources is not misplaced. 3y reason of the special
(nowledge and e2pertise of said administrative agencies over matters falling under their
jurisdiction, they are in a better position to pass judgment thereon@ thus, their findings of fact
in that regard are generally accorded great respect, if not finality,
B-*C
by the courts.
B#;C
5he
findings of fact of an administrative agency must be respected as long as they are supported by
substantial evidence, even if such evidence might not be overwhelming or even
preponderant. :t is not the tas( of an appellate court to weigh once more the evidence
submitted before the administrative body and to substitute its own judgment for that of the
administrative agency in respect of sufficiency of evidence.
B#)C
=owever, the rule that factual findings of an administrative agency are accorded respect
and even finality by courts admits of e2ceptions. 5his is true also in assessing factual findings
of lower courts.
B#-C
:t is incumbent on the petitioner to show that the resolution of the factual
issues by the administrative agency and6or by the trial court falls under any of the
e2ceptions. 9therwise, this Court will not disturb such findings.
B##C
?e mention and !uote e2tensively from the rulings of the 3ureau of "ands and the
/inister of Natural 7esources because the points, !uestions and issues raised by petitioner
before the trial court, the appellate court and now before this Court are basically the same as
those brought up before the aforesaid specialiFed administrative agencies. As held by the
Court of AppealsA
B#1C
S?e find that the contentious points raised by appellant in this action, are substantially the
same matters he raised in 3" Claim No. %$# 'N+. :n both actions, he claimed private
ownership over the land in !uestion, assailed the validity and effectiveness of the 8eed of
7elin!uishment of 7ights he e2ecuted in August )&, )*.;, that he had not been paid
the ,.,;;;.;; consideration, the value of the improvements he introduced on the land and
other e2penses incurred by him.T
:n this instance, both the principle of primary jurisdiction of administrative agencies and
the doctrine of finality of factual findings of the trial courts, particularly when affirmed by the
Court of Appeals as in this case, militate against petitionerRs cause. :ndeed, petitioner has not
given us sufficient reason to deviate from them.
La,- 3, D317u0e I1 !ub)3/ La,-
,etitioner argues that even if the technical description in the deeds of sale and those in
the sales application were not identical, the area in dispute remains his private property. =e
alleges that the deeds did not contain any technical description, as they were e2ecuted prior to
the survey conducted by the 3ureau of "ands@ thus, the properties sold were merely described
by reference to natural boundaries. =is private ownership thereof was also allegedly attested
to by private respondentRs former field manager in the latterRs February --, )*.; letter, which
contained an admission that the land leased by private respondent was covered by the sales
application.
5his contention is specious. 5he lac( of technical description did not prove that the
finding of the 8irector of "ands lac(ed substantial evidence. =ere, the issue is not so much
whether the subject land is identical with the property purchased by petitioner. 5he issue,
rather, is whether the land covered by the sales application is private or public land. :n his
sales application, petitioner e2pressly admitted that said property was public land. 5his is
formidable evidence as it amounts to an admission against interest.
:n the e2ercise of his primary jurisdiction over the issue, 8irector of "ands Casanova
ruled that the land was publicA
B#.C
S2 2 2 Even 'o+n the assumption that the lands mentioned in the deeds of transfer are the same
as the )1;-hectare area awarded to Nasipit, their purchase by 4illaflor 'or+ the latterRs
occupation of the same did not change the character of the land from that of public land to a
private property. 5he provision of the law is specific that public lands can only be ac!uired in
the manner provided for therein and not otherwise 'ec. )), C.A. No. )1), as amended+. 5he
records show that 4illaflor had applied for the purchase of lands in !uestion with this 9ffice
'ales Application No. 4-%;$+ on 8ecember -, )*1%. 222 5here is a condition in the sales
application 222 to the effect that he recogniFes that the land covered by the same is of public
domain and any and all rights he may have with respect thereto by virtue of continuous
occupation and cultivation are relin!uished to the Dovernment 'paragraph &, ales Application
No. 4-%;$ of 4icente 0. 4illaflor, p. -), carpeta+ of which 4illaflor is very much aware. :t
also appears that 4illaflor had paid for the publication fees appurtenant to the sale of the
land. =e participated in the public auction where he was declared the successful bidder. =e
had fully paid the purchase prive 'sic+ thereor 'sic+. :t would be a 'sic+ height of absurdity for
4illaflor to be buying that which is owned by him if his claim of private ownership thereof is
to be believed. 222.T
5his finding was affirmed by the /inister of Natural 7esourcesA
B#&C
SFirstly, the area in dispute is not the private property of appellant 'herein petitioner+.
5he evidence adduced by 'petitioner+ to establish his claim of ownership over the subject area
consists of deeds of absolute sale e2ecuted in his favor 222.
=owever, an e2amination of the technical descriptions of the tracts of land subject of the deeds
of sale will disclose that said parcels are not identical to, and do not tally with, the area in
controversy.
\:t is a basic assumption of our policy that lands of whatever classification belong to the
state. Enless alienated in accordance with law, it retains its rights over the same as dominus.
'antiago vs. de los antos, "--;-1), November --, )*$1, &) C7A ).-+.
For it is well-settled that no public land can be ac!uired by private persons without any grant,
e2press or implied from the government. :t is indispensable then that there be showing of title
from the state or any other mode of ac!uisition recogniFed by law. '"ee =ong =o(, et al. vs.
8avid, et al., "-#;#%*, 8ecember -$, )*$-, 1% C7A #$*+.R
222 222
222 222
?e, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing
evidence to establish that the contested area is of private ownership. =ence, the property must
be held to be public domain.
\5here being no evidence whatever that the property in !uestion was ever ac!uired by the
applicants or their ancestors either by composition title from the panish Dovernment or by
possessory information title or by any other means for the ac!uisition of public lands, the
property must be held to be public domain.R
3e that as it may, BpetitionerC, by filing a sales application over the controverted land,
ac(nowledged une!uivocably BsicC that the same is not his private property.
\As such sales applicant manifestly ac(nowledged that he does not own the land and that the
same is a public land under the administration of the 3ureau of "ands, to which the
application was submitted, 222 All of its acts prior thereof, including its real estate ta2
declarations, characteriFed its possessions of the land as that of a \sales applicantR. And
conse!uently, as one who e2pects to buy it, but has not as yet done so, and is not, therefore, its
owner.R',alawan Agricultural and :ndustrial Co., :nc. vs. 8irector of "ands, "--.*)1, /arch
-), )*$-, 11 C7A ).+.T
Clearly, this issue falls under the primary jurisdiction of the 8irector of "ands because
its resolution re!uires Ssurvey, classification, 222 disposition and management of the lands of
the public domain.T :t follows that his rulings deserve great respect. As petitioner failed to
show that this factual finding of the 8irector of "ands was unsupported by substantial
evidence, it assumes finality. 5hus, both the trial and the appellate courts correctly relied on
such finding.
B#$C
?e can do no less.
Se/o,- I11ue% ;o &imulation of +ontracts (roven
,etitioner insists that contrary to Article )#$)
B#%C
of the Civil Code, 7espondent Court
erroneously ignored the contemporaneous and subse!uent acts of the parties@ hence, it failed
to ascertain their true intentions. =owever, the rule on the interpretation of contracts that was
alluded to by petitioner is used in affirming, not negating, their validity. 5hus, Article )#$#,
B#*C
which is a conjunct of Article )#$), provides that, if the instrument is susceptible of two or
more interpretations, the interpretation which will ma(e it valid and effectual should be
adopted. :n this light, it is not difficult to understand that the legal basis urged by petitioner
does not support his allegation that the contracts to sell and the deed of relin!uishment are
simulated and fictitious. ,roperly understood, such rules on interpretation even negate
petitionerRs thesis.
3ut let us indulge the petitioner awhile and determine whether the cited
contemporaneous and subse!uent acts of the parties support his allegation of
simulation. ,etitioner asserts that the relin!uishment of rights and the agreements to sell were
simulated because, first, the language and terms of said contracts negated private
respondentRs ac!uisition of ownership of the land in issue@ andsecond, contemporaneous and
subse!uent communications between him and private respondent allegedly showed that the
latter admitted that petitioner owned and occupied the two parcels@ i.e.9 that private respondent
was not applying for said parcels but was interested only in the two hectares it had leased, and
that private respondent supported petitionerRs application for a patent.
,etitioner e2plains that the Agreement to ell dated 8ecember $, )*1% did not and could
not transfer ownership because paragraph % 'c+ thereof stipulates that the Sbalance of twelve
thousand pesos ',)-,;;;.;;+ shall be paid upon the e2ecution by the First ,arty BpetitionerC of
the Absolute 8eed of ale of the two parcels of land in !uestion in favor of the econd ,arty,
and upon delivery to the econd ,arty Bprivate respondentC of the Certificate of 9wnership of
the said two parcels of land.T 5he mortgage provisions in paragraphs & and $ of the agreement
state that the ,$,;;;.;; and ,.,;;;.;; were Searnest money or a loan with antichresis by the
free occupancy and use given to Nasipit of the )1; hectares of land not anymore as a
lessee.T :f the agreement to sell transferred ownership to Nasipit, then why was it necessary to
re!uire petitioner, in a second agreement, to mortgage his property in the event of
nonfulfillment of the prestations in the first agreementO
5rue, the agreement to sell did not absolutely transfer ownership of the land to private
respondent. 5his fact, however, does not show that the agreement was simulated. ,etitionerRs
delivery of the Certificate of 9wnership and e2ecution of the deed of absolute sale were
suspensive conditions, which gave rise to a corresponding obligation on the part of the private
respondent, i.e.9 the payment of the last installment of the consideration mentioned in the
8ecember $, )*1% Agreement. uch conditions did not affect the perfection of the contract or
prove simulation. Neither did the mortgage.
imulation occurs when an apparent contract is a declaration of a fictitious will,
deliberately made by agreement of the parties, in order to produce, for the purpose of
deception, the appearance of a juridical act which does not e2ist or is different from that which
was really e2ecuted.
B1;C
uch an intention is not apparent in the agreements. 5he intent to sell,
on the other hand, is as clear as daylight.
,etitioner alleges further that the deed of relin!uishment of right did not give full effect
to the two agreements to sell, because the preliminary clauses of the deed allegedly served
only to give private respondent an interest in the property as a future owner thereof and to
enable respondent to follow up petitionerRs sales application.
?e disagree. uch an intention is not indicated in the deed. 9n the contrary, a real and
factual sale is evident in paragraph & thereof, which statesA S5hat the Nasipit "umber Co., :nc.,
222 is very much interested in ac!uiring the land covered by the aforecited application to be
used for purposes of mechaniFed farmingT and the penultimate paragraph statingA S222
4:CEN5E 0. 4:""AF"97, hereby voluntarily renounce and relin!uish whatever rights to,
and interests : have in the land covered by my above-mentioned application in favor of the
Nasipit "umber Co., :nc.T
?e also hold that no simulation is shown either in the letter, dated 8ecember #, )*$#, of
the former field manager of private respondent, Deorge /ear. A pertinent portion of the letter
readsA
S'a+s regards your property at Acacia, an /ateo, : recall that we made some sort of
agreement for the occupancy, but : no longer recall the details and : had forgotten whether or
not we actually did occupy your land. 3ut if, as you say, we did occupy it, then : am sure that
the Company is obligated to pay a rental.T
5he letter did not contain any e2press admission that private respondent was still leasing
the land from petitioner as of that date. According to /ear, he could no longer recall the
details of his agreement with petitioner. 5his cannot be read as evidence of the simulation of
either the deed of relin!uishment or the agreements to sell. :t is evidence merely of an honest
lac( of recollection.
,etitioner also alleges that he continued to pay realty ta2es on the land even after the
e2ecution of said contracts. 5his is immaterial because payment of realty ta2es does not
necessarily prove ownership, much less simulation of said contracts.
B1)C
;onpayment of the +onsideration
5id ;ot (rove &imulation
,etitioner insists that nonpayment of the consideration in the contracts proves their
simulation. ?e disagree. Nonpayment, at most, gives him only the right to sue for
collection. Denerally, in a contract of sale, payment of the price is a resolutory condition and
the remedy of the seller is to e2act fulfillment or, in case of a substantial breach, to rescind the
contract under Article ))*) of the Civil Code.
B1-C
=owever, failure to pay is not even a breach,
but merely an event which prevents the vendorRs obligation to convey title from ac!uiring
binding force.
B1#C
,etitioner also argues that 7espondent Court violated evidentiary rules in upholding the
ruling of the 8irector of "ands that petitioner did not present evidence to show private
respondentRs failure to pay him. ?e disagree. ,rior to the amendment of the rules on
evidence on /arch )1, )*%*, ection ), 7ule )#), states that each party must prove his or her
own affirmative allegations.
B11C
5hus, the burden of proof in any cause rested upon the party
who, as determined by the pleadings or the nature of the case, asserts the affirmative of an
issue and remains there until the termination of the action.
B1.C
Although nonpayment is a
negative fact which need not be proved, the party see(ing payment is still re!uired to prove
the e2istence of the debt and the fact that it is already due.
B1&C
,etitioner showed the e2istence of the obligation with the presentation of the contracts,
but did not present any evidence that he demanded payment from private respondent. 5he
demand letters dated 0anuary - and ., )*$1 'E2hs. S0T and SET+, adduced in evidence by
petitioner, were for the payment of bac( rentals, damages to improvements and reimbursement
of ac!uisition costs and realty ta2es, not payment arising from the contract to sell.
5hus, we cannot fault 7espondent Court for adopting the finding of the 8irector of
"ands that petitioner Soffered no evidence to support his claim of nonpayment beyond his own
self-serving assertions,T as he did not even demand Spayment, orally or in writing, of the five
thousand ',.,;;;.;;+ pesos which was supposed to be due him since August )$, )*.;, the
date when the order of award was issued to Nasipit, and when his cause of action to recover
payment had accrued.T Nonpayment of the consideration in the contracts to sell or the deed of
relin!uishment was raised for the first time in the protest filed with the 3ureau of "ands on
0anuary #), )*$1. 3ut this protest letter was not the demand letter re!uired by law.
,etitioner alleges that the assignment of credit and the letter of the former field manager
of private respondent are contemporaneous and subse!uent acts revealing the nonpayment of
the consideration. =e maintains that the ,)-,;;;.;; credit assigned pertains to the ,.,;;;.;;
and ,$,;;;.;; initial payments in the 8ecember $, )*1% Agreement, because the balance
of ,)-,;;;.;; was not yet Sdue and accruing.T 5his is consistent, he argues, with the
representation that private respondent was not interested in filing a sales application over the
land in issue and that Nasipit was instead supporting petitionerRs application thereto
in /earRs letter to the 8irector of "ands dated February --, )*.; 'E2h. SKT+.
B1$C
5his argument is too strained to be acceptable. 5he assignment of credit did not
establish the nondelivery of these initial payments of the total consideration. 0irst, the
assignment of credit happened on 0anuary )*, )*1*, or a month after the signing of the
8ecember $, )*1% Agreement and almost si2 months after the 0uly $, )*1% Agreement to
ell. Second, it does not overcome the recitation in the Agreement of 8ecember $,
)*1%A S222 a+ 5he amount of E4EN 5=9EAN8 ',$,;;;.;;+ ,E9 has already been
paid by the econd ,arty to the First ,arty upon the e2ecution of the Agreement to ell, on
0uly $, )*1%@ b+ 5he amount of F:4E 5=9EAN8 ',.,;;;.;;+ ,E9 shall be paid upon the
signing of this present agreement@ 222.T
Aside from these facts, the 8irector of "ands found evidence of greater weight showing
that payment was actually madeA
B1%C
S2 2 2 '5+here is strong evidence to show that said 222 ',)-,;;;.;;+ had been paid by
NA:,:5 to Edward 0. Nell Company by virtue of the 8eed of Assignment of Credit e2ecuted
by 4illaflor 'E2h. S1) NA"C9T+ for the credit of the latter.
Atty. Dabriel 3anaag, resident counsel of NA:,:5 222 declared that it was he who notariFed
the \Agreement to ellR 'E2h. SFT+@ 2222 that subse!uently, in 0anuary )*1*, 4illaflor
e2ecuted a 8eed of Assignment of credit in favor of Edward 0. Nell Company 'E2h. S1)
NA"C9T+ whereby 4illaflor ceded to the latter his receivable for NA:,:5 corresponding to
the remaining balance in the amount of 222 ',)-,;;;.;;+ 222 of the total consideration 2222@
=e further testified that the said assignment 222 was communicated to NA:,:5 under cover
letter dated 0anuary -1, )*1* 'E2h. S1)-AT+ and not long thereafter, by virtue of the said
assignment of credit, NA:,:5 paid the balance 222 to Edward 0. Nell Company 'p. .%,
bid+. Atty. 3anaagRs aforesaid testimony stand unrebutted@ hence, must be given full weight
and credit.
222 222
222.T
5he 8irector of "ands also found that there had been payment of the consideration in the
relin!uishment of rightsA
B1*C
S9n the other hand, there are strong and compelling reasons to presume that 4illaflor had
already been paid the amount of Five 5housand ',.,;;;.;;+ ,esos.
First, 2 2 2 ?hat is surprising, however, is not so much his claims consisting of gigantic
amounts as his having forgotten to adduce evidence to prove his claim of non-payment of the
Five 5housand ',.,;;;.;;+ ,esos during the investigation proceedings when he had all the
time and opportunity to do so. 2222 5he fact that he did not adduce or even attempt to adduce
evidence in support thereof shows either that he had no evidence to offer of that NA:,:5 had
already paid him in fact. ?hat is worse is that 4illaflor did not even bother to command
payment, orally or in writing, of the Five 5housand ',.,;;;.;;+ ,esos which was supposed to
be due him since August )$, )*.;, the date when the order of award was issued to Nasipit, and
when his cause of action to recover payment had accrued. 5he fact that he only made a
command for payment on 0anuary #), )*$1, when he filed his protest or twenty-four '-1+
years later is immediately nugatory of his claim for non-payment.
3ut 4illaflor maintains that he had no (nowledge or notice that the order of award had already
been issued to NA:,:5 as he had gone to :ndonesia and he had been absent from the
,hilippines during all those twenty-four '-1+ years. 5his of course ta2es credulity.2222
\ 2 2 2 :t is more in (eeping with the ordinary course of things that he should have ac!uired
information as to what was transpiring in his affairs in /anila 2 2 2.\
econd, it should be understood that the condition that NA:,:5 should reimburse 4illaflor
the amount of Five 5housand ',.,;;;.;;+ ,esos upon its receipt of the order of award was
fulfilled as said award was issued to NA:,:5 on August )$, )*.;. 5he said deed of
relin!uishment was prepared and notariFed in /anila with 4illaflor and NA:,:5 signing the
instrument also in /anila. Now, considering that 4illaflor is presumed to be more assiduous
in following up with the 3ureau of "ands the e2peditious issuance of the order of award as the
'consideration+ would depend on the issuance of said order to award NA:,:5, would it not be
reasonable to believe that 4illaflor was at hand when the award was issued to NA:,:5 on
August )$, )*.;, or barely a day which he e2ecuted the deed of relin!uishment on August )&,
)*.;, in /anilaO 2222.
5hird, on the other hand, NA:,:5 has in his possession a sort of SorderT upon itself -- 'the
deed of relin!uishment wherein he'sic+ obligated itself to reimburse or pay 4illaflor the 222
consideration of the relin!uishment upon its receipt of the order of award+ for the payment of
the aforesaid amount the moment the order of award is issued to it. :t is reasonable to presume
that NA:,:5 has paid the 'consideration+ to 4illaflor.
222 222
222
2 2 2 ':+t was virtually impossible for NA:,:5, after the lapse of the intervening -1 years, to
be able to cope up with all the records necessary to show that the consideration for the deed of
relin!uishment had been fully paid. 5o e2pect NA:,:5 to (eep intact all records pertinent to
the transaction for the whole !uarter of a century would be to re!uire what even the law does
not. :ndeed, even the applicable law itself 'ec. ##$, National :nternal 7evenue Code+
re!uires that all records of corporations be preserved for only a ma2imum of five years.
NA:,:5 may well have added that at any rate while there are transactions where the proper
evidence is impossible or e2tremely difficult to produce after the lapse of time 222 the law
creates presumptions of regularity in favor of such transactions '-; Am. 0ur. -#-+ so that when
the basic fact is established in an action the e2istence of the presumed fact must be assumed
by force of law. '7ule )#, Eniform 7ules of Evidence@ * ?igmore, ec. -1*)+.T
5he Court also notes that /earRs letter of February --, )*.; was sent si2 months prior
to the e2ecution of the deed of relin!uishment of right. At the time of its writing, private
respondent had not perfected its ownership of the land to be able to !ualify as a sales
applicant. 3esides, although he was a party to the 0uly $, )*1% Agreement to ell, /ear was
not a signatory to the 8eed of 7elin!uishment or to the 8ecember $, )*1% Agreement to
ell. 5hus, he cannot be e2pected to (now the e2istence of and the amendments to the later
contracts. 5hese circumstances e2plain the mista(en representations, not misrepresentations,
in said letter.
6acB of ;otice of the *ward
,etitioner insists that private respondent suppressed evidence, pointing to his not having
been notified of the 9rder of Award dated August )$, )*.;.
B.;C
At the bottom of page - of the
order, petitioner was not listed as one of the parties who were to be furnished a copy by
8irector of "ands 0ose ,. 8ans. ,etitioner also posits that ,ublic "and :nspector ulpicio A.
5aeFa irregularly received the copies for both private respondent and the city treasurer of
3utuan City. 5he lac( of notice for petitioner can be easily e2plained. ,lainly, petitioner was
not entitled to said notice of award from the 8irector of "ands, because by then, he had
already relin!uished his rights to the disputed land in favor of private respondent. :n the
heading of the order, he was referred to as sales applicant-assignor. :n paragraph number 1,
the order stated that, on August )&, )*.;, he relin!uished his rights to the land subject of the
award to private respondent. From such date, the sales application was considered to be a
matter between the 3ureau of "ands and private respondent only. Considering these facts, the
failure to give petitioner a copy of the notice of the award cannot be considered as suppression
of evidence.
B.)C
Furthermore, this order was in fact available to petitioner and had been referred
to by him since 0anuary #), )*$1 when he filed his protest with the 3ureau of "ands.
B.-C
T.3r- I11ue% (rivate 4espondent Kualified
for an *ward of (ublic 6and
,etitioner asserts that private respondent was legally dis!ualified from ac!uiring the
parcels of land in !uestion because it was not authoriFed by its charter to ac!uire disposable
public agricultural lands under ections )-), )-- and )-# of the ,ublic "and Act, prior to its
amendment by ,.8. No. $&#. ?e disagree. 5he re!uirements for a sales application under the
,ublic "and Act areA ')+ the possession of the !ualifications re!uired by said Act 'under
ection -*+ and '-+ the lac( of the dis!ualifications mentioned therein 'under ections )-),
)--, and )-#+. =owever, the transfer of ownership via the two agreements dated 0uly $ and
8ecember $, )*1% and the relin!uishment of rights, being private contracts, were binding only
between petitioner and private respondent. 5he ,ublic "and Act finds no relevance because
the disputed land was covered by said Act only after the issuance of the order of award in
favor of private respondent. 5hus, the possession of any dis!ualification by private
respondent under said Act is immaterial to the private contracts between the parties
thereto. '?e are not, however, suggesting a departure from the rule that laws are deemed
written in contracts.+ Consideration of said provisions of the Act will further show their
inapplicability to these contracts. ection )-) of the Act pertains to ac!uisitions of public land
by a corporation from a grantee, but petitioner never became a grantee of the disputed
land. 9n the other hand, private respondent itself was the direct grantee. ections )-- and
)-# dis!ualify corporations, which are not authoriFed by their charter, from ac!uiring public
land@ the records do not show that private respondent was not so authoriFed under its charter.
Also, the determination by the 8irector of "ands and the /inister of Natural 7esources
of the !ualification of private respondent to become an awardee or grantee under the Act is
persuasive on 7espondent Court. :n :spinosa vs. Ma2alintal,
B.#C
the Court ruled that, by law,
the powers of the ecretary of Agriculture and Natural 7esources regarding the disposition of
public lands -- including the approval, rejection, and reinstatement of applications N are of
e2ecutive and administrative nature. 'uch powers, however, do not include the judicial
power to decide controversies arising from disagreements in civil or contractual relations
between the litigants.+ Conse!uently, the determination of whether private respondent is
!ualified to become an awardee of public land under C.A. )1) by sales application is included
therein.
All told, the only dis!ualification that can be imputed to private respondent is the
prohibition in the )*$# Constitution against the holding of alienable lands of the public
domain by corporations.
B.1C
=owever, this Court earlier settled the matter, ruling that said
constitutional prohibition had no retroactive effect and could not prevail over a vested right to
the land. :n %!og vs. *usi9 Jr.9
B..C
this Court declaredA
S?e hold that the said constitutional prohibition has no retroactive application to the sales
application of 3iGan 8evelopment Co., :nc. because it had already ac!uired a vested right to
the land applied for at the time the )*$# Constitution too( effect.
5hat vested right has to be respected. :t could not be abrogated by the new
Constitution. ection -, Article K::: of the )*#. Constitution allows private corporations to
purchase public agricultural lands not e2ceeding one thousand and twenty-four
hectares. ,etitionerRs prohibition action is barred by the doctrine of vested rights in
constitutional law.
\A right is vested when the right to enjoyment has become the property of some particular
person or persons as a present interest.R ')& C.0.. ))$#+. :t is \the privilege to enjoy property
legally vested, to enforce contracts, and enjoy the rights of property conferred by e2isting lawR
')- C.0. *.., Note 1&, No. &+ or \some right or interest in property which has become fi2ed
and established and is no longer open to doubt or controversyR '8owns vs. 3lount, )$; Fed.
)., -;, cited in 3alboa vs. Farrales, .) ,hil. 1*%, .;-+.
5he due process clause prohibits the annihilation of vested rights. \A state may not impair
vested rights by legislative enactment, by the enactment or by the subse!uent repeal of a
municipal ordinance, or by a change in the constitution of the tate, e2cept in a legitimate
e2ercise of the police powerR ')& C.0.. ))$$-$%+.
:t has been observed that, generally, the term \vested rightR e2presses the concept of present
fi2ed interest, which in right reason and natural justice should be protected against arbitrary
tate action, or an innately just an imperative right which an enlightened free society, sensitive
to inherent and irrefragable individual rights, cannot deny ')& C.0.. ))$1, Note $), No. .,
citing ,ennsylvania Dreyhound "ines, :nc. vs. 7osenthal, )*- Atl. -
nd
.%$+.
ecretary of 0ustice Abad antos in his )*$# opinion ruled that where the applicant, before the
Constitution too( effect, had fully complied with all his obligations under the ,ublic "and Act
in order to entitle him to a sales patent, there would seem to be no legal or e!uitable
justification for refusing to issue or release the sales patent 'p. -.1, 7ollo+.
:n 9pinion No. )1;, series of )*$1, he held that as soon as the applicant had fulfilled the
construction or cultivation re!uirements and has fully paid the purchase price, he should be
deemed to have ac!uired by purchase the particular tract of land and to him the area limitation
in the new Constitution would not apply.
:n 9pinion No. )%., series of )*$&, ecretary Abad antos held that where the cultivation
re!uirements were fulfilled before the new Constitution too( effect but the full payment of the
price was completed after 0anuary )$, )*$#, the applicant was, nevertheless, entitled to a sales
patent 'p. -.&, 7ollo+.
uch a contemporaneous construction of the constitutional prohibition by a high e2ecutive
official carries great weight and should be accorded much respect. :t is a correct interpretation
of section )) of Article K:4.
:n the instant case, it is incontestable that prior to the effectivity of the )*$# Constitution the
right of the corporation to purchase the land in !uestion had become fi2ed and established and
was no longer open to doubt or controversy.
:ts compliance with the re!uirements of the ,ublic "and "aw for the issuance of a patent had
the effect of segregating the said land from the public domain. 5he corporationRs right to
obtain a patent for that land is protected by law. :t cannot be deprived of that right without
due process '8irector of "ands vs. CA, )-# ,hil. *)*+.T
5he /inister of Natural 7esources ruled, and we agree, that private respondent was
similarly !ualified to become an awardee of the disputed land because its rights to it vested
prior to the effectivity of the )*$# ConstitutionA
B.&C
S"astly, appellee has ac!uired a vested right to the subject area and, therefore, is deemed not
affected by the new constitutional provision that no private corporation may hold alienable
land of the public domain e2cept by lease.
:t may be recalled that the ecretary of 0ustice in his 9pinion No. &1, series of )*$#, had
declared, to witA
\9n the other hand, with respect to sales application ready for issuance of sales patent, it is my
opinion that where the applicant had, before, the constitution too( effect, fully complied with
all his obligations under the ,ublic "and act in order to entitle him to sales patent, there would
seem to be not legal or e!uitable justification for refusing to issue or release the sales patent.R
:mplementing the aforesaid 9pinion No. &1 222, the then ecretary of Agriculture and Natural
7esources issued a memorandum, dated February )%, )*$1, which pertinently reads as
followsA
\:n the implementation of the foregoing opinion, sales application of private individuals
covering areas in e2cess of -1 hectares and those of corporations, associations, or partnership
which fall under any of the following categories shall be given due course and issued patents,
to witA
ales application for fishponds and for agricultural purposes 'FA, A and :D,A+ wherein
prior to 0anuary )$, )*$#,
a. the land covered thereby was awarded@
b. cultivation re!uirements of law were complied with as shown by investigation reports
submitted prior to 0anuary )$, )*$#@
c. land was surveyed and survey returns already submitted to the 8irector of "ands for
verification and approval@ and
d. purchase price was fully paid.\
From the records, it is evident that the aforestated re!uisites have been complied with by
appellee long before 0anuary )$, )*$#, the effectivity of the New Constitution. 5o restate, the
disputed area was awarded to appellee on August )$, )*.;, the purchase price was fully paid
on 0uly -&, )*.), the cultivation re!uirements were complied with as per investigation report
dated 8ecember #), )*1*, and the land was surveyed under ,ls-*$.T
5he same finding was earlier made by the 8irector of "andsA
B.$C
S:t is further contended by 4illaflor that Nasipit has no juridical personality to apply for the
purchase of public lands for agricultural purposes. 5he records clearly show, however, that
since the e2ecution of the deed of relin!uishment of August )&, )*.;, in favor of Nasipit,
4illaflor has always considered and recogniFed Nasipit as having the juridical personality to
ac!uire public lands for agricultural purposes. :n the deed of relin!uishment 222, it is statedA
\&. 5hat the Nasipit "umber Co., :nc., a corporation duly organiFed in accordance with the
laws of the ,hilippines, 2 2 2.R
Even this 9ffice had not failed to recogniFe the juridical personality of Nasipit to apply for the
purchase of public lands 222 when it awarded to it the land so relin!uished by 4illaflor '9rder
of Award dated August )$, )*.;+ and accepted its application therefor. At any rate, the
!uestion whether an applicant is !ualified to apply for the ac!uisition of public lands is a
matter between the applicant and this 9ffice to decide and which a third party li(e 4illaflor
has no personality to !uestion beyond merely calling the attention of this 9ffice thereto.T
Needless to say, we also agree that the November %, )*1& "ease Agreement between
petitioner and private respondent had been terminated by the agreements to sell and the
relin!uishment of rights. 3y the time the verbal leases were allegedly made in )*.) and )*..,
B.%C
the disputed land had already been ac!uired and awarded to private respondent. :n any
event, petitionerRs cause of action on these alleged lease agreements prescribed long before he
filed Civil Case No. -;$--:::, as correctly found by the trial and appellate courts.
B.*C
5hus, it is
no longer important, in this case, to pass upon the issue of whether or not amendments to a
lease contract can be proven by parol evidence. 5he same holds true as regards the issue of
forum-shopping.
All in all, petitioner has not provided us sufficient reason to disturb the cogent findings
of the 8irector of "ands, the /inister of Natural 7esources, the trial court and the Court of
Appeals.
9*EREFORE, the petition is hereby "SM"SS:.
9 978E7E8.
:G.R. No. 1111'7. (a,uary 1', 1997=
LEONARDO A. !AAT, 3, .31 /a7a/30y a1 OEE3/er-3,-.ar4e COID, Re43o,a) EGe/u03Fe
D3re/0or CREDD, Re43o, 2 a,- (OVITO LA+"GAN, (R., 3, .31 /a7a/30y a1
o<<u,30y E,F3ro,<e,0 a,- Na0ura) Re1our/e1 OEE3/er CENROD, bo0. oE
0.e De7ar0<e,0 oE E,F3ro,<e,0 a,- Na0ura) Re1our/e1 CDENRD,petitioners. vs.
O"RT OF A!!EALS, *ON. RIARDO A. #A"LI 3, .31 /a7a/30y a1
!re13-3,4 (u-4e oE #ra,/. 2, Re43o,a) Tr3a) our0 a0 Tu4ue4arao, a4aya,,
a,- S!O"SES #IENVENIDO a,- VITORIA DE G"$MAN, respondents.
D E I S I O N
TORRES, (R., J.%
?ithout violating the principle of e2haustion of administrative remedies, may an action
for replevin prosper to recover a movable property which is the subject matter of an
administrative forfeiture proceeding in the 8epartment of Environment and Natural 7esources
pursuant to ection &%-A of ,. 8. $;., as amended, entitled 5he 7evised Forestry Code of the
,hilippinesO
Are the ecretary of 8EN7 and his representatives empowered to confiscate and forfeit
conveyances used in transporting illegal forest products in favor of the governmentO
5hese are two fundamental !uestions presented before us for our resolution.
5he controversy on hand had its incipiency on /ay )*, )*%* when the truc( of private
respondent 4ictoria de DuFman while on its way to 3ulacan from an 0ose, 3aggao, Cagayan,
was seiFed by the 8epartment of Environment and Natural 7esources '8EN7, for brevity+
personnel in Aritao, Nueva 4iFcaya because the driver could not produce the re!uired
documents for the forest products found concealed in the truc(. ,etitioner 0ovito "ayugan, the
Community Environment and Natural 7esources 9fficer 'CEN79+ in Aritao, Cagayan, issued
on /ay -#, )*%* an order of confiscation of the truc( and gave the owner thereof fifteen ').+
days within which to submit an e2planation why the truc( should not be forfeited. ,rivate
respondents, however, failed to submit the re!uired e2planation. 9n 0une --, )*%*,
B)C
7egional E2ecutive 8irector 7ogelio 3aggayan of 8EN7 sustained petitioner "ayuganRs
action of confiscation and ordered the forfeiture of the truc( invo(ing ection &%-A of
,residential 8ecree No. $;. as amended by E2ecutive 9rder No. -$$. ,rivate respondents
filed a letter of reconsideration dated 0une -%, )*%* of the 0une --, )*%* order of E2ecutive
8irector 3aggayan, which was, however, denied in a subse!uent order of 0uly )-, )*%*.
B-C
ubse!uently, the case was brought by the petitioners to the ecretary of 8EN7 pursuant to
private respondentsR statement in their letter dated 0une -%, )*%* that in case their letter for
reconsideration would be denied then Sthis letter should be considered as an appeal to the
ecretary.T
B#C
,ending resolution however of the appeal, a suit for replevin, doc(eted as Civil
Case 1;#), was filed by the private respondents against petitioner "ayugan and E2ecutive
8irector 3aggayan
B1C
with the 7egional 5rial Court, 3ranch - of Cagayan,
B.C
which issued a
writ ordering the return of the truc( to private respondents.
B&C
,etitioner "ayugan and
E2ecutive 8irector 3aggayan filed a motion to dismiss with the trial court contending, inter
alia, that private respondents had no cause of action for their failure to e2haust administrative
remedies. 5he trial court denied the motion to dismiss in an order dated 8ecember -%, )*%*.
B$C
5heir motion for reconsideration having been li(ewise denied, a petition for certiorari was
filed by the petitioners with the respondent Court of Appeals which sustained the trial courtRs
order ruling that the !uestion involved is purely a legal !uestion.
B%C
=ence, this present petition,
B*C
with prayer for temporary restraining order and6or preliminary injunction, see(ing to reverse
the decision of the respondent Court of Appeals was filed by the petitioners on eptember *,
)**#. 3y virtue of the 7esolution dated eptember -$, )**#,
B);C
the prayer for the issuance of
temporary restraining order of petitioners was granted by this Court.
:nvo(ing the doctrine of e2haustion of administrative remedies, petitioners aver that the
trial court could not legally entertain the suit for replevin because the truc( was under
administrative seiFure proceedings pursuant to ection &%-A of ,.8. $;., as amended by E.9.
-$$. ,rivate respondents, on the other hand, would see( to avoid the operation of this principle
asserting that the instant case falls within the e2ception of the doctrine upon the justification
that ')+ due process was violated because they were not given the chance to be heard, and '-+
the seiFure and forfeiture was unlawful on the groundsA 'a+ that the ecretary of 8EN7 and
his representatives have no authority to confiscate and forfeit conveyances utiliFed in
transporting illegal forest products, and 'b+ that the truc( as admitted by petitioners was not
used in the commission of the crime.
Epon a thorough and delicate scrutiny of the records and relevant jurisprudence on the
matter, we are of the opinion that the plea of petitioners for reversal is in order.
5his Court in a long line of cases has consistently held that before a party is allowed to
see( the intervention of the court, it is a pre-condition that he should have availed of all the
means of administrative processes afforded him. =ence, if a remedy within the administrative
machinery can still be resorted to by giving the administrative officer concerned every
opportunity to decide on a matter that comes within his jurisdiction then such remedy should
be e2hausted first before courtRs judicial power can be sought. 5he premature invocation of
courtRs intervention is fatal to oneRs cause of action.
B))C
Accordingly, absent any finding of
waiver or estoppel the case is susceptible of dismissal for lac( of cause of action.
B)-C
5his
doctrine of e2haustion of administrative remedies was not without its practical and legal
reasons, for one thing, availment of administrative remedy entails lesser e2penses and
provides for a speedier disposition of controversies. :t is no less true to state that the courts of
justice for reasons of comity and convenience will shy away from a dispute until the system of
administrative redress has been completed and complied with so as to give the administrative
agency concerned every opportunity to correct its error and to dispose of the case. =owever,
we are not amiss to reiterate that the principle of e2haustion of administrative remedies as
tested by a battery of cases is not an ironclad rule. 5his doctrine is a relative one and its
fle2ibility is called upon by the peculiarity and uni!ueness of the factual and circumstantial
settings of a case. =ence, it is disregarded ')+ when there is a violation of due process,
B)#C
'-+
when the issue involved is purely a legal !uestion,
B)1C
'#+ when the administrative action is
patently illegal amounting to lac( or e2cess of jurisdiction,
B).C
'1+ when there is estoppel on the
part of the administrative agency concerned,
B)&C
'.+ when there is irreparable injury,
B)$C
'&+
when the respondent is a department secretary whose acts as an alter ego of the ,resident bears
the implied and assumed approval of the latter,
B)%C
'$+ when to re!uire e2haustion of
administrative remedies would be unreasonable,
B)*C
'%+ when it would amount to a nullification
of a claim,
B-;C
'*+ when the subject matter is a private land in land case proceedings,
B-)C
');+
when the rule does not provide a plain, speedy and ade!uate remedy, and '))+ when there are
circumstances indicating the urgency of judicial intervention.
B--C
:n the case at bar, there is no !uestion that the controversy was pending before the
ecretary of 8EN7 when it was forwarded to him following the denial by the petitioners of
the motion for reconsideration of private respondents through the order of 0uly )-, )*%*. :n
their letter of reconsideration dated 0une -%, )*%*,
B-#C
private respondents clearly recogniFe the
presence of an administrative forum to which they see( to avail, as they did avail, in the
resolution of their case. 5he letter, reads, thusA
S222
:f this motion for reconsideration does not merit your favorable action, then this letter should
be considered as an appeal to the ecretary.T
B-1C
:t was easy to perceive then that the private respondents loo(ed up to the ecretary for
the review and disposition of their case. 3y appealing to him, they ac(nowledged the
e2istence of an ade!uate and plain remedy still available and open to them in the ordinary
course of the law. 5hus, they cannot now, without violating the principle of e2haustion of
administrative remedies, see( courtRs intervention by filing an action for replevin for the grant
of their relief during the pendency of an administrative proceedings.
/oreover, it is important to point out that the enforcement of forestry laws, rules and
regulations and the protection, development and management of forest lands fall within the
primary and special responsibilities of the 8epartment of Environment and Natural 7esources.
3y the very nature of its function, the 8EN7 should be given a free hand unperturbed by
judicial intrusion to determine a controversy which is well within its jurisdiction. 5he
assumption by the trial court, therefore, of the replevin suit filed by private respondents
constitutes an unjustified encroachment into the domain of the administrative agencyRs
prerogative. 5he doctrine of primary jurisdiction does not warrant a court to arrogate unto
itself the authority to resolve a controversy the jurisdiction over which is initially lodged with
an administrative body of special competence.
B-.C
:n Felipe :smael, 0r. and Co. vs. 8eputy
E2ecutive ecretary,
B-&C
which was reiterated in the recent case of Concerned 9fficials of
/? vs. 4as!ueF,
B-$C
this Court heldA
S5hus, while the administration grapples with the comple2 and multifarious problems caused
by unbriddled e2ploitation of these resources, the judiciary will stand clear. A long line of
cases establish the basic rule that the courts will not interfere in matters which are addressed to
the sound discretion of government agencies entrusted with the regulation of activities coming
under the special technical (nowledge and training of such agencies.T
5o sustain the claim of private respondents would in effect bring the instant controversy
beyond the pale of the principle of e2haustion of administrative remedies and fall within the
ambit of e2cepted cases heretofore stated. =owever, considering the circumstances prevailing
in this case, we can not but rule out these assertions of private respondents to be without
merit. First, they argued that there was violation of due process because they did not receive
the /ay -#, )*%* order of confiscation of petitioner "ayugan. 5his contention has no leg to
stand on. 8ue process does not necessarily mean or re!uire a hearing, but simply an
opportunity or right to be heard.
B-%C
9ne may be heard , not solely by verbal presentation but
also, and perhaps many times more creditably and practicable than oral argument, through
pleadings.
B-*C
:n administrative proceedings moreover, technical rules of procedure and
evidence are not strictly applied@ administrative process cannot be fully e!uated with due
process in its strict judicial sense.
B#;C
:ndeed, deprivation of due process cannot be successfully
invo(ed where a party was given the chance to be heard on his motion for reconsideration,
B#)C
as in the instant case, when private respondents were undisputedly given the opportunity to
present their side when they filed a letter of reconsideration dated 0une -%, )*%* which was,
however, denied in an order of 0uly )-, )*%* of E2ecutive 8irector 3aggayan. :n Navarro :::
vs. 8amasco,
B#-C
we ruled that A
S5he essence of due process is simply an opportunity to be heard, or as applied to
administrative proceedings, an opportunity to e2plain oneRs side or an opportunity to see( a
reconsideration of the action or ruling complained of. A formal or trial type hearing is not at
all times and in all instances essential. 5he re!uirements are satisfied when the parties are
afforded fair and reasonable opportunity to e2plain their side of the controversy at hand. ?hat
is frowned upon is the absolute lac( of notice or hearing.T
econd, private respondents imputed the patent illegality of seiFure and forfeiture of the
truc( because the administrative officers of the 8EN7 allegedly have no power to perform
these acts under the law. 5hey insisted that only the court is authoriFed to confiscate and
forfeit conveyances used in transporting illegal forest products as can be gleaned from the
second paragraph of ection &% of ,.8. $;., as amended by E.9. -$$. 5he pertinent provision
reads as followsA
SEC5:9N &%. 222
222
5he court shall further order the confiscation in favor of the government of the timber or any
forest products cut, gathered, collected, removed, or possessed, as well as the machinery,
e!uipments, implements and tools illegaly BsicC used in the area where the timber or forest
products are found.T 'Enderline ours+
A reading, however, of the law persuades us not to go along with private respondentsR
thin(ing not only because the afore!uoted provision apparently does not mention nor include
SconveyancesT that can be the subject of confiscation by the courts, but to a large e2tent, due
to the fact that private respondentsR interpretation of the subject provision unduly restricts the
clear intention of the law and inevitably reduces the other provision of ection &%-A , which
is !uoted herein belowA
SEC5:9N &%-A. %dministrative %uthorit! of the epartment or 1is ul! %uthori@ed
Representative $o &rder *onfiscation. :n all cases of violation of this Code or other forest
laws, rules and regulations, the 8epartment =ead or his duly authoriFed representative ,
may order the confiscation of any forest products illegally cut, gathered, removed, or
possessed or abandoned, and all conveyances used either by land, water or air in the
commission of the offense and to dispose of the same in accordance with pertinent laws,
regulations and policies on the matter.T 'Enderline ours+
:t is, thus, clear from the foregoing provision that the ecretary and his duly authoriFed
representatives are given the authority to confiscate and forfeit any conveyances utiliFed in
violating the Code or other forest laws, rules and regulations. 5he phrase Sto dispose of the
sameT is broad enough to cover the act of forfeiting conveyances in favor of the government.
5he only limitation is that it should be made Sin accordance with pertinent laws, regulations or
policies on the matter.T :n the construction of statutes, it must be read in such a way as to give
effect to the purpose projected in the statute.
B##C
tatutes should be construed in the light of the
object to be achieved and the evil or mischief to be suppressed, and they should be given such
construction as will advance the object, suppress the mischief, and secure the benefits
intended.
B#1C
:n this wise, the observation of the olicitor Deneral is significant, thusA
S3ut precisely because of the need to ma(e forestry laws \more responsive to present
situations and realitiesR and in view of the \urgency to conserve the remaining resources of the
country,R that the government opted to add ection &%-A. 5his amendatory provision is
an administrative remedy totally separate and distinct from criminal proceedings. /ore than
anything else, it is intended to supplant the inade!uacies that characteriFe enforcement of
forestry laws through criminal actions. 5he preamble of E9 -$$-the law that added ection
&%-A to ,8 $;.-is most revealingA
\?=E7EA, there is an urgency to conserve the remaining forest resources of the country for
the benefit and welfare of the present and future generations of Filipinos@
?=E7EA, our forest resources may be effectively conserved and protected through the
vigilant enforcement and implementation of our forestry laws, rules and regulations@
?=E7EA, the implementation of our forestry laws suffers from technical difficulties, due to
certain inade!uacies in the penal provisions of the 7evised Forestry Code of the
,hilippines@ and
?=E7EA, to overcome this difficulties, there is a need to penaliFe certain acts more
responsive to present situations and realities@R
:t is interesting to note that ection &%-A is a new provision authoriFing the 8EN7 to
confiscate, not only \conveyances,R but forest products as well. 9n the other
hand, confiscation of forest products by the \courtR in a criminal action has long been provided
for in ection &%. :f as private respondents insist, the power on confiscation cannot be
e2ercised e2cept only through the court under ection &%, then ection &%-A would have no
purpose at all. imply put, ection &%-A would not have provided any solution to the problem
perceived in E9 -$$, supra.T
B#.C
,rivate respondents, li(ewise, contend that the seiFure was illegal because the petitioners
themselves admitted in the 9rder dated 0uly )-, )*%* of E2ecutive 8irector 3aggayan that the
truc( of private respondents was not used in the commission of the crime. 5his order, a copy
of which was given to and received by the counsel of private respondents, reads in part , vi@. A
S222 while it is true that the truc( of your client was not used by her in the commission of the
crime, we uphold your claim that the truc( owner is not liable for the crime and in no case
could a criminal case be filed against her as provided under Article #;* and #); of the
7evised ,enal Code. 222T
B#&C
?e observed that private respondents misread the content of the aforestated order and
obviously misinterpreted the intention of petitioners. ?hat is contemplated by the petitioners
when they stated that the truc( >was not used in the commission of the crime> is that it was not
used in the commission of the crime of theft, hence, in no case can a criminal action be filed
against the owner thereof for violation of Article #;* and #); of the 7evised ,enal Code.
,etitioners did not eliminate the possibility that the truc( was being used in the commission of
another crime, that is, the breach of ection &% of ,.8.$;. as amended by E.9. -$$. :n the
same order of 0uly )-, )*%*, petitioners pointed out%
S222 =owever, under ection &% of ,.8.$;. as amended and further amended by E2ecutive
9rder No.-$$ specifically provides for the confiscation of the conveyance used in the
transport of forest products not covered by the re!uired legal documents. he may not have
been involved in the cutting and gathering of the product in !uestion but the fact that she
accepted the goods for a fee or fare the same is therefor liable. 222T
B#$C
,rivate respondents, however, contended that there is no crime defined and punishable
under ection &% other than !ualified theft, so that, when petitioners admitted in the 0uly )-,
)*%* order that private respondents could not be charged for theft as provided for under
Articles #;* and #); of the 7evised ,enal Code, then necessarily private respondents could
not have committed an act constituting a crime under ection &%. ?e disagree. For clarity,
the provision of ection &% of ,.8. $;. before its amendment by E.9. -$$ and the provision of
ection ) of E.9. No.-$$ amending the aforementioned ection &% are reproduced herein,
thusA
SEC5:9N &%. *utting9 gathering andUor collecting timber or other products without license.
8 Any person who shall cut , gather , collect , or remove timber or other forest products from
any forest land, or timber from alienable and disposable public lands, or from private lands,
without any authority under a license agreement, lease, license or permit, shall be guilty of
!ualified theft as defined and punished under Articles #;* and #); of the 7evised ,enal Code
222.T 'Enderscoring ours@ ection &%, ,.8.$;. before its amendment by E.9.-$$ +
SEC5:9N ). ection &% of ,residential 8ecree No.$;., as amended, is hereby amended to
read as followsA
\ection &%. *utting9 gathering andUor collecting timber or other forest products without
license. 8Any person who shall cut, gather, collect, remove timber or other forest products
from any forest land, or timber from alienable or disposable public land, or from private land,
without any authority, or possess timber or other forest products without the legal documents
as re!uired under e2isting forest laws and regulations, shall be punished with the penalties
imposed under Articles #;* and #); of the 7evised ,enal Code 222.> 'Enderscoring ours@
ection ), E.9 No. -$$ amending ection &%, ,.8. $;. as amended+
?ith the introduction of E2ecutive 9rder No. -$$ amending ection &% of ,.8. $;., the
act of cutting, gathering, collecting, removing, or possessing forest products without authority
constitutes a distinct offense independent now from the crime of theft under Articles #;* and
#); of the 7evised ,enal Code, but the penalty to be imposed is that provided for under
Article #;* and #); of the 7evised ,enal Code. 5his is clear from the language of E2ecutive
9rder No. -$$ when it eliminated the phrase S shall be guilty of !ualified theft as defined and
punished under Articles #;* and #); of the 7evised ,enal Code T and inserted the words S
shall be punished with the penalties imposed under Article #;* and #); of the 7evised ,enal
Code T. ?hen the statute is clear and e2plicit, there is hardly room for any e2tended court
ratiocination or rationaliFation of the law.
B#%C
From the foregoing dis!uisition, it is clear that a suit for replevin can not be sustained
against the petitioners for the subject truc( ta(en and retained by them for administrative
forfeiture proceedings in pursuant to ection &%-A of the ,. 8. $;., as amended. 8ismissal of
the replevin suit for lac( of cause of action in view of the private respondentsR failure to
e2haust administrative remedies should have been the proper course of action by the lower
court instead of assuming jurisdiction over the case and conse!uently issuing the writ ordering
the return of the truc(. E2haustion of the remedies in the administrative forum, being a
condition precedent prior to oneRs recourse to the courts and more importantly, being an
element of private respondentsR right of action, is too significant to be waylaid by the lower
court.
:t is worth stressing at this point, that a suit for replevin is founded solely on the claim
that the defendant wrongfully withholds the property sought to be recovered. :t lies to recover
possession of personal chattels that are unlawfully detained.
B#*C
S5o detainT is defined as to
mean Sto hold or (eep in custody,T
B1;C
and it has been held that there is tortuous ta(ing
whenever there is an unlawful meddling with the property, or an e2ercise or claim of
dominion over it, without any pretense of authority or right@ this, without manual seiFing of
the property is sufficient.
B1)C
Ender the 7ules of Court, it is indispensable in replevin
proceedings, that the plaintiff must show by his own affidavit that he is entitled to the
possession of property, that the property is wrongfully detained by the defendant, alleging the
cause of detention, that the same has not been ta(en for ta2 assessment, or seiFed under
e2ecution, or attachment, or if so seiFed, that it is e2empt from such seiFure, and the actual
value of the property.
B1-C
,rivate respondents miserably failed to convince this Court that a
wrongful detention of the subject truc( obtains in the instant case. :t should be noted that the
truc( was seiFed by the petitioners because it was transporting forest products with out the
re!uired permit of the 8EN7 in manifest contravention of ection &% of ,.8. $;. as amended
by E.9 -$$. ection &%-A of ,.8. $;., as amended, un!uestionably warrants the confiscation
as well as the disposition by the ecretary of 8EN7 or his duly authoriFed representatives of
the conveyances used in violating the provision of forestry laws. Evidently, the continued
possession or detention of the truc( by the petitioners for administrative forfeiture proceeding
is legally permissible, hence , no wrongful detention e2ists in the case at bar.
/oreover, the suit for replevin is never intended as a procedural tool to !uestion the
orders of confiscation and forfeiture issued by the 8EN7 in pursuance to the authority given
under ,.8.$;., as amended. ection % of the said law is e2plicit that actions ta(en by the
8irector of the 3ureau of Forest 8evelopment concerning the enforcement of the provisions of
the said law are subject to review by the ecretary of 8EN7 and that courts may not review
the decisions of the ecretary e2cept through a special civil action for certiorari or
prohibition. :t reads A
EC5:9N % . 7E4:E? - All actions and decisions of the 8irector are subject to review,
motu propio or upon appeal of any person aggrieved thereby, by the 8epartment =ead whose
decision shall be final and e2ecutory after the lapse of thirty '#;+ days from the receipt of the
aggrieved party of said decision, unless appealed to the ,resident in accordance with
E2ecutive 9rder No. )*, eries of )*&&. 5he 8ecision of the 8epartment =ead may not be
reviewed by the courts e2cept through a special civil action for certiorari or prohibition.
9*EREFORE, the ,etition is D7AN5E8@ the 8ecision of the respondent Court of
Appeals dated 9ctober )&, )**) and its 7esolution dated 0uly )1, )**- are hereby E5
A:8E AN8 7E4E7E8@ the 7estraining 9rder promulgated on eptember -$, )**# is
hereby made permanent@ and the ecretary of 8EN7 is directed to resolve the controversy
with utmost dispatch.
SO ORDERED.
:G.R. No. 12''66. Se70e<ber 9, 1999=
OTA#ELA AL#A /da. 5e RA$, S7ou1e1 MAN"EL a,- S"SANA #RA"LIO,
RODOLFO, LO"RDES a,- #EATRI$ a)) 1ur,a<e- AL#A, petitioners. vs.
O"RT OF A!!EALS a,- (OSE LA*IA, respondents.
D E I S I O N
+NARES-SANTIAGO, J.%
3efore us is an appeal by certiorari from a decision rendered by the Court of Appeals
dated August )%, )**- affirming in toto the decision of the 7egional 5rial Court of Halibo,
A(lan, 3ranch :, in "and 7egistration Case No. H-);), "7C 7ecord No. H. ).);1, the
dispositive portion of which reads as followsA
S?=E7EF97E, judgment is hereby rendered as followsA
). 5he parcel of land described in ,lan ,su-)&)-$$ and the improvements thereon
situated in the ,oblacion of the /unicipality of 3anga, ,rovince of A(lan, ,hilippines,
with an area of 1,%1. s!uare meters is brought under the operation of the property
registration decree ',8 No. ).-*+ and the title thereto is registered and confirmed in the
name of applicant 0ose "achica, married to Adela 7aF of Halibo, A(lan, ,hilippines@
-. A ten ');+ meter road width along the national road mentioned in the
application be segregated for future road widening program upon payment of just
compensation to be annotated at the bac( of the title@
#. For lac( of merit, the opposition filed by the spouses /anuel and usana
3raulio, 9ctabela Alba 4da. 8e 7aF, 7odolfo Alba, "ourdes Alba and 3eatriF Alba are
hereby 8:/:E8.
9 978E7E8.T
B)C
5he factual antecedents of the case as summed by the trial court and adopted by the
Court of Appeals are as followsA
SApplicant 0ose "achica filed this application for title to land on April -%, )*.% with the claim
that the land applied for was purchased by him and his wife, Adela 7aF from, from one
Eulalio 7aF. 5he documents attached to the application areA technical description, surveyorRs
certificate, certification by the chief deputy assessor of A(lan and the blue print of ,su-
)&)-$$.
5he initial hearing was scheduled for 9ctober #), )*.% and the certificate of publication in the
9fficial DaFette was issued on eptember -#, )*.%. 5he certification of posting of the notice
of initial hearing was issued on 9ctober )#, )*.%.
5he land applied for is residential, situated in the ,oblacion of 3anga, A(lan, with an area of
1,%1. s!uare meters, bounded on the northeast by the property of the /unicipality of 3anga
'(etch, E2h. SFT+.
5he initial hearing was held on 9ctober #), )*.%. An order of general default was issued but
those who presented their opposition, namely, 9ctabela Alba 4da. 8e 7aF, /anuel and
usana 3raulio, 0ose 7ago, representing Apolonia 7ebeco, the 8irector of "ands and the
/unicipality of 3anga represented by the ,rovincial Fiscal, were given thirty '#;+ days to file
their written opposition.
/anuel C. 3raulio and usana ,. 3raulio filed their opposition on 9ctober #), )*.%. 5hey
opposed the registration of the southeastern portion of the -1; s!uare meters of the land
applied for alleging that they are the owners in fee simple and possessors of said portion and
all the improvements thereon for not less than $; years together with their predecessor-in-
interest deriving their title by purchase from the original owners. 5hey prayed for the Court to
declare them the true and absolute owners of the disputed portion of the same in their names.
9n 9ctober #), )*.%, 9ctabela 4da. de 7aF filed her opposition.
0ose 7ago filed his opposition on November -*, )*.% as the duly constituted attorney-in-fact
of Apolonia 7ebeco although no special power of attorney was attached. =e opposed the
registration of the northeastern portion of the land applied for, with an area of 1#.%# s!uare
meters. =e alleged that his principal is the owner by right of succession and is in the
possession of said portion with all its improvements for more than %; years together with his
predecessor-in-interest, continuously, peacefully and openly under claim of ownership. =e
prayed that his principal be declared the true and absolute owner of the disputed portion of
1#.%# s!uare meters.
9n /arch --, )*&&, the Court issued an 9rder allowing the applicant to hire another surveyor
to segregate the non-controversial portion of the land applied for and to notify the oppositors
and their counsels.
9n 0anuary )-, )*$;, a motion to lift the order of general default and to admit the attached
opposition of 7odolfo Alba, "ourdes Alba and 3eatriF Alba, as well as a motion to admit the
attached amended petition of 9ctabela 4da. de 7aF were filed. 5he Court in its order dated
/arch -), )*$; admitted said opposition and set aside the order of default.
:n their opposition, 7odolfo Alba, "ourdes Alba, represented by their attorney-in-fact,
9ctabela Alba 4da. de 7aF, alleged that they are the co-owners of a portion of the land
applied for with an area of -,-&- s!uare meters bounded on the north by 0anuario /asigon,
Nicolas 7ealtor, Agustina 7ebeldia and Apolonia 7ebeco, on the south by Eulalio 7aF and on
the west by the public mar(et of 3anga. 5hey claimed to have inherited the above-mentioned
portion from their late father, Eufrosino /. Alba, who purchased the same from 8ionisia
7egado in )*)%. =ence, they have been in possession continuously, openly and peacefully
under claim of ownership of the above-mentioned portion for not less $; years. 5hey prayed
that the disputed portion of -,-&- s!uare meters be registered as their pro8indiviso property.
:n her amended opposition, 9ctabela Alba 4da. de 7aF opposed the registration of the
southeastern portion of the land applied for with an area of ##).11 s!uare meters. he claimed
to have been in peaceful, continuous and open possession together with her deceased husband,
Eulalio 7aF, under claim of ownership of the above-mentioned portion for not less than $;
years, by purchase from its owners. he li(ewise opposed the registration of the western
portion of the land applied for, with an area of &$& s!uare meters, having purchased the same
from its original owners on 'sic+ her predecessor-in-interest has been open, peaceful and
continuous under claim of ownership for a period of not less than $; years. he prayed that
the portion of ##).11 s!uare meters be registered in her name and that of the heirs of Eulalio
7aF, pro indiviso.9 and the other portion of &$& s!uare meters be registered solely in her name.
9n February -., )*$;, the applicant 8r. 0ose "achica filed his consolidated opposition and
reply to the motion to lift order of default stating that there is no reason to do so under the
7ules of Court, and that the opposition of 7odolfo Alba, "ourdes Alba and 3eatriF Alba, as
well as the amended opposition of 9ctabela Alba 4da. de 7aF are without merit in law and in
fact.
9n /arch -), )*$;, the motion to lift the order of general default was granted and the
opposition of 7odolfo Alba, "ourdes Alba and 3eatriF Alba, as well as the opposition of
9ctabela Alba 4da. de 7aF were all admitted.
:n the hearing of /arch #, )*$-, applicant offered for admission e2hibits \AR to \:R and the
testimonies of ,edro 7uiF 'April -;, )*$)+, 0ose 7ago '9ct. -#, )*$;+ and 8r. 0ose "achica
'0uly )&, )*$)@ Feb. );, )*$-+. 5he Court admitted the same.
9n /arch )#, )*$1, the Court issued an order appointing Engr. Angeles 7elor to act as
Commissioner and delimit the portions claimed by the three sets of oppositors and submit an
amended approved plan together with the technical description for each portion.
5he CommissionerRs report and s(etch was submitted on 8ecember 1, )*$1. 5he applicant
filed his opposition to the CommissionerRs report on 8ecember )-, )*$1. 5he Court in its
order of 8ecember )#, )*$1 re!uired the Commissioner to submit an amended report and
amended s(etch.
5he CommissionerRs corrected report and s(etch was submitted on February -1, )*$. which
the Court approved on February -., )*$. there being no objection from the parties.
9n /arch )., )*$$, the Court issued an order whereby the testimony of oppositor 9ctabela
Alba 4da. de 7aF was stric(en off the record for her failure to appear in the scheduled hearing
on /arch )., )*$$.
Again, in its order dated /ay -$, )*$$ the testimony of 9ctabela Alba 4da. de 7aF was
stric(en off record because the latter was bedridden and can not possibly appear for cross-
e2amination.
9ppositor 9ctabela Alba 4da. de 7aF substituted by her heirs filed a formal offer of e2hibits
on August -1, )*%%. Applicant filed his comments thereto on August -*, )*%%. 5he Court
admitted said e2hibits and the testimony of their witness on /arch ), )*%*.
:n this applicaton for title to land filed by applicant 0ose "achica, four oppositions were filed
by the followingA
). 0ose 7ago, in representation of Apolonia 7ebeco@
-. /anuel C. 3raulio and usana 3raulio@
#. 7odolfo, "ourdes and 3eatriF, all surnamed Alba, represented by 9ctabela
Alba 4da. de 7aF@ and
1. 9ctabela Alba 4da. de 7aF.
:n the hearing of 9ctober -#, )*$;, counsel for oppositor 0ose 7ago manifested that he would
file a motion for withdrawal of opposition and 0ose 7ago himself declared his conformity
'5sn, 9ct. -#, )*$;, p. .+. Although no formal motion to withdraw was actually filed,
oppositor 7ago has not presented evidence on his behalf@ hence, his opposition must be
disregarded.
As regards oppositor /anuel C. 3raulio ans usana 3raulio, a deed of sale supposedly
e2ecuted by usana 3raulio and 9ctabela Alba 4da. de 7aF in )*.& was identified by Felimon
7aF, a witness for the oppositors '5sn, ept. -*, )*$$, pp. # to 1+. =owever, said deed cannot
be found in the records. Even so, the 3raulios have not presented evidence to show that by the
time this application was filed, they and their predecessors-in-interest have been in actual,
open, public, peaceful and continuous possession of the land claimed, in concept of owner, for
at least ); years sufficient to ac!uire title thereto 'Arts. )))$, )))%, ))#1, Civil Code of the
,hilippines+. As such, the opposition of /anuel C. 3raulio and usana 3raulio must be
dismissed.T
B-C
9n the basis of the testimonial and documentary evidence presented by the applicant and
the oppositor 7aF, the court a #uo rendered judgment in favor of the applicant as stated at the
outset. :n dismissing the claim of the remaining oppositors 7odolfo, "ourdes and 3eatriF, all
surnamed Alba, represented by 9ctabela Alba 4da. de 7aF and 9ctabela Alba 4da. de 7aF
herself, the trial court in sum noted that said oppositors have never offered any e2planation as
to the non-payment of realty ta2es for the disputed portions of the subject property from )*1)
to )*.% while the respondent6applicant continuously paid ta2es under 5a2 8eclaration No.
)1)%) covering said property from )*1.-)*.% when the case was filed per certification issued
by the /unicipal 5reasurerRs 9ffice of 3anga.
B#C
:n rendering judgment in favor of
respondent6applicant, the trial court stressed that while it is true that ta2 receipts and
declarations of ownership for ta2 purposes are not incontrovertible evidence of ownership,
they become strong evidence of ownership ac!uired by prescription when accompanied by
proof of actual possession.
8issatisfied, petitioners interposed an appeal to the Court of Appeals which affirmed the
decision of the trial court.
EnfaFed, petitioners now come to this Court arguing that N
). 5he Civil law provisions on prescription are inapplicable.
-. 5he applicable law is ection 1% BaC of the ,ublic "and "aw or Act )1), as
amended.
#. ,rivate respondent has not ac!uired ownership in fee simple, much less has he
met the conditions for judicial confirmation of imperfect title under ection 1%
BaC of Act )1), as amended, e2cept perhaps for a &-; s!uare meter portion of
the land applied for becauseA
#.). 5here is absolutely no proof of the alleged sales made by 7aF and Alba.
#.-. 5here is absolutely no reliable proof of the alleged theft of the deeds of
sale.
#.#. 5he identity of the land has not been established.
#.1. 5he Court of Appeals misapplied the basic rules governing the
introduction of secondary evidence.
#... 5he applicant6respondentRs 5a2 8eclaration No. )1)%) is a \doctoredR
ta2 declaration.
#.&. Applicant6respondentRs ta2 declarations have no probative value.
#.$. Applicant6respondent has not satisfied the re!uired !uantum of
evidence in land registration cases.
#.%. ,etitioners-oppositors have proven their right over the subject property.
:n rendering judgment in favor of private respondent, the Court of Appeals
reasoned, inter alia9 as followsA
S9n the basis of the testimonial and documentary evidence presented by the applicant, the trial
court did not err in confirming that the applicant is the absolute owner in fee simple of the
property subject of the application for registration entitling him to register the same in his
name under the operation of ,8 ).-*.
:t is of no moment that the applicant failed to produce the originals of those other
deeds6documents of conveyances, for he was able to present sufficient substantial secondary
evidence, in accordance with the re!uirements of ection 1, 7ule )#; of the 7evised 7ules of
Court, now ection ., same 7ule of the 7evised 7ules on Evidence, and the doctrines in point.
5hus, 3overnment vs. Martine@9 11 ,hil. %)$, e2plained that when the original writing is not
available for one reason or another which is the best or primary evidence, to prove its contents
is the testimony of some one who has read or (nown about it. Republic vs. *ourt of
%ppeals9 $# C7A )1%, laid out the foundation before secondary evidence is introduced, that
the due e2ecution, delivery and reason for non-production of the original writing must first be
produced. Ra!lago vs Jarabe9 -- C7A )-1$, ruled that it is not necessary to prove the loss
of the original document beyond all possibility of mista(e. A reasonable probability of its loss
is sufficient and this may be shown by abonafide 'sic+ and diligent search, fruitlessly made, for
it in places where it is li(ely to be found. After proving the due e2ecution and delivery of the
document, together with the fact that the same has been lost or destroyed, its contents may be
proved, among others, by the recollection of witnesses. And 6eall vs. earing9 $ ala. )-&@
and 6ogardas vs. $rinit! *hurch9 1 andf. Ch. 'Nn.y.+ &#*, are of the view that that where the
lost documents are more than thirty '#;+ years old and would thus prove themselves if
produced, secondary evidence of their contents is admissible without proof of their e2ecution.
:n the case at bar, petitioner ac!uired the property in )*1;-)*1). =e presented the 8eed 'E2h.
D+ e2ecuted by the vendor Faustino /artireF. ?hile he failed to present the other deeds of
sale covering the other portions of the property, he has sufficiently established that they were
notariFed documents and were ta(en by his mother-in-law sometime in )*.&. =e reported the
loss to the authorities and even filed a case of theft. =e further e2erted efforts and made a
diligent search of those documents from the notary public but in vain. =e presented the cler(
of the /unicipal 5reasurerRs 9ffice of 3anga, who testified having seen those deeds as they
were presented to him by the applicant and which were used as basis for the preparation and
issuance of 5a2 8eclaration No. )1)%) in the name of the ta2 declarant. 5a2 8eclaration No.
)1)%) 'E2h. =+ was presented in Court, proving that the land was declared for ta2 purposes in
the name of the applicant and his wife. 5he applicant has been paying the realty ta2 covering
the property since )*1. and beyond )*.%, when the application for registration was filed in
court, per certification of the /unicipal 5reasurer of 3anga 'E2h. )+.
:n resume, ?e find and so hold as did the trial court that 8r. 0ose "achica is the abolute owner
in fee simple of the land described in his application for its original registration in his
name. 5he land contains an area of 1,%1. s!uare meters, more or less, situated in 3anga,
A(lan, and
S3ounded on the NE., along line)--, by property of Apolonia 7imate@ on the E., along line --
#, by National road@ on the ?., along line #-1, by property of the /pl. Dovernment of 3anga
',ublic /ar(et+@ and on the N?., along line 1-), by property of the /unicipal Dovernment of
3anga ',ublic /ar(et+. 3eginning at a point mar(ed ) on plan, being N. 1. deg. ;-R E.,
1-#.#% m. from 3."."./. ), /p. of 3anga, A(lan@
thence, . ## deg. 1&R E., %$.&& m. to point S-T
thence, . .& deg. 1-R ?., &#.%) m. to point S#T
thence, N. #$ deg. --R ?., .*.-& m. to point S1T
thence, N. ## deg. 1-R E., $#.;% m. to the point of
beginning, 222 All points referred to are indicated on the plan and are mar(ed on the ground
by ,.".. Cyl. Conc. /ons. 3earings true date of the survey, 0anuary -., )*.$, and that of the
approval, 9ctober #, )*.$.T
5he applicant has been in public, open, continuous and adverse possession of the property
since )*1;-1) up to the present to the e2clusion of all, and thereby also ac!uired the property
by ac!uisitive prescription, in accordance with ections 1; and 1# of Act )*;, otherwise
(nown as the SCode of Civil ,rocedureT, having been in actual and adverse possession under
claim of ownership for over ten ');+ years, and thus in whatever way his occupancy might
have commenced or continued under a claim of title e2clusive of any other right and adverse
to all other claimants, resulted in the ac!uisition of title to the land by ac!uisitive prescription
'Jda. de elima vs. $io, #- C7A .)&+.
:ndeed, to borrow the apt words of the ponente in the elima case, such proof of ownership of,
and the adverse, continuous possession of the applicant since )*1;, strongly S222 militate
against any judicial cogniFance of a matter that could have been withheld in its (en,T hence,
whatever right oppositors may have had over the property or any portion thereof was thereby
also lost through e2tinctive prescription in favor of the applicant who had been in actual, open,
adverse and continuous possession of the land applied for in the concept of owner for over );
years when the application for registration was filed in court.T
B1C
:t is a fundamental and settled rule that findings of fact by the trial court and the Court
of Appeals are final, binding or conclusive on the parties and upon this Court,
B.C
which will not
be reviewed
B&C
or disturbed on appeal unless these findings are not supported by evidence
B$C
or
unless strong and cogent reasons dictate otherwise.
B%C
/ore e2plicitly, the findings of fact of the Court of Appeals, which are as a general rule
deemed conclusive, may be reviewed by this Court in the following instancesA
).C ?hen the factual findings of the Court of Appeals and the trial court are
contradictory@
B*C
-.C ?hen the conclusion is a finding grounded entirely on speculation, surmises
and conjectures@
B);C
#.C ?hen the inference made by the Court of Appeals from its findings of fact is
manifestly mista(en, absurd
B))C
or impossible@
1.C ?here there is a grave abuse of discretion in the appreciation of facts@
B)-C
..C ?hen the appellate court in ma(ing its findings went beyond the issues of the
case, and such findings are contrary to the submission of both appellant and
appellee@
&.C ?hen the judgment of the Court of Appeals is premised on a misapprehension
of facts@
B)#C
$.C ?hen the Court of Appeals manifestly overloo(ed certain relevant facts not
disputed by the parties which, if properly considered, would justify a different
conclusion@
B)1C
%.C ?hen the findings of fact are themselves conflicting@
*.C ?hen the findings of fact are conclusions without citation of specific evidence
on which they are based@ and
);.C ?hen the findings of fact of the Court of Appeals are premised on the
absence of evidence but such findings are contradicted by the evidence on
record.
B).C
5he primordial issue to be resolved is whether or not the private respondent6applicant is
entitled to the confirmation of his ownership in fee simple for the 1, %1. s!uare meter parcel
of land he applied for.
:n sum, both the trial court and the Court of Appeals adjudicated and confirmed private
respondent6applicantRs title to the land on the basis of the findings thatA ).C the private
respondent6applicant purchased the land from Faustino /artireF@ -.C the subject land is
covered by 5a2 8eclaration No. )1)%)@ #.C the private respondent6applicant has paid the realty
ta2es on the land from )*1. up to the filing of his application in )*.%@ 1.C the private
respondent6applicant has been in actual, open and continuous possession of the subject land in
the concept of owner since )*1., and ..C the private respondent6applicant has ac!uired the
land by prescription.
As stated earlier, a review of the findings of fact of the Court of Appeals is not a
function that this Court normally underta(es
B)&C
unless the appellate courtRs findings are
palpably unsupported by the evidence on record or unless the judgment itself is based on a
misapprehension of facts.
B)$C
A thorough review of the record convinces this Court that the
general rule with regard to the conclusiveness of the trial courtRs and appellate tribunalRs
factual findings should not be applied because there are material circumstances which, when
properly considered, would have altered the result of the case.
First, a circumspect scrutiny of the evidence e2tant on record reveals that with the
e2ception of &-; s!uare meters, there has been no satisfactory showing of how private
respondent6applicant ac!uired the remainder of the subject land.
As can be gathered from the discussion of the appellate court, as well as the arguments
proffered by private respondent, he ac!uired the land in !uestion from three '#+ sources,
namelyA a.C A 8eed of ale dated August )#, )*1) allegedly e2ecuted by Faustino /artireF
covering %1; s!uare meters@ b.C #;; s!uare meters allegedly purchased from private
respondentRs father-in-law Eulalio 7aF, and c.C #,$-. s!uare meters private respondent
allegedly bought in )*1; from Eufrocino Alba.
5he sale involving the first parcel of land covering %1; s!uare meters, was not
!uestioned by petitioners as its technical description delineated in the :scritura e Jenta
%bsoluta dated August )#, )*1),
B)%C
to witA
SEn terreno solar residencia antes palayero regado, actuado en el casco central del municipio
de 3anga, CapiF. in ninguna mejora, de una e2tension superficial de ochocientos cuarenta
metros cuadrados '%1; mts. cds.+ & sean cuarenta metros de frente por otros veinte y
unmetrode fondo, cuyos linderos por el Norte con propiedad de Eufrosino Alba y con Eulalio
7aF@ por Este con Eulalio 7aF y con la carretera provincial de Halibo a 3anga@ por ur con la
misma carretera provincial y con terreno del municipio para mercado@ y por al 9este con al
terreno del mercado municipal de 3anga y con propiedad de Eufrosino Alba y al terreno tienes
sus mojones de cemento en todos sus cuatro cantos de linderia y sin otro limite visible de
linderia mas !ue dichos mojones y esta amillarado a mi nombre en una sola hoja declaratoria
de propiedad 5a2 No. )-#$1 en la 9ficina del 5asador ,rovincial de CapiF, cuyo valor
amilarado actual es veinte pesos ',-;.;;+ 222T
leaves no room for doubt as to its identity, total area of %1; s!uare meters as well as its
dimensions of 1; meters in front and -) meters at the base. =ow this parcel was further
reduced to &-; s!uare meters is e2plained by the fact that the /unicipal Dovernment of 3anga
appropriated --; s!uare meters thereof for the 3anga ,ublic /ar(et 7oad.
?hat, however, is seriously contested are the alleged purchases of the other two parcels
from Eulalio 7aF measuring #;; s!uare meters and from Eufrocino Alba measuring #,$-.
s!uare meters owing to the !uestionable circumstances surrounding their ac!uisition.
5he records disclose that the subject land was originally owned by 8ionisia 7egado
under 5a2 8eclaration No. %;-.
B)*C
5he records further reveal that 8ionisia 7egado soldA B).C
),%.; s!uare meters of the land to the /unicipality of 3anga evidenced by a panish
document denominated as a deed of sale dated April -*, )*)1@
B-;C
B-.C ),#-; s!uare meters to
Eulalio 7aF evidenced by a document entitled :scritura de Jenta %bsoluta dated eptember &,
)*)%,
B-)C
and B#.C -,*#% s!uare meters to Eufrocino Alba evidenced by a deed of conveyance
dated eptember &, )*)% written in panish.
B--C
Faustino /artireF ac!uired a portion of %1; s!uare meters from Eulalio 7aF on 0anuary
)., )*##.
B-#C
7aF retained 1%; s!uare meters, however, he and his wife 9ctabela Alba
conveyed a -1; s!uare meter portion thereof to usana 3raulio on November ., )*.&.
B-1C
ubse!uently on /ay -*, )*&*, the heirs of Eufrocino Alba sold a &$& s!uare meter
portion of the parcel purchased by Eufrocino to 9ctabela Alba 4da. de 7aF.
B-.C
5he deed of
conveyance was duly registered with the 7egistry of 8eeds of A(lan pursuant to Act No. ##1
on 0une )$, )*&*
B-&C
and is covered by 5a2 8eclaration No. ##- in the name of Eulalio 7aF, her
husband.
B-$C
9ther than the foregoing transactions involving the subject land which are borne out by
the documentary evidence on record, private respondent6applicant did not produce the alleged
deeds of conveyances evidencing the purported transfers made by Eulalio 7aF and Eufrocino
Alba in his favor. :nstead he relied chiefly on secondary evidence to prove the e2istence
thereof which was sustained by both the trial and the appellate courts. uch reliance on
secondary evidence vis8V8vis the peculiar facts prevailing in this case rests on infirm legal
bases much more so in the face of the overwhelming documentary evidence of petitioners
arrayed against it because N
S. . . BaC contract of sale of realty cannot be proven by means of witnesses, but must
necessarily be evidenced by a written instrument, duly subscribed by the party charged, or by
his agent, or by secondary evidence of their contents. No other evidence, therefore, can be
received e2cept the documentary evidence referred to, in so far as regards such contracts, and
these are valueless as evidence unless they are drawn up in writing in the manner
aforesaid.T
B-%C
S%n applicant for registration of land9 if he relies on a document evidencing his title thereto,
must prove not only the genuineness of his title but the identit! of the land therein referred
to. $he document in such a case is either a basis of his claim for registration or not at all. :f ,
as in this case, he only claims a portion of what is included in his title, he must clearly prove
that the property sought to be registered is included in that title.T
B-*C
econd, there are glaring variances in the identities and technical descriptions of the land
applied for by private respondent6applicant and the land he purportedly purchased from
Eufrocino Alba.
,rivate respondent6applicant alleged that he purchased the remainder of the subject land
measuring #,$-. s!uare meters from Eufrocino Alba sometime in )*1; averring that this
parcel is listed as :tem No. . of his E2hibit S:T which is denominated as an S:nventory And
Appraisal 9f 5he ,roperties 9f 5he pouses Adela 7aF 8e "achica '8eceased+ and 8r. 0ose
"achica.T :tem No. .
B#;C
of the said inventory described the parcel of land mentioned therein as
followsA
S.. Ena parcela de terreno cocal secano, amillarado en nombre de Eufrocino Alba bajo el 5a2
No. )-$*- por valor de ,#*;.;;, situado en el municipio de 3anga, CapiF, !ue linda el Norte
con "orenFo 7etiro, y ilverio 7elis@ al Este con la carretera provincial 3anga-"ibacao@ al sur
con 3ienvenido /. Alba y al 9este con Cirilo rala y Adela 7aF@ con una e2tension
apro2imada de una ')+ hectarea '-;+ areas y '#.+ centiareas poco mas o menos. 'NoteA aid
property was purchased by the spouses 0ose "achica and Adela 7aF "achica from Eufrocino
/. Alba in the amount of ,.;;.;; as evidenced by a :scritura de *ompraventa e2ecuted on
November -., )*1;, at =imamaylan, Negros 9ccidental and notariFed by Atty. Conrado
Densiano, as 7eg. Not. )--, ,ag. &$, "ibro 4:::, erie )*1;+.
9n the other hand, the land applied for is described technically per ,su )&)-$$ as N
SA parcel of land 'as shown on ,lan ,su-)&)-$$+, situated in ,oblacion, /unicipality of
3anga, ,rovince of A(lan. 3ounded on the NE., along line )--, by property of Apolonia
7imate@ on the E., along line --#, by National 7oad@ on the ?., along line #-1, by property
of the /pl. Dovernment of 3anga ',ublic /ar(et+@ and on the N?., along line 1-), by
property of the /unicipal Dovernment of 3anga ',ublic /ar(et+. 3eginning at a point
mar(ed S)T on plan, being N. 1. deg. ;-R E., 1-#.#% m. from 3."."./. ), /p. of 3anga,
A(lan@
thence . ## deg. 1&R E. %$.&& m. to point S-T
thence . .& deg. 1-T ?., &#.%) m. to point S#T
thence N. #$ deg. --R ?., .*.-& m. to point S1T
thence N. ## deg. 1-R E., $#.;% m. to the point of
beginning, containing an area of F9E7 5=9EAN8 E:D=5 =EN87E8 AN8 F975I
F:4E '1,%1.+ LEA7E /E5E7. All points referred to are indicated on the plan and are
mar(ed on the ground by ,.".. Cyl. Conc. /ons. 3earings true date of survey, 0anuary -.,
)*.$, and that of the approval, 9ctober #, )*.$.T
B#)C
:t will be readily noted vis8V8vis the foregoing thatA a.C the land applied for is covered by
5a2 8eclaration No. )1)%) while the parcel allegedly purchased from Eufrocino Alba is
covered by 5a2 8eclaration No. ).$*-@ b.C the land applied for is pala!ero whereas the land
allegedly ac!uired from Eufrocino Alba is cocal secano. Pala! is unhus(ed rice,
B#-C
thus, the
term pala!ero refers to land devoted to the planting of rice@ cocal, on the other hand, means
coconut tree plantation
B##C
while secano denotes unwatered land or a dry sand ban(@
B#1C
c.C the
land applied for has an area of 1,%1. s!uare meters whereas the land supposedly sold by
Eufrocino Alba measures )-,;#. s!uare meters@ d.C the land applied for is bounded on the NE
by the 3anga ,ublic /ar(et, on the E by Apolonia 7imate, on the ? by the 3anga-Halibo
National 7oad@ and on the N? by the 3anga ,ublic /ar(et whereas the land allegedly
obtained from Eufrocino Alba is bounded on the N by Ernesto 7etino and ilverio 7elis, on
the E by the 3anga-"ibacao *arretera Provincial, on the by 3ienvenido Alba and on the ?
by Cirilo 7ala and Adela 7aF. :t needs be stressed in this regard that a person who claims that
he has better right to real property must prove not only his ownership of the same but also
must satisfactorily prove the identity thereof.
B#.C
5hird, both trial and appellate courts placed undue reliance on 5a2 8eclaration No.
)1)%) considering that there is no satisfactory e2planation of how the area of land covered by
5a2 8eclaration No. )1)%) geometrically ballooned from a modest &-; s!uare meter lot to a
huge parcel measuring 1, %1. s!uare meters.
As pointed out by petitioners, 5a2 8eclaration No. )1)%) was preceded by )*.1 5a2
8eclaration No. )#.$% in the name of private respondent6applicant and his spouse which
shows that the land declared therein for ta2ation purposes covers an area of &-; s!uare
meters. 5a2 8eclaration No. )#.$% was preceded by )*.# 5a2 8eclaration No. )#;1; in the
name of Adela 7aF, private respondentRs wife. 5he land declared for ta2ation purposes therein
also has an area of &-; s!uare meters. 5a2 8eclaration No. )#1;1; was preceded by )*1$
5a2 8eclaration No. &.-% in the name of private respondentRs wife, Adela 7aF. 5he land
declared therein for ta2ation purposes li(ewise measures &-; s!uare meters.
:t appears that the !uantum leap from &-; s!uare meters in )*1$ to 1,%1. s!uare meters
in )*.& came about on account of an affidavit dated November )$, )*.& wherein private
respondent6applicant re!uested
B#&C
the /unicipal Assessor of 3anga to issue a revised ta2
declaration covering 1,%1. s!uare meters on the bare claim that Sthe area has been decreasedT
to only &-; s!uare meters. 5he timing of the revision and its pro2imity to the date of filing of
the application can not but engender serious doubts on the application more so considering
that prior thereto realty ta2 payments covering the period )*1. to )*.& covered an area
measuring &-; s!uare meters and private respondent6applicant is ban(ing on said payments to
claim possession and ownership over the same period for an infinitely larger area of 1,%1.
s!uare meters.
A ta2 declaration, by itself, is not conclusive evidence of ownership.
B#$C
5a2 declarations
for a certain number of years, although constituting proof of claim of title to land,
B#%C
is not
incontrovertible evidence of ownership unless they are supported by other effective proof.
B#*C
:t
was, thus, held in one case
B1;C
that where realty ta2es covering thirty-one '#)+ years were paid
only a few months prior to the filing of an application, such payment does not constitute
sufficient proof that the applicant had a bona fide claim of ownership prior to the filing of the
application. till in another case,
B1)C
the claim that the applicant had been in continuous and
uninterrupted possession of the disputed land was not given credence because it was negated
by the fact that he declared the land for ta2ation purposes in 9ctober )*.* when he filed his
application for registration although he could have done so in )*#$ when he allegedly
purchased the land. A belated declaration is, furthermore, indicative that the applicant had no
real claim of ownership over the subject land prior to the declaration
B1-C
and where there are
serious discrepancies in the ta2 declarations as in this case, registration must be denied.
B1#C
:f at
all, the foregoing facts only serves to underscore private respondent6applicantRs crafty attempt
to cloa( with judicial color his underhanded scheme to seiFe the adjoining parcels of land and
to enrich himself at the e2pense of its rightful owners.
Fourth, the lower courtRs reliance on prescription is not well-ta(en given the peculiar
facts prevailing in this case.
5he law in force at the time an action accrues is what governs the proceeding consistent
with the fundamental dictum that laws shall have no retroactive effect, unless the contrary is
proved.
B11C
3asic is the rule that no statute, decree, ordinance, rule, regulation or policy shall be
given retrospective effect unless e2plicitly stated so.
B1.C
Along the same vein, a courtRs
jurisdiction depends on the law e2isting at the time an action is filed
B1&C
and a law continues to
be in force with regard to all rights which accrued prior to the amendment thereof.
B1$C
:n this case, the controlling statute when the private respondent6applicant filed his
application for registration on April -%, )*.% is ection 1% of Commonwealth Act )1), as
amended by 7A Nos. )*1- and &-#&,
B1%C
which states thatA
SEC. 1%. 5he following-described citiFens of the ,hilippines, occupying lands of the public
domain or claiming to own any such lands or an interest therein, but whose titles have not
been perfected or completed, may apply to the Court of First :nstance of the province where
the land is located for confirmation of their claims and the issuance of a certificate of title
therefor, under the "and 7egistration Act, to witA
'a+ 5hose who prior to the transfer of sovereignty from pain to the Enited tates have applied
for the purchase, composition or other form of grant of lands of the public domain under the
laws and royal decrees then in force and have instituted and prosecuted the proceedings in
connection therewith, but have with or without default upon their part, or for any other cause,
not received title therefor, if such applicants or grantees and their heirs have occupied and
cultivated said lands continuously since the filing of their applications.
B1*C
'b+ 5hose who by themselves or through their predecessors in interest have been in open,
continuous, e2clusive and notorious possession and occupation of agricultural lands of the
public domain under a bona fide claim of ownership, for at least thirty years immediately
preceding the filing of the application for confirmation of title e2cept when prevented by war
or force ma'eure. 5hese shall be conclusively presumed to have performed all the conditions
essential to a Dovernment grant and shall be entitled to a certificate of title under the
provisions of this chapter.
B.;C
'c+ /embers of the national cultural minorities who by themselves or through their
predecessors-in-interest have been in open, continuous, e2clusive and notorious possession
and occupation of lands of the public domain suitable to agriculture, whether disposable or
not, under a bona fide claim of ownership for at least #; years shall be entitled to the rights
granted in subsection 'b+ hereof.
B.)C
A circumspect scrutiny of the assailed 8ecision readily shows that in affirming the
ruling of the trial court, the Court of Appeals relied on the provisions of ection )* of Act
1*&
B.-C
in relation to the Civil CodeRs provisions on prescription on the assumption that the
subject land is private land. 5herein lies the flaw in the appellate courtRs postulate. 5he
application for registration of private respondent is for the judicial confirmation of an
imperfect title considering that the land is presumed under the 7egalian 8octrine to be part of
the public domain.
,ublic lands are broadly classified into ).C Alienable or disposable lands@ and, -.C
:nalienable or non-disposable public lands. Non-disposable public lands or those not
susceptible of private appropriation include a.C 5imber lands@ and, b.C /ineral lands.
B.#C
For
purposes of administration and disposition, the lands of the public domain classified as
\disposableR or \alienableR are further sub-classified into a.C Agricultural@ b.C 7esidential,
commercial, industrial or for similar productive purposes@ c.C Educational, charitable or other
similar purposes, and d.C 7eservations for town sites and for public and !uasi-public purposes.
B.1C
From the foregoing classifications, public agricultural land may be defined as those
alienable portions of the public domain which are neither timber nor mineral lands. 5hus the
term includes residential, commercial and industrial lands for the reason that these lands are
neither timber nor mineral lands.
B..C
9n the other hand, ection )* of Act No. 1*&, as amended, permits the registration of
private lands claimed to be owned by the applicant in fee simple which refer toA
).C "ands ac!uired by various types of titles from the government during the
panish 7egime by way of grants by the panish crown namely theA a.C $itulo real or
royal grant@ b.C *oncession especial or special grant@ c.C Composicion con el estado title
or adjustment title@ d.C $itulo de compra or title by purchase and@ e.C "nformacion
posesoria or possessory information title, which could become a $itulo gratuito or a
gratuitous title@
B.&C
-.C "ands that are claimed to be owned by accession, i.e. accretion, avulsion,
formation of islands, abandoned river beds, as provided for in Articles 1.$, 1&) and 1&1
of the Civil Code@ and
#.C "ands which have been ac!uired in any other manner provided by law.
uffice it to state that the land sought to be registered by private respondent hardly falls
under any of the latter classifications of land referred to by Act No. 1*&, as amended. Diven
the foregoing facts, prescription in the manner invo(ed by both courts can not be pleaded to
bolster private respondent6applicantRs claim because N
S. . . BNCo public land can be ac!uired by private persons without any grant, e2press or implied
from the government@ it is indispensable that there be a showing of title from the state . . . .
B.$C
2 2 2 2 2 2 2 2 2
:ndeed, the possession of public agricultural land, however, long the period may have
e2tended, never confers title thereto upon the possessor.
B.%C
5he reason, to reiterate our ruling,
is because the statute of limitations with regard to public agricultural land does not operate
against the tate, unless the occupant can prove possession and occupation of the same under
claim of ownership for the re!uired number of years to constitute a grant from the tate.T
B.*C
Fifth, even assuming e5 gratia argumenti that prescription can be applied in the manner
invo(ed by the trial court and the appellate court, it must be pointed out that N
S. . . B?Chile Art. ))#1 of the Civil Code provides that \'o+wnership and other real rights over
immovable property are ac!uired by ordinary prescription through possession of ten years,R
this provision of law must be read in conjunction with Art. )))$ of the same Code. 5his
article states that \222 'o+rdinary ac!uisitive prescription of things re!uires possession in good
faith and with just title for the time fi2ed by law.R 1ence9 a prescriptive title to real estate is
not ac#uired b! mere possession thereof under claim of ownership for a period of ten !ears
unless such possession was ac#uired con "usto titulo y buena fe 'with color of title and good
faith+.
B&;C
5he good faith of the possessor consists in the reasonable belief that the person from
whom he received the thing was the owner thereof, and could transmit his ownership.
B&)C
For
purposes of prescription, there is just title when the adverse claimant came into possession of
the property through one of the recogniFed modes of ac!uisition of ownership or other real
rights but the grantor was not the owner or could not transmit any right.T
B&-C
:t can not be said that private respondentRs possession was con 'usto titulo ! buena
fe. 9n the contrary, private respondent6applicantRs act of appropriating for himself the entire
area of 1,%1. s!uare meters to the e2clusion of petitioners who have been occupying portions
of the disputed land constituted acts of deprivation of the latterRs rights which is tantamount to
bad faith. :ndeed this Court has ruled that the N
S. . . BcConcealment and misrepresentation in the application that no other persons had any
claim or interest in the said land, constitute specific allegations of e2trinsic fraud supported by
competent proof. Failure and intentional omission of the applicants to disclose the fact of
actual physical possession by another person constitutes an allegation of actual fraud.
B&#C
"i(ewise, it is fraud to (nowingly omit or conceal a fact, upon which benefit is obtained to
the prejudice of a third person.T
B&1C
uffice it to state in this regard that to allow private respondent6applicant to benefit from
his own wrong would run counter to the ma2im e5 dolo malo non oritur actio 8 no man can be
allowed to found a claim upon his own wrongdoing.
B&.C
:t need not be overemphasiFed that e2traordinary ac!uisitive prescription can not
similarly vest ownership over the property upon private respondent6applicant because Article
))#$ of the Civil Code states in no uncertain terms that N
SA75. ))#$. 9wnership and other real rights over immovables also prescribe through
uninterrupted adverse possession thereof for thirt! !ears, without need of good faith.T
Needless to state, private respondent6applicantRs possession of thirteen ')#+ years falls
way below the thirty-year re!uirement mandated by Article ))#$.
i2th, petitioners6oppositors have, in star( contrast to the secondary proof of private
respondent, adduced overwhelming evidence to prove their ownership of the portions they
claim in the subject land. 5he evidence on record clearly points to the fact that private
respondent6applicantRs right, if at all, is confined to only &-; s!uare meters or what has been
left of the %1; s!uare meters he purchased from Faustino /artireF after --; s!uare meters
thereof were appropriated by the /unicipality of 3anga for the ,ublic /ar(et 7oad.
B&&C
5he records further bear out that the original owner of the whole area was one 8ionisia
7egado who e2ecuted three '#+ deeds of sale covering certain portions of the disputed lands,
namelyA ).C the 8eed of ale dated April -*, )*)1 covering ),%.; s!uare meters e2ecuted in
favor of the /unicipality of 3anga@
B&$C
-.C the 8eed of ale dated 0uly );, )*). covering ),#-;
s!uare meters e2ecuted in favor of Eulalio 7aF@
B&%C
and, #.C the 8eed of ale dated eptember
&, )*)% covering the balance with an area of -,*#% s!uare meters in favor of Eufrocino Alba.
B&*C
Faustino /artireF ac!uired only an %1; s!uare meter portion of the land by purchase
from Eulalio 7aF on 0anuary )., )*## as confirmed in paragraph - of the :scritura e Jenta
%bsoluta e2ecuted by him on August )#, )*1).
B$;C
After selling %1; s!uare meters to Faustino
/artireF, Eulalio 7aF retained 1%; s!uare meters but on November ., )*.& Eulalio 7aF and
his wife 9ctabela Alba conveyed -1; s!uare meters to usana 3raulio
B$)C
leaving a balance of
-1; s!uare meters which remained undisposed.
9n /ay -*, )*&*, 4irginia Alba, :nocentes Alba and Estrella Alba, children of the
deceased Eufrocino Alba, sold a &$& s!uare meter portion of the -,*#% s!uare meter lot
purchased by their father from 8ionisia 7egado to petitioner6oppositor 9ctabela alba 4da. 8e
7aF.
B$-C
5his 8eed was duly registered with the 7egistry of 8eeds of A(lan in accordance with
Act No. ##11 on 0une )$, )*&*.
B$#C
5he land is covered by 5a2 8eclaration No. ##- in the
name of 9ctabela Alba 4da. 8e 7aFRs husband.
B$1C
,etitioner6oppositor 9ctabela Alba 4da. 8e 7aFRs ownership of the remaining -1;
s!uare meter portion which she and her husband Eulalio 7aF bought from 8ionisia
7egado
B$.C
and the &$& s!uare meter portion which they bought from the heirs of Eufrocino
Alba
B$&C
is fully substantiated by documentary proof.
B$$C
7odolfo Alba, "ourdes Alba and
3eatriF AlbaRs ownership of a portion measuring ),##. s!uare meters
B$%C
and another portion
measuring -,-&- s!uare meters
B$*C
is li(ewise bac(ed by documentary evidence. usana
3raulioRs ownership of a -1; s!uare meter portion
B%;C
which she ac!uired from 9ctabela Alba
4da. 8e 7aF on November )), )*.&
B%)C
is also documented, her predecessor-in-interest having
ac!uired the same from 8ionisia 7egado on eptember &, )*)%.
B%-C
5he foregoing only serves to underscore the paucity of the proof of private
respondent6applicant to support his claim of ownership over the entire 1, %1. s!uare meter
area. =e has not adduced evidence to show how and when he was able to ac!uire, with the
e2ception of %1; s!uare meters further reduced to &-; s!uare meters on account of --; s!uare
meters appropriated for the mar(et road, the bigger area of #,$.. s!uare meters from anybody
let alone the ancestral owner, 8ionisia 7egado.
=is claim is anchored mainly on 7evised 5a2 8eclaration No. )1)%) which he was able
to procure from the /unicipal Assessor of 3anga in )*.& on the basis of a self-serving
affidavit which proffered the lame e2cuse that there was error in the statement of the area of
the land which he claimed to be 1,%1. s!uare meters instead of &-; s!uare meters N which was
the area reflected in earlier ta2 declarations namely, )*.1 5a2 8eclaration No. )#.$%@ )*.#
5a2 8eclaration No. )#;1#@ and )*1$ 5a2 8eclaration No. &.-%.
3e that as it may, the Court has reservations on the propriety of adjudicating to
petitioners the contested portions of the subject land, in view of their failure to present the
technical descriptions of these areas. Furthermore, there is no sufficient evidence showing
that petitioners have been in open, adverse, e2clusive, peaceful and continuous possession
thereof in the concept of owner, considering that the testimony of 9ctabela Alba vda. 8e 7aF
was stric(en off the record.
9*EREFORE, based on foregoing premises, the 8ecision of the 7egional 5rial Court
of Halibo, A(lan, 3ranch ) dated August )%, )**- in "and 7egistration Case No. H-);), "7C
7ecord No. H-).);1 is hereby /98:F:E8 as followsA
).C 5he &-; s!uare meter portion on which private respondent 0ose N. "achicaRs
house is situated, clearly delineating its metes and bounds, is hereby 978E7E8
segregated from the parcel of land described in ,su-)&)-$$ situated in the Poblacion of
the /unicipality of 3anga, ,rovince of A(lan, ,hilippines with an area of 1,1%1 s!uare
meters, to be registered and confirmed in the name of private respondent@
-.C A ten ');+ meter road width along the National road mentioned in the
application be segregated for future road widening programs upon the payment of just
compensation to be annotated at the bac( of the title.
#.C :nsofar as the ownership of the remainder of the subject land is concerned, the
case is hereby 7E/AN8E8 to the court of origin for the reception of further evidence
for the petitioners to establish the other re!uisites for the confirmation of title and
registration in their names of the areas they respectively claim.
SO ORDERED.
G.R. No. L-5;;67 (u,e 22, 19;8
DIRETOR OF LANDS a,- DIRETOR OF FOREST DEVELO!MENT, petitioners,
vs.
*ON. O"RT OF A!!EALS a,- ANTONIO VALERIANO, GA#RIELA
VALERIANO VDA. DE LA R"$, LETIIA A. VALERIANO a,- MARISSA
VALERIANO DE LA ROSA, respondents.
$he Solicitor 3eneral for petitioners.
*arlos *. Serapio for private respondents.

MELENIO-*ERRERA, J.:
,etitioners-public officials, through the olicitor Deneral, see( a review of the 8ecision and
7esolution of the then Court of Appeals affirming the judgment of the former Court of First
:nstance of 3ulacan, 3ranch :::, decreeing registration of a parcel of land in private
respondents< favor. 5he land in !uestion, :dentified as "ot -#1$, Cad-#;--8, Case #, 9bando
Cadastre, under ,lan Ap-;#-;;;.#., is situated in 9bando, 3ulacan, and has an area of
appro2imately *.# hectares. :t adjoins the Hailogan 7iver and private respondents have
converted it into a fishpond.
:n their application for registration filed on /ay );, )*$&, private respondents 'Applicants, for
brevity+ claimed that they are the co-owners in fee simple of the land applied for partly
through inheritance in )*)% and partly by purchase on /ay -, )*.%@ that it is not within any
forest Fone or military reservation@ and that the same is assessed for ta2ation purposes in their
names.
5he 7epublic of the ,hilippines, represented by the 8irector of the 3ureau of Forest
8evelopment opposed the application on the principal ground that the land applied for is
within the unclassified region of 9bando, 3ulacan, per 3F /ap "C No. &#$ dated /arch ),
)*-$@ and that areas within the unclassified region are denominated as forest lands and do not
form part of the disposable and alienable portion of the public domain.
After hearing, the 5rial Court ordered registration of the subject land in favor of the
Applicants. 5his was affirmed on appeal by respondent Appellate Court, which found that
>through indubitable evidence 'Applicants+ and their predecessors-in-interest have been in
open, public, continuous, peaceful and adverse possession of the subject parcel of land under a
bona fide claim of ownership for more than #; years prior to the filing of the application> and
are, therefore, entitled to registration. :t further opined that >since the subject property is
entirely devoted to fishpond purposes, it cannot be categoriFed as part of forest lands. >
3efore this instance, the principal issues posed areA ')+ whether or not Courts can reclassify
the subject public land@ and '-+ whether or not applicants are entitled to judicial confirmation
of title.
5he parties, through their respective counsel, stipulated that the land is within an unclassified
region of 9bando, 3ulacan, as shown by 3F /ap "C No. &#$, dated /arch ), )*-$. 1 No
evidence has been submitted that the land has been released or subse!uently classified despite
an :ndorsement, dated November )$, )*$&, of the 8istrict Forester, to the 8irector of Forest
8evelopment, containing the following recommendationA
ubject area re!uested for release was verified and found to be within the
Enclassified 7egion of 9bando, 3ulacan per 3F "C /ap No. &#$,
certified /arch ), )*-$. =owever, on-the-spot inspection conducted by a
representative of this 9ffice, it disclosed that the same was devoid of any
forest growth and forms part of a well-developed and );; percent
producing fishponds. 5wo houses of light materials were erected within
the area for the careta(ers temporary dwelling.
:n view thereof, and in fairness to the applicant considering the investment
introduced therein this 9ffice believes that the release is in order,
7ecommended for approval and be disposed of in accordance with the
,ublic "and "aw.
2
5he Dovernment<s case is meritorious.
:n effect, what the Courts a #uo have done is to release the subject property from the
unclassified category, which is beyond their competence and jurisdiction. 5he classification of
public lands is an e2clusive prerogative of the E2ecutive 8epartment of the Dovernment and
not of the Courts. :n the absence of such classification, the land remains as unclassified land
until it is released therefrom and rendered open to disposition.
&
5his should be so under time-
honored Constitutional precepts. 5his is also in consonance with the 7egalian doctrine that all
lands of the public domain belong to the tate,
8
and that the tate is the source of any asserted
right to ownership in land and charged with the conservation of such patrimony.
5
5he recommendation of the 8istrict Forester for release of subject property from the
unclassified region is not the ultimate word on the matter. And the fact that 3F /ap "C No.
&#$ dated /arch ), )*-$ showing subject property to be within the unclassified region was
not presented in evidence will not operate against the tate considering the stipulation between
the parties and under the well-settled rule that the tate cannot be estopped by the omission,
mista(e or error of its officials or agents,
6
if omission there was, in fact.
?hile it may be that the /unicipality of 9bando has been cadastrally surveyed in )*&), it
does not follow that an lands comprised therein are automatically released as alienable. A
survey made in a cadastral proceeding merely :dentifies each lot preparatory to a judicial
proceeding for adjudication of title to any of the lands upon claim of interested parties.
3esides, if land is within the jurisdiction of the 3ureau of Forest 8evelopment, it would be
beyond the jurisdiction of the Cadastral Court to register it under the 5orrens ystem.
ince the subject property is still unclassified, whatever possession Applicants may have had,
and, however long, cannot ripen into private ownership.
7
5he conversion of subject property into a fishpond by Applicants, or the alleged titling of
properties around it, does not automatically render the property as alienable and disposable.
Applicants< remedy lies in the release of the property from its present classification. :n fairness
to Applicants, and it appearing that there are titled lands around the subject property,
petitioners-officials should give serious consideration to the matter of classification of the land
in !uestion.
?=E7EF97E, the appealed 8ecision is reversed and the application for registration in "and
7egistration Case No. N-**-4-$& of the former Court of First :nstance of 3ulacan, 3ranch :::,
is hereby dismissed, without prejudice to the availment by the applicants of the proper
administrative remedy. No costs.
9 978E7E8.