LAGUNA LAKE DEVELOPMENT AUTHORITY VS.
CA present laws, rules and permits or authorizations remain in
HERMOSISIMA, JR., J.:
It is difficult for a man, scavenging on the garbage dump created by
affluence and profligate consumption and extravagance of the rich or
fishing in the murky waters of the Pasig River and the Laguna Lake or
making a clearing in the forest so that he can produce food for his
family, to understand why protecting birds, fish, and trees is more
important than protecting him and keeping his family alive.
How do we strike a balance between environmental protection, on
the one hand, and the individual personal interests of people, on the
other?
Towards environmental protection and ecology, navigational safety,
and sustainable development, Republic Act No. 4850 created the
"Laguna Lake Development Authority." This Government Agency is
supposed to carry out and effectuate the aforesaid declared policy,
so as to accelerate the development and balanced growth of the
Laguna Lake area and the surrounding provinces, cities and towns, in
the act clearly named, within the context of the national and regional
plans and policies for social and economic development.
Presidential Decree No. 813 of former President Ferdinand E. Marcos
amended certain sections of Republic Act No. 4850 because of the
concern for the rapid expansion of Metropolitan Manila, the suburbs
and the lakeshore towns of Laguna de Bay, combined with current
and prospective uses of the lake for municipal-industrial water
supply, irrigation, fisheries, and the like. Concern on the part of the
Government and the general public over: — the environment impact
of development on the water quality and ecology of the lake and its
related river systems; the inflow of polluted water from the Pasig
River, industrial, domestic and agricultural wastes from developed
areas around the lake; the increasing urbanization which induced the
deterioration of the lake, since water quality studies have shown that
the lake will deteriorate further if steps are not taken to check the
same; and the floods in Metropolitan Manila area and the lakeshore
towns which will influence the hydraulic system of Laguna de Bay,
since any scheme of controlling the floods will necessarily involve the
lake and its river systems, — likewise gave impetus to the creation of
the Authority.
Section 1 of Republic Act No. 4850 was amended to read as follows:
Sec. 1. Declaration of Policy. It is hereby declared to be the national
policy to promote, and accelerate the development and balanced
growth of the Laguna Lake area and the surrounding provinces, cities
and towns hereinafter referred to as the region, within the context
of the national and regional plans and policies for social and
economic development and to carry out the development of the
Laguna Lake region with due regard and adequate provisions for
environmental management and control, preservation of the quality
of human life and ecological systems, and the prevention of undue
ecological disturbances, deterioration and pollution.1
Special powers of the Authority, pertinent to the issues in this case,
include:
Sec. 3. Section 4 of the same Act is hereby further amended by adding
thereto seven new paragraphs to be known as paragraphs (j), (k), (l),
(m), (n), (o), and (p) which shall read as follows: xxx xxx xxx
(J) The provisions of existing laws to the contrary notwithstanding,
to engage in fish production and other aqua-culture projects in
Laguna de Bay and other bodies of water within its jurisdiction
and in pursuance thereof to conduct studies and make
experiments, whenever necessary, with the collaboration and
assistance of the Bureau of Fisheries and Aquatic Resources,
with the end in view of improving present techniques and
practices. Provided, that until modified, altered or amended by
the procedure provided in the following sub-paragraph, the
force;
(K) For the purpose of effectively regulating and monitoring
activities in Laguna de Bay, the Authority shall have exclusive
jurisdiction to issue new permit for the use of the lake waters for
any projects or activities in or affecting the said lake including
navigation, construction, and operation of fishpens, fish
enclosures, fish corrals and the like, and to impose necessary
safeguards for lake quality control and management and to
collect necessary fees for said activities and projects: Provided,
That the fees collected for fisheries may be shared between the
Authority and other government agencies and political sub-
divisions in such proportion as may be determined by the
President of the Philippines upon recommendation of the
Authority's Board: Provided, further, That the Authority's Board
may determine new areas of fishery development or activities
which it may place under the supervision of the Bureau of
Fisheries and Aquatic Resources taking into account the overall
development plans and programs for Laguna de Bay and related
bodies of water: Provided, finally, That the Authority shall
subject to the approval of the President of the Philippines
promulgate such rules and regulations which shall govern
fisheries development activities in Laguna de Bay which shall
take into consideration among others the following: socio-
economic amelioration of bonafide resident fishermen whether
individually or collectively in the form of cooperatives, lakeshore
town development, a master plan for fishpen construction and
operation, communal fishing ground for lake shore town
residents, and preference to lake shore town residents in hiring
laborer for fishery projects;
(L) To require the cities and municipalities embraced within the
region to pass appropriate zoning ordinances and other
regulatory measures necessary to carry out the objectives of the
Authority and enforce the same with the assistance of the
Authority;
(M) The provisions of existing laws to the contrary notwithstanding,
to exercise water rights over public waters within the Laguna de
Bay region whenever necessary to carry out the Authority's
projects;
(N) To act in coordination with existing governmental agencies in
establishing water quality standards for industrial, agricultural
and municipal waste discharges into the lake and to cooperate
with said existing agencies of the government of the
Philippines in enforcing such standards, or to separately pursue
enforcement and penalty actions as provided for in Section 4
(d) and Section 39-A of this Act: Provided, That in case of
conflict on the appropriate water quality standard to be
enforced such conflict shall be resolved thru the NEDA Board.2
To more effectively perform the role of the Authority under Republic
Act No. 4850, as though Presidential Decree No. 813 were not
thought to be completely effective, the Chief Executive, feeling that
the land and waters of the Laguna Lake Region are limited natural
resources requiring judicious management to their optimal
utilization to insure renewability and to preserve the ecological
balance, the competing options for the use of such resources and
conflicting jurisdictions over such uses having created undue
constraints on the institutional capabilities of the Authority in the
light of the limited powers vested in it by its charter, Executive Order
No. 927 further defined and enlarged the functions and powers of
the Authority and named and enumerated the towns, cities and
provinces encompassed by the term "Laguna de Bay Region".
Also, pertinent to the issues in this case are the following provisions
of Executive Order No. 927 which include in particular the sharing of
fees:
Sec 2. Water Rights Over Laguna de Bay and
Other Bodies of Water within the Lake Region: To
effectively regulate and monitor activities in the
Laguna de Bay region, the Authority shall have
exclusive jurisdiction to issue permit for the use
1
 of all surface water for any projects or activities
in or affecting the said region including
navigation, construction, and operation of
fishpens, fish enclosures, fish corrals and the like.
For the purpose of this Executive Order, the term "Laguna de Bay
Region" shall refer to the
Provinces of Rizal and Laguna; the Cities of San Pablo, Pasay,
Caloocan, Quezon, Manila and
Tagaytay; the towns of Tanauan, Sto. Tomas and Malvar in Batangas
Province; the towns of Silang and Carmona in Cavite Province; the
town of Lucban in Quezon Province; and the towns of Marikina,
Pasig, Taguig, Muntinlupa, and Pateros in Metro Manila.
Sec 3. Collection of Fees. The Authority is hereby empowered to
collect fees for the use of the lake water and its tributaries for all
beneficial purposes including but not limited to fisheries, recreation,
municipal, industrial, agricultural, navigation, irrigation, and waste
disposal purpose; Provided, that the rates of the fees to be collected,
and the sharing with other government agencies and political
subdivisions, if necessary, shall be subject to the approval of the
President of the Philippines upon recommendation of the Authority's
Board, except fishpen fee, which will be shared in the following
manner; 20 percent of the fee shall go to the lakeshore local
governments, 5 percent shall go to the Project Development Fund
which shall be administered by a Council and the remaining 75
percent shall constitute the share of LLDA. However, after the
implementation within the three-year period of the Laguna Lake
Fishery Zoning and Management Plan, the sharing will be modified
as follows: 35 percent of the fishpen fee goes to the lakeshore local
governments, 5 percent goes to the Project Development Fund and
the remaining 60 percent shall be retained by LLDA; Provided,
however, that the share of LLDA shall form part of its corporate funds
and shall not be remitted to the National Treasury as an exception to
the provisions of Presidential Decree No. 1234. (Emphasis supplied)
It is important to note that Section 29 of Presidential Decree No. 813
defined the term "Laguna Lake" in this manner:
Sec 41. Definition of Terms.
(11) Laguna Lake or Lake. Whenever Laguna Lake or lake is used in
this Act, the same shall refer to Laguna de Bay which is that area
covered by the lake water when it is at the average annual maximum
lake level of elevation 12.50 meters, as referred to a datum 10.00
meters below mean lower low water (M.L.L.W). Lands located at and
below such elevation are public lands which form part of the bed of
said lake.
Then came Republic Act No. 7160, the Local Government Code of
1991. The municipalities in the Laguna Lake Region interpreted the
provisions of this law to mean that the newly passed law gave
municipal governments the exclusive jurisdiction to issue fishing
privileges within their municipal waters because R.A. 7160 provides:
Sec. 149. Fishery Rentals, Fees and Charges.
(a) Municipalities shall have the exclusive
authority to grant fishery privileges in the
municipal waters and impose rental fees or
charges therefor in accordance with the
provisions of this Section.
(b) The Sangguniang Bayan may:
1. Grant fishing privileges to erect fish corrals, oyster, mussel or
other aquatic beds or bangus fry areas, within a definite zone of
the municipal waters, as determined by it; . . . .
2. Grant privilege to gather, take or catch bangus fry, prawn fry or
kawagkawag or fry of other species and fish from the municipal
waters by nets, traps or other fishing gears to marginal
fishermen free from any rental fee, charges or any other
imposition whatsoever.
Sec. 447. Power, Duties, Functions and Compensation. . . . .
(XI) Subject to the provisions of Book II of this Code, grant exclusive
privileges of constructing fish corrals or fishpens, or the taking or
catching of bangus fry, prawn fry or kawag-kawag or fry of any
species or fish within the municipal waters.
Municipal governments thereupon assumed the authority to issue
fishing privileges and fishpen permits. Big fishpen operators took
advantage of the occasion to establish fishpens and fishcages to the
consternation of the Authority. Unregulated fishpens and fishcages,
as of July, 1995, occupied almost one-third of the entire lake water
surface area, increasing the occupation drastically from 7,000
hectares in 1990 to almost 21,000 hectares in 1995. The Mayor's
permit to construct fishpens and fishcages were all undertaken in
violation of the policies adopted by the Authority on fishpen zoning
and the Laguna Lake carrying capacity.
To be sure, the implementation by the lakeshore municipalities of
separate independent policies in the operation of fishpens and
fishcages within their claimed territorial municipal waters in the lake
and their indiscriminate grant of fishpen permits have already
saturated the lake area with fishpens, thereby aggravating the
current environmental problems and ecological stress of Laguna
Lake.
In view of the foregoing circumstances, the Authority served notice
to the general public that:
In compliance with the instructions of His Excellency PRESIDENT
FIDEL V. RAMOS given on June 23, 1993 at Pila, Laguna pursuant to
Republic Act 4850 as amended by Presidential Decree 813 and
Executive Order 927 series of 1983 and in line with the policies and
programs of the Presidential Task Force on Illegal Fishpens and Illegal
Fishing, the general public is hereby notified that:
1 All fishpens, fishcages and other aqua-culture structures in the
Laguna de Bay Region, which were not registered or to which no
application for registration and/or permit has been filed with Laguna
Lake Development Authority as of March 31, 1993 are hereby
declared outrightly as illegal.
2 All fishpens, fishcages and other aqua-culture structures so
declared as illegal shall be subject to demolition which shall be
undertaken by the Presidential Task Force for Illegal Fishpen and
Illegal Fishing.
3 Owners of fishpens, fishcages and other aqua-culture structures
declared as illegal shall, without prejudice to demolition of their
structures be criminally charged in accordance with Section 39-A of
Republic Act 4850 as amended by P.D. 813 for violation of the same
laws. Violations of these laws carries a penalty of imprisonment of
not exceeding 3 years or a fine not exceeding Five Thousand Pesos or
both at the discretion of the court.
All operators of fishpens, fishcages and other aqua-culture structures
declared as illegal in accordance with the foregoing Notice shall have
one (1) month on or before 27 October 1993 to show cause before
the LLDA why their said fishpens, fishcages and other aqua-culture
structures should not be demolished/dismantled.
One month, thereafter, the Authority sent notices to the concerned
owners of the illegally constructed fishpens, fishcages and other
aqua-culture structures advising them to dismantle their respective
structures within 10 days from receipt thereof, otherwise, demolition
shall be effected.
Reacting thereto, the affected fishpen owners filed injunction cases
against the Authority before various regional trial courts, to wit: (a)
2
Civil Case No. 759-B, for Prohibition, Injunction and Damages,
Regional Trial Court, Branch 70, Binangonan, Rizal, filed by Fleet
Development, Inc. and Carlito Arroyo; (b) Civil Case No. 64049, for
Injunction, Regional Trial Court, Branch 162, Pasig, filed by IRMA
Fishing and Trading Corp., ARTM Fishing Corp., BDR Corp., MIRT Corp.
and TRIM Corp.; (c) Civil Case No. 566, for Declaratory Relief and
Injunction,
Regional Trial Court, Branch 163, Pasig, filed by Manila Marine Life
Business Resources, Inc. and Tobias Reynaldo
M. Tianco; (d) Civil Case No. 556-M, for Prohibition, Injunction and
Damages, Regional Trial Court, Branch 78, Morong, Rizal, filed by AGP
Fishing Ventures, Inc.; (e) Civil Case No. 522-M, for Prohibition,
Injunction and
Damages, Regional Trial Court, Branch 78, Morong, Rizal, filed by Blue
Lagoon and Alcris Chicken Growers, Inc.; (f) Civil Case No. 554-, for
Certiorari and Prohibition, Regional Trial Court, Branch 79, Morong,
Rizal, filed by Greenfields Ventures Industrial Corp. and R.J. Orion
Development Corp.; and (g) Civil Case No. 64124, for Injunction,
Regional Trial Court, Branch 15, Pasig, filed by SEA-MAR Trading Co.,
Inc. and Eastern Lagoon Fishing Corp. and Minamar Fishing
Corporation.
The Authority filed motions to dismiss the cases against it on
jurisdictional grounds. The motions to dismiss were invariably
denied. Meanwhile, temporary restraining order/writs of preliminary
mandatory injunction were issued in Civil Cases Nos. 64124, 759 and
566 enjoining the Authority from demolishing the fishpens and
similar structures in question.
Hence, the herein petition for certiorari, prohibition and injunction,
G.R. Nos. 120865-71, were filed by the Authority with this court.
Impleaded as parties-respondents are concerned regional trial courts
and respective private parties, and the municipalities and/or
respective Mayors of Binangonan, Taguig and Jala-jala, who issued
permits for the construction and operation of fishpens in Laguna de
Bay. The Authority sought the following reliefs, viz.:
A. Nullification of the temporary restraining order/writs of
preliminary injunction issued in Civil Cases Nos. 64125, 759 and
566;
B. Permanent prohibition against the regional trial courts from
exercising jurisdiction over cases involving the Authority which
is a co-equal body;
C. Judicial pronouncement that R.A. 7610 (Local Government Code
of 1991) did not repeal, alter or modify the provisions of R.A.
4850, as amended, empowering the Authority to issue permits
for fishpens, fishcages and other aqua-culture structures in
Laguna de Bay and that, the Authority the government agency
vested with exclusive authority to issue said permits.
By this Court's resolution of May 2, 1994, the Authority's
consolidated petitions were referred to the Court of Appeals.
In a Decision, dated June 29, 1995, the Court of Appeals dismissed
the Authority's consolidated petitions, the Court of Appeals holding
that: (A) LLDA is not among those quasi-judicial agencies of
government whose decision or order are appealable only to the
Court of Appeals; (B) the LLDA charter does vest LLDA with quasi-
judicial functions insofar as fishpens are concerned; (C) the provisions
of the LLDA charter insofar as fishing privileges in Laguna de Bay are
concerned had been repealed by the Local Government Code of
1991; (D) in view of the aforesaid repeal, the power to grant permits
devolved to and is now vested with their respective local government
units concerned.
Not satisfied with the Court of Appeals decision, the Authority has
returned to this Court charging the following errors:
THE HONORABLE COURT OF APPEALS PROBABLY COMMITTED AN
ERROR WHEN IT RULED THAT THE LAGUNA LAKE DEVELOPMENT
AUTHORITY IS NOT A QUASI-JUDICIAL AGENCY.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
WHEN IT RULED THAT R.A.
4850 AS AMENDED BY P.D. 813 AND E.O. 927 SERIES OF 1983 HAS
BEEN REPEALED BY REPUBLIC ACT 7160. THE SAID RULING IS
CONTRARY TO ESTABLISHED PRINCIPLES AND JURISPRUDENCE OF
STATUTORY CONSTRUCTION.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
WHEN IT RULED THAT THE POWER TO ISSUE FISHPEN PERMITS IN
LAGUNA DE BAY HAS BEEN DEVOLVED TO CONCERNED (LAKESHORE)
LOCAL GOVERNMENT UNITS.
We take a simplistic view of the controversy. Actually, the main and
only issue posed is: Which agency of the
Government — the Laguna Lake Development Authority or the towns
and municipalities comprising the region — should exercise
jurisdiction over the Laguna Lake and its environs insofar as the
issuance of permits for fishery privileges is concerned?
Section 4 (k) of the charter of the Laguna Lake Development
Authority, Republic Act No. 4850, the provisions of Presidential
Decree No. 813, and Section 2 of Executive Order No. 927, cited
above, specifically provide that the Laguna Lake Development
Authority shall have exclusive jurisdiction to issue permits for the use
of all surface water for any projects or activities in or affecting the
said region, including navigation, construction, and operation of
fishpens, fish enclosures, fish corrals and the like. On the other hand,
Republic Act No. 7160, the Local Government Code of 1991, has
granted to the municipalities the exclusive authority to grant fishery
privileges in municipal waters. The Sangguniang Bayan may grant
fishery privileges to erect fish corrals, oyster, mussels or other
aquatic beds or bangus fry area within a definite zone of the
municipal waters.
We hold that the provisions of Republic Act No. 7160 do not
necessarily repeal the aforementioned laws creating the Laguna Lake
Development Authority and granting the latter water rights authority
over Laguna de Bay and the lake region.
The Local Government Code of 1991 does not contain any express
provision which categorically expressly repeal the charter of the
Authority. It has to be conceded that there was no intent on the part
of the legislature to repeal Republic Act No. 4850 and its
amendments. The repeal of laws should be made clear and
expressed.
It has to be conceded that the charter of the Laguna Lake
Development Authority constitutes a special law. Republic Act No.
7160, the Local Government Code of 1991, is a general law. It is basic
in statutory construction that the enactment of a later legislation
which is a general law cannot be construed to have repealed a special
law. It is a well-settled rule in this jurisdiction that "a special statute,
provided for a particular case or class of cases, is not repealed by a
subsequent statute, general in its terms, provisions and application,
unless the intent to repeal or alter is manifest, although the terms of
the general law are broad enough to include the cases embraced in
the special law."3
Where there is a conflict between a general law and a special statute,
the special statute should prevail since it evinces the legislative intent
more clearly than the general statute. The special law is to be taken
as an exception to the general law in the absence of special
circumstances forcing a contrary conclusion. This is because implied
repeals are not favored and as much as possible, effect must be given
to all enactments of the legislature. A special law cannot be repealed,
amended or altered by a subsequent general law by mere
implication.4
Thus, it has to be concluded that the charter of the Authority should
prevail over the Local Government Code of 1991.
Considering the reasons behind the establishment of the Authority,
which are environmental protection, navigational safety, and
3
sustainable development, there is every indication that the legislative
intent is for the Authority to proceed with its mission.
We are on all fours with the manifestation of petitioner Laguna Lake
Development Authority that "Laguna de Bay, like any other single
body of water has its own unique natural ecosystem. The 900 km²
lake surface water, the eight (8) major river tributaries and several
other smaller rivers that drain into the lake, the 2,920 km² basin or
watershed transcending the boundaries of Laguna and Rizal
provinces, greater portion of Metro Manila, parts of Cavite, Batangas,
and Quezon provinces, constitute one integrated delicate natural
ecosystem that needs to be protected with uniform set of policies; if
we are to be serious in our aims of attaining sustainable
development. This is an exhaustible natural resource — a very limited
one — which requires judicious management and optimal utilization
to ensure renewability and preserve its ecological integrity and
balance."
"Managing the lake resources would mean the implementation of a
national policy geared towards the protection, conservation,
balanced growth and sustainable development of the region with
due regard to the inter-generational use of its resources by the
inhabitants in this part of the earth. The authors of Republic Act 4850
have foreseen this need when they passed this LLDA law — the
special law designed to govern the management of our Laguna de
Bay lake resources."
"Laguna de Bay therefore cannot be subjected to fragmented
concepts of management policies where lakeshore local government
units exercise exclusive dominion over specific portions of the lake
water. The garbage thrown or sewage discharged into the lake,
abstraction of water therefrom or construction of fishpens by
enclosing its certain area, affect not only that specific portion but the
entire 900 km² of lake water. The implementation of a cohesive and
integrated lake water resource management policy, therefore, is
necessary to conserve, protect and sustainably develop Laguna de
Bay."5
The power of the local government units to issue fishing privileges
was clearly granted for revenue purposes. This is evident from the
fact that Section 149 of the New Local Government Code
empowering local governments to issue fishing permits is embodied
in Chapter 2, Book II, of Republic Act No. 7160 under the heading,
"Specific Provisions On The Taxing And Other Revenue Raising Power
Of Local Government Units."
On the other hand, the power of the Authority to grant permits for
fishpens, fishcages and other aqua-culture structures is for the
purpose of effectively regulating and monitoring activities in the
Laguna de Bay region (Section 2, Executive Order No. 927) and for
lake quality control and management.6 It does partake of the nature
of police power which is the most pervasive, the least limitable and
the most demanding of all State powers including the power of
taxation. Accordingly, the charter of the Authority which embodies a
valid exercise of police power should prevail over the Local
Government Code of 1991 on matters affecting Laguna de Bay.
There should be no quarrel over permit fees for fishpens, fishcages
and other aqua-culture structures in the Laguna de Bay area. Section
3 of Executive Order No. 927 provides for the proper sharing of fees
collected.
In respect to the question as to whether the Authority is a quasi-
judicial agency or not, it is our holding that, considering the
provisions of Section 4 of Republic Act No. 4850 and Section 4 of
Executive Order No. 927, series of 1983, and the ruling of this Court
in Laguna Lake Development Authority vs. Court of Appeals, 231 SCRA
304, 306, which we quote:
As a general rule, the adjudication of pollution cases generally
pertains to the Pollution Adjudication Board (PAB), except in cases
where the special law provides for another forum. It must be
recognized in this regard that the LLDA, as a specialized
administrative agency, is specifically mandated under Republic Act
No. 4850 and its amendatory laws to carry out and make effective
the declared national policy of promoting and accelerating the
development and balanced growth of the Laguna Lake area and the
surrounding provinces of Rizal and Laguna and the cities of San Pablo,
Manila, Pasay, Quezon and Caloocan with due regard and adequate
provisions for environmental management and control, preservation
of the quality of human life and ecological systems, and the
prevention of undue ecological disturbances, deterioration and
pollution. Under such a broad grant of power and authority, the
LLDA, by virtue of its special charter, obviously has the responsibility
to protect the inhabitants of the Laguna Lake region from the
deleterious effects of pollutants emanating from the discharge of
wastes from the surrounding areas. In carrying out the
aforementioned declared policy, the LLDA is mandated, among
others, to pass upon and approve or disapprove all plans, programs,
and projects proposed by local government offices/agencies within
the region, public corporations, and private persons or enterprises
where such plans, programs and/or projects are related to those of
the LLDA for the development of the region.
. . . . While it is a fundamental rule that an administrative agency has
only such powers as are expressly granted to it by law, it is likewise a
settled rule that an administrative agency has also such powers as
are necessarily implied in the exercise of its express powers. In the
exercise, therefore, of its express powers under its charter, as a
regulatory and quasi-judicial body with respect to pollution cases in
the Laguna Lake region, the authority of the LLDA to issue a "cease
and desist order" is, perforce, implied. Otherwise, it may well be
reduced to a "toothless" paper agency.
There is no question that the Authority has express powers as a
regulatory and quasi-judicial body in respect to pollution cases with
authority to issue a "cease and desist order" and on matters affecting
the construction of illegal fishpens, fishcages and other aqua-culture
structures in Laguna de Bay. The Authority's pretense, however, that
it is co-equal to the Regional Trial Courts such that all actions against
it may only be instituted before the Court of Appeals cannot be
sustained. On actions necessitating the resolution of legal questions
affecting the powers of the Authority as provided for in its charter,
the Regional Trial Courts have jurisdiction.
In view of the foregoing, this Court holds that Section 149 of Republic
Act No. 7160, otherwise known as the
Local Government Code of 1991, has not repealed the provisions of
the charter of the Laguna Lake Development Authority, Republic Act
No. 4850, as amended. Thus, the Authority has the exclusive
jurisdiction to issue permits for the enjoyment of fishery privileges in
Laguna de Bay to the exclusion of municipalities situated therein and
the authority to exercise such powers as are by its charter vested on
it.
Removal from the Authority of the aforesaid licensing authority will
render nugatory its avowed purpose of protecting and developing
the Laguna Lake Region. Otherwise stated, the abrogation of this
power would render useless its reason for being and will in effect
denigrate, if not abolish, the Laguna Lake Development Authority.
This, the Local Government Code of 1991 had never intended to do.
WHEREFORE, the petitions for prohibition, certiorari and injunction
are hereby granted, insofar as they relate to the authority of the
Laguna Lake Development Authority to grant fishing privileges within
the Laguna Lake Region.
The restraining orders and/or writs of injunction issued by Judge
Arturo Marave, RTC, Branch 78, Morong, Rizal;
Judge Herculano Tech, RTC, Branch 70, Binangonan, Rizal; and Judge
Aurelio Trampe, RTC, Branch 163, Pasig, Metro Manila, are hereby
declared null and void and ordered set aside for having been issued
with grave abuse of discretion.
The Municipal Mayors of the Laguna Lake Region are hereby
prohibited from issuing permits to construct and operate fishpens,
4
fishcages and other aqua-culture structures within the Laguna Lake
Region, their previous issuances being declared null and void. Thus,
the fishing permits issued by Mayors Isidro B. Pacis, Municipality of
Binangonan; Ricardo D. Papa, Municipality of Taguig; and Walfredo
M. de la Vega, Municipality of Jala-jala, specifically, are likewise
declared null and void and ordered cancelled.
The fishpens, fishcages and other aqua-culture structures put up by
operators by virtue of permits issued by Municipal Mayors within the
Laguna Lake Region, specifically, permits issued to Fleet
Development, Inc. and
Carlito Arroyo; Manila Marine Life Business Resources, Inc.,
represented by, Mr. Tobias Reynald M. Tiangco;
Greenfield Ventures Industrial Development Corporation and R.J.
Orion Development Corporation; IRMA
Fishing And Trading Corporation, ARTM Fishing Corporation, BDR
Corporation, Mirt Corporation and Trim Corporation; Blue Lagoon
Fishing Corporation and ALCRIS Chicken Growers, Inc.; AGP Fish
Ventures, Inc., represented by its President Alfonso Puyat; SEA MAR
Trading Co., Inc., Eastern Lagoon Fishing Corporation, and MINAMAR
Fishing Corporation, are hereby declared illegal structures subject to
demolition by the Laguna Lake Development Authority.
SO ORDERED.
Davide, Jr., Bellosillo and Kapunan, JJ., concur.
G.R. No. 73002 December 29, 1986
DIRECTOR OF LANDS INTERMEDIATE APPELLATE
COURT and ACME PLYWOOD & VENEER CO. INC.,
ETC., respondents. D. Nacion Law Office for private
respondent.
The Director of Lands has brought this appeal by certiorari
from a judgment of the Intermediate Appellate Court affirming a
decision of the Court of First Instance of Isabela, which ordered
registration in favor of Acme Plywood & Veneer Co., Inc. of five
parcels of land measuring 481, 390 square meters, more or less,
acquired by it from Mariano and Acer Infiel, members of the Dumagat
tribe.
The registration proceedings were for confirmation of title under
Section 48 of Commonwealth Act No. 141 (The Public Land Act). as
amended: and the appealed judgment sums up the findings of the
trial court in said proceedings in this wise:
1. That Acme Plywood & Veneer Co. Inc., represented by
Mr. Rodolfo Nazario is a corporation duly organized in
accordance with the laws of the Republic of the
Philippines and registered with the Securities and
Exchange Commission on December 23, 1959;
2. That Acme Plywood & Veneer Co. Inc., represented by
Mr. Rodolfo Nazario can acquire real properties
pursuant to the provisions of the Articles of
Incorporation particularly on the provision of its
secondary purposes (paragraph (9), Exhibit 'M-l');
3. That the land subject of the Land Registration
proceeding was ancestrally acquired by Acme Plywood
& Veneer Co., Inc., on October 29, 1962, from Mariano
Infiel and Acer Infiel, both members of the Dumagat tribe
and as such are cultural minorities;
4. That the constitution of the Republic of the Philippines
of 1935 is applicable as the sale took place on October
29, 1962;
5. That the possession of the Infiels over the land
relinquished or sold to Acme Plywood & Veneer Co.,
Inc., dates back before the Philippines was discovered
by Magellan as the ancestors of the Infiels have
possessed and occupied the land from generation to
generation until the same came into the possession of
Mariano Infiel and Acer Infiel;
6. That the possession of the applicant Acme Plywood &
Veneer Co., Inc., is continuous, adverse and public from
1962 to the present and tacking the possession of the
Infiels who were granted from whom the applicant
bought said land on October 29, 1962, hence the
possession is already considered from time
immemorial.
7. That the land sought to be registered is a private land
pursuant to the provisions of Republic Act No. 3872
granting absolute ownership to members of the non-
Christian Tribes on land occupied by them or their
ancestral lands, whether with the alienable or
disposable public land or within the public domain;
8. That applicant Acme Plywood & Veneer Co. Inc., has
introduced more than Forty-Five Million
(P45,000,000.00) Pesos worth of improvements, said
improvements were seen by the Court during its ocular
investigation of the land sought to be registered on
September 18, 1982;
9. That the ownership and possession of the land sought
to be registered by the applicant was duly recognized by
the government when the Municipal Officials of
Maconacon, Isabela, have negotiated for the donation
of the townsite from Acme Plywood & Veneer Co., Inc.,
and this negotiation came to reality when the Board of
Directors of the Acme Plywood & Veneer Co., Inc., had
donated a part of the land bought by the Company from
the Infiels for the townsite of Maconacon Isabela (Exh.
'N') on November 15, 1979, and which donation was
accepted by the Municipal Government of Maconacon,
Isabela (Exh. 'N-l'), during their special session on
November 22, 1979.
The Director of Lands takes no issue with any of these findings except
as to the applicability of the 1935 Constitution to the matter at hand.
Concerning this, he asserts that, the registration proceedings have
been commenced only on July 17, 1981, or long after the 1973
Constitution had gone into effect, the latter is the correctly applicable
law; and since section 11 of its Article XIV prohibits private
corporations or associations from holding alienable lands of the
public domain, except by lease not to exceed 1,000 hectares (a
prohibition not found in the 1935 Constitution which was in force in
1962 when Acme purchased the lands in question from the Infiels), it
was reversible error to decree registration in favor of Acme Section
48, paragraphs (b) and (c), of Commonwealth Act No. 141, as
amended, reads:
SEC. 48. The following described citizens of the Philippines,
occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have
not been perfected or completed, may apply to the Court
of First Instance of the province where the land is located
for confirmation of their claims, and the issuance of a
certificate of title therefor, under the Land Registration
Act, to wit:
xxx xxx xxx
(b) Those who by themselves or through their
predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of
agricultural lands of the public domain, under a bona fide
claim of acquisition or ownership, for at least thirty years
immediately preceding the filing of the application for
5
 confirmation of title except when prevented by war or
force majeure. These shall be conclusively presumed to
have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of
title under the provisions of this chapter.
(c) Members of the National Cultural minorities who
by themselves or through their predecessors-ininterest
have been in open. continuous, exclusive 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 30 years shall be
entitled to the rights granted in subsection (b) hereof.
The Petition for Review does not dispute-indeed, in view of the
quoted findings of the trial court which were cited and affirmed by
the Intermediate Appellate Court, it can no longer controvert before
this Court-the fact that Mariano and Acer Infiel, from whom Acme
purchased the lands in question on October 29, 1962, are members
of the national cultural minorities who had, by themselves and
through their progenitors, possessed and occupied those lands since
time immemorial, or for more than the required 30-year period and
were, by reason thereof, entitled to exercise the right granted in
Section 48 of the Public Land Act to have their title judicially
confirmed. Nor is there any pretension that Acme, as the successor-
in-interest of the Infiels, is disqualified to acquire and register
ownership of said lands under any provisions of the 1973
Constitution other than Section 11 of its Article XIV already referred
to.
Given the foregoing, the question before this Court is whether or not
the title that the Infiels had transferred to
Acme in 1962 could be confirmed in favor of the latter in proceedings
instituted by it in 1981 when the 1973 Constitution was already in
effect, having in mind the prohibition therein against private
corporations holding lands of the public domain except in lease not
exceeding 1,000 hectares.
The question turns upon a determination of the character of the
lands at the time of institution of the registration proceedings in
1981. If they were then still part of the public domain, it must be
answered in the negative. If, on the other hand, they were then
already private lands, the constitutional prohibition against their
acquisition by private corporations or associations obviously does not
apply.
In this regard, attention has been invited to Manila Electric Company
vs. Castro-Bartolome, et al, 1 where a similar set of facts prevailed. In
that case, Manila Electric Company, a domestic corporation more
than 60% of the capital stock of which is Filipino-owned, had
purchased in 1947 two lots in Tanay, Rizal from the Piguing spouses.
The lots had been possessed by the vendors and, before them, by
their predecessor-in-interest, Olimpia Ramos, since prior to the
outbreak of the Pacific War in 1941. On December 1, 1976, Meralco
applied to the Court of First Instance of Rizal, Makati Branch, for
confirmation of title to said lots. The court, assuming that the lots
were public land, dismissed the application on the ground that
Meralco, a juridical person, was not qualified to apply for registration
under Section 48(b) of the Public Land Act which allows only Filipino
citizens or natural persons to apply for judicial confirmation of
imperfect titles to public land. Meralco appealed, and a majority of
this Court upheld the dismissal. It was held that:
..., the said land is still public land. It would cease to be
public land only upon the issuance of the certificate of title
to any Filipino citizen claiming it under section 48(b).
Because it is still public land and the Meralco, as a juridical
person, is disqualified to apply for its registration under
section 48(b), Meralco's application cannot be given due
course or has to be dismissed.
Finally, it may be observed that the constitutional
prohibition makes no distinction between (on the one
hand) alienable agricultural public lands as to which no
occupant has an imperfect title and (on the other hand)
alienable lands of the public domain as to which an
occupant has on imperfect title subject to judicial
confirmation.
Since section 11 of Article XIV does not distinguish, we
should not make any distinction or qualification.
The prohibition applies to alienable public lands as to which
a Torrens title may be secured under section 48(b). The
proceeding under section 48(b) 'presupposes that the land
is public' (Mindanao vs. Director of Lands, L-19535, July 30,
1967, 20 SCRA 641, 644).
The present Chief Justice entered a vigorous dissent, tracing the line
of cases beginning with Carino in 1909 2 thru Susi in 1925 3 down to
Herico in 1980, 4 which developed, affirmed and reaffirmed the
doctrine that open, exclusive and undisputed possession of alienable
public land for the period prescribed by law creates the legal fiction
whereby the land, upon completion of the requisite period ipso jure
and without the need of judicial or other sanction, ceases to be public
land and becomes private property. That said dissent expressed what
is the better — and, indeed, the correct, view-becomes evident from
a consideration of some of the principal rulings cited therein,
The main theme was given birth, so to speak, in Carino involving the
Decree/Regulations of June 25, 1880 for adjustment of royal lands
wrongfully occupied by private individuals in the Philippine Islands. It
was ruled that:
It is true that the language of articles 4 and 5 5 attributes
title to those 'who may prove' possession for the necessary
time and we do not overlook the argument that this means
may prove in registration proceedings. It may be that an
English conveyancer would have recommended an
application under the foregoing decree, but certainly it was
not calculated to convey to the mind of an Igorot chief the
notion that ancient family possessions were in danger, if he
had read every word of it. The words 'may prove'
(acrediten) as well or better, in view of the other
provisions, might be taken to mean when called upon to do
so in any litigation. There are indications that registration
was expected from all but none sufficient to show that, for
want of it, ownership actually gained would be lost. The
effect of the proof, wherever made, was not to confer title,
but simply to establish it, as already conferred by the
decree, if not by earlier law. ...
That ruling assumed a more doctrinal character because expressed in
more categorical language, in Susi:
.... In favor of Valentin Susi, there is, moreover, the
presumption juris et de jure established in paragraph (b) of
section 45 of Act No. 2874, amending Act No. 926, that all
the necessary requirements for a grant by the Government
were complied with, for he has been in actual and physical
possession, personally and through his predecessors, of an
agricultural land of the public domain openly,
continuously, exclusively and publicly since July 26, 1984,
with a right to a certificate of title to said land under the
provisions of Chapter VIII of said Act. So that when Angela
Razon applied for the grant in her favor,
Valentin Susi had already acquired, by operation of law
not only a right to a grant, but a grant of the Government,
for it is not necessary that a certificate of title should be
issued in order that said grant may be sanctioned by the
courts, an application therefore is sufficient, under the
provisions of section 47 of Act No. 2874. If by a legal
fiction, Valentin Susi had acquired the land in question by
a grant of the State, it had already ceased to be of the
public domain and had become private property, at least
by presumption, of Valentin Susi, beyond the control of
the Director of Lands. Consequently, in selling the land in
question of Angela Razon, the Director of Lands disposed
6
 of a land over which he had no longer any title or control,
and the sale thus made was void and of no effect, and
Angela Razon did not thereby acquire any right. 6
Succeeding cases, of which only some need be mentioned, likeof
Lacaste vs. Director of Lands, 7 Mesina vs. Vda. de Sonza, 8 Manarpac
vs. Cabanatuan, 9 Miguel vs. Court of Appeals 10 and Herico vs. Dar,
supra, by invoking and affirming the Susi doctrine have firmly rooted
it in jurisprudence.
Herico, in particular, appears to be squarely affirmative: 11
.... Secondly, under the provisions of Republic Act No. 1942, which
the respondent Court held to be inapplicable to the petitioner's case,
with the latter's proven occupation and cultivation for more than 30
years since 1914, by himself and by his predecessors-in-interest, title
over the land has vested on petitioner so as to segregate the land
from the mass of public land. Thereafter, it is no longer disposable
under the Public Land Act as by free patent. ....
xxx xxx xxx
As interpreted in several cases, when the conditions as specified in
the foregoing provision are complied with, the possessor is deemed
to have acquired, by operation of law, a right to a grant, a
government grant, without the necessity of a certificate of title being
issued. The land, therefore, ceases to be of the public domain and
beyond the authority of the Director of Lands to dispose of. The
application for confirmation is mere formality, the lack of which does
not affect the legal sufficiency of the title as would be evidenced by
the patent and the Torrens title to be issued upon the strength of said
patent. 12
Nothing can more clearly demonstrate the logical inevitability of
considering possession of public land which is of the character and
duration prescribed by statute as the equivalent of an express grant
from the State than the dictum of the statute itself 13 that the
possessor(s) "... shall be conclusively presumed to have performed all
the conditions essential to a Government grant and shall be entitled
to a certificate of title .... " No proof being admissible to overcome a
conclusive presumption, confirmation proceedings would, in truth be
little more than a formality, at the most limited to ascertaining
whether the possession claimed is of the required character and
length of time; and registration thereunder would not confer title,
but simply recognize a title already vested. The proceedings would
not originally convert the land from public to private land, but only
confirm such a conversion already affected by operation of law from
the moment the required period of possession became complete. As
was so well put in Carino, "... (T)here are indications that registration
was expected from all, but none sufficient to show that, for want of
it, ownership actually gained would be lost. The effect of the proof,
wherever made, was not to confer title, but simply to establish it, as
already conferred by the decree, if not by earlier law."
If it is accepted-as it must be-that the land was already private land
to which the Infiels had a legally sufficient and transferable title on
October 29, 1962 when Acme acquired it from said owners, it must
also be conceded that Acme had a perfect right to make such
acquisition, there being nothing in the 1935 Constitution then in
force (or, for that matter, in the 1973 Constitution which came into
effect later) prohibiting corporations from acquiring and owning
private lands.
Even on the proposition that the land remained technically "public"
land, despite immemorial possession of the
Infiels and their ancestors, until title in their favor was actually
confirmed in appropriate proceedings under the Public Land Act,
there can be no serious question of Acmes right to acquire the land
at the time it did, there also being nothing in the 1935 Constitution
that might be construed to prohibit corporations from purchasing or
acquiring interests in public land to which the vendor had already
acquired that type of so-called "incomplete" or "imperfect" title. The
only limitation then extant was that corporations could not acquire,
hold or lease public agricultural lands in excess of 1,024 hectares. The
purely accidental circumstance that confirmation proceedings were
brought under the aegis of the 1973 Constitution which forbids
corporations from owning lands of the public domain cannot defeat
a right already vested before that law came into effect, or invalidate
transactions then perfectly valid and proper. This Court has already
held, in analogous circumstances, that the Constitution cannot impair
vested rights.
We hold that the said constitutional prohibition 14 has no retroactive
application to the sales application of Binan Development Co., Inc.
because it had already acquired a vested right to the land applied for
at the time the 1973 Constitution took effect.
That vested right has to be respected. It could not be abrogated by
the new Constitution. Section 2, Article XIII of the 1935 Constitution
allows private corporations to purchase public agricultural lands not
exceeding one thousand and twenty-four hectares. Petitioner'
prohibition action is barred by the doctrine of vested rights in
constitutional law.
xxx xxx xxx
The 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 subsequent repeal of a municipal ordinance, or
by a change in the constitution of the State, except in a legitimate
exercise of the police power'(16 C.J.S. 1177-78). xxx xxx xxx
In the instant case, it is incontestable that prior to the effectivity of
the 1973 Constitution the right of the corporation to purchase the
land in question had become fixed and established and was no longer
open to doubt or controversy.
Its compliance with the requirements of the Public Land Law for the
issuance of a patent had the effect of segregating the said land from
the public domain. The corporation's right to obtain a patent for the
land is protected by law. It cannot be deprived of that right without
due process (Director of Lands vs. CA, 123 Phil. 919).<äre||anº•1àw>
15
The fact, therefore, that the confirmation proceedings were
instituted by Acme in its own name must be regarded as simply
another accidental circumstance, productive of a defect hardly more
than procedural and in nowise affecting the substance and merits of
the right of ownership sought to be confirmed in said proceedings,
there being no doubt of Acme's entitlement to the land. As it is
unquestionable that in the light of the undisputed facts, the Infiels,
under either the 1935 or the 1973 Constitution, could have had title
in themselves confirmed and registered, only a rigid subservience to
the letter of the law would deny the same benefit to their lawful
successor-in-interest by valid conveyance which violates no
constitutional mandate.
The Court, in the light of the foregoing, is of the view, and so holds,
that the majority ruling in Meralco must be reconsidered and no
longer deemed to be binding precedent. The correct rule, as
enunciated in the line of cases already referred to, is that alienable
public land held by a possessor, personally or through his
predecessors-ininterest, openly, continuously and exclusively for the
prescribed statutory period (30 years under The Public Land Act, as
amended) is converted to private property by the mere lapse or
completion of said period, ipso jure. Following that rule and on the
basis of the undisputed facts, the land subject of this appeal was
already private property at the time it was acquired from the Infiels
by Acme. Acme thereby acquired a registrable title, there being at
the time no prohibition against said corporation's holding or owning
private land. The objection that, as a juridical person, Acme is not
qualified to apply for judicial confirmation of title under section 48(b)
of the Public Land Act is technical, rather than substantial and, again,
finds its answer in the dissent in Meralco:
7
6. To uphold respondent judge's denial of Meralco's application on
the technicality that the Public Land Act allows only citizens of the
Philippines who are natural persons to apply for confirmation of their
title would be impractical and would just give rise to multiplicity of
court actions. Assuming that there was a technical error not having
filed the application for registration in the name of the Piguing
spouses as the original owners and vendors, still it is conceded that
there is no prohibition against their sale of the land to the applicant
Meralco and neither is there any prohibition against the application
being refiled with retroactive effect in the name of the original
owners and vendors (as such natural persons) with the end result of
their application being granted, because of their indisputable
acquisition of ownership by operation of law and the conclusive
presumption therein provided in their favor. It should not be
necessary to go through all the rituals at the great cost of refiling of
all such applications in their names and adding to the overcrowded
court dockets when the Court can after all these years dispose of it
here and now. (See Francisco vs. City of Davao)
The ends of justice would best be served, therefore, by considering
the applications for confirmation as amended to conform to the
evidence, i.e. as filed in the names of the original persons who as
natural persons are duly qualified to apply for formal confirmation of
the title that they had acquired by conclusive presumption and
mandate of the Public Land Act and who thereafter duly sold to the
herein corporations (both admittedly Filipino corporations duly
qualified to hold and own private lands) and granting the applications
for confirmation of title to the private lands so acquired and sold or
exchanged.
There is also nothing to prevent Acme from reconveying the lands to
the Infiels and the latter from themselves applying for confirmation
of title and, after issuance of the certificate/s of title in their names,
deeding the lands back to Acme. But this would be merely indulging
in empty charades, whereas the same result is more efficaciously and
speedily obtained, with no prejudice to anyone, by a liberal
application of the rule on amendment to conform to the evidence
suggested in the dissent in Meralco.
While this opinion seemingly reverses an earlier ruling of
comparatively recent vintage, in a real sense, it breaks no precedent,
but only reaffirms and re-established, as it were, doctrines the
soundness of which has passed the test of searching examination and
inquiry in many past cases. Indeed, it is worth noting that the majority
opinion, as well as the concurring opinions of Chief Justice Fernando
and Justice Abad Santos, in Meralco rested chiefly on the proposition
that the petitioner therein, a juridical person, was disqualified from
applying for confirmation of an imperfect title to public land under
Section 48(b) of the Public Land Act. Reference to the 1973
Constitution and its Article XIV, Section 11, was only tangential
limited to a brief paragraph in the main opinion, and may, in that
context, be considered as essentially obiter. Meralco, in short,
decided no constitutional question.
WHEREFORE, there being no reversible error in the appealed
judgment of the Intermediate Appellate Court, the same is hereby
affirmed, without costs in this instance.
SO ORDERED.
KRIVENTOR VS. THE REGISTER OF DEEDS, CITY OF MANILA,
respondent and appellee.
Alenxander A. Kriventor alien, bought a residential lot from the
Magdalena Estate, Inc., in December of 1941, the registration of
which was interrupted by the war. In May, 1945, he sought to
accomplish said registration but was denied by the register of deeds
of Manila on the ground that, being an alien, he cannot acquire land
in this jurisdiction. Krivenko then brought the case to the fourth
branch of the Court of First Instance of Manila by means of a consulta,
and that court rendered judgment sustaining the refusal of the
register of deeds, from which Krivenko appealed to this Court.
There is no dispute as to these facts. The real point in issue is whether
or not an alien under our Constitution may acquire residential land.
It is said that the decision of the case on the merits is unnecessary,
there being a motion to withdraw the appeal which should have been
granted outright, and reference is made to the ruling laid down by
this Court in another case to the effect that a court should not pass
upon a constitutional question if its judgment may be made to rest
upon other grounds. There is, we believe, a confusion of ideas in this
reasoning. It cannot be denied that the constitutional question is
unavoidable if we choose to decide this case upon the merits. Our
judgment cannot to be made to rest upon other grounds if we have
to render any judgment at all. And we cannot avoid our judgment
simply because we have to avoid a constitutional question. We
cannot, for instance, grant the motion withdrawing the appeal only
because we wish to evade the constitutional; issue. Whether the
motion should be, or should not be, granted, is a question involving
different considerations now to be stated.
According to Rule 52, section 4, of the Rules of Court, it is
discretionary upon this Court to grant a withdrawal of appeal after
the briefs have been presented. At the time the motion for
withdrawal was filed in this case, not only had the briefs been
prensented, but the case had already been voted and the majority
decision was being prepared. The motion for withdrawal stated no
reason whatsoever, and the Solicitor General was agreeable to it.
While the motion was pending in this Court, came the new circular of
the Department of Justice, instructing all register of deeds to accept
for registration all transfers of residential lots to aliens. The herein
respondentappellee was naturally one of the registers of deeds to
obey the new circular, as against his own stand in this case which had
been maintained by the trial court and firmly defended in this Court
by the Solicitor General. If we grant the withdrawal, the the result
would be that petitioner-appellant Alexander A. Krivenko wins his
case, not by a decision of this Court, but by the decision or circular of
the Department of Justice, issued while this case was pending before
this Court. Whether or not this is the reason why appellant seeks the
withdrawal of his appeal and why the Solicitor General readily agrees
to that withdrawal, is now immaterial. What is material and indeed
very important, is whether or not we should allow interference with
the regular and complete exercise by this Court of its constitutional
functions, and whether or not after having held long deliberations
and after having reached a clear and positive conviction as to what
the constitutional mandate is, we may still allow our conviction to be
silenced, and the constitutional mandate to be ignored or
misconceived, with all the harmful consequences that might be
brought upon the national patromony. For it is but natural that the
new circular be taken full advantage of by many, with the
circumstance that perhaps the constitutional question may never
come up again before this court, because both vendors and vendees
will have no interest but to uphold the validity of their transactions,
and very unlikely will the register of deeds venture to disobey the
orders of their superior. Thus, the possibility for this court to voice its
conviction in a future case may be remote, with the result that our
indifference of today might signify a permanent offense to the
Constitution.
All thse circumstances were thoroughly considered and weighted by
this Court for a number of days and the legal result of the last vote
was a denial of the motion withdrawing the appeal. We are thus
confronted, at this stage of the proceedings, with our duty, the
constitutional question becomes unavoidable. We shall then proceed
to decide that question.
Article XIII, section 1, of the Constitutional is as follows:
Article XIII. — Conservation and utilization of natural
resources.
SECTION 1. All agricultural, timber, and mineral lands of the
public domain, water, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other
natural resources of the Philippines belong to the State,
and their disposition, exploitation, development, or
8
 utilization shall be limited to citizens of the Philippines, or
to corporations or associations at least sixty per centum of
the capital of which is owned by such citizens, subject to
any existing right, grant, lease, or concession at the time of
the inaguration of the Government established uunder this
Constitution. Natural resources, with the exception of
public agricultural land, shall not be alienated, and no
licence, concession, or lease for the exploitation,
development, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years,
renewable for another twenty-five years, except as to
water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water
"power" in which cases beneficial use may be the measure
and the limit of the grant.
The scope of this constitutional provision, according to its heading
and its language, embraces all lands of any kind of the public domain,
its purpose being to establish a permanent and fundamental policy
for the conservation and utilization of all natural resources of the
Nation. When, therefore, this provision, with reference to lands of
the public domain, makes mention of only agricultural, timber and
mineral lands, it means that all lands of the public domain are
classified into said three groups, namely, agricultural, timber and
mineral. And this classification finds corroboration in the
circumstance that at the time of the adoption of the Constitution,
that was the basic classification existing in the public laws and judicial
decisions in the Philippines, and the term "public agricultural lands"
under said classification had then acquired a technical meaning that
was well-known to the members of the Constitutional Convention
who were mostly members of the legal profession.
As early as 1908, in the case of Mapa vs. Insular Government (10 Phil.,
175, 182), this Court said that the phrase "agricultural public lands"
as defined in the Act of Congress of July 1, 1902, which phrase is also
to be found in several sections of the Public Land Act (No. 926),
means "those public lands acquired from Spain which are neither
mineral for timber lands." This definition has been followed in long
line of decisions of this Court. (See Montano vs.Insular Government,
12 Phil., 593; Ibañez de Aldecoa vs. Insular Government, 13 Phil., 159;
Ramos vs. Director of Lands, 39 Phil., 175; Jocson vs. Director of
Forestry, 39 Phil., 560; Ankron vs. Government of the Philippines, 40
Phil., 10.) And with respect to residential lands, it has been held that
since they are neither mineral nor timber lands, of necessity they
must be classified as agricultural. In Ibañez de Aldecoa vs. Insular
Government (13 Phil., 159, 163), this Court said:
Hence, any parcel of land or building lot is susceptible of
cultivation, and may be converted into a field, and planted
with all kinds of vegetation; for this reason, where land is
not mining or forestal in its nature, it must necessarily be
included within the classification of agricultural land, not
because it is actually used for the purposes of agriculture,
but because it was originally agricultural and may again
become so under other circumstances; besides, the Act of
Congress contains only three classification, and makes no
special provision with respect to building lots or urban
lands that have ceased to be agricultural land.
In other words, the Court ruled that in determining whether a parcel
of land is agricultural, the test is not only whether it is actually
agricultural, but also its susceptibility to cultivation for agricultural
purposes. But whatever the test might be, the fact remains that at
the time the Constitution was adopted, lands of the public domain
were classified in our laws and jurisprudence into agricultural,
mineral, and timber, and that the term "public agricultural lands" was
construed as referring to those lands that were not timber or mineral,
and as including residential lands. It may safely be presumed,
therefore, that what the members of the Constitutional Convention
had in mind when they drafted the Constitution was this well-known
classification and its technical meaning then prevailing.
Certain expressions which appear in Constitutions, . . . are
obviously technical; and where such words have been in
use prior to the adoption of a Constitution, it is presumed
that its framers and the people who ratified it have used
such expressions in accordance with their technical
meaning. (11 Am. Jur., sec. 66, p. 683.) AlsoCalder vs. Bull,
3 Dall. [U.S.], 386; 1 Law. ed., 648; Bronson vs. Syverson, 88
Wash., 264; 152 P., 1039.)
It is a fundamental rule that, in construing constitutions,
terms employed therein shall be given the meaning which
had been put upon them, and which they possessed, at the
time of the framing and adoption of the instrument. If a
word has acquired a fixed, technical meaning in legal and
constitutional history, it will be presumed to have been
employed in that sense in a written Constitution.
(McKinney vs. Barker, 180 Ky., 526; 203 S.W., 303; L.R.A.,
1918 E, 581.)
Where words have been long used in a technical sense and
have been judicially construed to have a certain meaning,
and have been adopted by the legislature as having a
certain meaning prior to a particular statute in which they
are used, the rule of construction requires that the words
used in such statute should be construed according to the
sense in which they have been so previously used, although
the sense may vary from strict literal meaning of the words.
(II Sutherland, Statutory Construction, p. 758.)
Therefore, the phrase "public agricultural lands" appearing in section
1 of Article XIII of the Constitution must be construed as including
residential lands, and this is in conformity with a legislative
interpretation given after the adoption of the Constitution. Well
known is the rule that "where the Legislature has revised a statute
after a Constitution has been adopted, such a revision is to be
regarded as a legislative construction that the statute so revised
conforms to the Constitution." (59 C.J., 1102.) Soon after the
Constitution was adopted, the National Assembly revised the Public
Land Law and passed Commonwealth Act No. 141, and sections 58,
59 and 60 thereof permit the sale of residential lots to Filipino citizens
or to associations or corporations controlled by such citizens, which
is equivalent to a solemn declaration that residential lots are
considered as agricultural lands, for, under the Constitution, only
agricultural lands may be alienated.
It is true that in section 9 of said Commonwealth Act No. 141,
"alienable or disposable public lands" which are the same "public
agriculture lands" under the Constitution, are classified into
agricultural, residential, commercial, industrial and for other
puposes. This simply means that the term "public agricultural lands"
has both a broad and a particular meaning. Under its broad or general
meaning, as used in the Constitution, it embraces all lands that are
neither timber nor mineral. This broad meaning is particularized in
section 9 of Commonwealth Act No. 141 which classifies "public
agricultural lands" for purposes of alienation or disposition, into
lands that are stricly agricultural or actually devoted to cultivation for
agricultural puposes; lands that are residential; commercial;
industrial; or lands for other purposes. The fact that these lands are
made alienable or disposable under Commonwealth Act No. 141, in
favor of Filipino citizens, is a conclusive indication of their character
as public agricultural lands under said statute and under the
Constitution.
It must be observed, in this connection that prior to the Constitution,
under section 24 of Public Land Act No.
2874, aliens could acquire public agricultural lands used for industrial
or residential puposes, but after the Constitution and under section
23 of Commonwealth Act No. 141, the right of aliens to acquire such
kind of lands is completely stricken out, undoubtedly in pursuance of
the constitutional limitation. And, again, prior to the Constitution,
under section 57 of Public Land Act No. 2874, land of the public
domain suitable for residence or industrial purposes could be sold or
leased to aliens, but after the Constitution and under section 60 of
Commonwealth Act No. 141, such land may only be leased, but not
sold, to aliens, and the lease granted shall only be valid while the land
is used for the purposes referred to. The exclusion of sale in the new
9
Act is undoubtedly in pursuance of the constitutional limitation, and
this again is another legislative construction that the term "public
agricultural land" includes land for residence purposes.
Such legislative interpretation is also in harmony with the
interpretation given by the Executive Department of the
Government. Way back in 1939, Secretary of Justice Jose Abad
Santos, in answer to a query as to "whether or not the phrase 'public
agricultural lands' in section 1 of Article XII (now XIII) of the
Constitution may be interpreted to include residential, commercial,
and industrial lands for purposes of their disposition," rendered the
following short, sharp and crystal-clear opinion:
Section 1, Article XII (now XIII) of the Constitution classifies
lands of the public domain in the Philippines into
agricultural, timber and mineral. This is the basic
classification adopted since the enactment of the Act of
Congress of July 1, 1902, known as the Philippine Bill. At
the time of the adoption of the Constitution of the
Philippines, the term 'agricultural public lands' and,
therefore, acquired a technical meaning in our public laws.
The Supreme Court of the Philippines in the leading case of
Mapa vs. Insular Government, 10 Phil., 175, held that the
phrase 'agricultural public lands' means those public lands
acquired from Spain which are neither timber nor mineral
lands. This definition has been followed by our Supreme
Court in many subsequent case. . . .
Residential commercial, or industrial lots forming part of
the public domain must have to be included in one or more
of these classes. Clearly, they are neither timber nor
mineral, of necessity, therefore, they must be classified as
agricultural.
Viewed from another angle, it has been held that in
determining whether lands are agricultural or not, the
character of the land is the test (Odell vs. Durant, 62 N.W.,
524; Lorch vs. Missoula Brick and Tile Co., 123 p.25). In
other words, it is the susceptibility of the land to cultivation
for agricultural purposes by ordinary farming methods
which determines whether it is agricultural or not (State vs.
Stewart, 190 p. 129).
Furthermore, as said by the Director of Lands, no reason is
seen why a piece of land, which may be sold to a person if
he is to devote it to agricultural, cannot be sold to him if he
intends to use it as a site for his home.
This opinion is important not alone because it comes from a Secratary
of Justice who later became the Chief Justice of this Court, but also
because it was rendered by a member of the cabinet of the late
President Quezon who actively participated in the drafting of the
constitutional provision under consideration. (2 Aruego, Framing of
the Philippine Constitution, p. 598.) And the opinion of the Quezon
administration was reiterated by the Secretary of Justice under the
Osmeña administration, and it was firmly maintained in this Court by
the Solicitor General of both administrations.
It is thus clear that the three great departments of the Government
— judicial, legislative and executive — have always maintained that
lands of the public domain are classified into agricultural, mineral and
timber, and that agricultural lands include residential lots.
Under section 1 of Article XIII of the Constitution, "natural resources,
with the exception of public agricultural land, shall not be aliented,"
and with respect to public agricultural lands, their alienation is
limited to Filipino citizens. But this constitutional purpose conserving
agricultural resources in the hands of Filipino citizens may easily be
defeated by the Filipino citizens themselves who may alienate their
agricultural lands in favor of aliens. It is partly to prevent this result
that section 5 is included in Article XIII, and it reads as follows:
Sec. 5. Save in cases of hereditary succession, no private
agricultural land will be transferred or assigned except to
individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the
Philippines.
This constitutional provision closes the only remaining avenue
through which agricultural resources may leak into aliens' hands. It
would certainly be futile to prohibit the alienation of public
agricultural lands to aliens if, after all, they may be freely so alienated
upon their becoming private agricultural lands in the hands of Filipino
citizens. Undoubtedly, as above indicated, section 5 is intended to
insure the policy of nationalization contained in section 1. Both
sections must, therefore, be read together for they have the same
purpose and the same subject matter. It must be noticed that the
persons against whom the prohibition is directed in section 5 are the
very same persons who under section 1 are disqualified "to acquire
or hold lands of the public domain in the Philippines." And the subject
matter of both sections is the same, namely, the non-transferability
of "agricultural land" to aliens. Since "agricultural land" under section
1 includes residential lots, the same technical meaning should be
attached to "agricultural land under section 5. It is a rule of statutory
construction that "a word or phrase repeated in a statute will bear
the same meaning throughout the statute, unless a different
intention appears." (II Sutherland, Statutory Construction, p. 758.)
The only difference between "agricultural land" under section 5, is
that the former is public and the latter private. But such difference
refers to ownership and not to the class of land. The lands are the
same in both sections, and, for the conservation of the national
patrimony, what is important is the nature or class of the property
regardless of whether it is owned by the State or by its citizens.
Reference is made to an opinion rendered on September 19, 1941,
by the Hon. Teofilo Sison, then Secretary of Justice, to the effect that
residential lands of the public domain may be considered as
agricultural lands, whereas residential lands of private ownership
cannot be so considered. No reason whatsoever is given in the
opinion for such a distinction, and no valid reason can be adduced for
such a discriminatory view, particularly having in mind that the
purpose of the constitutional provision is the conservation of the
national patrimony, and private residential lands are as much an
integral part of the national patrimony as the residential lands of the
public domain. Specially is this so where, as indicated above, the
prohibition as to the alienable of public residential lots would
become superflous if the same prohibition is not equally applied to
private residential lots. Indeed, the prohibition as to private
residential lands will eventually become more important, for time
will come when, in view of the constant disposition of public lands in
favor of private individuals, almost all, if not all, the residential lands
of the public domain shall have become private residential lands.
It is maintained that in the first draft of section 5, the words "no land
of private ownership" were used and later changed into "no
agricultural land of private ownership," and lastly into "no private
agricultural land" and from these changes it is argued that the word
"agricultural" introduced in the second and final drafts was intended
to limit the meaning of the word "land" to land actually used for
agricultural purposes. The implication is not accurate. The wording of
the first draft was amended for no other purpose than to clarify
concepts and avoid uncertainties. The words "no land" of the first
draft, unqualified by the word "agricultural," may be mistaken to
include timber and mineral lands, and since under section 1, this kind
of lands can never be private, the prohibition to transfer the same
would be superfluous. Upon the other hand, section 5 had to be
drafted in harmony with section 1 to which it is supplementary, as
above indicated. Inasmuch as under section 1, timber and mineral
lands can never be private, and the only lands that may become
private are agricultural lands, the words "no land of private
ownership" of the first draft can have no other meaning than "private
agricultural land." And thus the change in the final draft is merely one
of words in order to make its subject matter more specific with a view
to avoiding the possible confusion of ideas that could have arisen
from the first draft.
10
If the term "private agricultural lands" is to be construed as not
including residential lots or lands not strictly agricultural, the result
would be that "aliens may freely acquire and possess not only
residential lots and houses for themselves but entire subdivisions,
and whole towns and cities," and that "they may validly buy and hold
in their names lands of any area for building homes, factories,
industrial plants, fisheries, hatcheries, schools, health and vacation
resorts, markets, golf courses, playgrounds, airfields, and a host of
other uses and purposes that are not, in appellant's words, strictly
agricultural." (Solicitor General's Brief, p. 6.) That this is obnoxious to
the conservative spirit of the Constitution is beyond question.
One of the fundamental principles underlying the provision of Article
XIII of the Constitution and which was embodied in the report of the
Committee on Nationalization and Preservation of Lands and other
Natural Resources of the Constitutional Convention, is "that lands,
minerals, forests, and other natural resources constitute the
exclusive heritage of the Filipino nation. They should, therefore, be
preserved for those under the sovereign authority of that nation and
for their posterity." (2 Aruego, Framing of the Filipino Constitution,
p. 595.) Delegate Ledesma, Chairman of the Committee on
Agricultural Development of the Constitutional Convention, in a
speech delivered in connection with the national policy on
agricultural lands, said: "The exclusion of aliens from the privilege of
acquiring public agricultural lands and of owning real estate is a
necessary part of the Public Land Laws of the Philippines to keep pace
with the idea of preserving the Philippines for the Filipinos."
(Emphasis ours.) And, of the same tenor was the speech of Delegate
Montilla who said: "With the complete nationalization of our lands
and natural resources it is to be understood that our God-given
birthright should be one hundred per cent in Filipino hands . . .. Lands
and natural resources are immovables and as such can be compared
to the vital organs of a person's body, the lack of possession of which
may cause instant death or the shortening of life. If we do not
completely antionalize these two of our most important belongings,
I am afraid that the time will come when we shall be sorry for the
time we were born. Our independence will be just a mockery, for
what kind of independence are we going to have if a part of our
country is not in our hands but in those of foreigners?" (Emphasis
ours.) Professor Aruego says that since the opening days of the
Constitutional Convention one of its fixed and dominating objectives
was the conservation and nationalization of the natural resources of
the country. (2 Aruego, Framing of the Philippine Constitution, p
592.) This is ratified by the members of the Constitutional Convention
who are now members of this Court, namely,
Mr. Justice Perfecto, Mr. Justice Briones, and Mr. Justice Hontiveros.
And, indeed, if under Article XIV, section 8, of the Constitution, an
alien may not even operate a small jitney for hire, it is certainly not
hard to understand that neither is he allowed to own a pieace of land.
This constitutional intent is made more patent and is strongly
implemented by an act of the National Assembly passed soon after
the Constitution was approved. We are referring again to
Commonwealth Act No. 141. Prior to the Constitution, there were in
the Public Land Act No. 2874 sections 120 and 121 which granted
aliens the right to acquire private only by way of reciprocity. Said
section reads as follows:
SEC. 120. No land originally acquired in any manner under
the provisions of this Act, nor any permanent improvement
on such land, shall be encumbered, alienated, or
transferred, except to persons, corporations, associations,
or partnerships who may acquire lands of the public
domain under this Act; to corporations organized in the
Philippine Islands authorized therefor by their charters,
and, upon express authorization by the Philippine
Legislature, to citizens of countries the laws of which grant
to citizens of the Philippine Islands the same right to
acquire, hold, lease, encumber, dispose of, or alienate
land, or permanent improvements thereon, or any interest
therein, as to their own citizens, only in the manner and to
the extent specified in such laws, and while the same are
in force but not thereafter.
SEC. 121. No land originally acquired in any manner under
the provisions of the former Public Land Act or of any other
Act, ordinance, royal order, royal decree, or any other
provision of law formerly in force in the Philippine Islands
with regard to public lands, terrenos baldios y realengos, or
lands of any other denomination that were actually or
presumptively of the public domain or by royal grant or in
any other form, nor any permanent improvement on such
land, shall be encumbered, alienated, or conveyed, except
to persons, corporations, or associations who may acquire
land of the public domain under this Act; to corporate
bodies organized in the Philippine Islands whose charters
may authorize them to do so, and, upon express
authorization by the Philippine Legislature, to citizens of
the countries the laws of which grant to citizens of the
Philippine Islands the same right to acquire, hold, lease,
encumber, dispose of, or alienate land or pemanent
improvements thereon or any interest therein, as to their
own citizens, and only in the manner and to the extent
specified in such laws, and while the same are in force, but
not thereafter: Provided, however, That this prohibition
shall not be applicable to the conveyance or acquisition by
reason of hereditary succession duly acknowledged and
legalized by competent courts, nor to lands and
improvements acquired or held for industrial or residence
purposes, while used for such purposes: Provided, further,
That in the event of the ownership of the lands and
improvements mentioned in this section and in the last
preceding section being transferred by judicial decree to
persons,corporations or associations not legally
capacitated to acquire the same under the provisions of
this Act, such persons, corporations, or associations shall
be obliged to alienate said lands or improvements to
others so capacitated within the precise period of five
years, under the penalty of such property reverting to the
Government in the contrary case." (Public Land Act, No.
2874.)
It is to be observed that the pharase "no land" used in these section
refers to all private lands, whether strictly agricultural, residential or
otherwise, there being practically no private land which had not been
acquired by any of the means provided in said two sections.
Therefore, the prohibition contained in these two provisions was, in
effect, that no private land could be transferred to aliens except
"upon express authorization by the Philippine Legislature, to citizens
of Philippine Islands the same right to acquire, hold, lease, encumber,
dispose of, or alienate land." In other words, aliens were granted the
right to acquire private land merely by way of reciprocity. Then came
the Constitution and Commonwealth Act No. 141 was passed,
sections 122 and 123 of which read as follows:
SEC. 122. No land originally acquired in any manner under
the provisions of this Act, nor any permanent improvement
on such land, shall be encumbered, alienated, or
transferred, except to persons, corporations, associations,
or partnerships who may acquire lands of the public
domain under this Act or to corporations organized in the
Philippines authorized thereof by their charters.
SEC. 123. No land originally acquired in any manner under
the provisions of any previous Act, ordinance, royal order,
royal decree, or any other provision of law formerly in force
in the Philippines with regard to public lands terrenos
baldios y realengos, or lands of any other denomination
that were actually or presumptively of the public domain,
or by royal grant or in any other form, nor any permanent
improvement on such land, shall be encumbered,
alienated, or conveyed, except to persons, corporations or
associations who may acquire land of the public domain
under this Act or to corporate bodies organized in the
Philippines whose charters authorize them to do so:
Provided, however, That this prohibition shall not be
applicable to the conveyance or acquisition by reason of
hereditary succession duly acknowledged and legalized by
competent courts: Provided, further, That in the event of
11
 the ownership of the lands and improvements mentioned
in this section and in the last preceding section being
transferred by judicial decree to persons, corporations or
associations not legally capacitated to acquire the same
under the provisions of this Act, such persons,
corporations, or associations shall be obliged to alienate
said lands or improvements to others so capacitated within
the precise period of five years; otherwise, such property
shall revert to the Government.
These two sections are almost literally the same as sections 120 and
121 of Act No. 2874, the only difference being that in the new
provisions, the right to reciprocity granted to aliens is completely
stricken out. This, undoubtedly, is to conform to the absolute policy
contained in section 5 of Article XIII of the Constitution which, in
prohibiting the alienation of private agricultural lands to aliens,
grants them no right of reciprocity. This legislative construction
carries exceptional weight, for prominent members of the National
Assembly who approved the new Act had been members of the
Constitutional Convention.
It is said that the lot question does not come within the purview of
sections 122 and 123 of Commonwealth Act No. 141, there being no
proof that the same had been acquired by one of the means provided
in said provisions. We are not, however, diciding the instant case
under the provisions of the Public Land Act, which have to refer to
land that had been formerly of the public domain, otherwise their
constitutionality may be doubtful. We are deciding the instant case
under section 5 of Article XIII of the Constitution which is more
comprehensive and more absolute in the sense that it prohibits the
transfer to alien of any private agricultural land including residential
land whatever its origin might have been.
And, finally, on June 14, 1947, the Congress approved Republic Act
No. 133 which allows mortgage of "private real property" of any kind
in favor of aliens but with a qualification consisting of expressly
prohibiting aliens to bid or take part in any sale of such real property
as a consequence of the mortgage. This prohibition makes no
distinction between private lands that are strictly agricultural and
private lands that are residental or commercial. The prohibition
embraces the sale of private lands of any kind in favor of aliens, which
is again a clear implementation and a legislative interpretation of the
constitutional prohibition. Had the Congress been of opinion that
private residential lands may be sold to aliens under the Constitution,
no legislative measure would have been found necessary to
authorize mortgage which would have been deemed also permissible
under the Constitution. But clearly it was the opinion of the Congress
that such sale is forbidden by the Constitution and it was such opinion
that prompted the legislative measure intended to clarify that
mortgage is not within the constitutional prohibition.
It is well to note at this juncture that in the present case we have no
choice. We are construing the Constitution as it is and not as we may
desire it to be. Perhaps the effect of our construction is to preclude
aliens, admitted freely into the Philippines from owning sites where
they may build their homes. But if this is the solemn mandate of the
Constitution, we will not attempt to compromise it even in the name
of amity or equity. We are satisfied, however, that aliens are not
completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights such as a lease
contract which is not forbidden by the Constitution. Should they
desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.
For all the foregoing, we hold that under the Constitution aliens may
not acquire private or public agricultural lands, including residential
lands, and, accordingly, judgment is affirmed, without costs.
G.R. No. L-43938 April 15, 1988
REPUBLIC OF THE PHILIPPINES
(DIRECTOR OF FOREST
DEVELOPMENT), petitioner, vs.
HON. COURT OF APPEALS (THIRD DIVISION) and JOSE Y. DE LA ROSA,
respondents.
G.R. No. L-44081 April 15, 1988
DIRECTOR OF FOREST DEVELOPMENT VS. DELA ROSA
The Regalian doctrine reserves to the State 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 In the cases at bar, which have been
consolidated because they pose a common issue, this doctrine was
not correctly applied.
These cases arose from the application for registration of a parcel of
land filed on February 11, 1965, by Jose de la Rosa on his own behalf
and on behalf of his three children, Victoria, Benjamin and Eduardo.
The land, situated in Tuding, Itogon, Benguet Province, was divided
into 9 lots and covered by plan Psu-225009. According to the
application, Lots 1-5 were sold to Jose de la Rosa and Lots 6-9 to his
children by Mamaya Balbalio and Jaime Alberto, respectively, in
1964. 2
The application was separately opposed by Benguet Consolidated,
Inc. as to Lots 1-5, Atok Big Wedge Corporation, as to Portions of Lots
1-5 and all of Lots 6-9, and by the Republic of the Philippines, through
the Bureau of Forestry Development, as to lots 1-9. 3
In support of the application, both Balbalio and Alberto testified that
they had acquired the subject land by virtue of prescription Balbalio
claimed to have received Lots 1-5 from her father shortly after the
Liberation. She testified she was born in the land, which was
possessed by her parents under claim of ownership. 4 Alberto said he
received Lots 6-9 in 1961 from his mother, Bella Alberto, who
declared that the land was planted by Jaime and his predecessors-in-
interest to bananas, avocado, nangka and camote, and was enclosed
with a barbedwire fence. She was corroborated by Felix Marcos, 67
years old at the time, who recalled the earlier possession of the land
by Alberto's father. 5 Balbalio presented her tax declaration in 1956
and the realty tax receipts from that year to 1964, 6 Alberto his tax
declaration in 1961 and the realty tax receipts from that year to 1964.
7
Benguet opposed on the ground that the June Bug mineral claim
covering Lots 1-5 was sold to it on September 22, 1934, by the
successors-in-interest of James Kelly, who located the claim in
September 1909 and recorded it on October 14, 1909. From the date
of its purchase, Benguet had been in actual, continuous and exclusive
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 taxes on the land. 8
For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9
were covered by the Emma and Fredia mineral claims located by
Harrison and Reynolds on December 25, 1930, and recorded on
January 2, 1931, in the office of the mining recorder of Baguio. These
claims were purchased from these locators on November 2, 1931, by
Atok, which has since then been in open, continuous and exclusive
possession of the said lots as evidenced by its annual assessment
work on the claims, such as the boring of tunnels, and its payment of
annual taxes thereon. 9
The location of the mineral claims was made in accordance with
Section 21 of the Philippine Bill of 1902 which provided that:
SEC. 21. All valuable mineral deposits in public lands in the philippine
Islands both surveyed and unsurveyed are hereby declared to be free
and open to exploration, occupation and purchase and the land in
which they are found to occupation and purchase by the citizens of
the United States, or of said islands.
12
The Bureau of Forestry Development also interposed its objection,
arguing that the land sought to be registered was covered by the
Central Cordillera Forest Reserve under Proclamation No. 217 dated
February 16, 1929. Moreover, by reason of its nature, it was not
subject to alienation under the Constitutions of 1935 and 1973. 10
The trial court * 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 The applicants appealed to the
respondent court, * which reversed the trial court and recognized the
claims of the applicant, but subject to the rights of Benguet and Atok
respecting their mining claims. 12 In other words, the Court of Appeals
affirmed the surface rights of the de la Rosas over the land while at
the same time reserving the sub-surface rights of Benguet and Atok
by virtue of their mining claims.
Both Benguet and Atok have appealed to this Court, invoking their
superior right of ownership. The Republic 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.
It is true that the subject property was considered forest land and
included in the Central Cordillera Forest Reserve, but this did not
impair the rights already vested in Benguet and Atok at that time. The
Court of Appeals correctly declared that:
There is no question that the 9 lots applied for are within the June
Bug mineral claims of Benguet and the "Fredia and Emma" mineral
claims of Atok. The June Bug mineral claim of plaintiff Benguet was
one of the 16 mining claims of James E. Kelly, American and mining
locator. He filed his declaration of the location of the June Bug
mineral and the same was recorded in the Mining Recorder's Office
on October 14, 1909. All of the Kelly claims ha subsequently been
acquired by Benguet Consolidated, Inc. Benguet's evidence is that it
had made improvements on the June Bug mineral claim consisting of
mine tunnels prior to 1935. It had submitted the required affidavit of
annual assessment. After World War II, Benguet introduced
improvements on mineral claim June Bug, and also conducted
geological mappings, geological sampling and trench side cuts. In
1948, Benguet redeclared the "June Bug" for taxation and had
religiously paid the taxes.
The Emma and Fredia claims were two of the several claims of
Harrison registered in 1931, and which Atok representatives
acquired. Portions of Lots 1 to 5 and all of Lots 6 to 9 are within the
Emma and Fredia mineral claims of Atok Big Wedge Mining Company.
The June Bug mineral claim of Benguet and the Fredia and Emma
mineral claims of Atok having been perfected prior to the approval
of the Constitution of the Philippines of 1935, they were removed
from the public domain and had become private properties of
Benguet and Atok.
It is not disputed that the location of the mining claim under
consideration was perfected prior to November 15, 1935, when the
Government of the Commonwealth was inaugurated; and according
to the laws existing at that time, as construed and applied by this
court in McDaniel v. Apacible and Cuisia (42 Phil. 749), a valid location
of a mining claim segregated the area from the public domain. Said
the court in that case: The moment the locator discovered a valuable
mineral deposit on the lands located, and perfected his location in
accordance with law, the power of the United States Government to
deprive him of the exclusive right to the possession and enjoyment
of the located claim was gone, the lands had become mineral lands
and they were exempted from lands that could be granted to any
other person. The 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. By such location and perfection, the land
located is segregated from the public domain even as against the
Government. (Union Oil Co. v. Smith, 249 U.S. 337; Van Mess v.
Roonet, 160 Cal. 131; 27 Cyc. 546).
"The 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. Where there is a valid location of a mining claim, the area
becomes segregated from the public domain and the property of the
locator." (St. Louis Mining & Milling Co. v. Montana Mining Co., 171
U.S. 650; 655; 43 Law ed., 320, 322.) "When a location of a mining
claim is perfected it has the effect of a grant by the United States of
the right of present and exclusive possession, with the right to the
exclusive enjoyment of all the surface ground as well as of all the
minerals within the lines of the claim, except as limited by the
extralateral right of adjoining locators; and this is the locator's right
before as well as after the issuance of the patent. While a lode locator
acquires 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."(18 R.C.L. 1152) (Gold Creek Mining Corporation
v. Hon. Eulogio Rodriguez, Sec. of Agriculture and Commerce, and
Quirico Abadilla, Director of the Bureau of Mines, 66 Phil. 259, 265-
266)
It is of no importance whether Benguet and Atok had secured a
patent for as held in the Gold Creek Mining Corp. Case, for all physical
purposes of ownership, the owner is not required 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.
We agree likewise with the oppositors that having complied with all
the requirements of the mining laws, the claims were removed from
the public domain, and not even the government of the Philippines
can take away this right from them. The reason is obvious. Having
become the private properties of the oppositors, they cannot be
deprived thereof without due process of law. 13
Such rights were not affected either by the stricture in the
Commonwealth Constitution against the alienation of all lands of the
public domain except those agricultural in nature for this was made
subject to existing rights. Thus, in its Article XIII, Section 1, it was
categorically provided that:
SEC. 1. 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 Philipppines
belong to the State, and their disposition, exploitation, development,
or utilization shall be limited to citizens of the Philippines or to
corporations or associations at least 60% of the capital of which is
owned by such citizens, subject to any existing right, grant, lease or
concession at the time of the inauguration of the government
established under this Constitution.
Natural resources with the exception of public agricultural lands,
shall not be alienated, and no license, concession, or lease for the
exploitation, development or utilization of any of the natural
resources shall be granted for a period exceeding 25 years, except 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.
Implementing this provision, Act No. 4268, approved on November
8, 1935, declared:
Any provision of existing laws, executive order, proclamation to the
contrary notwithstanding, all locations of mining claim made prior to
February 8, 1935 within lands set apart as forest reserve under Sec.
1826 of the Revised Administrative Code which would be valid and
subsisting location except to the existence of said reserve are hereby
declared to be valid and subsisting locations as of the date of their
respective locations.
13
The perfection of the mining claim converted the property to mineral
land and under the laws then in force removed it from the public
domain. 14 By such act, the locators acquired exclusive 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.
15As the land had become the private property of the locators, they
had the right to transfer the same, as they did, to Benguet and Atok.
It 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
acquisitive prescription. However, the method invoked by the de la
Rosas is not available in the case at bar, for two reasons.
First, the trial court found that the evidence of open, continuous,
adverse and exclusive possession submitted by the applicants was
insufficient to support their claim of ownership. They themselves had
acquired the land only in 1964 and applied for its registration in 1965,
relying on the earlier alleged possession of their predecessors-in-
interest. 16The 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. We defer to his judgment in
the absence of a showing that it was reached with grave abuse of
discretion or without sufficient basis. 17
Second, even if it be assumed that the predecessors-in-interest of the
de la Rosas 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 as agricultural land, which it was not. The
property was mineral land, and they were claiming it as agricultural
land. They were not disputing the lights of the mining locators nor
were they seeking to oust them as such and to replace them in the
mining of the land. In fact, Balbalio testified that she was aware of
the diggings being undertaken "down below" 18 but she did not mind,
much less protest, the same although she claimed to be the owner of
the said land.
The 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. This is rather doctrine, for it is a well-known
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 Under the aforesaid ruling, the land is
classified as mineral underneath and agricultural on the surface,
subject to separate claims of title. This is also difficult to understand,
especially in its practical application.
Under the theory of the respondent court, the surface owner will be
planting on the land while the mining locator will be boring tunnels
underneath. The 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. How deep can the farmer, and how high
can the miner, go without encroaching on each other's rights? Where
is the dividing line between the surface and the sub-surface rights?
The Court feels that the rights over the land are indivisible and that
the land itself cannot be half agricultural and half mineral. The
classification must be categorical; the land must be either completely
mineral or completely agricultural. In the instant case, as already
observed, the land which was originally classified as forest land
ceased to be so and became mineral — and completely mineral —
once the mining claims were perfected. 20 As long as mining
operations were being undertaken 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.
What must have misled the respondent court is Commonwealth Act
No. 137, providing as follows:
Sec. 3. All mineral lands of the public domain and minerals belong to
the State, and their disposition, exploitation, development or
utilization, shall be limited to citizens of the Philippines, or to
corporations, or associations, at least 60% of the capital of which is
owned by such citizens, subject to any existing right, grant, lease or
concession at the time of the inauguration of government
established under the Constitution.
SEC. 4. The 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
extract or utilize, the minerals which may be found on or under the
surface.
SEC. 5. The ownership of, and the right to extract and utilize, the
minerals included within all areas for which public agricultural land
patents are granted are excluded and excepted from all such patents.
SEC. 6. The ownership of, and the right to extract and utilize, the
minerals included within all areas for which Torrens titles are granted
are excluded and excepted from all such titles.
This is an application of the Regalian doctrine which, as its name
implies, is intended for the benefit of the State, not of private
persons. The rule simply reserves to the State 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." Thus, 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 extract or utilize the said minerals without the permission
of the State to which such minerals belong.
The 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 simultaneously. The 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
State to enable it to extract the minerals therein in the exercise of its
sovereign prerogative. The 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 undertaken therein, For the loss sustained by such
owner, he is of course entitled to just compensation under the
Mining Laws or in appropriate expropriation proceedings. 21
Our holding is that Benguet and Atok have exclusive rights to the
property in question by virtue of their respective mining claims which
they validly acquired before the Constitution of 1935 prohibited the
alienation of all lands of the public domain except agricultural lands,
subject to vested rights existing at the time of its adoption. The land
was not and could not have been transferred to the private
respondents by virtue of acquisitive prescription, nor could its use be
shared simultaneously by them and the mining companies for
agricultural and mineral purposes.
WHEREFORE, the decision of the respondent court dated April 30,
1976, is SET ASIDE and that of the trial court dated March 11, 1969,
is REINSTATED, without any pronouncement as to costs.
SO ORDERED.
[G.R. No. 135385. December 6, 2000] ISAGANU CRUZ VS.
SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES
Petitioners Isagani Cruz and Cesar Europa brought this suit for
prohibition and mandamus as citizens and taxpayers, assailing the
constitutionality of certain provisions of Republic Act No. 8371 (R.A.
8371), otherwise known as the Indigenous Peoples Rights Act of 1997
(IPRA), and its Implementing Rules and Regulations (Implementing
Rules).
In its resolution of September 29, 1998, the Court required
respondents to comment.[1] In compliance, respondents Chairperson
and Commissioners of the National Commission on Indigenous
14
Peoples (NCIP), the government agency created under the IPRA to
implement its provisions, filed on October 13, 1998 their Comment
to the Petition, in which they defend the constitutionality of the IPRA
and pray that the petition be dismissed for lack of merit.
On October 19, 1998, respondents Secretary of the
Department of Environment and Natural Resources (DENR) and
Secretary of the Department of Budget and Management (DBM) filed
through the Solicitor General a consolidated Comment. The Solicitor
General is of the view that the IPRA 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.
On November 10, 1998, a group of intervenors, composed of
Sen. Juan Flavier, one of the authors of the IPRA, Mr. Ponciano
Bennagen, a member of the 1986 Constitutional Commission, and the
leaders and members of 112 groups of indigenous peoples (Flavier,
et. al), filed their Motion for Leave to Intervene. They join the NCIP in
defending the constitutionality of IPRA and praying for the dismissal
of the petition.
On March 22, 1999, the Commission on Human Rights (CHR)
likewise filed a Motion to Intervene and/or to Appear as Amicus
Curiae. The CHR asserts that IPRA is an expression of the principle of
parens patriae and that the State has the responsibility to protect
and guarantee the rights of those who are at a serious disadvantage
like indigenous peoples. For this reason it prays that the petition be
dismissed.
On March 23, 1999, another group, composed of the Ikalahan
Indigenous People and the Haribon Foundation for the Conservation
of Natural Resources, Inc. (Haribon, et al.), filed a motion to Intervene
with attached Comment-in-Intervention. They agree with the NCIP
and Flavier, et al. that IPRA is consistent with the Constitution and
pray that the petition for prohibition and mandamus be dismissed.
The motions for intervention of the aforesaid groups and
organizations were granted.
Oral arguments were heard on April 13, 1999. Thereafter, the
parties and intervenors filed their respective memoranda in which
they reiterate the arguments adduced in their earlier pleadings and
during the hearing.
Petitioners assail the constitutionality of the following
provisions of the IPRA and its Implementing Rules on the ground that
they amount to an unlawful deprivation of the States ownership over
lands of the public domain as well as minerals and other natural
resources therein, in violation of the regalian doctrine embodied in
Section 2, Article XII of the Constitution:
(1) Section 3(a) which defines the extent and coverage of
ancestral domains, and Section 3(b) which, in turn,
defines ancestral lands;
(2) Section 5, in relation to section 3(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;
(3) Section 6 in relation to section 3(a) and 3(b) which
defines the composition of ancestral domains and
ancestral lands;
(4) Section 7 which recognizes and enumerates the rights of
the indigenous peoples over the ancestral domains;
(5) Section 8 which recognizes and enumerates the rights of
the indigenous peoples over the ancestral lands;
(6) Section 57 which provides for priority rights of the
indigenous peoples in the harvesting, extraction,
development or exploration 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 utilization of natural resources
therein for a period not exceeding 25 years, renewable
for not more than 25 years; and
(7) Section 58 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.[2]
Petitioners also content that, by providing for an all-
encompassing definition of ancestral domains and ancestral lands
which might even include private lands found within said areas,
Sections 3(a) and 3(b) violate the rights of private landowners.[3]
In addition, petitioners question the provisions of the IPRA
defining the powers and jurisdiction of the NCIP and making
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. [4] These
provisions are:
(1) sections 51 to 53 and 59 which detail the process of
delineation and recognition of ancestral domains and
which vest on the NCIP the sole authority to
delineate ancestral domains and ancestral lands;
(2) Section 52[i] which provides that upon certification
by the NCIP that a particular area is an ancestral
domain and upon notification to the following
officials, namely, the Secretary of Environment and
Natural Resources, Secretary of Interior and Local
Governments, Secretary of Justice and Commissioner
of the National Development Corporation, the
jurisdiction of said officials over said area terminates;
(3) Section 63 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;
(4) Section 65 which states that customary laws and
practices shall be used to resolve disputes involving
indigenous peoples; and
(5) Section 66 which vests on the NCIP the jurisdiction
over all claims and disputes involving rights of the
indigenous peoples.[5]
Finally, petitioners assail the validity of Rule VII, Part II, Section
1 of the NCIP Administrative Order No. 1, series of 1998, which
provides that the administrative relationship of the NCIP to the Office
of the President is characterized as a lateral but autonomous
relationship for purposes of policy and program coordination. They
contend that said Rule infringes upon the Presidents power of control
over executive departments under Section 17, Article VII of the
Constitution.[6]
Petitioners pray for the following:
(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59,
63, 65 and 66 and other related provisions of R.A. 8371
are unconstitutional and invalid;
(2) The issuance of a writ of prohibition directing the
Chairperson and Commissioners of the NCIP to cease
and desist from implementing the assailed provisions of
R.A. 8371 and its Implementing Rules;
(3) The issuance of a writ of prohibition directing the
Secretary of the Department of Environment and
Natural Resources to cease and desist from implementing
Department of Environment and Natural Resources
Circular No. 2, series of 1998;
15
 (4) The issuance of a writ of prohibition directing the
Secretary of Budget and Management to cease and
desist from disbursing public funds for the
implementation of the assailed provisions of R.A. 8371;
and
(5) The issuance of a writ of mandamus commanding the
Secretary of Environment and Natural Resources to
comply with his duty of carrying out the States
constitutional mandate to control and supervise the
exploration, development, utilization and conservation
of Philippine natural resources.[7]
After due deliberation on the petition, the members of the
Court voted as follows:
Seven (7) voted to dismiss the petition. Justice Kapunan filed an
opinion, which the Chief Justice and Justices Bellosillo, Quisumbing,
and Santiago join, sustaining the validity of the challenged provisions
of R.A. 8371. Justice Puno also filed a separate opinion sustaining all
challenged provisions of the law with the exception of Section 1, Part
II, Rule III of NCIP Administrative Order No. 1, series of 1998, the Rules
and Regulations Implementing the IPRA, and Section 57 of the IPRA
which he contends should be interpreted as dealing with the large-
scale exploitation of natural resources and should be read in
conjunction with Section 2, Article XII of the 1987 Constitution. On
the other hand, Justice Mendoza voted to dismiss the petition solely
on the ground that it does not raise a justiciable controversy and
petitioners do not have standing to question the constitutionality of
R.A. 8371.
Seven (7) other members of the Court voted to grant the
petition. Justice Panganiban filed a separate opinion expressing the
view that Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of
R.A. 8371 are unconstitutional. He reserves judgment on the
constitutionality of Sections 58, 59, 65, and 66 of the law, which he
believes must await the filing of specific cases by those whose rights
may have been violated by the IPRA. Justice Vitug also filed a separate
opinion expressing the view that Sections 3(a), 7, and 57 of R.A. 8371
are unconstitutional.Justices Melo, Pardo, Buena, Gonzaga-Reyes,
and De Leon join in the separate opinions of Justices Panganiban and
Vitug.
As the votes were equally divided (7 to 7) and the necessary
majority was not obtained, the case was redeliberated upon.
However, after redeliberation, the voting remained the
same.Accordingly, pursuant to Rule 56, Section 7 of the Rules of Civil
Procedure, the petition is DISMISSED.
Attached hereto and made integral parts thereof are the
separate opinions of Justices Puno, Vitug, Kapunan, Mendoza, and
Panganiban.
SO ORDERED
[G.R. No. 124293. January 31, 2005]
J.G. SUMMIT HOLDINGS, INC., petitioner, vs. COURT OF APPEALS;
COMMITTEE ON PRIVATIZATION, its Chairman and
Members; ASSET PRIVATIZATION TRUST; and PHILYARDS
HOLDINGS, INC., respondents.
For resolution before this Court are two motions filed by the
petitioner, J.G. Summit Holdings, Inc. for reconsideration of our
Resolution dated September 24, 2003 and to elevate this case to the
Court En Banc. The petitioner questions the Resolution which
reversed our Decision of November 20, 2000, which in turn reversed
and set aside a Decision of the Court of Appeals promulgated on July
18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of
September 24, 2003, are as follows:
On January 27, 1997, the National Investment and Development
Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of
Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which
subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will
contribute P330 million for the capitalization of PHILSECO in the
proportion of 60%-40% respectively. One of its salient features is the
grant to the parties of the right of first refusal should either of them
decide to sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its
interest in SNS [PHILSECO] to any third party without giving the other
under the same terms the right of first refusal. This provision shall
not apply if the transferee is a corporation owned or controlled by
the GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and
interest in PHILSECO to the Philippine National
Bank (PNB). Such interests were subsequently transferred to the
National Government pursuant to Administrative Order No. 14. On
December 8, 1986, President Corazon C. Aquino issued Proclamation
No. 50 establishing the Committee on Privatization (COP) and the
Asset Privatization Trust (APT) to take title to, and possession of,
conserve, manage and dispose of non-performing assets of the
National Government. Thereafter, on February 27, 1987, a trust
agreement was entered into between the National Government and
the APT wherein the latter was named the trustee of the National
Government's share in PHILSECO. In 1989, as a result of a quasi-
reorganization of PHILSECO to settle its huge obligations to PNB, the
National Government's shareholdings in PHILSECO increased to
97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.
In the interest of the national economy and the government, the COP
and the APT deemed it best to sell the National Government's share
in PHILSECO to private entities. After a series of negotiations
between the APT and KAWASAKI, they agreed that the latter's right
of first refusal under the JVA be "exchanged" for the right to top by
five percent (5%) the highest bid for the said shares. They further
agreed that KAWASAKI would be entitled to name a company in
which it was a stockholder, which could exercise the right to top. On
September 7, 1990, KAWASAKI informed APT that Philyards Holdings,
Inc. (PHI)[1] would exercise its right to top.
At the pre-bidding conference held on September 18, 1993,
interested bidders were given copies of the JVA between NIDC and
KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for
the National Government's 87.6% equity share in PHILSECO. The
provisions of the ASBR were explained to the interested bidders who
were notified that the bidding would be held on December 2, 1993.
A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through
public bidding is the National Government's equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of
PHILSECO's outstanding capital stock), which will be sold as a whole
block in accordance with the rules herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final
approval of both the APT Board of Trustees and the Committee on
Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all
bids.
16
3.0 This public bidding shall be on an Indicative Price Bidding basis.
The Indicative price set for the National Government's 87.67% equity
in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION
(P1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of
Trustees at its regular meeting following the bidding, for the purpose
of determining whether or not it should be endorsed by the APT
Board of Trustees to the COP, and the latter approves the same. The
APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc., that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT within
which to exercise their "Option to Top the Highest Bid" by offering a
bid equivalent to the highest bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. exercise their "Option to Top the Highest Bid," they
shall so notify the APT about such exercise of their option and deposit
with APT the amount equivalent to ten percent (10%) of the highest
bid plus five percent (5%) thereof within the thirty (30)-day period
mentioned in paragraph 6.0 above. APT will then serve notice upon
Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc.
declaring them as the preferred bidder and they shall have a period
of ninety (90) days from the receipt of the APT's notice within which
to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. fail to exercise their "Option to Top the Highest Bid"
within the thirty (30)-day period, APT will declare the highest bidder
as the winning bidder.
xxx xxx xxx
12.0 The bidder shall be solely responsible for examining with
appropriate care these rules, the official bid forms, including any
addenda or amendments thereto issued during the bidding period.
The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares
which may, in any manner, affect the bidder's proposal. Failure on
the part of the bidder to so examine and inform itself shall be its sole
risk and no relief for error or omission will be given by APT or COP. .
..
At the public bidding on the said date, petitioner J.G. Summit
Holdings, Inc.[2] submitted a bid of Two Billion and Thirty Million
Pesos (P2,030,000,000.00) with an acknowledgment of
KAWASAKI/[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up
to thirty (30) days to act on APT's recommendation based on the
result of this bidding. Should the COP approve the highest bid, APT
shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT within
which to exercise their "Option to Top the Highest Bid" by offering a
bid equivalent to the highest bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the
sale on December 3, 1993 "subject to the right of Kawasaki Heavy
Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5%
as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was
protesting the offer of PHI to top its bid on the grounds that: (a) the
KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS],
Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR
because the last four (4) companies were the losing bidders thereby
circumventing the law and prejudicing the weak winning bidder; (b)
only KAWASAKI could exercise the right to top; (c) giving the same
option to top to PHI constituted unwarranted benefit to a third party;
(d) no right of first refusal can be exercised in a public bidding or
auction sale; and (e) the JG Summit consortium was not estopped
from questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid
the balance of the purchase price of the subject bidding. On February
7, 1994, the APT notified petitioner that PHI had exercised its option
to top the highest bid and that the COP had approved the same on
January 6, 1994. On February 24, 1994, the APT and PHI executed a
Stock Purchase Agreement. Consequently, petitioner filed with this
Court a Petition for Mandamus under G.R. No. 114057. On May 11,
1994, said petition was referred to the Court of Appeals. On July 18,
1995, the Court of Appeals denied the same for lack of merit. It ruled
that the petition for mandamus was not the proper remedy to
question the constitutionality or legality of the right of first refusal
and the right to top that was exercised by KAWASAKI/PHI, and that
the matter must be brought "by the proper party in the proper forum
at the proper time and threshed out in a full blown trial." The Court
of Appeals further ruled that the right of first refusal and the right to
top are prima facie legal and that the petitioner, "by participating in
the public bidding, with full knowledge of the right to top granted to
KAWASAKI/[PHILYARDS] isestopped from questioning the validity of
the award given to [PHILYARDS] after the latter exercised the right to
top and had paid in full the purchase price of the subject shares,
pursuant to the ASBR." Petitioner filed a Motion for Reconsideration
of said Decision which was denied on March 15, 1996. Petitioner thus
filed a Petition for Certiorari with this Court alleging grave abuse of
discretion on the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling
among others that the Court of Appeals erred when it dismissed the
petition on the sole ground of the impropriety of the special civil
action of mandamus because the petition was also one of certiorari.
It further ruled that a shipyard like PHILSECO is a public utility whose
capitalization must be sixty percent (60%) Filipino-owned.
Consequently, the right to top granted to KAWASAKI under the Asset
Specific Bidding Rules (ASBR) drafted for the sale of the 87.67%
equity of the National Government in PHILSECO is illegal not only
because it violates the rules on competitive bidding but more so,
because it allows foreign corporations to own more than 40% equity
in the shipyard. It also held that "although the petitioner had the
opportunity to examine the ASBR before it participated in the
bidding, it cannot be estopped from questioning the
unconstitutional, illegal and inequitable provisions thereof." Thus,
this Court voided the transfer of the national government's 87.67%
share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the right
of JG Summit, as the highest bidder, to take title to the said shares,
viz:
WHEREFORE, the instant petition for review on certiorari is
GRANTED. The assailed Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to
APT its bid price of Two Billion Thirty Million Pesos
(P2,030,000,000.00), less its bid deposit plus interests upon the
finality of this Decision. In turn, APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less
bid deposit and interests from petitioner;
(b) execute a Stock Purchase Agreement with
petitioner;
(c) cause the issuance in favor of petitioner of the
certificates of stocks representing 87.6% of
PHILSECO's total capitalization;
(d) return to private respondent PHGI the amount of
Two Billion One Hundred Thirty-One Million Five
Hundred Thousand Pesos (P2,131,500,000.00); and
17
 (e) cause the cancellation of the stock certificates
issued to PHI.
SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted]
three basic issues for x x x resolution: (1)
Whether PHILSECO is a public utility; (2) Whether under the 1977 JVA,
KAWASAKI can exercise its right of first refusal only up to 40% of the
total capitalization of PHILSECO; and (3) Whether the right to top
granted to KAWASAKI violates the principles of competitive
bidding.[3] (citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in
favor of the respondents. On the first issue, we held that Philippine
Shipyard and Engineering Corporation (PHILSECO) is not a public
utility, as by nature, a shipyard is not a public utility[4] and that no law
declares a shipyard to be a public utility. [5] On the second issue, we
found nothing in the 1977 Joint Venture Agreement (JVA) which
prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI)
from acquiring more than 40% of PHILSECOs total capitalization.[6] On
the final issue, we held that the right to top granted to KAWASAKI in
exchange for its right of first refusal did not violate the principles of
competitive bidding.[7]
On October 20, 2003, the petitioner filed a Motion for
Reconsideration[8] and a Motion to Elevate This Case to the Court En
Banc.[9] Public respondents Committee on Privatization (COP) and
Asset Privatization Trust (APT), and private respondent Philyards
Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit
Holdings, Inc.s (JG Summits) Motion for Reconsideration and Motion
to Elevate This Case to the Court En Banc on January 29, 2004 and
February 3, 2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end
this litigation are the following:
1. Whether there are sufficient bases to elevate the
case at bar to the Court en banc.
2. Whether the motion for reconsideration raises
any new matter or cogent reason to warrant a reconsideration of
this Courts Resolution of September 24, 2003.
Motion to Elevate this Case to the Court En Banc
The petitioner prays for the elevation of the case to the Court
en banc on the following grounds:
1. The main issue of the propriety of the bidding process
involved in the present case has been confused with the policy issue
of the supposed fate of the shipping industry which has never been
an issue that is determinative of this case.[10]
2. The present case may be considered under the Supreme
Court Resolution dated February 23, 1984 which included among en
banc cases those involving a novel question of law and those where
a doctrine or principle laid down by the Court en banc or in division
may be modified or reversed.[11]
3. There was clear executive interference in the judicial
functions of the Court when the Honorable Jose Isidro Camacho,
Secretary of Finance, forwarded to Chief Justice Davide, a
memorandum dated November 5, 2001, attaching a copy of the
Foreign Chambers Report dated October 17, 2001, which matter was
placed in the agenda of the Court and noted by it in a formal
resolution dated November 28, 2001.[12]
Opposing J.G. Summits motion to elevate the case en banc,
PHILYARDS points out the petitioners inconsistency in previously
opposing PHILYARDS Motion to Refer the Case to the Court En Banc.
PHILYARDS contends that J.G. Summit should now be estopped from
asking that the case be referred to the Court en banc. PHILYARDS
further contends that the Supreme Court en banc is not an appellate
court to which decisions or resolutions of its divisions may be
appealed citing Supreme Court Circular No. 2-89 dated February 7,
1989.[13] PHILYARDS also alleges that there is no novel question of law
involved in the present case as the assailed Resolution was based on
well-settled jurisprudence. Likewise, PHILYARDS stresses that the
Resolution was merely an outcome of the motions for
reconsideration filed by it and the COP and APT and is consistent with
the inherent power of courts to amend and control its process and
orders so as to make them conformable to law and justice. (Rule 135,
sec. 5)[14] Private respondent belittles the petitioners allegations
regarding the change in ponente and the alleged executive
interference as shown by former Secretary of Finance Jose Isidro
Camachos memorandum dated November 5, 2001 arguing that these
do not justify a referral of the present case to the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En
Banc should be granted, J.G. Summit further argued that: its
Opposition to the Office of the Solicitor Generals Motion to Refer is
different from its own Motion to Elevate; different grounds are
invoked by the two motions; there was unwarranted executive
interference; and the change in ponente is merely noted in asserting
that this case should be decided by the Court en banc.[15]
We find no merit in petitioners contention that the propriety of
the bidding process involved in the present case has been confused
with the policy issue of the fate of the shipping industry which,
petitioner maintains, has never been an issue that is determinative of
this case. The Courts Resolution of September 24, 2003 reveals a clear
and definitive ruling on the propriety of the bidding process. In
discussing whether the right to top granted to KAWASAKI in exchange
for its right of first refusal violates the principles of competitive
bidding, we made an exhaustive discourse on the rules and principles
of public bidding and whether they were complied with in the case at
bar.[16] This Court categorically ruled on the petitioners argument
that PHILSECO, as a shipyard, is a public utility which should maintain
a 60%-40% Filipino-foreign equity ratio, as it was a pivotal issue. In
doing so, we recognized the impact of our ruling on the shipbuilding
industry which was beyond avoidance.[17]
We reject petitioners argument that the present case may be
considered under the Supreme Court Resolution dated February 23,
1984 which included among en banc cases those involving a novel
question of law and those where a doctrine or principle laid down by
the court en banc or in division may be modified or reversed. The case
was resolved based on basic principles of the right of first refusal in
commercial law and estoppel in civil law. Contractual obligations
arising from rights of first refusal are not new in this jurisdiction and
have been recognized in numerous cases.[18] Estoppel is too known a
civil law concept to require an elongated discussion. Fundamental
principles on public bidding were likewise used to resolve the issues
raised by the petitioner. To be sure, petitioner leans on the right to
top in a public bidding in arguing that the case at bar involves a novel
issue. We are not swayed. The right to top was merely a condition or
a reservation made in the bidding rules which was fully disclosed to
all bidding parties. In Bureau Veritas, represented by Theodor H.
Hunermann v. Office of the President, et al., [19]we dealt with this
conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons
v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an
"invitation to bid, there is a condition imposed upon the bidders to
the effect that the bidding shall be subject to the right of the
government to reject any and all bids subject to its discretion. In the
case at bar, the government has made its choice and unless an
unfairness or injustice is shown, the losing bidders have no cause to
complain nor right to dispute that choice. This is a well-settled
doctrine in this jurisdiction and elsewhere."
The discretion to accept or reject a bid and award contracts is vested
in the Government agencies entrusted with that function. The
discretion given to the authorities on this matter is of such wide
18
latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni
v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this discretion is
a policy decision that necessitates prior inquiry, investigation,
comparison, evaluation, and deliberation. This task can best be
discharged by the Government agencies concerned, not by the
Courts. The role of the Courts is to ascertain whether a branch or
instrumentality of the Government has transgressed its
constitutional boundaries. But the Courts will not interfere with
executive or legislative discretion exercised within those boundaries.
Otherwise, it strays into the realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the
Courts will set aside the award of a contract made by a government
entity. Grave abuse of discretion implies a capricious, arbitrary and
whimsical exercise of power (Filinvest Credit Corp. v. Intermediate
Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The
abuse of discretion must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform a duty
enjoined by law, as to act at all in contemplation of law, where the
power is exercised in an arbitrary and despotic manner by reason of
passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-
40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of
discretion on the part of public respondents when they awarded the
CISS contract to Respondent SGS. In the "Invitation to Prequalify and
Bid" (Annex "C," supra), the CISS Committee made an express
reservation of the right of the Government to "reject any or all bids
or any part thereof or waive any defects contained thereon and
accept an offer most advantageous to the Government." It is a well-
settled rule that where such reservation is made in an Invitation to
Bid, the highest or lowest bidder, as the case may be, is not entitled
to an award as a matter of right (C & C Commercial Corp. v. Menor,
L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or any
Bid may be rejected or, in the exercise of sound discretion, the award
may be made to another than the lowest bidder (A.C. Esguerra &
Sons v. Aytona, supra, citing 43 Am. Jur., 788). (emphases supplied)
Like the condition in the Bureau Veritas case, the right to top was a
condition imposed by the government in the bidding rules which was
made known to all parties. It was a condition imposed on all bidders
equally, based on the APTs exercise of its discretion in deciding on
how best to privatize the governments shares in PHILSECO. It was
not a whimsical or arbitrary condition plucked from the ether and
inserted in the bidding rules but a condition which the APT approved
as the best way the government could comply with its contractual
obligations to KAWASAKI under the JVA and its mandate of getting
the most advantageous deal for the government. The right to top had
its history in the mutual right of first refusal in the JVA and was
reached by agreement of the government and KAWASAKI.
Further, there is no executive interference in the functions of
this Court by the mere filing of a memorandum by Secretary of
Finance Jose Isidro Camacho. The memorandum was merely noted to
acknowledge its filing. It had no further legal significance. Notably
too, the assailed Resolution dated September 24, 2003 was decided
unanimously by the Special First Division in favor of the
respondents.
Again, we emphasize that a decision or resolution of a Division
is that of the Supreme Court[20] and the Court en banc is not an
appellate court to which decisions or resolutions of a Division may be
appealed.[21] For all the foregoing reasons, we find no basis to elevate
this case to the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioners
Motion for Reconsideration. First, that a fair resolution of the case
should be based on contract law, not on policy considerations; the
contracts do not authorize the right to top to be derived from the
right of first refusal.[22] Second, that neither the right of first refusal
nor the right to top can be legally exercised by the consortium which
is not the proper party granted such right under either the JVA or the
Asset Specific Bidding Rules (ASBR).[23] Third, that the maintenance of
the 60%-40% relationship between the National Investment and
Development Corporation (NIDC) and KAWASAKI arises from contract
and from the Constitution because PHILSECO is a landholding
corporation and need not be a public utility to be bound by the 60%-
40% constitutional limitation.[24]
On the other hand, private respondent PHILYARDS asserts that
J.G. Summit has not been able to show compelling reasons to warrant
a reconsideration of the Decision of the Court.[25] PHILYARDS denies
that the Decision is based mainly on policy considerations and points
out that it is premised on principles governing obligations and
contracts and corporate law such as the rule requiring respect for
contractual stipulations, upholding rights of first refusal, and
recognizing the assignable nature of contracts rights.[26] Also, the
ruling that shipyards are not public utilities relies on established case
law and fundamental rules of statutory construction. PHILYARDS
stresses that KAWASAKIs right of first refusal or even the right to top
is not limited to the 40% equity of the latter.[27] On the landholding
issue raised by J.G. Summit, PHILYARDS emphasizes that this is a non-
issue and even involves a question of fact. Even assuming that this
Court can take cognizance of such question of fact even without the
benefit of a trial, PHILYARDS opines that landholding by PHILSECO at
the time of the bidding is irrelevant because what is essential is that
ultimately a qualified entity would eventually hold PHILSECOs real
estate properties.[28] Further, given the assignable nature of the right
of first refusal, any applicable nationality restrictions, including
landholding limitations, would not affect the right of first refusal
itself, but only the manner of its exercise.[29] Also, PHILYARDS argues
that if this Court takes cognizance of J.G. Summits allegations of fact
regarding PHILSECOs landholding, it must also recognize PHILYARDS
assertions that PHILSECOs landholdings were sold to another
corporation.[30] As regards the right of first refusal, private
respondent explains that KAWASAKIs reduced shareholdings (from
40% to 2.59%) did not translate to a deprivation or loss of its
contractually granted right of first refusal.[31] Also, the bidding was
valid because PHILYARDS exercised the right to top and it was of no
moment that losing bidders later joined PHILYARDS in raising the
purchase price.[32] In cadence with the private respondent
PHILYARDS, public respondents COP and APT contend:
1. The conversion of the right of first refusal into a right to top
by 5% does not violate any provision in the JVA between NIDC and
KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed
by the constitutional restriction on foreign ownership.
3. The petitioner is legally estopped from assailing the validity
of the proceedings of the public bidding as it voluntarily submitted
itself to the terms of the ASBR which included the provision on the
right to top.
4. The right to top was exercised by PHILYARDS as the nominee
of KAWASAKI and the fact that PHILYARDS formed a consortium to
raise the required amount to exercise the right to top the highest bid
by 5% does not violate the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement
for the acquisition of lands does not apply to PHILSECO because as
admitted by petitioner itself, PHILSECO no longer owns real property.
6. Petitioners motion to elevate the case to the Court en banc
is baseless and would only delay the termination of this case.[33]
In a Consolidated Comment dated March 8, 2004, J.G. Summit
countered the arguments of the public and private respondents in
this wise:
1. The award by the APT of 87.67% shares of PHILSECO to
PHILYARDS with losing bidders through the exercise of a right
to top, which is contrary to law and the constitution is null and
19
 void for being violative of substantive due process and the
abuse of right provision in the Civil Code.
a. The bidders[] right to top was actually exercised by
losing bidders.
b. The right to top or the right of first refusal cannot co-
exist with a genuine competitive bidding.
c. The benefits derived from the right to top were
unwarranted.
2. The landholding issue has been a legitimate issue since the
start of this case but is shamelessly ignored by the
respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of
fact.
c. That PHILSECO owned land at the time that the right
of first refusal was agreed upon and at the time of the
bidding are most relevant.
d. Whether a shipyard is a public utility is not the core
issue in this case.
3. Fraud and bad faith attend the alleged conversion of an
inexistent right of first refusal to the right to top.
a. The history behind the birth of the right to top shows
fraud and bad faith.
b. The right of first refusal was, indeed, effectively
useless.
4. Petitioner is not legally estopped to challenge the right to top
in this case.
a. Estoppel is unavailing as it would stamp validity to an
act that is prohibited by law or against public policy.
b. Deception was patent; the right to top was an
attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced
from the right of first refusal is not new and we have already ruled on
the issue in our Resolution of September 24, 2003. We upheld the
mutual right of first refusal in the JVA.[34] We also ruled that nothing
in the JVA prevents KAWASAKI from acquiring more than 40% of
PHILSECOs total capitalization.[35]Likewise, nothing in the JVA or ASBR
bars the conversion of the right of first refusal to the right to top. In
sum, nothing new and of significance in the petitioners pleading
warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the
right of first refusal nor the right to top can legally be exercised by
the consortium which is not the proper party granted such right
under either the JVA or the ASBR. Thus, we held:
The fact that the losing bidder, Keppel Consortium (composed of
Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has
joined PHILYARDS in the latter's effort to raise P2.131 billion
necessary in exercising the right to top is not contrary to law, public
policy or public morals. There is nothing in the ASBR that bars the
losing bidders from joining either the winning bidder (should the right
to top is not exercised) or KAWASAKI/PHI (should it exercise its right
to top as it did), to raise the purchase price. The petitioner did not
allege, nor was it shown by competent evidence, that the
participation of the losing bidders in the public bidding was done with
fraudulent intent. Absent any proof of fraud, the formation by
[PHILYARDS] of a consortium is legitimate in a free enterprise system.
The appellate court is thus correct in holding the petitioner estopped
from questioning the validity of the transfer of the National
Government's shares in PHILSECO to respondent.[36]
Further, we see no inherent illegality on PHILYARDS act in
seeking funding from parties who were losing bidders. This is a purely
commercial decision over which the State should not interfere absent
any legal infirmity. It is emphasized that the case at bar involves the
disposition of shares in a corporation which the government sought
to privatize. As such, the persons with whom PHILYARDS desired to
enter into business with in order to raise funds to purchase the shares
are basically its business. This is in contrast to a case involving a
contract for the operation of or construction of a government
infrastructure where the identity of the buyer/bidder or financier
constitutes an important consideration. In such cases, the
government would have to take utmost precaution to protect public
interest by ensuring that the parties with which it is contracting have
the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since
PHILSECO is a landholding company, KAWASAKI could exercise its
right of first refusal only up to 40% of the shares of PHILSECO due to
the constitutional prohibition on landholding by corporations with
more than 40% foreign-owned equity. It further argues that since
KAWASAKI already held at least 40% equity in PHILSECO, the right of
first refusal was inutile and as such, could not subsequently be
converted into the right to top. [37] Petitioner also asserts that, at
present, PHILSECO continues to violate the constitutional provision
on landholdings as its shares are more than 40% foreignowned. [38]
PHILYARDS admits that it may have previously held land but had
already divested such landholdings.[39] It contends, however, that
even if PHILSECO owned land, this would not affect the right of first
refusal but only the exercise thereof. If the land is retained, the right
of first refusal, being a property right, could be assigned to a qualified
party. In the alternative, the land could be divested before the
exercise of the right of first refusal. In the case at bar, respondents
assert that since the right of first refusal was validly converted into a
right to top, which was exercised not by KAWASAKI, but by
PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are
owned by Filipinos), then there is no violation of the Constitution.[40]
At first, it would seem that questions of fact beyond cognizance by
this Court were involved in the issue. However, the records show that
PHILYARDS admits it had owned land up until the time of the
bidding.[41] Hence, the only issue is whether KAWASAKI had a valid
right of first refusal over PHILSECO shares under the JVA considering
that PHILSECO owned land until the time of the bidding and
KAWASAKI already held 40% of PHILSECOs equity.
We uphold the validity of the mutual rights of first refusal under
the JVA between KAWASAKI and NIDC. First of all, the right of first
refusal is a property right of PHILSECO shareholders, KAWASAKI and
NIDC, under the terms of their JVA. This right allows them to purchase
the shares of their co-shareholder before they are offered to a third
party. The agreement of co-shareholders to mutually grant this right
to each other, by itself, does not constitute a violation of the
provisions of the Constitution limiting land ownership to Filipinos
and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO
still owns land, the right of first refusal can be validly assigned to a
qualified Filipino entity in order to maintain the 60%-40% ratio. This
transfer, by itself, does not amount to a violation of the Anti-Dummy
Laws, absent proof of any fraudulent intent. The transfer could be
made either to a nominee or such other party which the holder of the
right of first refusal feels it can comfortably do business with.
Alternatively, PHILSECO may divest of its landholdings, in which case
KAWASAKI, in exercising its right of first refusal, can exceed 40% of
PHILSECOs equity. In fact, it can even be said that if the foreign
shareholdings of a landholding corporation exceeds 40%, it is not
the foreign stockholders ownership of the shares which is adversely
affected but the capacity of the corporation to own land that is, the
20
corporation becomes disqualified to own land. This finds support
under the basic corporate law principle that the corporation and its
stockholders are separate juridical entities. In this vein, the right of
first refusal over shares pertains to the shareholders whereas the
capacity to own land pertains to the corporation. Hence, the fact that
PHILSECO owns land cannot deprive stockholders of their right of first
refusal. No law disqualifies a person from purchasing shares in a
landholding corporation even if the latter will exceed the allowed
foreign equity, what the law disqualifies is the corporation from
owning land. This is the clear import of the following provisions in the
Constitution:
Section 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated.
The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State
may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. Such agreements
may be for a period not exceeding twenty-five years, renewable for
not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and
limit of the grant.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands
shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of
the public domain.[42] (emphases supplied)
The petitioner further argues that an option to buy land is void
in itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52
[1967]). The right of first refusal granted to KAWASAKI, a Japanese
corporation, is similarly void. Hence, the right to top, sourced from
the right of first refusal, is also void.[43] Contrary to the contention of
petitioner, the case of Lui She did not that say an option to buy land
is void in itself, for we ruled as follows:
x x x To be sure, a lease to an alien for a reasonable period is valid.
So is an option giving an alien the right to buy real property on
condition that he is granted Philippine citizenship. As this Court said
in Krivenko vs. Register of Deeds:
[A]liens are not completely excluded by the Constitution from the use
of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights such
as a lease contract which is not forbidden by the Constitution. Should
they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy,
a piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property, this to last for 50 years, then it
becomes clear that the arrangement is a virtual transfer of
ownership whereby the owner divests himself in stages not only of
the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and
jus abutendi) but also of the right to dispose of it (jus disponendi)
rights the sum total of which make up ownership. It is just as if today
the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which
ownership is made up are consolidated in an alien. And yet this is just
exactly what the parties in this case did within this pace of one year,
with the result that Justina Santos'[s] ownership of her property was
reduced to a hollow concept. If this can be done, then the
Constitutional ban against alien landholding in the Philippines, as
announced in Krivenko vs. Register of Deeds, is indeed in grave
peril.[44] (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to
a virtual transfer of ownership as the owner could not sell or dispose
of his properties. The contract in Lui Sheprohibited the owner of the
land from selling, donating, mortgaging, or encumbering the
property during the 50-year period of the option to buy. This is not
so in the case at bar where the mutual right of first refusal in favor of
NIDC and KAWASAKI does not amount to a virtual transfer of land to
a non-Filipino. In fact, the case at bar involves a right of first refusal
over shares of stock while the Lui She case involves an option to buy
the land itself. As discussed earlier, there is a distinction between the
shareholders ownership of shares and the corporations ownership of
land arising from the separate juridical personalities of the
corporation and its shareholders.
We note that in its Motion for Reconsideration, J.G. Summit
alleges that PHILSECO continues to violate the Constitution as its
foreign equity is above 40% and yet owns long-term leasehold rights
which are real rights.[45] It cites Article 415 of the Civil Code which
includes in the definition of immovable property, contracts for public
works, and servitudes and other real rights over immovable
property.[46] Any existing landholding, however, is denied by
PHILYARDS citing its recent financial statements.[47] First, these are
questions of fact, the veracity of which would require introduction of
evidence. The Court needs to validate these factual allegations based
on competent and reliable evidence. As such, the Court cannot
resolve the questions they pose. Second, J.G. Summit misreads the
provisions of the Constitution cited in its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private
respondent is not a 60%-40% corporation, and this violates the
Constitution x x x The violation continues to this day because under
the law, it continues to own real property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14,
Article XIV of the 1973 Constitution (the JVA was signed in 1977),
provided:
Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain.
32.1 This provision is the same as Section 7, Article XII of the 1987
Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or
hold lands of the public domain are corporations at least 60%
of which is owned by Filipino citizens (Sec. 22, Commonwealth
Act 141, as amended). (emphases supplied)
As correctly observed by the public respondents, the prohibition in
the Constitution applies only to ownership of land.[48] It does not
extend to immovable or real property as defined under Article 415
of the Civil Code. Otherwise, we would have a strange situation
where the ownership of immovable property such as trees, plants
and growing fruit attached to the land[49] would be limited to Filipinos
and Filipino corporations only.
III.
WHEREFORE, in view of the foregoing, the petitioners Motion
for Reconsideration is DENIED WITH FINALITY and the decision
appealed from is AFFIRMED. The Motion to Elevate This Case to the
Court En Banc is likewise DENIED for lack of merit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and
Tinga, JJ., concur.
21