Fulltext Of All Reclamation Cases.docx

See page 272 for continutation 1. Francisco I. Chavez vs NHA, et. Al. G.R. No. 164527 In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 65, petitioner, in his capacity as taxpayer, seeks:

to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993 between the National Housing Authority and R-II Builders, Inc. and the Smokey Mountain Development and Reclamation Project embodied therein; the subsequent amendments to the said JVA; and all other agreements signed and executed in relation thereto including, but not limited to the Smokey Mountain Asset Pool Agreement dated 26 September 1994 and the separate agreements for Phase I and Phase II of the Projectas well as all other transactions which emanated therefrom, for being UNCONSTITUTIONAL and INVALID; to enjoin respondentsparticularly respondent NHAfrom further implementing and/or enforcing the said project and other agreements related thereto, and from further deriving and/or enjoying any rights, privileges and interest therefrom x x x; and to compel respondents to disclose all documents and information relating to the projectincluding, but not limited to, any subsequent agreements with respect to the different phases of the project, the revisions over the original plan, the additional works incurred thereon, the current financial condition of respondent R-II Builders, Inc., and the transactions made respecting the project.1

FACTS: On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO) 1612 approving and directing the implementation of the Comprehensive and Integrated 1

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Metropolitan Manila Waste Management Plan (the Plan). The Metro Manila Commission, in coordination with various government agencies, was tasked as the lead agency to implement the Plan as formulated by the Presidential Task Force on Waste Management created by Memorandum Circular No. 39. A day after, on March 2, 1988, MO 161-A 3 was issued, containing the guidelines which prescribed the functions and responsibilities of fifteen (15) various government departments and offices tasked to implement the Plan, namely: DPWH, DOH , DENR , NEDA, Philippine Constabulary Integrated National Police, Philippine Information Agency and the Local Government Unit (referring to the City of Manila), DSWD, NHA, DepEd and Presidential Management Staff. Specifically, respondent NHA was ordered to conduct feasibility studies and develop lowcost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects.

On the other hand, the DENR was tasked to review and evaluate

proposed projects under the Plan with regard to their environmental impact, conduct regular monitoring of activities of the Plan to ensure compliance with environmental standards and assist DOH in the conduct of the study on hospital waste management. At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland in Balut, Tondo, Manila, where numerous Filipinos resided in subhuman conditions, collecting items that may have some monetary value from the garbage. Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain lowcost housing project which resulted in the formulation of the Smokey Mountain Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain Development and Reclamation Project (SMDRP; the Project). The Project aimed to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling

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component of the project. 4 Once finalized, the Plan was submitted to President Aquino for her approval. On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was enacted. Its declared policy under Section 1 is [t]o recognize the indispensable role of the private sector as the main engine for national growth and development and provide the most appropriate favorable incentives to mobilize private resources for the purpose. Sec. 3 authorized and empowered [a]ll government infrastructure agencies, including government-owned and controlled corporations and local government units x x x to enter into contract with any duly pre-qualified private contractor for the financing, construction, operation and maintenance of any financially viable infrastructure facilities through the build-operate-transfer or build and transfer scheme. RA 6957 defined build-and-transfer scheme as [a] contractual arrangement whereby the contractor undertakes the construction, including financing, of a given infrastructure facility, and its turnover after the completion to the government agency or local government unit concerned which shall pay the contractor its total investment expended on the project, plus reasonable rate of return thereon. The last paragraph of Sec. 6 of the BOT Law provides that the repayment scheme in the case of land reclamation or the building of industrial estates may consist of [t]he grant of a portion or percentage of the reclaimed land or industrial estate built, subject to the constitutional requirements with respect to the ownership of lands. On February 10, 1992, Joint Resolution No. 035 was passed by both houses of Congress. Sec. 1 of this resolution provided, among other things, that:

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Section 1. There is hereby approved the following national infrastructure projects for implementation under the provisions of Republic Act No. 6957 and its implementing rules and regulations: xxxx (d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and related facilities; xxxx (k) facilities;

Land reclamation, dredging and other related development

(l) Industrial estates, regional industrial centers and export processing zones including steel mills, iron-making and petrochemical complexes and related infrastructure and utilities; xxxx (p) Environmental and solid waste management-related facilities such as collection equipment, composting plants, incinerators, landfill and tidal barriers, among others; and (q) facilities.

Development of new townsites and communities and related

This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the approval of all national infrastructure projects by the Congress. On January 17, 1992, President Aquino proclaimed MO 415 6 approving and directing the implementation of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated:

Section 3. The National Housing Authority is hereby directed to implement the Smokey Mountain Development Plan and Reclamation of the 6

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Area Across R-10 through a private sector joint venture scheme at the least cost to the government. Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed to the National Housing Authority as well as the area to be reclaimed across R-10. (Emphasis supplied.)

In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of proposals regarding the technical feasibility of reclamation, while the DENR was directed to (1) facilitate titling of Smokey Mountain and of the area to be reclaimed and (2) assist in the technical evaluation of proposals regarding environmental impact statements.7

In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the implementation of the Plan, chaired by the National Capital Region-Cabinet Officer for Regional Development (NCR-CORD) with the heads of the NHA, City of Manila, DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development Bank of the Philippines (DBP) as members.8 The NEDA subsequently became a member of the EXECOM. Notably, in a September 2, 1994 Letter,9 PEA General Manager Amado Lagdameo approved the plans for the reclamation project prepared by the NHA.

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In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was created composed of the technical representatives of the EXECOM [t]o assist the NHA in the evaluation of the project proposals, assist in the resolution of all issues and problems in the project to ensure that all aspects of the development from squatter relocation, waste management, reclamation, environmental protection, land and house construction meet governing regulation of the region and to facilitate the completion of the project.10

Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for the right to become NHAs joint venture partner in the implementation of the SMDRP. The notices were published in newspapers of general circulation on January 23 and 26 and February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13) contractors who responded, only five (5) contractors fully complied with the required pre-qualification documents. Based on the evaluation of the pre-qualification documents, the EXECOM declared the New San Jose Builders, Inc. and R-II Builders, Inc. (RBI) as the top two contractors. Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and Financing Plan) of the top two (2) contractors in this manner:

(1)

The DBP, as financial advisor to the Project, evaluated their Financial

Proposals;

(2)

The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the

Housing Construction and Reclamation; 10

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(3)

The DENR evaluated Technical Proposals on Waste Management and

Disposal by conducting the Environmental Impact Analysis; and

(4)

The NHA and the City of Manila evaluated the socio-economic benefits

presented by the proposals.

On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the Philippines.

On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to approve the R-II Builders, Inc. (RBI) proposal which garnered the highest score of 88.475%.

Subsequently, the EXECOM made a Project briefing to President Ramos. As a result, President Ramos issued Proclamation No. 3911 on September 9, 1992, which reads:

WHEREAS, the National Housing Authority has presented a viable conceptual plan to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey Mountain as the enabling component of the project; 11

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xxxx These parcels of land of public domain are hereby placed under the administration and disposition of the National Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port-related activities. In order to facilitate the early development of the area for disposition, the Department of Environment and Natural Resources, through the Lands and Management Bureau, is hereby directed to approve the boundary and subdivision survey and to issue a special patent and title in the name of the National Housing Authority, subject to final survey and private rights, if any there be. (Emphasis supplied.)

On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI [s]ubject to final review and approval of the Joint Venture Agreement by the Office of the President.12

On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement 13 (JVA) for the development of the Smokey Mountain dumpsite and the reclamation of the area across R-10 based on Presidential Decree No. (PD) 757 14 which mandated NHA [t]o undertake the physical and socio-economic upgrading and development of lands of the public domain identified for housing, MO 161-A which required NHA to conduct the 12

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feasibility studies and develop a low-cost housing project at the Smokey Mountain, and MO 415 as amended by MO 415-A which approved the Conceptual Plan for Smokey Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project involves the clearing of Smokey Mountain for eventual development into a low cost medium rise housing complex and industrial/commercial site with the reclamation of the area directly across [R10] to act as the enabling component of the Project. 15 The JVA covered a lot in Tondo, Manila with an area of two hundred twelve thousand two hundred thirty-four (212,234) square meters and another lot to be reclaimed also in Tondo with an area of four hundred thousand (400,000) square meters.

The Scope of Work of RBI under Article II of the JVA is as follows:

a) To fully finance all aspects of development of Smokey Mountain and reclamation of no more than 40 hectares of Manila Bay area across Radial Road 10. b) To immediately commence on the preparation of feasibility report and detailed engineering with emphasis to the expedient acquisition of the Environmental Clearance Certificate (ECC) from the DENR. c) The construction activities will only commence after the acquisition of the ECC, and d) Final details of the contract, including construction, duration and delivery timetables, shall be based on the approved feasibility report and detailed engineering.

Other obligations of RBI are as follows:

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2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed Engineering as approved by the Office of the President. All costs and expenses for hiring technical personnel, date gathering, permits, licenses, appraisals, clearances, testing and similar undertaking shall be for the account of the [RBI]. 2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units complete with basic amenities such as plumbing, electrical and sewerage facilities within the temporary housing project as staging area to temporarily house the squatter families from the Smokey Mountain while development is being undertaken. These temporary housing units shall be turned over to the [NHA] for disposition. 2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on the leveled Smokey Mountain complete with basic utilities and amenities, in accordance with the plans and specifications set forth in the Final Report approved by the [NHA]. Completed units ready for mortgage take out shall be turned over by the [RBI] to NHA on agreed schedule. 2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10] as contained in Proclamation No. 39 as the enabling component of the project and payment to the [RBI] as its asset share. 2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to complete all herein development works to be undertaken on a phase to phase basis in accordance with the work program stipulated therein.

The profit sharing shall be based on the approved pre-feasibility report submitted to the EXECOM, viz:

For the developer (RBI):

1.

To own the forty (40) hectares of reclaimed land.

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2. To own the commercial area at the Smokey Mountain area composed of 1.3 hectares, and 3. To own all the constructed units of medium rise low cost permanent housing units beyond the 3,500 units share of the [NHA]. For the NHA: 1.

To own the temporary housing consisting of 3,500 units.

2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at the Smokey Mountain area. 3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the Smokey Mountain area to be awarded to qualified on site residents. 4.

To own the Industrial Area site consisting of 3.2 hectares, and

5. To own the open spaces, roads and facilities within the Smokey Mountain area.

In the event of extraordinary increase in labor, materials, fuel and non-recoverability of total project expenses,16 the OP, upon recommendation of the NHA, may approve a corresponding adjustment in the enabling component.

The functions and responsibilities of RBI and NHA are as follows:

For RBI:

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4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to the expedient acquisition, with the assistance of the [NHA] of Environmental Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the [DENR]. Construction shall only commence after the acquisition of the ECC. The Environment Compliance Certificate (ECC) shall form part of the FINAL REPORT. The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed engineering and architectural drawings, technical specifications and other related and required documents relative to the Smokey Mountain area. With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to develop the same in a manner that it deems necessary to recover the [RBIs] investment, subject to environmental and zoning rules. 4.02 Finance the total project cost for land development, housing construction and reclamation of the PROJECT. 4.03 Warrant that all developments shall be in compliance with the requirements of the FINAL REPORT. 4.04 Provide all administrative resources for the submission of project accomplishment reports to the [NHA] for proper evaluation and supervision on the actual implementation. 4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to the PROJECT, from the owners of the adjacent lots for access road, water, electrical power connections and drainage facilities. 4.06 Provide temporary field office and transportation vehicles (2 units), one (1) complete set of computer and one (1) unit electric typewriter for the [NHAs] field personnel to be charged to the PROJECT.

For the NHA:

4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within Smokey Mountain to the Temporary Housing Complex 12

or to other areas prepared as relocation areas with the assistance of the [RBI]. The [RBI] shall be responsible in releasing the funds allocated and committed for relocation as detailed in the FINAL REPORT. 4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all necessary permits, licenses, appraisals, clearances and accreditations for the PROJECT subject to existing laws, rules and regulations. 4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain and Reclamation Area while the land development and construction of housing units are in progress to determine whether the development and construction works are undertaken in accordance with the FINAL REPORT. If in its judgment, the PROJECT is not pursued in accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to undertake necessary remedial works. All expenses, charges and penalties incurred for such remedial, if any, shall be for the account of the [RBI]. 4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x 4.11 Handle the processing and documentation of all sales transactions related to its assets shares from the venture such as the 3,500 units of permanent housing and the allotted industrial area of 3.2 hectares. 4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be deducted from the proceeds due to the [NHA]. 4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for the Smokey Mountain and Reclamation Area within 90 days upon submission of Survey returns to the Land Management Sector. The land titles to the 40-hectare reclaimed land, the 1.3 hectare commercial area at the Smokey Mountain area and the constructed units of medium-rise permanent housing units beyond the 3,500 units share of the [NHA] shall be issued in the name of the [RBI] upon completion of the project. However, the [RBI] shall have the authority to pre-sell its share as indicated in this agreement.

The final details of the JVA, which will include the construction duration, costs, extent of reclamation, and delivery timetables, shall be based on the FINAL REPORT which will be contained in a Supplemental Agreement to be executed later by the parties. The JVA may be modified or revised by written agreement between the NHA and RBI specifying the clauses to be revised or modified and the corresponding amendments. 13

If the Project is revoked or terminated by the Government through no fault of RBI or by mutual agreement, the Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable rate of return not exceeding that stated in the feasibility study and in the contract as of the date of such revocation, cancellation, or termination on a schedule to be agreed upon by both parties. As a preliminary step in the project implementation, consultations and dialogues were conducted with the settlers of the Smokey Mountain Dumpsite Area. At the same time, DENR started processing the application for the Environmental Clearance Certificate (ECC) of the SMDRP. As a result however of the consultative dialogues, public hearings, the report on the on-site field conditions, the Environmental Impact Statement (EIS) published on April 29 and May 12, 1993 as required by the Environmental Management Bureau of DENR, the evaluation of the DENR, and the recommendations from other government agencies, it was discovered that design changes and additional work have to be undertaken to successfully implement the Project.17

Thus, on February 21, 1994, the parties entered into another agreement denominated as the Amended and Restated Joint Venture Agreement 18 (ARJVA) which delineated the different phases of the Project. Phase I of the Project involves the construction of temporary housing units for the current residents of the Smokey Mountain dumpsite, the clearing and leveling-off of the dumpsite, and the construction of medium-rise low-cost housing units at the cleared and leveled dumpsite.19 Phase II of the Project involves the construction of an

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incineration area for the on-site disposal of the garbage at the dumpsite. 20 The enabling component or consideration for Phase I of the Project was increased from 40 hectares of reclaimed lands across R-10 to 79 hectares.21 The revision also provided for the enabling component for Phase II of 119 hectares of reclaimed lands contiguous to the 79 hectares of reclaimed lands for Phase I.22 Furthermore, the amended contract delineated the scope of works and the terms and conditions of Phases I and II, thus:

The PROJECT shall consist of Phase I and Phase II. Phase I shall involve the following: a.

the construction of 2,992 units of temporary housing for the affected residents while clearing and development of Smokey Mountain [are] being undertaken

b.

the clearing of Smokey Mountain and the subsequent construction of 3,520 units of medium rise housing and the development of the industrial/commercial site within the Smokey Mountain area

c.

the reclamation and development of a 79 hectare area directly across Radial Road 10 to serve as the enabling component of Phase

I

Phase II shall involve the following: a.

the construction and operation of an incinerator plant that will conform to the emission standards of the DENR

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b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed under Phase I to serve as the enabling component of Phase II.

Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from 3,500 units under the JVA. 23 However, it was required to construct 3,520 medium-rise low-cost permanent housing units instead of 3,500 units under the JVA. There was a substantial change in the design of the permanent housing units such that a loft shall be incorporated in each unit so as to increase the living space from 20 to 32 square meters. The additions and changes in the Original Project Component are as follows:

ORIGINAL 1.

CHANGES/REVISIONS

TEMPORARY HOUSING Wood/Plywood, ga. 31 G.I. Sheet usable life of 3 years, 12 SM floor area. sm & 12 sm floor area.

2.

Concrete/Steel Frame Structure gauge 26 G.I. roofing sheets future use as permanent structures for factory and warehouses mixed 17

MEDIUM RISE MASS HOUSING Box type precast Shelter component 20 square meter area with 2.4 meter height; bare type, 160 units/ building.

Conventional and precast concrete structures, 32 square floor meter floor area with loft floor (sleeping quarter) 3.6 m. floor height, painted and improved architectural faade, 80 units/ building.

3. MITIGATING MEASURES

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3.1 For reclamation work

a. 100% use of Smokey Mountain material as dredgefill b. Concrete Sheet Piles short depth of embedment c. Silt removal approximately 1.0 meter only

Use of clean dredgefill material below the MLLW and SM material mixed with dredgefill above MLLW.

Use of Steel Sheet Piles needed for longer depth of embedment.

Need to remove more than 3.0 meters of silt after sub-soil investigation.24

These material and substantial modifications served as justifications for the increase in the share of RBI from 40 hectares to 79 hectares of reclaimed land.

Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA, the stipulated cost for Phase I was pegged at six billion six hundred ninety-three million three hundred eighty-seven thousand three hundred sixty-four pesos (PhP 6,693,387,364).

In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM submitted the ARJVA for approval by the OP. After review of said agreement, the OP directed that certain terms and conditions of the ARJVA be further clarified or amended preparatory to its approval. Pursuant to the Presidents directive, the parties reached an agreement on the clarifications and amendments required to be made on the ARJVA.

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On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and Restated Joint Venture Agreement (AARJVA) 25 clarifying certain terms and condition of the ARJVA, which was submitted to President Ramos for approval, to wit:

Phase II shall involve the following: a.

the construction and operation of an incinerator plant that will conform to the emission standards of the DENR

b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed under Phase I to serve as the enabling component of Phase II, the exact size and configuration of which shall be approved by the SMDRP Committee26

Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows: 2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area directly across Radial Road 10 (R-10) to serve as payment to the DEVELOPER as its asset share for Phase I and to develop such land into commercial area with port facilities; provided, that the port plan shall be integrated with the Philippine Port Authoritys North Harbor plan for the Manila Bay area and provided further, that the final reclamation and port plan for said reclaimed area shall be submitted for approval by the Public Estates Authority and the Philippine Ports Authority, respectively: provided finally, that subject to par. 2.02 above, actual reclamation work may commence 25

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upon approval of the final reclamation plan by the Public Estates Authority. xxxx 9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and shall read as follows: 5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY through no fault of the DEVELOPER, the AUTHORITY shall compensate the DEVELOPER for the value of the completed portions of, and actual expenditures on the PROJECT plus a reasonable rate of return thereon, not exceeding that stated in the Cost Estimates of Items of Work previously approved by the SMDRP Executive Committee and the AUTHORITY and stated in this Agreement, as of the date of such revocation, cancellation, or termination, on a schedule to be agreed upon by the parties, provided that said completed portions of Phase I are in accordance with the approved FINAL REPORT.

Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 1994 27 increasing the proposed area for reclamation across R-10 from 40 hectares to 79 hectares, 28 to wit:

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in me by the law, and as recommended by the SMDRP Executive Committee, do hereby authorize the increase of the area of foreshore or submerged lands of Manila Bay to be reclaimed, as previously authorized under Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s. 1992), from Four Hundred Thousand (400,000) square meters, more or less, to Seven Hundred Ninety Thousand (790,000) square meters, more or less. 27

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On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain Dumpsite.

In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary Teofisto T. Guingona, Jr., approved the ARJVA as amended by the AARJVA.

On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No. 39, conveying in favor of NHA a 401,485-square meter area.

On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC), now known as the Home Guaranty Corporation, and the Philippine National Bank (PNB)29 executed the Smokey Mountain Asset Pool Formation Trust Agreement (Asset Pool Agreement).30 Thereafter, a Guaranty Contract was entered into by NHA, RBI, and HIGC.

On June 23, 1994, the Legislature passed the Clean Air Act. 31 The Act made the establishment of an incinerator illegal and effectively barred the implementation of the

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planned incinerator project under Phase II. Thus, the off-site disposal of the garbage at the Smokey Mountain became necessary.32

The land reclamation was completed in August 1996.33

Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter area.

During the actual construction and implementation of Phase I of the SMDRP, the Inter-Agency Technical Committee found and recommended to the EXECOM on December 17, 1997 that additional works were necessary for the completion and viability of the Project. The EXECOM approved the recommendation and so, NHA instructed RBI to implement the change orders or necessary works.34

Such necessary works comprised more than 25% of the original contract price and as a result, the Asset Pool incurred direct and indirect costs. Based on C1 12 A of the Implementing Rules and Regulations of PD 1594, a supplemental agreement is required for

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all change orders and extra work orders, the total aggregate cost of which being more than twenty-five (25%) of the escalated original contract price.

The EXECOM requested an opinion from the Department of Justice (DOJ) to determine whether a bidding was required for the change orders and/or necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated August 26, 1993 and November 12, 1993, opined that a rebidding, pursuant to the aforequoted provisions of the implementing rules (referring to PD 1594) would not be necessary where the change orders inseparable from the original scope of the project, in which case, a negotiation with the incumbent contractor may be allowed.

Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a supplemental agreement covering said necessary works.

On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the aforementioned necessary works and submitted it to the President on March 24, 1998 for approval.

Outgoing President Ramos decided to endorse the consideration of the Supplemental Agreement to incoming President Joseph E. Estrada. On June 30, 1998, Estrada became the 13th Philippine President.

However, the approval of the Supplemental Agreement was unacted upon for five months. As a result, the utilities and the road networks were constructed to cover only the 22

79-hectare original enabling component granted under the ARJVA. The 220-hectare extension of the 79-hectare area was no longer technically feasible. Moreover, the financial crises and unreliable real estate situation made it difficult to sell the remaining reclaimed lots. The devaluation of the peso and the increase in interest cost led to the substantial increase in the cost of reclamation. On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due to the delay in the approval of the Supplemental Agreement, the consequent absence of an enabling component to cover the cost of the necessary works for the project, and the resulting inability to replenish the Asset Pool funds partially used for the completion of the necessary works. As of August 1, 1998 when the project was suspended, RBI had already accomplished a portion of the necessary works and change orders which resulted in [RBI] and the Asset Pool incurring advances for direct and indirect cost which amount can no longer be covered by the 79-hectare enabling component under the ARJVA. Repeated demands were made by RBI in its own capacity and on behalf of the asset pool on NHA for payment for the advances for direct and indirect costs subject to NHA validation. In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the SMDRP EXECOM and further directed it to review the Supplemental Agreement and submit its recommendation on the completion of the SMDRP.

The reconstituted EXECOM conducted a review of the project and recommended the amendment of the March 20, 1998 Supplemental Agreement to make it more feasible and to identify and provide new sources of funds for the project and provide for a new enabling component to cover the payment for the necessary works that cannot be covered by the 79hectare enabling component under the ARJVA.35 35 23

The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02 36 which approved the modification of the Supplemental Agreement, to wit:

a) Approval of 150 hectares additional reclamation in order to the reclamation feasible as part of the enabling component. b)

make

The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based on surveys) to the SMDRP Asset Pool.

c)

The inclusion in the total development cost of other additional, necessary and indispensable infrastructure works and the revision of the original cost stated in the Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP 2,969,134,053.13. d)

Revision in the sharing agreement between the parties.

In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and complete the SMDRP subject to certain guidelines and directives.

After the parties in the case at bar had complied with the March 23, 2000 Memorandum, the NHA November 9, 2000 Resolution No. 4323 approved the conveyance of the 17-hectare Vitas property in favor of the existing or a newly created Asset Pool of the project to be developed into a mixed commercial-industrial area, subject to certain conditions.

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On January 20, 2001, then President Estrada was considered resigned. On the same day, President Gloria M. Arroyo took her oath as the 14th President of the Philippines.

As of February 28, 2001, the estimated total project cost of the SMDRP has reached P8.65 billion comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost, 37 subject to validation by the NHA.

On August 28, 2001, NHA issued Resolution No. 4436 to pay for the various necessary works/change orders to SMDRP, to effect the corresponding enabling component consisting of the conveyance of the NHAs Vitas Property and an additional 150-hectare reclamation area and to authorize the release by NHA of PhP 480 million as advance to the project to make the Permanent Housing habitable, subject to reimbursement from the proceeds of the expanded enabling component.38

On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the parties, and on February 28, 2002, the Housing and Urban Development Coordinating Council (HUDCC) submitted the agreement to the OP for approval.

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In the July 20, 2002 Cabinet Meeting, HUDCC was directed to submit the works covered by the PhP 480 million [advance to the Project] and the ASA to public bidding. 39 On August 28, 2002, the HUDCC informed RBI of the decision of the Cabinet.

In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the government to bid out the remaining works under the ASA thereby unilaterally terminating the Project with RBI and all the agreements related thereto. RBI demanded the payment of just compensation for all accomplishments and costs incurred in developing the SMDRP plus a reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA and Section 6.2 of the ASA.40

Consequently, the parties negotiated the terms of the termination of the JVA and other subsequent agreements.

On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA) whereby both parties agreed to terminate the JVA and other subsequent agreements, thus:

1.

TERMINATION 1.1

In compliance with the Cabinet directive dated 30 July 2002 to submit the works covered by the P480 Million and the ASA to public bidding, the following agreements executed by

39

40

26

and between the NHA and the DEVELOPER are hereby terminated, to wit: a. b. c. d. e. xxxx 5.

Joint Venture Agreement (JVA) dated 19 March 1993 Amended and Restated Joint Venture Agreement (ARJVA) dated 21 February 1994 Amendment and Restated Joint Venture Agreement dated 11 August 1994 Supplemental Agreement dated 24 March 1998 Amended Supplemental Agreement (ASA) dated 19 November 2001.

SETTLEMENT OF CLAIMS 5.1

Subject to the validation of the DEVELOPERs claims, the NHA hereby agrees to initially compensate the Developer for the abovementioned costs as follows: a.

Direct payment to DEVELOPER of the amounts herein listed in the following manner: a.1 P250 Million in cash from the escrow account in accordance with Section 2 herewith; a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area immediately after joint determination of the appraised value of the said property in accordance with the procedure herein set forth in the last paragraph of Section 5.3. For purposes of all payments to be made through conveyance of real properties, the parties shall secure from the NHA Board of Directors all documents necessary and sufficient to effect the transfer of title over the properties to be conveyed to RBI, which documents shall be issued within a reasonable period.

5.2

Any unpaid balance of the DEVELOPERS claims determined after the validation process referred to in Section 4 hereof, may be paid in cash, bonds or through the conveyance of properties or any combination thereof. The manner, terms and conditions of payment of the balance shall be specified and agreed upon later within a period of three months from the time a substantial amount representing the unpaid balance has been validated pursuant hereto including, but 27

not limited to the programming of quarterly cash payments to be sourced by the NHA from its budget for debt servicing, from its income or from any other sources. 5.3

In any case the unpaid balance is agreed to be paid, either partially or totally through conveyance of properties, the parties shall agree on which properties shall be subject to conveyance. The NHA and DEVELOPER hereby agree to determine the valuation of the properties to be conveyed by getting the average of the appraisals to be made by two (2) mutually acceptable independent appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an agreement with the asset pool for the development and operations of a port in the Smokey Mountain Area which is a major component of SMDRP to provide a source of livelihood and employment for Smokey Mountain residents and spur economic growth. A Subscription Agreement was executed between the Asset Pool and HCPTI whereby the asset pool subscribed to 607 million common shares and 1,143 million preferred shares of HCPTI. The HCPTI preferred shares had a premium and penalty interest of 7.5% per annum and a mandatory redemption feature. The asset pool paid the subscription by conveying to HCPTI a 10-hectare land which it acquired from the NHA being a portion of the reclaimed land of the SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and 251358.

Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from PPA, it suffered a net income loss of PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in 2003. The Project Governing Board of the Asset Pool later conveyed by way of dacion en pago a number of HCPTI shares to RBI in lieu of cash payment for the latters work in SMDRP.

28

On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition which impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero II, raising constitutional issues.

The NHA reported that thirty-four (34) temporary housing structures and twentyone (21) permanent housing structures had been turned over by respondent RBI. It claimed that 2,510 beneficiary-families belonging to the poorest of the poor had been transferred to their permanent homes and benefited from the Project.

The Issues

The grounds presented in the instant petition are: I NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY VALIDLY RECLAIM FORESHORE AND SUBMERGED LAND BECAUSE: 1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED ANY POWER AND AUTHORITY TO RECLAIM LANDS OF THE PUBLIC DOMAIN AS THIS POWER IS VESTED EXCLUSIVELY WITH THE PEA. 2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS WERE GIVEN THE POWER AND AUTHORITY TO RECLAIM FORESHORE AND SUBMERGED LAND, THEY WERE NEVER GIVEN THE AUTHORITY BY THE DENR TO DO SO. II 29

RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED FORESHORE AND SUBMERGED LAND AREAS BECAUSE: 1. THE RECLAIMED FORESHORE AND SUBMERGED LAND ARE INALIENABLE PUBLIC LANDS WHICH ARE COMMERCE OF MAN. 2.

PARCELS OF BEYOND THE

ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED ALIENABLE LANDS OF THE PUBLIC DOMAIN, RESPONDENT R-II BUILDERS STILL COULD NOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY DECLARATION THAT THE SAID LANDS WERE NO LONGER NEEDED FOR PUBLIC USE.

3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE ALIENABLE AND NO LONGER NEEDED FOR PUBLIC USE, RESPONDENT RII BUILDERS STILL CANNOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY LAW AUTHORIZING THE SALE THEREOF. 4. THERE WAS NEVER ANY PUBLIC BIDDING AWARDING OWNERSHIP OF THE SUBJECT LAND TO RESPONDENT R-II BUILDERS. 5.

ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER OF ALIENABLE PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II BUILDERS, BEING PRIVATE CORPORATION IS NONETHELESS EXPRESSLYPROHIBITED BY THE PHILIPPINE CONSTITUTION TO ACQUIRE LANDS OF THE PUBLIC DOMAIN.

III RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE MAJORITY STOCKS ARE OWNED AND CONTROLLED BY RESPONDENT ROMEROS CORPORATIONS R-II BUILDERS AND R-II HOLDINGS IS DISQUALIFIED FROM BEING A TRANSFEREE OF PUBLIC LAND. IV RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION RELATED TO THE SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION PROJECT.

30

The Courts Ruling

Before we delve into the substantive issues raised in this petition, we will first deal with several procedural matters raised by respondents.

Whether petitioner has the requisite locus standi to file this case

Respondents argue that petitioner Chavez has no legal standing to file the petition.

Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the avails of the suit can file a complaint or petition. 41 Respondents claim that petitioner is not a proper party-in-interest as he was unable to show that he has sustained or is in immediate or imminent danger of sustaining some direct and personal injury as a result of the execution and enforcement of the assailed contracts or agreements. 42 Moreover, they assert that not all government contracts can justify a taxpayers suit especially when no public funds were utilized in contravention of the Constitution or a law. We explicated in Chavez v. PCGG43 that in cases where issues of transcendental public importance are presented, there is no necessity to show that petitioner has experienced or is in actual danger of suffering direct and personal injury as the requisite injury is assumed. 41

42

43

31

We find our ruling in Chavez v. PEA44 as conclusive authority on locus standi in the case at bar since the issues raised in this petition are averred to be in breach of the fair diffusion of the countrys natural resources and the constitutional right of a citizen to information which have been declared to be matters of transcendental public importance. Moreover, the pleadings especially those of respondents readily reveal that public funds have been indirectly utilized in the Project by means of Smokey Mountain Project Participation Certificates (SMPPCs) bought by some government agencies.

Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.

Whether petitioners direct recourse to this Court was proper

Respondents are one in asserting that petitioner circumvents the principle of hierarchy of courts in his petition. Judicial hierarchy was made clear in the case of People v. Cuaresma, thus:

There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level (inferior) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Courts original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon the Courts time and attention which are better 44

32

devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Courts docket.45 x x x The OSG claims that the jurisdiction over petitions for prohibition and mandamus is concurrent with other lower courts like the Regional Trial Courts and the Court of Appeals. Respondent NHA argues that the instant petition is misfiled because it does not introduce special and important reasons or exceptional and compelling circumstances to warrant direct recourse to this Court and that the lower courts are more equipped for factual issues since this Court is not a trier of facts. Respondents RBI and RHI question the filing of the petition as this Court should not be unduly burdened with repetitions, invocation of jurisdiction over constitutional questions it had previously resolved and settled.

In the light of existing jurisprudence, we find paucity of merit in respondents postulation.

While direct recourse to this Court is generally frowned upon and discouraged, we have however ruled in Santiago v. Vasquez that such resort to us may be allowed in certain situations, wherein this Court ruled that petitions for certiorari, prohibition, or mandamus, though cognizable by other courts, may directly be filed with us if the redress desired cannot be obtained in the appropriate courts or where exceptional compelling circumstances justify availment of a remedy within and calling for the exercise of [this Courts] primary jurisdiction.46

45

46

33

The instant petition challenges the constitutionality and legality of the SMDRP involving several hectares of government land and hundreds of millions of funds of several government agencies. Moreover, serious constitutional challenges are made on the different aspects of the Project which allegedly affect the right of Filipinos to the distribution of natural resources in the country and the right to information of a citizenmatters which have been considered to be of extraordinary significance and grave consequence to the public in general. These concerns in the instant action compel us to turn a blind eye to the judicial structure meant to provide an orderly dispensation of justice and consider the instant petition as a justified deviation from an established precept.

Core factual matters undisputed

Respondents next challenge the projected review by this Court of the alleged factual issues intertwined in the issues propounded by petitioner. They listed a copious number of questions seemingly factual in nature which would make this Court a trier of facts. 47

We find the position of respondents bereft of merit.

For one, we already gave due course to the instant petition in our January 18, 2005 Resolution.48 In said issuance, the parties were required to make clear and concise statements of established facts upon which our decision will be based. 47

48

34

Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the facts needed to decide the instant petition are well established from the admissions of the parties in their pleadings 49 and those derived from the documents appended to said submissions. Indeed, the core facts which are the subject matter of the numerous issues raised in this petition are undisputed.

Now we will tackle the issues that prop up the instant petition.

Since petitioner has cited our decision in PEA as basis for his postulations in a number of issues, we first resolve the queryis PEA applicable to the case at bar?

A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.

The Court finds that PEA is not a binding precedent to the instant petition because the facts in said case are substantially different from the facts and circumstances in the case at bar, thus:

(1)

The reclamation project in PEA was undertaken through a JVA entered into

between PEA and AMARI. The reclamation project in the instant NHA case was undertaken 49

35

by the NHA, a national government agency in consultation with PEA and with the approval of two Philippine Presidents;

(2)

In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and

reclaim submerged areas without public bidding on April 25, 1995. In the instant NHA case, the NHA and RBI executed a JVA after RBI was declared the winning bidder on August 31, 1992 as the JVA partner of the NHA in the SMDRP after compliance with the requisite public bidding.

(3)

In PEA, there was no law or presidential proclamation classifying the lands to

be reclaimed as alienable and disposal lands of public domain. In this RBI case, MO 415 of former President Aquino and Proclamation No. 39 of then President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed lands as alienable and disposable;

(4)

In PEA, the Chavez petition was filed before the amended JVA was executed

by PEA and AMARI. In this NHA case, the JVA and subsequent amendments were already substantially implemented. Subsequently, the Project was terminated through a MOA signed on August 27, 2003. Almost one year later on August 5, 2004, the Chavez petition was filed;

(5)

In PEA, AMARI was considered to be in bad faith as it signed the amended JVA

after the Chavez petition was filed with the Court and after Senate Committee Report No. 560 was issued finding that the subject lands are inalienable lands of public domain. In the

36

instant petition, RBI and other respondents are considered to have signed the agreements in good faith as the Project was terminated even before the Chavez petition was filed;

(6)

The PEA-AMARI JVA was executed as a result of direct negotiation between

the parties and not in accordance with the BOT Law. The NHA-RBI JVA and subsequent amendments constitute a BOT contract governed by the BOT Law; and

(7)

In PEA, the lands to be reclaimed or already reclaimed were transferred to

PEA, a government entity tasked to dispose of public lands under Executive Order No. (EO) 525.50 In the NHA case, the reclaimed lands were transferred to NHA, a government entity NOT tasked to dispose of public land and therefore said alienable lands were converted to patrimonial lands upon their transfer to NHA.51

Thus the PEA Decision52 cannot be considered an authority or precedent to the instant case. The principle of stare decisis53 has no application to the different factual setting of the instant case.

50

51

52

53

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We will now dwell on the substantive issues raised by petitioner. After a perusal of the grounds raised in this petition, we find that most of these issues are moored on our PEA Decision which, as earlier discussed, has no application to the instant petition. For this reason alone, the petition can already be rejected. Nevertheless, on the premise of the applicability of said decision to the case at bar, we will proceed to resolve said issues.

First Issue: Whether respondents NHA and RBI have been granted the power and authority to reclaim lands of the public domain as this power is vested exclusively in PEA as claimed by petitioner

Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim foreshore and submerged land because they were not given any power and authority to reclaim lands of the public domain as this power was delegated by law to PEA.

Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public domain, the Public Estates Authority (PEA), petitioner claims, is the primary authority for the reclamation of all foreshore and submerged lands of public domain, and relies on PEA where this Court held:

Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. The same section also states that [A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; x x 38

x. Thus, under EO No. 525, in relation to PD No. 3-A and PD No. 1084, PEA became the primary implementing agency of the National Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity to undertake the reclamation of lands and ensure their maximum utilization in promoting public welfare and interests. Since large portions of these reclaimed lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for public service.54

In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by PEA or through a contract executed by PEA with another person or entity but by the NHA through an agreement with respondent RBI. Therefore, he concludes that the reclamation is null and void.

Petitioners contention has no merit.

EO 525 reads:

Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity authorized under its charter shall be undertaken in consultation with the PEA upon approval of the President. (Emphasis supplied.) 54

39

The aforequoted provision points to three (3) requisites for a legal and valid reclamation project, viz:

(1)

approval by the President;

(2)

favorable recommendation of PEA; and

(3)

undertaken by any of the following:

a.

by PEA

b.

by any person or entity pursuant to a contract it executed with PEA

c.

by the National Government agency or entity authorized under its charter to reclaim lands subject to consultation with PEA

Without doubt, PEA under EO 525 was designated as the agency primarily responsible for integrating, directing, and coordinating all reclamation projects. Primarily means mainly, principally, mostly, generally.

Thus, not all reclamation projects fall

under PEAs authority of supervision, integration, and coordination. The very charter of PEA, PD 1084,55 does not mention that PEA has the exclusive and sole power and authority to reclaim lands of public domain. EO 525 even reveals the exceptionreclamation projects by a national government agency or entity authorized by its charter to reclaim land. One 55

40

example is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and develop submerged areas for port related purposes. Under its charter, PD 857, PPA has the power to reclaim, excavate, enclose or raise any of the lands vested in it.

Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily responsible for integrating, directing and coordinating reclamation projects, such authority is NOT exclusive and such power to reclaim may be granted or delegated to another government agency or entity or may even be undertaken by the National Government itself, PEA being only an agency and a part of the National Government.

Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP. After a scrutiny of the facts culled from the records, we find that the project met all the three (3) requirements, thus:

1.

There was ample approval by the President of the Philippines; as a matter of

fact, two Philippine Presidents approved the same, namely: Presidents Aquino and Ramos. President Aquino sanctioned the reclamation of both the SMDRP housing and commercialindustrial sites through MO 415 (s. 1992) which approved the SMDRP under Sec. 1 and directed NHA x x x to implement the Smokey Mountain Development Plan and Reclamation of the Area across R-10 through a private sector joint venture scheme at the least cost to government under Section 3.

For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly reserved the Smokey Mountain Area and the Reclamation Area for a housing project and related commercial/industrial development. 41

Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the increase of the Reclamation Area from 40 hectares of foreshore and submerged land of the Manila Bay to 79 hectares. It speaks of the reclamation of 400,000 square meters, more or less, of the foreshore and submerged lands of Manila Bay adjoining R-10 as an enabling component of the SMDRP.

As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975 square meters of Smokey Mountain, Special Patent No. 3592 covering 401,485 square meters of reclaimed land, and Special Patent No. 3598 covering another 390,000 square meters of reclaimed land were issued by the DENR.

Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.

2.

The requisite favorable endorsement of the reclamation phase was impliedly

granted by PEA. President Aquino saw to it that there was coordination of the project with PEA by designating its general manager as member of the EXECOM tasked to supervise the project implementation. The assignment was made in Sec. 2 of MO 415 which provides:

Section 2. An Executive Committee is hereby created to oversee the implementation of the Plan, chaired by the NCR-CORD, with the heads of the following agencies as members: The National Housing Authority, the City of Manila, the Department of Public Works and Highways, the Public Estates Authority, the Philippine Ports Authority, the Department of Environment and Natural Resources and the Development Bank of the Philippines. (Emphasis supplied.) 42

The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated as part of the recommendations of the EXECOM created under MO 415. While there was no specific recommendation on the SMDRP emanating solely from PEA, we find that the approbation of the Project and the land reclamation as an essential component by the EXECOM of which PEA is a member, and its submission of the SMDRP and the agreements on the Project to the President for approval amply met the second requirement of EO 525.

3.

The third element was also presentthe reclamation was undertaken either by

PEA or any person or entity under contract with PEA or by the National Government agency or entity authorized under its charter to reclaim lands subject to consultation with PEA. It cannot be disputed that the reclamation phase was not done by PEA or any person or entity under contract with PEA. However, the reclamation was implemented by the NHA, a national government agency whose authority to reclaim lands under consultation with PEA is derived from its charterPD 727 and other pertinent lawsRA 7279 56 and RA 6957 as amended by RA 7718.

While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had more than enough authority to do so under existing laws. While PD 757, the charter of NHA, does not explicitly mention reclamation in any of the listed powers of the agency, we rule that the NHA has an implied power to reclaim land as this is vital or incidental to effectively, logically, and successfully implement an urban land reform and housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution. 56

43

Basic in administrative law is the doctrine that a government agency or office has express and implied powers based on its charter and other pertinent statutes. Express powers are those powers granted, allocated, and delegated to a government agency or office by express provisions of law. On the other hand, implied powers are those that can be inferred or are implicit in the wordings of the law 57 or conferred by necessary or fair implication in the enabling act. 58 In Angara v. Electoral Commission, the Court clarified and stressed that when a general grant of power is conferred or duty enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred by necessary implication. 59 It was also explicated that when the statute does not specify the particular method to be followed or used by a government agency in the exercise of the power vested in it by law, said agency has the authority to adopt any reasonable method to carry out its functions.60

The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA 6957, and PD 3-A,61 viz:

57

58

59

60

61

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1.

NHAs power to reclaim derived from PD 757 provisions:

a.

Sec. 3 of PD 757 implies that reclamation may be resorted to in order to

attain the goals of NHA:

Section 3. Progress and Objectives. The Authority shall have the following purposes and objectives: xxxx b)

To undertake housing, development, resettlement or other activities as would enhance the provision of housing to every Filipino;

c)

To harness and promote private participation in housing ventures in terms of capital expenditures, land, expertise, financing and other facilities for the sustained growth of the housing industry. (Emphasis supplied.)

Land reclamation is an integral part of the development of resources for some of the housing requirements of the NHA. Private participation in housing projects may also take the form of land reclamation.

b.

Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo

Foreshore Development Authority (TFDA), has the power to reclaim, thus:

Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing Corporation (PHHC), the Presidential Assistant on Housing Resettlement Agency (PAHRA), the Tondo Foreshore Development Authority (TFDA), the Central Institute for the Training and 45

Relocation of Urban Squatters (CITRUS), the Presidential Committee for Housing and Urban Resettlement (PRECHUR), Sapang Palay Development Committee, Inter-Agency Task Force to Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all other existing government housing and resettlement agencies, task forces and ad-hoc committees, are hereby dissolved. Their powers and functions, balance of appropriations, records, assets, rights, and choses in action, are transferred to, vested in, and assumed by the Authority. x x x (Emphasis supplied.)

PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers, and functions. Sec. 2 provides:

Section 2. Objectives and Purposes. The Authority shall have the following purposes and objectives: a) To undertake all manner of activity, business or development projects for the establishment of harmonious, comprehensive, integrated and healthy living community in the Tondo Foreshoreland and its resettlement site; b) To undertake and promote the physical and socio-economic amelioration of the Tondo Foreshore residents in particular and the nation in general (Emphasis supplied.)

The powers and functions are contained in Sec. 3, to wit:

a) To develop and implement comprehensive and integrated urban renewal programs for the Tondo Foreshore and Dagat-dagatan lagoon and/or any other additional/alternative resettlement site and to formulate and enforce general and specific policies for its development which shall ensure reasonable degree of compliance with environmental standards.

46

b) To prescribe guidelines and standards for the reservation, conservation and utilization of public lands covering the Tondo Foreshore land and its resettlement sites; c) To construct, acquire, own, lease, operate and maintain infrastructure facilities, housing complex, sites and services; d) To determine, regulate and supervise the establishment and operation of housing, sites, services and commercial and industrial complexes and any other enterprises to be constructed or established within the Tondo Foreshore and its resettlement sites; e) To undertake and develop, by itself or through joint ventures with other public or private entities, all or any of the different phases of development of the Tondo Foreshore land and its resettlement sites; f) To acquire and own property, property-rights and interests, and encumber or otherwise dispose of the same as it may deem appropriate (Emphasis supplied.)

From the foregoing provisions, it is readily apparent that the TFDA has the explicit power to develop public lands covering the Tondo foreshore land and any other additional and alternative resettlement sites under letter b, Sec. 3 of PD 570. Since the additional and/or alternative sites adjacent to Tondo foreshore land cover foreshore and submerged areas, the reclamation of said areas is necessary in order to convert them into a comprehensive and integrated resettlement housing project for the slum dwellers and squatters of Tondo. Since the powers of TFDA were assumed by the NHA, then the NHA has the power to reclaim lands in the Tondo foreshore area which covers the 79-hectare land subject of Proclamations Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.

c.

Sec. 6 of PD 757 delineates the functions and powers of the NHA which

embrace the authority to reclaim land, thus:

47

Sec. 6. Powers and functions of the Authority.The Authority shall have the following powers and functions to be exercised by the Board in accordance with its established national human settlements plan prepared by the Human Settlements Commission: (a) Develop and implement the comprehensive and integrated housing program provided for in Section hereof; xxxx (c) Prescribe guidelines and standards for the reservation, conservation and utilization of public lands identified for housing and resettlement; xxxx (e) Develop and undertake housing development and/or resettlement projects through joint ventures or other arrangements with public and private entities; xxxx (k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable; (l) Acquire property rights and interests and encumber or otherwise dispose the same as it may deem appropriate; xxxx (s) Perform such other acts not inconsistent with this Decree, as may be necessary to effect the policies and objectives herein declared. (Emphasis supplied.)

The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It can make use of public lands under letter (c) of Sec. 6 which includes reclaimed land as site for its comprehensive and integrated housing projects under letter (a) which can be undertaken through joint ventures with private entities under letter (e). Taken together with letter (s) which authorizes NHA to perform such other activities necessary to effect the policies and objectives of PD 757, it is safe to conclude that the NHAs power to reclaim 48

lands is a power that is implied from the exercise of its explicit powers under Sec. 6 in order to effectively accomplish its policies and objectives under Sec. 3 of its charter. Thus, the reclamation of land is an indispensable component for the development and construction of the SMDRP housing facilities.

2.

NHAs implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHAs mandate to [d]evelop and undertake housing development and/or resettlement projects through joint ventures or other arrangements with public and private entities.

The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and 29 of RA 7279, which provide:

Section 12. Disposition of Lands for Socialized Housing.The National Housing Authority, with respect to lands belonging to the National Government, and the local government units with respect to other lands within their respective localities, shall coordinate with each other to formulate and make available various alternative schemes for the disposition of lands to the beneficiaries of the Program. These schemes shall not be limited to those involving transfer of ownership in fee simple but shall include lease, with option to purchase, usufruct or such other variations as the local government units or the National Housing Authority may deem most expedient in carrying out the purposes of this Act. xxxx

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Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local government units, in coordination with the National Housing Authority, shall implement the relocation and resettlement of persons living in danger areas such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public places as sidewalks, roads, parks, and playgrounds. The local government unit, in coordination with the National Housing Authority, shall provide relocation or resettlement sites with basic services and facilities and access to employment and livelihood opportunities sufficient to meet the basic needs of the affected families. (Emphasis supplied.)

Lands belonging to the National Government include foreshore and submerged lands which can be reclaimed to undertake housing development and resettlement projects.

3.

MO 415 explains the undertaking of the NHA in SMDRP:

WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to conduct feasibility studies and develop low-cost housing projects at the dumpsites of Metro Manila; WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to convert the Smokey Mountain dumpsite into a habitable housing project inclusive of the reclamation area across R-10 as enabling component of the Project; WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of Manila and other government agencies and instrumentalities to ensure effective and efficient implementation; WHEREAS, the government encourages private sector initiative in the implementation of its projects. (Emphasis supplied.)

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Proceeding from these whereas clauses, it is unequivocal that reclamation of land in the Smokey Mountain area is an essential and vital power of the NHA to effectively implement its avowed goal of developing low-cost housing units at the Smokey Mountain dumpsites. The interpretation made by no less than the President of the Philippines as Chief of the Executive Branch, of which the NHA is a part, must necessarily command respect and much weight and credit.

4.

RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and

EO 525.

Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is unequivocal that all government infrastructure agencies like the NHA can undertake infrastructure or development projects using the contractual arrangements prescribed by the law, and land reclamation is one of the projects that can be resorted to in the BOT project implementation under the February 10, 1992 Joint Resolution No. 3 of the 8th Congress.

From the foregoing considerations, we find that the NHA has ample implied authority to undertake reclamation projects.

Even without an implied power to reclaim lands under NHAs charter, we rule that the authority granted to NHA, a national government agency, by the President under PD 3-A reinforced by EO 525 is more than sufficient statutory basis for the reclamation of lands under the SMDRP.

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PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers on September 23, 1972. It provided that [t]he provisions of any law to the contrary notwithstanding, the reclamation of areas, underwater, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under the proper contract. It repealed, in effect, RA 1899 which previously delegated the right to reclaim lands to municipalities and chartered cities and revested it to the National Government. 62 Under PD 3-A, national government can only mean the Executive Branch headed by the President. It cannot refer to Congress as it was dissolved and abolished at the time of the issuance of PD 3-A on September 23, 1972. Moreover, the Executive Branch is the only implementing arm in the government with the equipment, manpower, expertise, and capability by the very nature of its assigned powers and functions to undertake reclamation projects. Thus, under PD 3-A, the Executive Branch through the President can implement reclamation of lands through any of its departments, agencies, or offices.

Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA, which was granted, among others, the power to reclaim land, including foreshore and submerged areas by dredging, filling or other means or to acquire reclaimed lands. The PEAs power to reclaim is not however exclusive as can be gleaned from its charter, as the President retained his power under PD 3-A to designate another agency to reclaim lands.

On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for integrating, directing, and coordinating reclamation projects for and on behalf of the National Government although other national government agencies can be designated by the President to reclaim lands in coordination with the PEA. Despite the issuance of EO 525, PD 3-A remained valid and subsisting. Thus, the National Government through the President still retained the power and control over all reclamation projects in the country. 62

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The power of the National Government through the President over reclamation of areas, that is, underwater whether foreshore or inland, was made clear in EO 543 63 which took effect on June 24, 2006. Under EO 543, PEA was renamed the Philippine Reclamation Authority (PRA) and was granted the authority to approve reclamation projects, a power previously reposed in the President under EO 525. EO 543 reads:

Section 1. The power of the President to approve reclamation projects is hereby delegated to the Philippine Reclamation Authority [formerly PEA], through its governing board, subject to compliance with existing laws and rules and subject to the condition that reclamation contracts to be executed with any person or entity go through public bidding. Section 2. Nothing in the Order shall be construed as diminishing the Presidents authority to modify, amend or nullify PRAs action. Section 3. All executive issuances inconsistent with this Executive Order are hereby repealed or amended accordingly. (Emphasis supplied.)

Sec. 2 of EO 543 strengthened the power of control and supervision of the President over reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now PRA).

From the foregoing issuances, we conclude that the Presidents delegation to NHA, a national government agency, to reclaim lands under the SMDRP, is legal and valid, firmly anchored on PD 3-A buttressed by EO 525 notwithstanding the absence of any specific grant of power under its charter, PD 757.

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Second Issue: Whether respondents NHA and RBI were given the power and authority by DENR to reclaim foreshore and submerged lands

Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim, they were not authorized to do so by the DENR. Again, reliance is made on our ruling in PEA where it was held that the DENRs authority is necessary in order for the government to validly reclaim foreshore and submerged lands. In PEA, we expounded in this manner:

As manager, conservator and overseer of the natural resources of the State, DENR exercises supervision and control over alienable and disposable public lands. DENR also exercises exclusive jurisdiction on the management and disposition of all lands of the public domain. Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the country. DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No. 141.

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In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.64

Despite our finding that PEA is not a precedent to the case at bar, we find after all that under existing laws, the NHA is still required to procure DENRs authorization before a reclamation project in Manila Bay or in any part of the Philippines can be undertaken. The requirement applies to PEA, NHA, or any other government agency or office granted with such power under the law.

Notwithstanding the need for DENR permission, we nevertheless find petitioners position bereft of merit.

The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for the following reasons:

1.

Sec. 17, Art. VII of the Constitution provides that the President shall have

control of all executive departments, bureaus and offices. The President is assigned the task of seeing to it that all laws are faithfully executed. Control, in administrative law, means the power of an officer to alter, modify, nullify or set aside what a subordinate officer has done

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in the performance of his duties and to substitute the judgment of the former for that of the latter.65

As such, the President can exercise executive power motu proprio and can supplant the act or decision of a subordinate with the Presidents own. The DENR is a department in the executive branch under the President, and it is only an alter ego of the latter. Ordinarily the proposed action and the staff work are initially done by a department like the DENR and then submitted to the President for approval. However, there is nothing infirm or unconstitutional if the President decides on the implementation of a certain project or activity and requires said department to implement it. Such is a presidential prerogative as long as it involves the department or office authorized by law to supervise or execute the Project. Thus, as in this case, when the President approved and ordered the development of a housing project with the corresponding reclamation work, making DENR a member of the committee tasked to implement the project, the required authorization from the DENR to reclaim land can be deemed satisfied. It cannot be disputed that the ultimate power over alienable and disposable public lands is reposed in the President of the Philippines and not the DENR Secretary. To still require a DENR authorization on the Smokey Mountain when the President has already authorized and ordered the implementation of the Project would be a derogation of the powers of the President as the head of the executive branch. Otherwise, any department head can defy or oppose the implementation of a project approved by the head of the executive branch, which is patently illegal and unconstitutional.

In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the executive department, the President may act directly or order the said department to undertake an activity, thus:

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[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII of the Constitution specifies [her] power as Chief executive departments, bureaus and offices. [She] shall ensure that the laws be faithfully executed. As Chief Executive, President Arroyo holds the steering wheel that controls the course of her government. She lays down policies in the execution of her plans and programs. Whatever policy she chooses, she has her subordinates to implement them. In short, she has the power of control. Whenever a specific function is entrusted by law or regulation to her subordinate, she may act directly or merely direct the performance of a duty x x x. Such act is well within the prerogative of her office (emphasis supplied).66

Moreover, the power to order the reclamation of lands of public domain is reposed first in the Philippine President. The Revised Administrative Code of 1987 grants authority to the President to reserve lands of public domain for settlement for any specific purpose, thus:

Section 14. Power to Reserve Lands of the Public and Private Domain of the Government.(1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation. (Emphasis supplied.)

President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and issued MO 415 authorizing the implementation of the Smokey Mountain Development Project plus the reclamation of the area across R-10. Then President Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and the 40-hectare 66

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commercial/industrial area, and Proclamation No. 465 and MO 415 increasing the area of foreshore and submerged lands of Manila Bay to be reclaimed from 40 to 79 hectares. Having supervision and control over the DENR, both Presidents directly assumed and exercised the power granted by the Revised Administrative Code to the DENR Secretary to authorize the NHA to reclaim said lands. What can be done indirectly by the DENR can be done directly by the President. It would be absurd if the power of the President cannot be exercised simply because the head of a department in the executive branch has not acted favorably on a project already approved by the President. If such arrangement is allowed then the department head will become more powerful than the President.

2.

Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM

chaired by the NCR-CORD to oversee the implementation of the Project. The EXECOM was the one which recommended approval of the project plan and the joint venture agreements. Clearly, the DENR retained its power of supervision and control over the laws affected by the Project since it was tasked to facilitate the titling of the Smokey Mountain and of the area to be reclaimed, which shows that it had tacitly given its authority to the NHA to undertake the reclamation.

3.

Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and

3592 while then Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced the areas covered by the reclamation. These patents conveyed the lands to be reclaimed to the NHA and granted to said agency the administration and disposition of said lands for subdivision and disposition to qualified beneficiaries and for development for mix land use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port related activities. Such grant of authority to administer and dispose of lands of public domain under the SMDRP is of course subject to the powers of the EXECOM of SMDRP, of which the DENR is a member.

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4.

The issuance of ECCs by the DENR for SMDRP is but an exercise of its power

of supervision and control over the lands of public domain covered by the Project.

Based on these reasons, it is clear that the DENR, through its acts and issuances, has ratified and confirmed the reclamation of the subject lands for the purposes laid down in Proclamations Nos. 39 and 465.

Third Issue: Whether respondent RBI can acquire reclaimed foreshore and submerged lands considered as inalienable and outside the commerce of man

Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and submerged areas as these are inalienable public lands beyond the commerce of man based on Art. 1409 of the Civil Code which provides:

Article 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; xxxx (7)

Those expressly prohibited or declared void by law. 59

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and they cannot be alienated except for alienable agricultural lands of the public domain. One of the States natural resources are lands of public domain which include reclaimed lands. Petitioner contends that for these reclaimed lands to be alienable, there must be a law or presidential proclamation officially classifying these reclaimed lands as alienable and disposable and open to disposition or concession. Absent such law or proclamation, the reclaimed lands cannot be the enabling component or consideration to be paid to RBI as these are beyond the commerce of man.

We are not convinced of petitioners postulation.

The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the State for the following reasons, viz:

First, there were three (3) presidential proclamations classifying the reclaimed lands across R-10 as alienable or disposable hence open to disposition or concession, to wit:

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(1)

MO 415 issued by President Aquino, of which Sec. 4 states that [t]he land

covered by the Smokey Mountain Dumpsite is hereby conveyed to the National Housing Authority as well as the area to be reclaimed across R-10.

The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the declaration that said lands are alienable and disposable. Otherwise, the NHA cannot effectively use them in its housing and resettlement project.

(2)

Proclamation No. 39 issued by then President Ramos by which the reclaimed

lands were conveyed to NHA for subdivision and disposition to qualified beneficiaries and for development into a mixed land use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port-related activities. Said directive carries with it the pronouncement that said lands have been transformed to alienable and disposable lands. Otherwise, there is no legal way to convey it to the beneficiaries.

(3)

Proclamation No. 465 likewise issued by President Ramos enlarged the

reclaimed area to 79 hectares to be developed and disposed of in the implementation of the SMDRP. The authority put into the hands of the NHA to dispose of the reclaimed lands tacitly sustains the conversion to alienable and disposable lands.

Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on Proclamations Nos. 39 and 465 issued by President Ramos, without doubt, classified the reclaimed areas as alienable and disposable.

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Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the lands to be reclaimed are classified as alienable and disposable. We find however that such conclusion is derived and implicit from the authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries.

The query is, when did the declaration take effect? It did so only after the special patents covering the reclaimed areas were issued. It is only on such date that the reclaimed lands became alienable and disposable lands of the public domain. This is in line with the ruling in PEA where said issue was clarified and stressed:

PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties.67 (Emphasis supplied.)

Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the requirement in PEA that [t]here must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession (emphasis supplied).68 67

68 62

Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find that RA 6957 as amended by RA 7718 provides ample authority for the classification of reclaimed land in the SMDRP for the repayment scheme of the BOT project as alienable and disposable lands of public domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:

For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the build-operate-and transfer arrangement or any of its variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements with respect to the ownership of the land. (Emphasis supplied.)

While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands that shall serve as payment to the project proponent have become alienable and disposable lands and opened for disposition; nonetheless, this conclusion is necessarily implied, for how else can the land be used as the enabling component for the Project if such classification is not deemed made?

It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not convert alienable lands of public domain into private or patrimonial lands. We ruled in PEA that alienable lands of public domain must be transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands (emphasis supplied).69 To

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lands reclaimed by PEA or through a contract with a private person or entity, such reclaimed lands still remain alienable lands of public domain which can be transferred only to Filipino citizens but not to a private corporation. This is because PEA under PD 1084 and EO 525 is tasked to hold and dispose of alienable lands of public domain and it is only when it is transferred to Filipino citizens that it becomes patrimonial property. On the other hand, the NHA is a government agency not tasked to dispose of public lands under its charterThe Revised Administrative Code of 1987. The NHA is an end-user agency authorized by law to administer and dispose of reclaimed lands. The moment titles over reclaimed lands based on the special patents are transferred to the NHA by the Register of Deeds, they are automatically converted to patrimonial properties of the State which can be sold to Filipino citizens and private corporations, 60% of which are owned by Filipinos. The reason is obvious: if the reclaimed land is not converted to patrimonial land once transferred to NHA, then it would be useless to transfer it to the NHA since it cannot legally transfer or alienate lands of public domain. More importantly, it cannot attain its avowed purposes and goals since it can only transfer patrimonial lands to qualified beneficiaries and prospective buyers to raise funds for the SMDRP.

From the foregoing considerations, we find that the 79-hectare reclaimed land has been declared alienable and disposable land of the public domain; and in the hands of NHA, it has been reclassified as patrimonial property.

Petitioner, however, contends that the reclaimed lands were inexistent prior to the three (3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the declaration that such areas are alienable and disposable land of the public domain, citing PEA, has no legal basis.

Petitioners contention is not well-taken. 64

Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into consideration the special patents issued by the DENR demonstrates the inherent weakness of his proposition. As was ruled in PEA cited by petitioner himself, PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering the Freedom Islands is equivalent to an official proclamation classifying the Freedom islands as alienable or disposable lands of public domain. In a similar vein, the combined and collective effect of Proclamations Nos. 39 and 465 with Special Patents Nos. 3592 and 3598 is tantamount to and can be considered to be an official declaration that the reclaimed lots are alienable or disposable lands of the public domain.

The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which evidence transfer of ownership of reclaimed lands to the NHA, are official acts of the DENR Secretary in the exercise of his power of supervision and control over alienable and disposable public lands and his exclusive jurisdiction over the management and disposition of all lands of public domain under the Revised Administrative Code of 1987. Special Patent No. 3592 speaks of the transfer of Lots 1 and 2, and RI-003901-000012-D with an area of 401,485 square meters based on the survey and technical description approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued in favor of the NHA transferring to said agency a tract of land described in Plan RL-00-000013 with an area of 390,000 square meters based on the survey and technical descriptions approved by the Bureau of Lands.

The conduct of the survey, the preparation of the survey plan, the computation of the technical description, and the processing and preparation of the special patent are matters within the technical area of expertise of administrative agencies like the DENR and the Land Management Bureau and are generally accorded not only respect but at times even 65

finality.70 Preparation of special patents calls for technical examination and a specialized review of calculations and specific details which the courts are ill-equipped to undertake; hence, the latter defer to the administrative agency which is trained and knowledgeable on such matters.71

Subsequently, the special patents in the name of the NHA were submitted to the Register of Deeds of the City of Manila for registration, and corresponding certificates of titles over the reclaimed lots were issued based on said special patents. The issuance of certificates of titles in NHAs name automatically converts the reclaimed lands to patrimonial properties of the NHA. Otherwise, the lots would not be of use to the NHAs housing projects or as payment to the BOT contractor as the enabling component of the BOT contract. The laws of the land have to be applied and interpreted depending on the changing conditions and times. Tempora mutantur et legis mutantur in illis (time changes and laws change with it). One such law that should be treated differently is the BOT Law (RA 6957) which brought about a novel way of implementing government contracts by allowing reclaimed land as part or full payment to the contractor of a government project to satisfy the huge financial requirements of the undertaking. The NHA holds the lands covered by Special Patents Nos. 3592 and 3598 solely for the purpose of the SMDRP undertaken by authority of the BOT Law and for disposition in accordance with said special law. The lands become alienable and disposable lands of public domain upon issuance of the special patents and become patrimonial properties of the Government from the time the titles are issued to the NHA. As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:

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It is true that, once a patent is registered and the corresponding certificate of title is issued, the land covered by them ceases to be part of the public domain and becomes private property, and the Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of one year from the date of issuance of such patent.72

The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,73 Heirs of Carlos Alcaraz v. Republic,74 and the more recent case of Doris Chiongbian-Oliva v. Republic of the Philippines.75 Thus, the 79-hectare reclaimed land became patrimonial property after the issuance of certificates of titles to the NHA based on Special Patents Nos. 3592 and 3598.

One last point. The ruling in PEA cannot even be applied retroactively to the lots covered by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-hectare reclaimed land). The reclamation of the land under SMDRP was completed in August 1996 while the PEA decision was rendered on July 9, 2002. In the meantime, subdivided lots forming parts of the reclaimed land were already sold to private corporations for value and separate titles issued to the buyers. The Project was terminated through a Memorandum of Agreement signed on August 27, 2003. The PEA decision became final through the November 11, 2003 Resolution. It is a settled precept that decisions of the Supreme Court

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can only be applied prospectively as they may prejudice vested rights if applied retroactively.

In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective application of its decisions based on considerations of equity and fair play, thus: At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the Civil Code judicial decisions applying or interpreting the laws of the Constitution shall form a part of the legal system of the Philippines. But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that laws shall have no retroactive effect unless the contrary is provided. This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional. The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] x x x when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and acted on the faith thereof.76

Fourth Issue: Whether respondent RBI can acquire reclaimed lands when there was no declaration that said lands are no longer needed for public use

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Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable lands of the public domain, still, the reclamation is flawed for there was never any declaration that said lands are no longer needed for public use.

We are not moved by petitioners submission.

Even if it is conceded that there was no explicit declaration that the lands are no longer needed for public use or public service, there was however an implicit executive declaration that the reclaimed areas R-10 are not necessary anymore for public use or public service when President Aquino through MO 415 conveyed the same to the NHA partly for housing project and related commercial/industrial development intended for disposition to and enjoyment of certain beneficiaries and not the public in general and partly as enabling component to finance the project.

President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed lands of the Smokey Mountain project are no longer required for public use or service, thus:

These parcels of land of public domain are hereby placed under the administration and disposition of the National Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port related activities. (Emphasis supplied.)

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While numerical count of the persons to be benefited is not the determinant whether the property is to be devoted to public use, the declaration in Proclamation No. 39 undeniably identifies only particular individuals as beneficiaries to whom the reclaimed lands can be sold, namelythe Smokey Mountain dwellers. The rest of the Filipinos are not qualified; hence, said lands are no longer essential for the use of the public in general.

In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing the area to be reclaimed from forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are undoubtedly set aside for the beneficiaries of SMDRP and not the publicdeclaring the power of NHA to dispose of land to be reclaimed, thus: The authority to administer, develop, or dispose lands identified and reserved by this Proclamation and Proclamation No. 39 (s.1992), in accordance with the SMDRP, as enhance, is vested with the NHA, subject to the provisions of existing laws. (Emphasis supplied.)

MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the reclaimed areas for public use or service as the Project cannot be successfully implemented without the withdrawal of said lands from public use or service. Certainly, the devotion of the reclaimed land to public use or service conflicts with the intended use of the Smokey Mountain areas for housing and employment of the Smokey Mountain scavengers and for financing the Project because the latter cannot be accomplished without abandoning the public use of the subject land. Without doubt, the presidential proclamations on SMDRP together with the issuance of the special patents had effectively removed the reclaimed lands from public use.

More decisive and not in so many words is the ruling in PEA which we earlier cited, that PD No. 1085 and President Aquinos issuance of a land patent also constitute a 70

declaration that the Freedom Islands are no longer needed for public service. Consequently, we ruled in that case that the reclaimed lands are open to disposition or concession to qualified parties.77

In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have classified the reclaimed lands as alienable and disposable and open to disposition or concession as they would be devoted to units for Smokey Mountain beneficiaries. Hence, said lands are no longer intended for public use or service and shall form part of the patrimonial properties of the State under Art. 422 of the Civil Code. 78 As discussed a priori, the lands were classified as patrimonial properties of the NHA ready for disposition when the titles were registered in its name by the Register of Deeds.

Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure project are necessarily reclassified as alienable and disposable lands under the BOT Law; otherwise, absurd and illogical consequences would naturally result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor since there will be no consideration for its contractual obligations. Since reclaimed land will be conveyed to the contractor pursuant to the BOT Law, then there is an implied declaration that such land is no longer intended for public use or public service and, hence, considered patrimonial property of the State.

Fifth Issue: Whether there is a law authorizing sale of 77

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reclaimed lands

Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no law authorizing their sale. He argues that unlike PEA, no legislative authority was granted to the NHA to sell reclaimed land.

This position is misplaced.

Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the NHA is not empowered by any law to sell reclaimed land, thus:

Section 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation or association authorized to purchase or lease public lands for agricultural purposes. The area of the land so leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease if requested and shall in no case exceed one hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, transfers, made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public interest; but the land so granted donated or transferred to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress; Provided, further, That any person, corporation, association or partnership disqualified from purchasing public land for agricultural purposes under the provisions of this Act, may lease land included under this title suitable for industrial or residential purposes, but the lease granted shall only be valid while such land is used for the purposes referred to. (Emphasis supplied.) 72

Reliance on said provision is incorrect as the same applies only to a province, municipality or branch or subdivision of the Government. The NHA is not a government unit but a government corporation performing governmental and proprietary functions.

In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under the law to other parties, thus:

Section 6. Powers and functions of the Authority. The Authority shall have the following powers and functions to be exercised by the Boards in accordance with the established national human settlements plan prepared by the Human Settlements Commission: xxxx (k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable; (l) Acquire property rights and interests, and encumber or otherwise dispose the same as it may deem appropriate (Emphasis supplied.)

Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber or otherwise dispose of them as it may deem appropriate. The transfer of the reclaimed lands by the National Government to the NHA for housing, commercial, and industrial purposes transformed them into patrimonial lands which are of course owned by the State in its private or proprietary capacity. Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or qualified corporation.

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Sixth Issue: Whether the transfer of reclaimed lands to RBI was done by public bidding

Petitioner also contends that there was no public bidding but an awarding of ownership of said reclaimed lands to RBI. Public bidding, he says, is required under Secs. 63 and 67 of CA 141 which read:

Section 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce for authority to dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of agricultural public land, that the Government will lease or sell, as the case may be, the lots or blocks specified in the advertisement, for the purpose stated in the notice and subject to the conditions specified in this chapter. xxxx Section 67. The lease or sale shall be made through oral bidding; and adjudication shall be made to the highest bidder. However, where an applicant has made improvements on the land by virtue of a permit issued to him by competent authority, the sale or lease shall be made by sealed bidding as prescribed in section twenty-six of this Act, the provisions of which shall be applied whenever applicable. If all or part of the lots remain unleased or unsold, the Director of Lands shall from time to time announce in the Official Gazette or in any other newspapers of general circulation, the lease of sale of those lots, if necessary.

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He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands were conveyed to RBI by negotiated contract and not by public bidding as required by law.

This stand is devoid of merit.

There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture partner in the Smokey Mountain Project. Notices or Invitations to Bid were published in the national dailies on January 23 and 26, 1992 and February 1, 14, 16, and 23, 1992. The bidding proper was done by the Bids and Awards Committee (BAC) on May 18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and DENR opened the bids and evaluated them, resulting in the award of the contract to respondent RBI on October 7, 1992.

On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said JVA was amended and restated into the ARJVA. On August 11, 1994, the ARJVA was again amended. On September 7, 1994, the OP approved the ARJVA and the amendments to the ARJVA. From these factual settings, it cannot be gainsaid that there was full compliance with the laws and regulations governing public biddings involving a right, concession, or property of the government.

Petitioner concedes that he does not question the public bidding on the right to be a joint venture partner of the NHA, but the absence of bidding in the sale of alienable and disposable lands of public domain pursuant to CA 141 as amended.

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Petitioners theory is incorrect.

Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by the Director of Lands of alienable and disposable lands of public domain. This is not present in the case at bar. The lands reclaimed by and conveyed to the NHA are no longer lands of public domain. These lands became proprietary lands or patrimonial properties of the State upon transfer of the titles over the reclaimed lands to the NHA and hence outside the ambit of CA 141. The NHA can therefore legally transfer patrimonial land to RBI or to any other interested qualified buyer without any bidding conducted by the Director of Lands because the NHA, unlike PEA, is a government agency not tasked to sell lands of public domain. Hence, it can only hold patrimonial lands and can dispose of such lands by sale without need of public bidding.

Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding when government property has become unserviceable for any cause or is no longer needed. It appears from the Handbook on Property and Supply Management System, Chapter 6, that reclaimed lands which have become patrimonial properties of the State, whose titles are conveyed to government agencies like the NHA, which it will use for its projects or programs, are not within the ambit of Sec. 79. We quote the determining factors in the Disposal of Unserviceable Property, thus:

Determining Factors in the Disposal of Unserviceable Property Property, which can no longer be repaired or reconditioned; Property whose maintenance costs of repair more than outweigh the benefits and services that will be derived from its continued use;

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Property that has become obsolete or outmoded because of changes in technology; Serviceable property that has been rendered unnecessary due to change in the agencys function or mandate; Unused supplies, materials and spare parts that were procured in excess of requirements; and Unused supplies and materials that [have] become dangerous to use because of long storage or use of which is determined to be hazardous. 79

Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in question are very much needed by the NHA for the Smokey Mountain Project because without it, then the projects will not be successfully implemented. Since the reclaimed lands are not unserviceable properties and are very much needed by NHA, then Sec. 79 of PD 1445 does not apply.

More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed lands transferred to a government agency like the NHA which has entered into a BOT contract with a private firm. The reason is obvious. If the patrimonial property will be subject to public bidding as the only way of disposing of said property, then Sec. 6 of RA 6957 on the repayment scheme is almost impossible or extremely difficult to implement considering the uncertainty of a winning bid during public auction. Moreover, the repayment scheme of a BOT contract may be in the form of non-monetary payment like the grant of a portion or percentage of reclaimed land. Even if the BOT partner participates in the public bidding, there is no assurance that he will win the bid and therefore the payment in kind as agreed to by the parties cannot be performed or the winning bid prize might be below the estimated valuation of the land. The only way to harmonize Sec. 79 of PD 1445 79

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with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT contracts involving patrimonial lands. The law does not intend anything impossible (lex non intendit aliquid impossibile).

Seventh Issue: Whether RBI, being a private corporation, is barred by the Constitution to acquire lands of public domain

Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the 1987 Constitution from acquiring lands of public domain.

Petitioners proposition has no legal mooring for the following reasons:

1.

RA 6957 as amended by RA 7718 explicitly states that a contractor can be

paid a portion as percentage of the reclaimed land subject to the constitutional requirement that only Filipino citizens or corporations with at least 60% Filipino equity can acquire the same. It cannot be denied that RBI is a private corporation, where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is valid and constitutional. 2.

When Proclamations Nos. 39 and 465 were issued, inalienable lands covered

by said proclamations were converted to alienable and disposable lands of public domain. When the titles to the reclaimed lands were transferred to the NHA, said alienable and disposable lands of public domain were automatically classified as lands of the private domain or patrimonial properties of the State because the NHA is an agency NOT tasked to dispose of alienable or disposable lands of public domain. The only way it can transfer the 78

reclaimed land in conjunction with its projects and to attain its goals is when it is automatically converted to patrimonial properties of the State. Being patrimonial or private properties of the State, then it has the power to sell the same to any qualified personunder the Constitution, Filipino citizens as private corporations, 60% of which is owned by Filipino citizens like RBI.

3.

The NHA is an end-user entity such that when alienable lands of public

domain are transferred to said agency, they are automatically classified as patrimonial properties. The NHA is similarly situated as BCDA which was granted the authority to dispose of patrimonial lands of the government under RA 7227. The nature of the property holdings conveyed to BCDA is elucidated and stressed in the May 6, 2003 Resolution in Chavez v. PEA, thus:

BCDA is an entirely different government entity. BCDA is authorized by law to sell specific government lands that have long been declared by presidential proclamations as military reservations for use by the different services of the armed forces under the Department of National Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is general and national. BCDA holds government lands that have been granted to end-user government entitiesthe military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as the government agency primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. x x x Well-settled is the doctrine that public land granted to an enduser government agency for a specific public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or military purposes and reclassifies such lands as patrimonial property for sale to private parties.

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Government owned lands, as long as they are patrimonial property, can be sold to private parties, whether Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial property which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified private corporations.80 (Emphasis supplied.)

The foregoing Resolution makes it clear that the SMDRP was a program adopted by the Government under Republic Act No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes), as amended by RA 7718, which is a special law similar to RA 7227. Moreover, since the implementation was assigned to the NHA, an end-user agency under PD 757 and RA 7279, the reclaimed lands registered under the NHA are automatically classified as patrimonial lands ready for disposition to qualified beneficiaries.

The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private corporation, is disqualified from being a transferee of public land. What was transferred to HCPTI is a 10-hectare lot which is already classified as patrimonial property in the hands of the NHA. HCPTI, being a qualified corporation under the 1987 Constitution, the transfer of the subject lot to it is valid and constitutional.

Eighth Issue: Whether respondents can be compelled to disclose 80

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all information related to the SMDRP

Petitioner asserts his right to information on all documents such as contracts, reports, memoranda, and the like relative to SMDRP.

Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public like the current stage of the Project, the present financial capacity of RBI, the complete list of investors in the asset pool, the exact amount of investments in the asset pool and other similar important information regarding the Project.

He prays that respondents be compelled to disclose all information regarding the SMDRP and furnish him with originals or at least certified true copies of all relevant documents relating to the said project including, but not limited to, the original JVA, ARJVA, AARJVA, and the Asset Pool Agreement.

This relief must be granted.

The right of the Filipino people to information on matters of public concern is enshrined in the 1987 Constitution, thus:

ARTICLE II 81

xxxx SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. ARTICLE III SEC. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.

In Valmonte v. Belmonte, Jr., this Court explicated this way:

[A]n essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the peoples will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit. 81

In PEA, this Court elucidated the rationale behind the right to information:

These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other 81

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constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also essential to hold public officials at all times x x x accountable to the people, for unless citizens have the proper information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy.82

Sec. 28, Art. II compels the State and its agencies to fully disclose all of its transactions involving public interest. Thus, the government agencies, without need of demand from anyone, must bring into public view all the steps and negotiations leading to the consummation of the transaction and the contents of the perfected contract. 83 Such information must pertain to definite propositions of the government, meaning official recommendations or final positions reached on the different matters subject of negotiation. The government agency, however, need not disclose intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the exploratory stage. The limitation also covers privileged communication like information on military and diplomatic secrets; information affecting national security; information on investigations of crimes by law enforcement agencies before the prosecution of the accused; information on foreign relations, intelligence, and other classified information.

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It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution, there is still no enabling law that provides the mechanics for the compulsory duty of government agencies to disclose information on government transactions. Hopefully, the desired enabling law will finally see the light of day if and when Congress decides to approve the proposed Freedom of Access to Information Act. In the meantime, it would suffice that government agencies post on their bulletin boards the documents incorporating the information on the steps and negotiations that produced the agreements and the agreements themselves, and if finances permit, to upload said information on their respective websites for easy access by interested parties. Without any law or regulation governing the right to disclose information, the NHA or any of the respondents cannot be faulted if they were not able to disclose information relative to the SMDRP to the public in general.

The other aspect of the peoples right to know apart from the duty to disclose is the duty to allow access to information on matters of public concern under Sec. 7, Art. III of the Constitution. The gateway to information opens to the public the following: (1) official records; (2) documents and papers pertaining to official acts, transactions, or decisions; and (3) government research data used as a basis for policy development.

Thus, the duty to disclose information should be differentiated from the duty to permit access to information. There is no need to demand from the government agency disclosure of information as this is mandatory under the Constitution; failing that, legal remedies are available. On the other hand, the interested party must first request or even demand that he be allowed access to documents and papers in the particular agency. A request or demand is required; otherwise, the government office or agency will not know of the desire of the interested party to gain access to such papers and what papers are needed. The duty to disclose covers only transactions involving public interest, while the duty to allow access has a broader scope of information which embraces not only transactions 84

involving public interest, but any matter contained in official communications and public documents of the government agency.

We find that although petitioner did not make any demand on the NHA to allow access to information, we treat the petition as a written request or demand. We order the NHA to allow petitioner access to its official records, documents, and papers relating to official acts, transactions, and decisions that are relevant to the said JVA and subsequent agreements relative to the SMDRP.

Ninth Issue: Whether the operative fact doctrine applies to the instant petition

Petitioner postulates that the operative fact doctrine is inapplicable to the present case because it is an equitable doctrine which could not be used to countenance an inequitable result that is contrary to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.84

The argument of the Solicitor General is meritorious. 84

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The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus:

As the new Civil Code puts it: When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive. Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official. This language has been quoted with approval in a resolution in 86

Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co.85 (Emphasis supplied.)

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that:

Moreover, we certainly cannot nullify the City Governments order of suspension, as we have no reason to do so, much less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application.86 (Emphasis supplied.)

The principle was further explicated in the case of Rieta v. People of the Philippines, thus:

In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; 85

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that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. x x x It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.

In the May 6, 2003 Resolution in Chavez v. PEA,87 we ruled that De Agbayani88 is not applicable to the case considering that the prevailing law did not authorize private corporations from owning land. The prevailing law at the time was the 1935 Constitution as no statute dealt with the same issue.

In the instant case, RA 6957 was the prevailing law at the time that the joint venture agreement was signed. RA 6957, entitled An Act Authorizing The Financing, Construction, Operation And Maintenance Of Infrastructure Projects By The Private Sector And For Other Purposes, which was passed by Congress on July 24, 1989, allows repayment to the private

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contractor of reclaimed lands.89 Such law was relied upon by respondents, along with the above-mentioned executive issuances in pushing through with the Project. The existence of such law and issuances is an operative fact to which legal consequences have attached. This Court is constrained to give legal effect to the acts done in consonance with such executive and legislative acts; to do otherwise would work patent injustice on respondents.

Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the transfer of land, although illegal or unconstitutional, will not be invalidated on considerations of equity and social justice. However, in that case, we did not apply the same considering that PEA, respondent in said case, was not entitled to equity principles there being bad faith on its part, thus:

There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition, two Senate Committees had already approved on September 16, 1997 Senate Committee Report No. 560. This Report concluded, after a well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA.90

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Such indicia of bad faith are not present in the instant case. When the ruling in PEA was rendered by this Court on July 9, 2002, the JVAs were all executed. Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the JVAs were already terminated by virtue of the MOA between the NHA and RBI. The respondents had no reason to think that their agreements were unconstitutional or even questionable, as in fact, the concurrent acts of the executive department lent validity to the implementation of the Project. The SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and investors who made investments in the project or who bought SMPPCs. These properties and rights cannot be disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP implementation. Evidently, the operative fact principle has set in. The titles to the lands in the hands of the buyers can no longer be invalidated. The Courts Dispositions

Based on the issues raised in this petition, we find that the March 19, 1993 JVA between NHA and RBI and the SMDRP embodied in the JVA, the subsequent amendments to the JVA and all other agreements signed and executed in relation to it, including, but not limited to, the September 26, 1994 Smokey Mountain Asset Pool Agreement and the agreement on Phase I of the Project as well as all other transactions which emanated from the Project, have been shown to be valid, legal, and constitutional. Phase II has been struck down by the Clean Air Act.

With regard to the prayer for prohibition, enjoining respondents particularly respondent NHA from further implementing and/or enforcing the said Project and other agreements related to it, and from further deriving and/or enjoying any rights, privileges and interest from the Project, we find the same prayer meritless. 90

Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:

Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial, quasijudicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may require.

It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation to the SMDRP and the agreements relative to it. Likewise, it has not been shown what ministerial functions the NHA has with regard to the SMDRP.

A ministerial duty is one which is so clear and specific as to leave no room for the exercise of discretion in its performance. It is a duty which an officer performs in a given state of facts in a prescribed manner in obedience to the mandate of legal authority, without regard to the exercise of his/her own judgment upon the propriety of the act done. 91

Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA and other related agreements, certainly does not involve ministerial functions of the 91

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NHA but instead requires exercise of judgment. In fact, Item No. 4 of the MOA terminating the JVAs provides for validation of the developers (RBIs) claims arising from the termination of the SMDRP through the various government agencies. 92 Such validation requires the exercise of discretion.

In addition, prohibition does not lie against the NHA in view of petitioners failure to avail and exhaust all administrative remedies. Clear is the rule that prohibition is only available when there is no adequate remedy in the ordinary course of law.

More importantly, prohibition does not lie to restrain an act which is already a fait accompli. The operative fact doctrine protecting vested rights bars the grant of the writ of prohibition to the case at bar. It should be remembered that petitioner was the Solicitor General at the time SMDRP was formulated and implemented. He had the opportunity to question the SMDRP and the agreements on it, but he did not. The moment to challenge the Project had passed.

On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to disclose all documents and information relating to the project, including, but not limited to, any subsequent agreements with respect to the different phases of the Project, the revisions of the original plan, the additional works incurred on the Project, the current financial condition of respondent RBI, and the transactions made with respect to the project. We earlier ruled that petitioner will be allowed access to official records relative to the SMDRP. That would be adequate relief to satisfy petitioners right to the information gateway. 92

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WHEREFORE, the petition is PARTIALLY GRANTED.

The prayer for a writ of prohibition is DENIED for lack of merit.

The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner to all public documents and official records relative to the SMDRPincluding, but not limited to, the March 19, 1993 JVA between the NHA and RBI and subsequent agreements related to the JVA, the revisions over the original plan, and the additional works incurred on and the transactions made with respect to the Project.

No costs.

SO ORDERED.

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2. G.R. NO. 191109 - July 18, 2012] REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY (PRA), Petitioner, v. CITY OF PARANAQUE, Respondent. DECISION MENDOZA, J.: This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, on pure questions of law, assailing the January 8, 2010 Order 1 of the Regional Trial Court, Branch 195, Parafiaque City (RTC), which ruled that petitioner Philippine Reclamation Authority (PRA) is a government-owned and controlled corporation (GOCC), a taxable entity, and, therefore, . not exempt from payment of real property taxes. The pertinent portion of the said order reads:IÏ‚rIαlIαIω In view of the finding of this court that petitioner is not exempt from payment of real property taxes, respondent ParaAà ±aque City Treasurer Liberato M. Carabeo did not act xxx without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing the warrants of levy on the subject properties. WHEREFORE, the instant petition is dismissed. The Motion for Leave to File and Admit Attached Supplemental Petition is denied and the supplemental petition attached thereto is not admitted. The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public Estates Authority, Defining its Powers and Functions, Providing Funds Therefor and For Other Purposes) which took effect on February 4, 1977 to provide a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by, the government with the object of maximizing their utilization and hastening their development consistent with public interest.

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FACTS: On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then President Ferdinand Marcos, PEA was designated as the agency primarily responsible for integrating, directing and coordinating all reclamation projects for and on behalf of the National Government. On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380 transforming PEA into PRA, which shall perform all the powers and functions of the PEA relating to reclamation activities. By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including those located in ParaAÃ ±aque City, and was issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 557, and 559) and Transfer Certificates of Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed lands. On February 19, 2003, then ParaAÃ ±aque City Treasurer Liberato M. Carabeo (Carabeo) issued Warrants of Levy on PRA s reclaimed properties (Central Business Park and Barangay San Dionisio) located in ParaAÃ ±aque City based on the assessment for delinquent real property taxes made by then ParaAÃ ±aque City Assessor Soledad Medina Cue for tax years 2001 and 2002. On March 26, 2003, PRA filed a petition for prohibition with prayer for temporary restraining order (TRO) and/or writ of preliminary injunction against Carabeo before the RTC. On April 3, 2003, after due hearing, the RTC issued an order denying PRA s petition for the issuance of a temporary restraining order. On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to proceed with the public auction of the subject reclaimed properties on April 7, 2003. In response, Carabeo sent a letter stating that the public auction could not be deferred because the RTC had already denied PRA s TRO application. On April 25, 2003, the RTC denied PRA s prayer for the issuance of a writ of preliminary injunction for being moot and academic considering that the auction sale of the subject properties on April 7, 2003 had already been consummated. On August 3, 2009, after an exchange of several pleadings and the failure of both parties to arrive at a compromise agreement, PRA filed a Motion for Leave to File and Admit Attached Supplemental Petition which sought to declare as null and void the assessment for real property taxes, the levy based on the said assessment, the public auction sale conducted on April 7, 2003, and the Certificates of Sale issued pursuant to the auction sale. On January 8, 2010, the RTC rendered its decision dismissing PRA s petition. In ruling that PRA was not exempt from payment of real property taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It was organized as a stock corporation because it 95

had an authorized capital stock divided into no par value shares. In fact, PRA admitted its corporate personality and that said properties were registered in its name as shown by the certificates of title. Therefore, as a GOCC, local tax exemption is withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160 Local Government Code (LGC) which was the prevailing law in 2001 and 2002 with respect to real property taxation. The RTC also ruled that the tax exemption claimed by PRA under E.O. No. 654 had already been expressly repealed by R.A. No. 7160 and that PRA failed to comply with the procedural requirements in Section 206 thereof. Not in conformity, PRA filed this petition for certiorari assailing the January 8, 2010 RTC Order based on the following GROUNDSIÏ‚IηIαAà ±rIοblIεAÅ ¡ IνIιraâ € IÏ…Iαl lIαIω lIιbrIαrAà ¿ I THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT RECLAIMED LANDS CONSIDERING THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE VIS-Aà €-VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT OF APPEALS. II THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE, EXEMPT FROM REAL PROPERTY TAX. chanrobles virtual law library PRA asserts that it is not a GOCC under Section 2(13) of the Introductory Provisions of the Administrative Code. Neither is it a GOCC under Section 16, Article XII of the 1987 Constitution because it is not required to meet the test of economic viability. Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Although it has a capital stock divided into shares, it is not authorized to distribute dividends and allotment of surplus and profits to its stockholders. Therefore, it may not be classified as a stock corporation because it lacks the second requisite of a stock corporation which is the distribution of dividends and allotment of surplus and profits to the stockholders. It insists that it may not be classified as a non-stock corporation because it has no members and it is not organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers as provided in Section 88 of the Corporation Code. 96

Moreover, PRA points out that it was not created to compete in the market place as there was no competing reclamation company operated by the private sector. Also, while PRA is vested with corporate powers under P.D. No. 1084, such circumstance does not make it a corporation but merely an incorporated instrumentality and that the mere fact that an incorporated instrumentality of the National Government holds title to real property does not make said instrumentality a GOCC. Section 48, Chapter 12, Book I of the Administrative Code of 1987 recognizes a scenario where a piece of land owned by the Republic is titled in the name of a department, agency or instrumentality. Thus, PRA insists that, as an incorporated instrumentality of the National Government, it is exempt from payment of real property tax except when the beneficial use of the real property is granted to a taxable person. PRA claims that based on Section 133(o) of the LGC, local governments cannot tax the national government which delegate to local governments the power to tax. It explains that reclaimed lands are part of the public domain, owned by the State, thus, exempt from the payment of real estate taxes. Reclaimed lands retain their inherent potential as areas for public use or public service. While the subject reclaimed lands are still in its hands, these lands remain public lands and form part of the public domain. Hence, the assessment of real property taxes made on said lands, as well as the levy thereon, and the public sale thereof on April 7, 2003, including the issuance of the certificates of sale in favor of the respondent ParaAà ±aque City, are invalid and of no force and effect. On the other hand, the City of ParaAà ±aque (respondent) argues that PRA since its creation consistently represented itself to be a GOCC. PRA s very own charter (P.D. No. 1084) declared it to be a GOCC and that it has entered into several thousands of contracts where it represented itself to be a GOCC. In fact, PRA admitted in its original and amended petitions and pre-trial brief filed with the RTC of ParaAà ±aque City that it was a GOCC. Respondent further argues that PRA is a stock corporation with an authorized capital stock divided into 3 million no par value shares, out of which 2 million shares have been subscribed and fully paid up. Section 193 of the LGC of 1991 has withdrawn tax exemption privileges granted to or presently enjoyed by all persons, whether natural or juridical, including GOCCs. Hence, since PRA is a GOCC, it is not exempt from the payment of real property tax. THE COURT S RULING The Court finds merit in the petition. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC as follows:IÏ‚rIαlIαIω SEC. 2. General Terms Defined. x x x x 97

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. On the other hand, Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows:IςrIαlIαIω SEC. 2. General Terms Defined. x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x From the above definitions, it is clear that a GOCC must be "organized as a stock or nonstock corporation" while an instrumentality is vested by law with corporate powers. Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. When the law vests in a government instrumentality corporate powers, the instrumentality does not necessarily become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a GOCC. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines, and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. They are not, however, GOCCs in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities. 2IςrIνll Correlatively, Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." Section 87 thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." Further, Section 88 provides that non-stock corporations are "organized for charitable, 98

religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has capital stock divided into shares; and (2) that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation. As for non-stock corporations, they must have members and must not distribute any part of their income to said members.3IςrIνll In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot be considered as a stock corporation because although it has a capital stock divided into no par value shares as provided in Section 7 4 of P.D. No. 1084, it is not authorized to distribute dividends, surplus allotments or profits to stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the subsequent executive issuances pertaining to PRA, particularly, E.O. No. 525,5 E.O. No. 6546 and EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments or profits to its stockholders. PRA cannot be considered a non-stock corporation either because it does not have members. A non-stock corporation must have members. 8 Moreover, it was not organized for any of the purposes mentioned in Section 88 of the Corporation Code. Specifically, it was created to manage all government reclamation projects. Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16, Article XII of the 1987 Constitution provides as follows:IςrIαlIαIω Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The fundamental provision above authorizes Congress to create GOCCs through special charters on two conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must meet the test of economic viability. In this case, PRA may have passed the first condition of common good but failed the second one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or commercial activities. Neither was it created to compete in the market place considering that there were no other competing reclamation companies being operated by the private sector. As mentioned earlier, PRA was created essentially to perform a public service considering that it was primarily responsible for a coordinated, economical and efficient reclamation, administration and operation of lands belonging to the government with the object of maximizing their utilization and hastening their development consistent with the public interest. Sections 2 and 4 of P.D. No. 1084 reads, as follows:IςrIαlIαIω Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical and efficient reclamation of lands, and the administration and 99

operation of lands belonging to, managed and/or operated by the government, with the object of maximizing their utilization and hastening their development consistent with the public interest. Section 4. Purposes. The Authority is hereby created purposes:IÏ‚IηIαAà ±rIοblIεAÅ ¡ IνIιraâ € IÏ…Iαl lIαIω lIιbrIαrAà ¿

for

the

following

(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land; (b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government. (c) To provide for, operate or administer such services as may be necessary for the efficient, economical and beneficial utilization of the above properties. chanrobles virtual law library The twin requirement of common good and economic viability was lengthily discussed in the case of Manila International Airport Authority v. Court of Appeals, 9 the pertinent portion of which reads:IςrIαlIαIω Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:IςrIαlIαIω SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good meaning for economic development purposes these government-owned or controlled 100

corporations with special charters are usually organized as stock corporations just like ordinary private corporations. In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution. Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities known as "government-owned or controlled corporations" must meet the test of economic viability because they compete in the market place. This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their incometo meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers. Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows:IςrIαlIαIω MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers' money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain. Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad that I 101

am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good. Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:IςrIαlIαIω The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms. Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public. However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code. [Emphases supplied] This Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory Provisions of the Administrative Code or under Section 16, Article XII of the 1987 Constitution. The facts, the evidence on record and jurisprudence on the issue support the position that PRA was not organized either as a stock or a non-stock corporation. Neither was it created by Congress to operate commercially and compete in the private market. Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated government instrumentality, it is exempt from payment of real property tax. Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by PRA. On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA from paying realty taxes and protects it from the taxing powers of local government units. Sections 234(a) and 133(o) of the LGC provide, as follows: 102

SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the real property tax:IςrIαlIαIω (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. xxx SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:IςrIαlIαIω xxx (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. [Emphasis supplied] It is clear from Section 234 that real property owned by the Republic of the Philippines (the Republic) is exempt from real property tax unless the beneficial use thereof has been granted to a taxable person. In this case, there is no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity. There is no showing on record either that PRA leased the subject reclaimed properties to a private taxable entity. This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local governments from imposing "taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. Indeed, the Republic grants the beneficial use of its real property to an agency or instrumentality of the national government. This happens when the title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption, unless "the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person."10IςrIνll The rationale behind Section 133(o) has also been explained in the case of the Manila International Airport Authority,11 to wit:IςrIαlIαIω Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide." 103

When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:IςrIαlIαIω The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies. There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation:IςrIαlIαIω The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579) This doctrine emanates from the "supremacy" of the National Government over local governments. "Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a 104

way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation." (U.S. v. Sanchez, 340 US 42) The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. [Emphases supplied] HELD: The Court agrees with PRA that the subject reclaimed lands are still part of the public domain, owned by the State and, therefore, exempt from payment of real estate taxes. Section 2, Article XII of the 1987 Constitution reads in part, as follows:IÏ 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 60 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 provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of the grant. Similarly, Article 420 of the Civil Code enumerates properties belonging to the State:IÏ‚rIαlIαIÏ ‰ Art. 420. The following things are property of public dominion:IÏ‚IηIαAà ±rIοblIεAÅ ¡ IνIιraâ € IÏ… Iαl lIαIω lIιbrIαrAà ¿ (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. [Emphases supplied] chanrobles virtual law library 105

Here, the subject lands are reclaimed lands, specifically portions of the foreshore and offshore areas of Manila Bay. As such, these lands remain public lands and form part of the public domain. In the case of Chavez v. Public Estates Authority and AMARI Coastal Development Corporation, the Court held that foreshore and submerged areas irrefutably belonged to the public domain and were inalienable unless reclaimed, classified as alienable lands open to disposition and further declared no longer needed for public service. The fact that alienable lands of the public domain were transferred to the PEA (now PRA) and issued land patents or certificates of title in PEA s name did not automatically make such lands private. This Court also held therein that reclaimed lands retained their inherent potential as areas for public use or public service. As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands. Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA's name does not automatically make such lands private. 13IςrIνll Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, thus:IςrIαlIαIω SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.(1)The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation. Reclaimed lands such as the subject lands in issue are reserved lands for public use. They are properties of public dominion. The ownership of such lands remains with the State unless they are withdrawn by law or presidential proclamation from public use. Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these inalienable 106

natural resources of the State into alienable or disposable lands of the public domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-public use. As the Court has repeatedly ruled, properties of public dominion are not subject to execution or foreclosure sale. Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by respondent, as well as the issuances of certificates of title in favor of respondent, are without basis. WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court, Branch 195, ParaAÃ ±aque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine Reclamation Authority are hereby declared EXEMPT from real estate taxes. All real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of ParaAÃ ±aque on the subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and the Certificates of Sale subsequently issued by the ParaAÃ ±aque City Treasurer in favor of the City of ParaAÃ ±aque, are all declared VOID. SO ORDERED.

3. G.R. No. 133250

July 9, 2002

FRANCISCO I. vs. PUBLIC ESTATES AUTHORITY CORPORATION, respondents.

CHAVEZ, and

AMARI

petitioner, COASTAL

BAY

DEVELOPMENT

CARPIO, J.: This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary restraining order. The petition seeks to compel the Public Estates 107

Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation. The Facts On November 20, 1973, the government, through the Commissioner of Public Highways, signed a contract with the Construction and Development Corporation of the Philippines ("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of the total reclaimed land. FACTS: On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and all kinds of lands."1 On the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands reclaimed in the foreshore and offshore of the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP). On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981, which stated: "(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be agreed upon by the parties, to be paid according to progress of works on a unit price/lump sum basis for items of work to be agreed upon, subject to price escalation, retention and other terms and conditions provided for in Presidential Decree No. 1594. All the financing required for such works shall be provided by PEA. xxx (iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold, transferred or otherwise disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in the Financial Center Area covered by land pledge No. 5 and approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at varying elevations above Mean Low Water Level located outside the Financial Center Area and the First Neighborhood Unit."3 108

On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality of Paranñ aque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering the three reclaimed islands known as the "Freedom Islands" located at the southern portion of the Manila-Cavite Coastal Road, Paranñ aque City. The Freedom Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares. On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a private corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250 hectares of submerged areas surrounding these islands to complete the configuration in the Master Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through negotiation without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in its Resolution No. 1245, confirmed the JVA.5 On June 8, 1995, then President Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6 On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate Committee on Government Corporations and Public Enterprises, and the Committee on Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate Committees reported the results of their investigation in Senate Committee Report No. 560 dated September 16, 1997. 7 Among the conclusions of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public domain which the government has not classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal. On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate Committee Report No. 560. The members of the Legal Task Force were the Secretary of Justice,8 the Chief Presidential Legal Counsel, 9 and the Government Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA, contrary to the conclusions reached by the Senate Committees.11 On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-going renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the negotiating panel of PEA.

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On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed the petition "for unwarranted disregard of judicial hierarchy, without prejudice to the refiling of the case before the proper court."12 On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order. Petitioner contends the government stands to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the people to information on matters of public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of public dominion. After several motions for extension of time, 13 PEA and AMARI filed their Comments on October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated June 22, 1999. In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties to file their respective memoranda. On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph E. Estrada approved the Amended JVA. Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on "constitutional and statutory grounds the renegotiated contract be declared null and void."14 The Issues The issues raised by petitioner, PEA15 and AMARI16 are as follows: I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS; II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS; 110

III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES; IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT; V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT; VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT. The Court's Ruling First issue: whether the principal reliefs prayed for in the petition are moot and academic because of subsequent events. The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations for a new agreement." The petition also prays that the Court enjoin PEA from "privately entering into, perfecting and/or executing any new agreement with AMARI." PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office of the President has approved the Amended JVA on May 28, 1999. Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the signing and approval of the Amended JVA before the Court could act on the issue. Presidential approval does not resolve the constitutional issue or remove it from the ambit of judicial review. We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its violation of Section 111

3, Article XII of the Constitution, which prohibits the government from alienating lands of the public domain to private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and if already implemented, to annul the effects of such unconstitutional contract. The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single private corporation. It now becomes more compelling for the Court to resolve the issue to insure the government itself does not violate a provision of the Constitution intended to safeguard the national patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution. In the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of title and ownership of alienable lands of the public domain in the name of AMARI. Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar, and the public. 17 Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,18 covered agricultural lands sold to private corporations which acquired the lands from private parties. The transferors of the private corporations claimed or could claim the right to judicial confirmation of their imperfect titles 19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas for nonagricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and notorious occupation of agricultural lands of the public domain for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title expired on December 31, 1987. 20 Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because of the possible transfer at any time by PEA to AMARI of title and ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy percent proportionate share in the reclaimed areas as the reclamation progresses. The Amended JVA even allows AMARI to mortgage at any time the entire reclaimed area to raise financing for the reclamation project. 21 Second issue: whether the petition merits dismissal for failing to observe the principle governing the hierarchy of courts. PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court. The principle of hierarchy of courts applies generally to cases involving 112

factual questions. As it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case, however, raises constitutional issues of transcendental importance to the public.22 The Court can resolve this case without determining any factual issue related to the case. Also, the instant case is a petition for mandamus which falls under the original jurisdiction of the Court under Section 5, Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case. Third issue: whether the petition merits dismissal for non-exhaustion of administrative remedies. PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information without first asking PEA the needed information. PEA claims petitioner's direct resort to the Court violates the principle of exhaustion of administrative remedies. It also violates the rule that mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary course of law. PEA distinguishes the instant case from Tanñ ada v. Tuvera 23 where the Court granted the petition for mandamus even if the petitioners there did not initially demand from the Office of the President the publication of the presidential decrees. PEA points out that in Tanñ ada, the Executive Department had an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of Commonwealth Act No. 638 25 to publish the presidential decrees. There was, therefore, no need for the petitioners in Tanñ ada to make an initial demand from the Office of the President. In the instant case, PEA claims it has no affirmative statutory duty to disclose publicly information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of administrative remedies to the instant case in view of the failure of petitioner here to demand initially from PEA the needed information. The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation. Under Section 79 of the Government Auditing Code, 26 the disposition of government lands to private parties requires public bidding. PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of its lands. The law obligated PEA to make this public disclosure even without demand from petitioner or from anyone. PEA failed to make this public disclosure because the original JVA, like the Amended JVA, was the result of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make the public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct judicial intervention. Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative remedies does not apply when the issue involved is a purely legal or constitutional question.27 The principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of lands of the public domain to private corporations. We rule that the principle of exhaustion of administrative remedies does not apply in the instant case. Fourth issue: whether petitioner has locus standi to bring this suit 113

PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his constitutional right to information without a showing that PEA refused to perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus, there is no actual controversy requiring the exercise of the power of judicial review. The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to comply with its constitutional duties. There are two constitutional issues involved here. First is the right of citizens to information on matters of public concern. Second is the application of a constitutional provision intended to insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly information on the sale of government lands worth billions of pesos, information which the Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in violation of the Constitution, compelling PEA to comply with a constitutional duty to the nation. Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental importance to the public, thus "Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of government agencies or instrumentalities, if the issues raised are of 'paramount public interest,' and if they 'immediately affect the social, economic and moral well being of the people.' Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the proceeding involves the assertion of a public right, such as in this case. He invokes several decisions of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest. xxx In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection 114

with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they sought to be enforced 'is a public right recognized by no less than the fundamental law of the land.' Legaspi v. Civil Service Commission, while reiterating Tanñ ada, further declared that 'when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the right.' Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, 'public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved.' We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner's standing. Similarly, the instant petition is anchored on the right of the people to information and access to official records, documents and papers — a right guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should be allowed." We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rights - to information and to the equitable diffusion of natural resources matters of transcendental public importance, the petitioner has the requisite locus standi. Fifth issue: whether the constitutional right to information includes official information on on-going negotiations before a final agreement. Section 7, Article III of the Constitution explains the people's right to information on matters of public concern in this manner: "Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law." (Emphasis supplied) 115

The State policy of full transparency in all transactions involving public interest reinforces the people's right to information on matters of public concern. This State policy is expressed in Section 28, Article II of the Constitution, thus: "Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest." (Emphasis supplied) These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x accountable to the people," 29 for unless citizens have the proper information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30 – "An essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the people's will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit." PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to information is limited to "definite propositions of the government." PEA maintains the right does not include access to "intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the 'exploratory stage'." Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the closing of the transaction. To support its contention, AMARI cites the following discussion in the 1986 Constitutional Commission: "Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself?

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Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both steps leading to a contract and already a consummated contract, Mr. Presiding Officer. Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the transaction. Mr. Ople: Yes, subject only to reasonable safeguards on the national interest. Mr. Suarez: Thank you."32 (Emphasis supplied) AMARI argues there must first be a consummated contract before petitioner can invoke the right. Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade the quality of decision-making in government agencies. Government officials will hesitate to express their real sentiments during deliberations if there is immediate public dissemination of their discussions, putting them under all kinds of pressure before they decide. We must first distinguish between information the law on public bidding requires PEA to disclose publicly, and information the constitutional right to information requires PEA to release to the public. Before the consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the public matters relating to the disposition of its property. These include the size, location, technical description and nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must prepare all these data and disclose them to the public at the start of the disposition process, long before the consummation of the contract, because the Government Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at any time during the bidding process. Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or review committee is not immediately accessible under the right to information. While the evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the bids or proposals. However, once the committee makes its official recommendation, there arises a "definite proposition" on the part of the government. From this moment, the public's right to information attaches, and any citizen can access all the non-proprietary information leading to such definite proposition. In Chavez v. PCGG,33 the Court ruled as follows: "Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the government, not necessarily to intra-agency or 117

inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the "exploratory" stage. There is need, of course, to observe the same restrictions on disclosure of information in general, as discussed earlier – such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information." (Emphasis supplied) Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood that the right to information "contemplates inclusion of negotiations leading to the consummation of the transaction." Certainly, a consummated contract is not a requirement for the exercise of the right to information. Otherwise, the people can never exercise the right if no contract is consummated, and if one is consummated, it may be too late for the public to expose its defects.1âwphi1.nêt Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates the State policy of full transparency on matters of public concern, a situation which the framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from participating in the public discussion of any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its transactions involving public interest." The right covers three categories of information which are "matters of public concern," namely: (1) official records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3) government research data used in formulating policies. The first category refers to any document that is part of the public records in the custody of government agencies or officials. The second category refers to documents and papers recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts, transactions or decisions of government agencies or officials. The third category refers to research data, whether raw, collated or processed, owned by the government and used in formulating government policies. The information that petitioner may access on the renegotiation of the JVA includes evaluation reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference and other documents attached to such reports or minutes, all relating to the JVA. However, the right to information does not compel PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of the JVA. 34 The right only affords access to records, documents and papers, which means the opportunity to inspect and copy them. One who exercises the right must copy the records, documents and papers at his expense. The exercise of the right is also subject to reasonable regulations to protect the integrity of the public records and to minimize disruption to government operations, like rules specifying when and how to conduct the inspection and copying. 35

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The right to information, however, does not extend to matters recognized as privileged information under the separation of powers. 36 The right does not also apply to information on military and diplomatic secrets, information affecting national security, and information on investigations of crimes by law enforcement agencies before the prosecution of the accused, which courts have long recognized as confidential. 37 The right may also be subject to other limitations that Congress may impose by law. There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers. The information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house of Congress, 38 are recognized as confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to protect the independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial power. 39 This is not the situation in the instant case. We rule, therefore, that the constitutional right to information includes official information on on-going negotiations before a final contract. The information, however, must constitute definite propositions by the government and should not cover recognized exceptions like privileged information, military and diplomatic secrets and similar matters affecting national security and public order. 40 Congress has also prescribed other limitations on the right to information in several legislations. 41 Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to be reclaimed, violate the Constitution. The Regalian Doctrine The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine which holds that the State owns all lands and waters of the public domain. Upon the Spanish conquest of the Philippines, ownership of all "lands, territories and possessions" in the Philippines passed to the Spanish Crown. 42 The King, as the sovereign ruler and representative of the people, acquired and owned all lands and territories in the Philippines except those he disposed of by grant or sale to private individuals. The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State, in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the foundation of the time-honored principle of land ownership that "all lands that were not acquired from the Government, either by purchase or by grant, belong to the public domain." 43 Article 339 of the Civil Code of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine. Ownership and Disposition of Reclaimed Lands 119

The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. On November 7, 1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. CA No. 141 continues to this day as the general law governing the classification and disposition of lands of the public domain. The Spanish Law of Waters of 1866 and the Civil Code of 1889 Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the maritime zone of the Spanish territory belonged to the public domain for public use.44 The Spanish Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows: "Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority." Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the reclamation, provided the government issued the necessary permit and did not reserve ownership of the reclaimed land to the State. Article 339 of the Civil Code of 1889 defined property of public dominion as follows: "Art. 339. Property of public dominion is – 1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shores, roadsteads, and that of a similar character; 2. That belonging exclusively to the State which, without being of general public use, is employed in some public service, or in the development of the national wealth, such as walls, fortresses, and other works for the defense of the territory, and mines, until granted to private individuals." Property devoted to public use referred to property open for use by the public. In contrast, property devoted to public service referred to property used for some specific public service and open only to those authorized to use the property.

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Property of public dominion referred not only to property devoted to public use, but also to property not so used but employed to develop the national wealth. This class of property constituted property of public dominion although employed for some economic or commercial activity to increase the national wealth. Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into private property, to wit: "Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the territory, shall become a part of the private property of the State." This provision, however, was not self-executing. The legislature, or the executive department pursuant to law, must declare the property no longer needed for public use or territorial defense before the government could lease or alienate the property to private parties.45 Act No. 1654 of the Philippine Commission On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed and foreshore lands. The salient provisions of this law were as follows: "Section 1. The control and disposition of the foreshore as defined in existing law, and the title to all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise throughout the Philippine Islands, shall be retained by the Government without prejudice to vested rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension. Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise to be divided into lots or blocks, with the necessary streets and alleyways located thereon, and shall cause plats and plans of such surveys to be prepared and filed with the Bureau of Lands. (b) Upon completion of such plats and plans the Governor-General shall give notice to the public that such parts of the lands so made or reclaimed as are not needed for public purposes will be leased for commercial and business purposes, x x x. xxx (e) The leases above provided for shall be disposed of to the highest and best bidder therefore, subject to such regulations and safeguards as the Governor-General may by executive order prescribe." (Emphasis supplied) 121

Act No. 1654 mandated that the government should retain title to all lands reclaimed by the government. The Act also vested in the government control and disposition of foreshore lands. Private parties could lease lands reclaimed by the government only if these lands were no longer needed for public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that unlike other public lands which the government could sell to private parties, these reclaimed lands were available only for lease to private parties. Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties with government permission remained private lands. Act No. 2874 of the Philippine Legislature On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as follows: "Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time to time classify the lands of the public domain into – (a) Alienable or disposable, (b) Timber, and (c) Mineral lands, x x x. Sec. 7. For the purposes of the government and disposition of alienable or disposable public lands, the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are open to disposition or concession under this Act." Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited or classified x x x. xxx Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be classified as suitable for residential purposes or for commercial, industrial, or other productive purposes other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of under the provisions of this chapter, and not otherwise. Sec. 56. The lands disposable under this title shall be classified as follows: 122

(a) Lands reclaimed by the Government by dredging, filling, or other means; (b) Foreshore; (c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers; (d) Lands not included in any of the foregoing classes. x x x. Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed of to private parties by lease only and not otherwise, as soon as the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied) Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain into x x x alienable or disposable" 47 lands. Section 7 of the Act empowered the Governor-General to "declare what lands are open to disposition or concession." Section 8 of the Act limited alienable or disposable lands only to those lands which have been "officially delimited and classified." Section 56 of Act No. 2874 stated that lands "disposable under this title 48 shall be classified" as government reclaimed, foreshore and marshy lands, as well as other lands. All these lands, however, must be suitable for residential, commercial, industrial or other productive non-agricultural purposes. These provisions vested upon the Governor-General the power to classify inalienable lands of the public domain into disposable lands of the public domain. These provisions also empowered the Governor-General to classify further such disposable lands of the public domain into government reclaimed, foreshore or marshy lands of the public domain, as well as other non-agricultural lands. Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain classified as government reclaimed, foreshore and marshy lands "shall be disposed of to private parties by lease only and not otherwise." The Governor-General, before allowing the lease of these lands to private parties, must formally declare that the lands were "not necessary for the public service." Act No. 2874 reiterated the State policy to lease and not to sell government reclaimed, foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or disposable lands of the public domain that the government could not sell to private parties.

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The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the reason the government prohibited the sale, and only allowed the lease, of these lands to private parties. The State always reserved these lands for some future public service. Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only lands for non-agricultural purposes the government could sell to private parties. Thus, under Act No. 2874, the government could not sell government reclaimed, foreshore and marshy lands to private parties, unless the legislature passed a law allowing their sale.49 Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government permission remained private lands. Dispositions under the 1935 Constitution On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that – "Section 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 Philippines 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 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 inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, 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 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 limit of the grant." (Emphasis supplied) The 1935 Constitution barred the alienation of all natural resources except public agricultural lands, which were the only natural resources the State could alienate. Thus, foreshore lands, considered part of the State's natural resources, became inalienable by constitutional fiat, available only for lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands only after these lands were reclaimed and classified as alienable agricultural lands of the public domain. Government reclaimed and 124

marshy lands of the public domain, being neither timber nor mineral lands, fell under the classification of public agricultural lands.50 However, government reclaimed and marshy lands, although subject to classification as disposable public agricultural lands, could only be leased and not sold to private parties because of Act No. 2874. The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of the public domain was only a statutory prohibition and the legislature could therefore remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from acquiring government reclaimed and marshy lands of the public domain that were classified as agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows: "Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in excess of one thousand and twenty four hectares, nor may any individual acquire such lands by purchase in excess of one hundred and forty hectares, or by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twentyfour hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be leased to an individual, private corporation, or association." (Emphasis supplied) Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874 to open for sale to private parties government reclaimed and marshy lands of the public domain. On the contrary, the legislature continued the long established State policy of retaining for the government title and ownership of government reclaimed and marshy lands of the public domain. Commonwealth Act No. 141 of the Philippine National Assembly On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as amended, remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands.51 Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or disposable"52 lands of the public domain, which prior to such classification are inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President to "declare what lands are open to disposition or concession." Section 8 of CA No. 141 states that the government can declare open for disposition or concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of CA No. 141 read as follows: "Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public domain into – 125

(a) Alienable or disposable, (b) Timber, and (c) Mineral lands, and may at any time and in like manner transfer such lands from one class to another,53 for the purpose of their administration and disposition. Sec. 7. For the purposes of the administration and disposition of alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture and Commerce, shall from time to time declare what lands are open to disposition or concession under this Act. Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited and classified and, when practicable, surveyed, and which have not been reserved for public or quasi-public uses, nor appropriated by the Government, nor in any manner become private property, nor those on which a private right authorized and recognized by this Act or any other valid law may be claimed, or which, having been reserved or appropriated, have ceased to be so. x x x." Thus, before the government could alienate or dispose of lands of the public domain, the President must first officially classify these lands as alienable or disposable, and then declare them open to disposition or concession. There must be no law reserving these lands for public or quasi-public uses. The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public domain, are as follows: "Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is intended to be used for residential purposes or for commercial, industrial, or other productive purposes other than agricultural, and is open to disposition or concession, shall be disposed of under the provisions of this chapter and not otherwise. Sec. 59. The lands disposable under this title shall be classified as follows: (a) Lands reclaimed by the Government by dredging, filling, or other means; (b) Foreshore; (c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers; 126

(d) Lands not included in any of the foregoing classes. Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation, or association authorized to purchase or lease public lands for agricultural purposes. x x x. Sec. 61. The lands comprised in classes (a), (b), and (c) of section fiftynine shall be disposed of to private parties by lease only and not otherwise, as soon as the President, upon recommendation by the Secretary of Agriculture, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied) Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public domain. All these lands are intended for residential, commercial, industrial or other non-agricultural purposes. As before, Section 61 allowed only the lease of such lands to private parties. The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural purposes not classified as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands, however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to qualified private parties. Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for residential, commercial, industrial or other productive purposes other than agricultural "shall be disposed of under the provisions of this chapter and not otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of the land. Any disposition of government reclaimed, foreshore and marshy disposable lands for non-agricultural purposes must comply with Chapter IX, Title III of CA No. 141, 54 unless a subsequent law amended or repealed these provisions. In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of Appeals,55 Justice Reynato S. Puno summarized succinctly the law on this matter, as follows: "Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by the government by dredging, filling, or other means. Act 1654 mandated that the control and disposition of the foreshore and lands under water remained in the national government. Said law allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the foreshore and lands reclaimed by the government were to be "disposed of to private parties by lease only and not otherwise." Before leasing, however, the Governor-General, upon recommendation of the Secretary of Agriculture and Natural Resources, had first to determine that the land reclaimed was not necessary for the public service. This requisite 127

must have been met before the land could be disposed of. But even then, the foreshore and lands under water were not to be alienated and sold to private parties. The disposition of the reclaimed land was only by lease. The land remained property of the State." (Emphasis supplied) As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained in effect at present." The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands, however, became a constitutional edict under the 1935 Constitution. Foreshore lands became inalienable as natural resources of the State, unless reclaimed by the government and classified as agricultural lands of the public domain, in which case they would fall under the classification of government reclaimed lands. After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the public domain continued to be only leased and not sold to private parties. 56 These lands remained sui generis, as the only alienable or disposable lands of the public domain the government could not sell to private parties. Since then and until now, the only way the government can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that the government could sell to private parties. Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under Section 59 that the government previously transferred to government units or entities could be sold to private parties. Section 60 of CA No. 141 declares that – "Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease is requested, and shall not exceed one hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, or transfers made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public interest; but the land so granted, donated, or transferred to a province, municipality or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x." (Emphasis supplied)

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The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority required in Section 56 of Act No. 2874. One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units and entities from the maximum area of public lands that could be acquired from the State. These government units and entities should not just turn around and sell these lands to private parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes to government units and entities could be used to circumvent constitutional limitations on ownership of alienable or disposable lands of the public domain. In the same manner, such transfers could also be used to evade the statutory prohibition in CA No. 141 on the sale of government reclaimed and marshy lands of the public domain to private parties. Section 60 of CA No. 141 constitutes by operation of law a lien on these lands.57 In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows: "Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of agricultural public land, x x x. Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the highest bidder. x x x." (Emphasis supplied) Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or disposable lands of the public domain.58 Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with government permission. However, the reclaimed land could become private land only if classified as alienable agricultural land of the public domain open to disposition under CA No. 141. The 1935 Constitution prohibited the alienation of all natural resources except public agricultural lands. The Civil Code of 1950 The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that – "Art. 420. The following things are property of public dominion: 129

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. x x x. Art. 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State." Again, the government must formally declare that the property of public dominion is no longer needed for public use or public service, before the same could be classified as patrimonial property of the State.59 In the case of government reclaimed and marshy lands of the public domain, the declaration of their being disposable, as well as the manner of their disposition, is governed by the applicable provisions of CA No. 141. Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those properties of the State which, without being for public use, are intended for public service or the "development of the national wealth." Thus, government reclaimed and marshy lands of the State, even if not employed for public use or public service, if developed to enhance the national wealth, are classified as property of public dominion. Dispositions under the 1973 Constitution The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that – "Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the exception of agricultural, industrial or commercial, residential, and resettlement lands of the public domain, natural resources shall not be alienated, and no license, concession, or lease for the exploration, development, exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for not more than twentyfive 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." (Emphasis supplied) The 1973 Constitution prohibited the alienation of all natural resources with the exception of "agricultural, industrial or commercial, residential, and resettlement lands of the public 130

domain." In contrast, the 1935 Constitution barred the alienation of all natural resources except "public agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution encompassed industrial, commercial, residential and resettlement lands of the public domain.60 If the land of public domain were neither timber nor mineral land, it would fall under the classification of agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural resources except agricultural lands of the public domain. The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973 Constitution declared that – "Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development requirements of the natural resources, shall determine by law the size of land of the public domain which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or association, and the conditions therefor. No private corporation or association may hold alienable lands of the public domain except by lease not to exceed one thousand hectares in area nor may any citizen hold such lands by lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or association may hold by lease, concession, license or permit, timber or forest lands and other timber or forest resources in excess of one hundred thousand hectares. However, such area may be increased by the Batasang Pambansa upon recommendation of the National Economic and Development Authority." (Emphasis supplied) Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain only through lease. Only individuals could now acquire alienable lands of the public domain, and private corporations became absolutely barred from acquiring any kind of alienable land of the public domain. The constitutional ban extended to all kinds of alienable lands of the public domain, while the statutory ban under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable lands of the public domain. PD No. 1084 Creating the Public Estates Authority On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers: "Sec. 4. Purpose. The Authority is hereby created for the following purposes:

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(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land; (b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government; (c) To provide for, operate or administer such service as may be necessary for the efficient, economical and beneficial utilization of the above properties. Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for which it is created, have the following powers and functions: (a)To prescribe its by-laws. xxx (i) To hold lands of the public domain in excess of the area permitted to private corporations by statute. (j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal, ditch, flume x x x. xxx (o) To perform such acts and exercise such functions as may be necessary for the attainment of the purposes and objectives herein specified." (Emphasis supplied) PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain. Foreshore areas are those covered and uncovered by the ebb and flow of the tide. 61 Submerged areas are those permanently under water regardless of the ebb and flow of the tide.62 Foreshore and submerged areas indisputably belong to the public domain 63 and are inalienable unless reclaimed, classified as alienable lands open to disposition, and further declared no longer needed for public service. The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public domain did not apply to PEA since it was then, and until today, a fully owned government corporation. The constitutional ban applied then, as it still applies now, only to "private corporations and associations." PD No. 1084 expressly empowers PEA "to hold lands of the public domain" even "in excess of the area permitted to private corporations by statute." Thus, PEA can hold title to private lands, as well as title to lands of the public domain. 132

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in view of Section 60 of CA No.141, which states – "Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress; x x x." (Emphasis supplied) Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. Hence, such legislative authority could only benefit private individuals. Dispositions under the 1987 Constitution The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and except for alienable agricultural lands of the public domain, natural resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution state that – "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. x x x. Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant. Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which 133

may be acquired, developed, held, or leased and the conditions therefor." (Emphasis supplied) The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations from acquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141. The Rationale behind the Constitutional Ban The rationale behind the constitutional ban on corporations from acquiring, except through lease, alienable lands of the public domain is not well understood. During the deliberations of the 1986 Constitutional Commission, the commissioners probed the rationale behind this ban, thus: "FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says: `No private corporation or association may hold alienable lands of the public domain except by lease, not to exceed one thousand hectares in area.' If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the 1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public lands. But it has not been very clear in jurisprudence what the reason for this is. In some of the cases decided in 1982 and 1983, it was indicated that the purpose of this is to prevent large landholdings. Is that the intent of this provision? MR. VILLEGAS: I think that is the spirit of the provision. FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the Iglesia ni Cristo was not allowed to acquire a mere 313square meter land where a chapel stood because the Supreme Court said it would be in violation of this." (Emphasis supplied) In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way: "Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands by private corporations is to equitably diffuse land ownership or to encourage 'owner-cultivatorship and the economic familysize farm' and to prevent a recurrence of cases like the instant case. Huge landholdings by corporations or private persons had spawned social unrest." 134

However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited the size of alienable lands of the public domain that corporations could acquire. The Constitution could have followed the limitations on individuals, who could acquire not more than 24 hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under the 1987 Constitution. If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and smaller plots from one generation to the next. In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional ban, individuals who already acquired the maximum area of alienable lands of the public domain could easily set up corporations to acquire more alienable public lands. An individual could own as many corporations as his means would allow him. An individual could even hide his ownership of a corporation by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public domain. The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area of alienable land of the public domain to a qualified individual. This constitutional intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable public lands are gradually decreasing in the face of an ever-growing population. The most effective way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to individuals. This, it would seem, is the practical benefit arising from the constitutional ban. The Amended Joint Venture Agreement The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three properties, namely: 1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;" 2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and

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3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to regularize the configuration of the reclaimed area." 65 PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently reclaim another 350 hectares x x x."66 In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are still submerged areas forming part of Manila Bay. Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent, respectively, the total net usable area which is defined in the Amended JVA as the total reclaimed area less 30 percent earmarked for common areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that – "x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or conveyance of the title pertaining to AMARI's Land share based on the Land Allocation Plan. PEA, when requested in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering AMARI's Land Share in the name of AMARI, x x x; provided, that if more than seventy percent (70%) of the titled area at any given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles pertaining to AMARI, until such time when a corresponding proportionate area of additional land pertaining to PEA has been titled." (Emphasis supplied) Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of reclaimed land which will be titled in its name. To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that – "PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture the full and exclusive right, authority and privilege to undertake the Project in accordance with the Master Development Plan."

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The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its supplemental agreement dated August 9, 1995. The Threshold Issue The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state that: "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. x x x. xxx Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x."(Emphasis supplied) Classification of Reclaimed Foreshore and Submerged Areas PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are alienable or disposable lands of the public domain. In its Memorandum, 67 PEA admits that – "Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and disposable lands of the public domain: 'Sec. 59. The lands disposable under this title shall be classified as follows: (a) Lands reclaimed by the government by dredging, filling, or other means; x x x.'" (Emphasis supplied) Likewise, the Legal Task Force 68 constituted under Presidential Administrative Order No. 365 admitted in its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the public domain."69 The Legal Task Force concluded that – "D. Conclusion 137

Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA, as owner, may validly convey the same to any qualified person without violating the Constitution or any statute. The constitutional provision prohibiting private corporations from holding public land, except by lease (Sec. 3, Art. XVII, 70 1987 Constitution), does not apply to reclaimed lands whose ownership has passed on to PEA by statutory grant." Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these inalienable natural resources of the State into alienable or disposable lands of the public domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-public use.71 Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or concession which have been officially delimited and classified."72 The President has the authority to classify inalienable lands of the public domain into alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the Philippine Government for use as the Chancery of the Philippine Embassy. Although the Chancery had transferred to another location thirteen years earlier, the Court still ruled that, under Article 422 74 of the Civil Code, a property of public dominion retains such character until formally declared otherwise. The Court ruled that – "The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public domain, not available for private appropriation or ownership 'until there is a formal declaration on the part of the government to withdraw it from being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied) PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No. 3517 in the 138

name of PEA for the 157.84 hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents. To this day, these certificates of title are still in the name of PEA. PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties. At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom Islands although subsequently there were partial erosions on some areas. The government had also completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain into "agricultural, forest or timber, mineral lands, and national parks." Being neither timber, mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural resources that the State may alienate to qualified private parties. All other natural resources, such as the seas or bays, are "waters x x x owned by the State" forming part of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution. AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation, reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the ownership of reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed lands are lands of the public domain which the State may not alienate." 75 Article 5 of the Spanish Law of Waters reads as follows: "Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority." (Emphasis supplied) Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with "proper permission" from the State. Private parties could own the reclaimed land only if not "otherwise provided by the terms of the grant of authority." This clearly meant that no one could reclaim from the sea without permission from the State 139

because the sea is property of public dominion. It also meant that the State could grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a private person reclaiming from the sea without permission from the State could not acquire ownership of the reclaimed land which would remain property of public dominion like the sea it replaced. 76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of land ownership that "all lands that were not acquired from the government, either by purchase or by grant, belong to the public domain."77 Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first be classified as alienable or disposable before the government can alienate them. These lands must not be reserved for public or quasi-public purposes. 78 Moreover, the contract between CDCP and the government was executed after the effectivity of the 1973 Constitution which barred private corporations from acquiring any kind of alienable land of the public domain. This contract could not have converted the Freedom Islands into private lands of a private corporation. Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of areas under water and revested solely in the National Government the power to reclaim lands. Section 1 of PD No. 3-A declared that – "The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under a proper contract. (Emphasis supplied) x x x." PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under water could now be undertaken only by the National Government or by a person contracted by the National Government. Private parties may reclaim from the sea only under a contract with the National Government, and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866. Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Government's implementing arm to undertake "all reclamation projects of the government," which "shall be undertaken by the PEA or through a proper contract executed by it with any person or entity." Under such contract, a private party receives compensation for reclamation services rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. The reclaimed land can be used as payment in kind only if the reclaimed land is first classified as alienable or disposable land open to disposition, and then declared no longer needed for public service. 140

The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying these submerged areas as alienable or disposable lands of the public domain open to disposition. These submerged areas are not covered by any patent or certificate of title. There can be no dispute that these submerged areas form part of the public domain, and in their present state are inalienable and outside the commerce of man. Until reclaimed from the sea, these submerged areas are, under the Constitution, "waters x x x owned by the State," forming part of the public domain and consequently inalienable. Only when actually reclaimed from the sea can these submerged areas be classified as public agricultural lands, which under the Constitution are the only natural resources that the State may alienate. Once reclaimed and transformed into public agricultural lands, the government may then officially classify these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare these lands no longer needed for public service. Only then can these reclaimed lands be considered alienable or disposable lands of the public domain and within the commerce of man. The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable lands open to disposition is necessary because PEA is tasked under its charter to undertake public services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o own or operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary." PEA is empowered to issue "rules and regulations as may be necessary for the proper use by private parties of any or all of the highways, roads, utilities, buildings and/or any of its properties and to impose or collect fees or tolls for their use." Thus, part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed for public use or service since many of the functions imposed on PEA by its charter constitute essential public services. Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government." The same section also states that "[A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity "to undertake the reclamation of lands and ensure their maximum utilization in promoting public welfare and interests."79 Since large portions of these reclaimed lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for public service.1âwphi1.nêt Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned by the PEA," could not automatically operate to classify inalienable lands into 141

alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would automatically become alienable once reclaimed by PEA, whether or not classified as alienable or disposable. The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the Department of Environment and Natural Resources ("DENR" for brevity) the following powers and functions: "Sec. 4. Powers and Functions. The Department shall: (1) x x x xxx (4) Exercise supervision and control over forest lands, alienable and disposable public lands, mineral resources and, in the process of exercising such control, impose appropriate taxes, fees, charges, rentals and any such form of levy and collect such revenues for the exploration, development, utilization or gathering of such resources; xxx (14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits, concessions, lease agreements and such other privileges concerning the development, exploration and utilization of the country's marine, freshwater, and brackish water and over all aquatic resources of the country and shall continue to oversee, supervise and police our natural resources; cancel or cause to cancel such privileges upon failure, non-compliance or violations of any regulation, order, and for all other causes which are in furtherance of the conservation of natural resources and supportive of the national interest; (15) Exercise exclusive jurisdiction on the management and disposition of all lands of the public domain and serve as the sole agency responsible for classification, sub-classification, surveying and titling of lands in consultation with appropriate agencies."80 (Emphasis supplied) As manager, conservator and overseer of the natural resources of the State, DENR exercises "supervision and control over alienable and disposable public lands." DENR also exercises "exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the country.

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DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 681 and 782 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No. 141. In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain. Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not make the lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Absent two official acts – a classification that these lands are alienable or disposable and open to disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain inalienable lands of the public domain. Only such an official classification and formal declaration can convert reclaimed lands into alienable or disposable lands of the public domain, open to disposition under the Constitution, Title I and Title III83 of CA No. 141 and other applicable laws.84 PEA's Authority to Sell Reclaimed Lands PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x."85 (Emphasis by PEA) In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which states that – "Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: x x x." 143

Thus, the Court concluded that a law is needed to convey any real property belonging to the Government. The Court declared that "It is not for the President to convey real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence." (Emphasis supplied) PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that – "The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract for the reclamation and construction of the ManilaCavite Coastal Road Project between the Republic of the Philippines and the Construction and Development Corporation of the Philippines dated November 20, 1973 and/or any other contract or reclamation covering the same area is hereby transferred, conveyed and assigned to the ownership and administration of the Public Estates Authority established pursuant to PD No. 1084; Provided, however, That the rights and interests of the Construction and Development Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and respected. Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the Republic of the Philippines (Department of Public Highways) arising from, or incident to, the aforesaid contract between the Republic of the Philippines and the Construction and Development Corporation of the Philippines. In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in favor of the Republic of the Philippines the corresponding shares of stock in said entity with an issued value of said shares of stock (which) shall be deemed fully paid and non-assessable. The Secretary of Public Highways and the General Manager of the Public Estates Authority shall execute such contracts or agreements, including appropriate agreements with the Construction and Development Corporation of the Philippines, as may be necessary to implement the above. Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of the Public Estates Authority without prejudice to the subsequent transfer to the contractor or his assignees of such portion or portions of the land reclaimed or to be reclaimed as provided for in the above-mentioned contract. On the basis of such patents, the Land Registration Commission shall issue the corresponding certificate of title." (Emphasis supplied) 144

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that "Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible for its administration, development, utilization or disposition in accordance with the provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use of reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084." There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states that PEA should dispose of its reclaimed lands "in accordance with the provisions of Presidential Decree No. 1084," the charter of PEA. PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by the government." 87 (Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private parties its patrimonial properties in accordance with the PEA charter free from constitutional limitations. The constitutional ban on private corporations from acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial lands. PEA may also sell its alienable or disposable lands of the public domain to private individuals since, with the legislative authority, there is no longer any statutory prohibition against such sales and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its alienable or disposable lands of the public domain to private corporations since Section 3, Article XII of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only individuals. Private corporations remain barred from acquiring any kind of alienable land of the public domain, including government reclaimed lands. The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private corporations but only to individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987 Constitutions. The requirement of public auction in the sale of reclaimed lands Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition, and further declared no longer needed for public service, PEA would have to conduct a public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence of a law 145

exempting PEA from holding a public auction. 88 Special Patent No. 3517 expressly states that the patent is issued by authority of the Constitution and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended." This is an acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed alienable lands of the public domain unless otherwise provided by law. Executive Order No. 654, 89 which authorizes PEA "to determine the kind and manner of payment for the transfer" of its assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does not authorize PEA to dispense with public auction. Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the government is required to sell valuable government property through public bidding. Section 79 of PD No. 1445 mandates that – "Section 79. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body in the presence of the auditor concerned or other authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission." It is only when the public auction fails that a negotiated sale is allowed, in which case the Commission on Audit must approve the selling price. 90 The Commission on Audit implements Section 79 of the Government Auditing Code through Circular No. 89-296 91 dated January 27, 1989. This circular emphasizes that government assets must be disposed of only through public auction, and a negotiated sale can be resorted to only in case of "failure of public auction." At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore and submerged alienable lands of the public domain. Private corporations are barred from bidding at the auction sale of any kind of alienable land of the public domain. PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of 146

the additional reclaimed areas in favor of the winning bidder. 92 No one, however, submitted a bid. On December 23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands through negotiation, without need of another public bidding, because of the failure of the public bidding on December 10, 1991.93 However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to 750 hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750 hectares, almost double the area publicly auctioned. Besides, the failure of public bidding happened on December 10, 1991, more than three years before the signing of the original JVA on April 25, 1995. The economic situation in the country had greatly improved during the intervening period. Reclamation under the BOT Law and the Local Government Code The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear: "Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states – "Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the buildoperate-and-transfer arrangement or any of its variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements with respect to the ownership of the land: x x x." (Emphasis supplied) A private corporation, even one that undertakes the physical reclamation of a government BOT project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional ban. Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local governments in land reclamation projects to pay the contractor or developer in kind consisting of a percentage of the reclaimed land, to wit: "Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure Projects by the Private Sector. x x x xxx

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In case of land reclamation or construction of industrial estates, the repayment plan may consist of the grant of a portion or percentage of the reclaimed land or the industrial estate constructed." Although Section 302 of the Local Government Code does not contain a proviso similar to that of the BOT Law, the constitutional restrictions on land ownership automatically apply even though not expressly mentioned in the Local Government Code. Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor or developer is an individual, portions of the reclaimed land, not exceeding 12 hectares96 of non-agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing such conveyance. This is the only way these provisions of the BOT Law and the Local Government Code can avoid a direct collision with Section 3, Article XII of the 1987 Constitution. Registration of lands of the public domain Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public respondent PEA transformed such lands of the public domain to private lands." This theory is echoed by AMARI which maintains that the "issuance of the special patent leading to the eventual issuance of title takes the subject land away from the land of public domain and converts the property into patrimonial or private property." In short, PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands have become private lands of PEA. In support of their theory, PEA and AMARI cite the following rulings of the Court: 1. Sumail v. Judge of CFI of Cotabato,97 where the Court held – "Once the patent was granted and the corresponding certificate of title was issued, the land ceased to be part of the public domain and became private property over which the Director of Lands has neither control nor jurisdiction." 2. Lee Hong Hok v. David,98 where the Court declared "After the registration and issuance of the certificate and duplicate certificate of title based on a public land patent, the land covered thereby automatically comes under the operation of Republic Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled "While the Director of Lands has the power to review homestead patents, he may do so only so long as the land remains part of the public domain and continues to be under his exclusive control; but once the patent is registered 148

and a certificate of title is issued, the land ceases to be part of the public domain and becomes private property over which the Director of Lands has neither control nor jurisdiction." 4. Manalo v. Intermediate Appellate Court,100 where the Court held – "When the lots in dispute were certified as disposable on May 19, 1971, and free patents were issued covering the same in favor of the private respondents, the said lots ceased to be part of the public domain and, therefore, the Director of Lands lost jurisdiction over the same." 5.Republic v. Court of Appeals,101 where the Court stated – "Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the whole lot, validly sufficient for initial registration under the Land Registration Act. Such land grant is constitutive of a 'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section 122 of the Act, which governs the registration of grants or patents involving public lands, provides that 'Whenever public lands in the Philippine Islands belonging to the Government of the United States or to the Government of the Philippines are alienated, granted or conveyed to persons or to public or private corporations, the same shall be brought forthwith under the operation of this Act (Land Registration Act, Act 496) and shall become registered lands.'" The first four cases cited involve petitions to cancel the land patents and the corresponding certificates of titles issued to private parties. These four cases uniformly hold that the Director of Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land automatically comes under the Torrens System. The fifth case cited involves the registration under the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao Medical Center, a government unit under the Department of Health. The National Government transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the registration of the 12.8hectare public land in the name of Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is an example of a public land being registered under Act No. 496 without the land losing its character as a property of public dominion. In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEA's patent or certificates of title. In fact, the thrust of the instant petition is that PEA's certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation. 149

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does not give the registrant a better right than what the registrant had prior to the registration.102 The registration of lands of the public domain under the Torrens system, by itself, cannot convert public lands into private lands. 103 Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of the public domain automatically becomes private land cannot apply to government units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit: "NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the Public Estates Authority the aforesaid tracts of land containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical description of which are hereto attached and made an integral part hereof." (Emphasis supplied) Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of alienable lands of the public domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated on the certificate of title. 104 Alienable lands of the public domain held by government entities under Section 60 of CA No. 141 remain public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing their disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed alienable lands of the public domain because of the constitutional ban. Only individuals can benefit from such law. The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable lands of the public domain must be transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public domain as private or patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow private corporations to acquire directly from government agencies limitless areas of lands which, prior to such law, are concededly public lands.

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Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that – "EXECUTIVE ORDER NO. 525 Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation Projects Whereas, there are several reclamation projects which are ongoing or being proposed to be undertaken in various parts of the country which need to be evaluated for consistency with national programs; Whereas, there is a need to give further institutional support to the Government's declared policy to provide for a coordinated, economical and efficient reclamation of lands; Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the National Government or any person authorized by it under proper contract; Whereas, a central authority is needed to act on behalf of the National Government which shall ensure a coordinated and integrated approach in the reclamation of lands; Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government corporation to undertake reclamation of lands and ensure their maximum utilization in promoting public welfare and interests; and Whereas, Presidential Decree No. 1416 provides the President with continuing authority to reorganize the national government including the transfer, abolition, or merger of functions and offices. NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby order and direct the following: Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity authorized under its charter 151

shall be undertaken in consultation with the PEA upon approval of the President. x x x ." As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands. Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA's name does not automatically make such lands private. To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong. This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations amassing huge landholdings never before seen in this country - creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition. The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529, automatically become private lands is contrary to existing laws. Several laws authorize lands of the public domain to be registered under the Torrens System or Act No. 152

496, now PD No. 1529, without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows: Act No. 496 "Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the Philippine Islands are alienated, granted, or conveyed to persons or the public or private corporations, the same shall be brought forthwith under the operation of this Act and shall become registered lands." PD No. 1529 "Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree." (Emphasis supplied) Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529 includes conveyances of public lands to public corporations. Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress." This provision refers to government reclaimed, foreshore and marshy lands of the public domain that have been titled but still cannot be alienated or encumbered unless expressly authorized by Congress. The need for legislative authority prevents the registered land of the public domain from becoming private land that can be disposed of to qualified private parties. The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states – "Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: (1) x x x (2) For property belonging to the Republic of the Philippines, but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality." (Emphasis supplied)

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Thus, private property purchased by the National Government for expansion of a public wharf may be titled in the name of a government corporation regulating port operations in the country. Private property purchased by the National Government for expansion of an airport may also be titled in the name of the government agency tasked to administer the airport. Private property donated to a municipality for use as a town plaza or public school site may likewise be titled in the name of the municipality. 106 All these properties become properties of the public domain, and if already registered under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in any existing law for the de-registration of land from the Torrens System. Private lands taken by the Government for public use under its power of eminent domain become unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the Register of Deeds to issue in the name of the National Government new certificates of title covering such expropriated lands. Section 85 of PD No. 1529 states – "Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is expropriated or taken by eminent domain, the National Government, province, city or municipality, or any other agency or instrumentality exercising such right shall file for registration in the proper Registry a certified copy of the judgment which shall state definitely by an adequate description, the particular property or interest expropriated, the number of the certificate of title, and the nature of the public use. A memorandum of the right or interest taken shall be made on each certificate of title by the Register of Deeds, and where the fee simple is taken, a new certificate shall be issued in favor of the National Government, province, city, municipality, or any other agency or instrumentality exercising such right for the land so taken. The legal expenses incident to the memorandum of registration or issuance of a new certificate of title shall be for the account of the authority taking the land or interest therein." (Emphasis supplied) Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws. AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA "is not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP under its 1973 contract with the Republic." Whether the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA requires PEA to "cause the issuance and delivery of the certificates of title conveying AMARI's Land Share in the name of AMARI."107 This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private corporations "shall not hold such alienable lands of the public domain 154

except by lease." The transfer of title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or alienation under CA No. 141,the Government Auditing Code, and Section 3, Article XII of the 1987 Constitution. The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part of the public domain and are also inalienable, unless converted pursuant to law into alienable or disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis, not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential as areas for public use or public service. Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of the State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to private corporations, do so at their own risk. We can now summarize our conclusions as follows: 1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws. 2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man. 3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares110 of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. 4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of still submerged areas of Manila Bay, such transfer is 155

void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio. Seventh issue: whether the Court is the proper forum to raise the issue of whether the Amended JVA is grossly disadvantageous to the government. Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual matters. WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint Venture Agreement which is hereby declared NULL and VOID ab initio. SO ORDERED.

4. [G.R. No. 103882. November 25, 1998] 156

REPUBLIC OF THE PHILIPPINES, petitioner, vs. THE HONORABLE COURT OF APPEALS AND REPUBLIC REAL ESTATE CORPORATION, respondents. CULTURAL CENTER OF THE PHILIPPINES, intervenor.

[G.R. No. 105276. November 25, 1998]

PASAY CITY AND REPUBLIC REAL ESTATE CORPORATION, petitioners, vs. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, respondents. DECISION PURISIMA, J.: At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised Rules of Court. Here, the Court is confronted with a case commenced before the then Court of First Instance (now Regional Trial Court) of Rizal in Pasay City, in 1961, more than 3 decades back, that has spanned six administrations of the Republic and outlasted the tenure of ten (10) Chief Justices of the Supreme Court. In G.R. No. 103882, the Republic of the Philippines, as petitioner, assails the Decision, dated January 29, 1992 and Amended Decision, dated April 28, 1992, of the Court of Appealsi, which affirmed with modification the Decision of the former Court of First Instance of Rizal (Branch 7, Pasay City) in Civil Case No. 2229-P, entitled Republic of the Philippines versus Pasay City and Republic Real Estate Corporation. The facts that matter are, as follows: FACTS: Republic Act No. 1899 (RA 1899), which was approved on June 22, 1957, authorized the reclamation of foreshore lands by chartered cities and municipalities. Section I of said law, reads: SECTION 1. Authority is hereby granted to all municipalities and chartered cities to undertake and carry out at their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications. On May 6, 1958, invoking the aforecited provision of RA 1899, the Pasay City Council passed Ordinance No. 121, for the reclamation of Three Hundred (300) hectares of foreshore lands in Pasay City, empowering the City Mayor to award and enter into reclamation contracts, and prescribing terms and conditions therefor. The said Ordinance was amended on April 21, 1959 by Ordinance No. 158, which authorized the Republic Real Estate Corporation (RREC) to reclaim foreshore lands of Pasay City under certain terms and 157

conditions. On April 24, 1959, Pasay City and RREC entered into an Agreement ii for the reclamation of the foreshore lands in Pasay City. On December 19, 1961, the Republic of the Philippines (Republic) filed a Complaintiii for Recovery of Possession and Damages with Writ of Preliminary Preventive Injunction and Mandatory Injunction, docketed as Civil Case No. 2229-P before the former Court of First Instance of Rizal, (Branch 7, Pasay City). On March 5, 1962, the Republic of the Philippines filed an Amended Complaint iv questioning subject Agreement between Pasay City and RREC (Exhibit P) on the grounds that the subject-matter of such Agreement is outside the commerce of man, that its terms and conditions are violative of RA 1899, and that the said Agreement was executed without any public bidding. The Answersv of RREC and Pasay City, dated March 10 and March 14, 1962, respectively, averred that the subject-matter of said Agreement is within the commerce of man, that the phrase foreshore lands within the contemplation of RA 1899 has a broader meaning than the cited definition of the term in the Words and Phrases and in the Websters Third New International Dictionary and the plans and specifications of the reclamation involved were approved by the authorities concerned. On April 26,1962, Judge Angel H. Mojica, (now deceased) of the former Court of First Instance of Rizal (Branch 7, Pasay City) issued an Ordervi the dispositive portion of which was to the following effect: WHEREFORE, the court hereby orders the defendants, their agents, and all persons claiming under them, to refrain from further reclaiming or committing acts of dispossession or dispoilation over any area within the Manila Bay or the Manila Bay Beach Resort, until further orders of the court. On the following day, the same trial court issued a writ of preliminary injunction vii which enjoined the defendants, RREC and Pasay City, their agents, and all persons claiming under them from further reclaiming or committing acts of dispossession. Thereafter, a Motion to Interveneviii, dated June 27, 1962, was filed by Jose L. Bautista, Emiliano Custodio, Renato Custodio, Roger de la Rosa, Belen Gonzales, Norma Martinez, Emilia E. Paez, Ambrosio R. Parreno, Antolin M. Oreta, Sixto L. Orosa, Pablo S. Sarmiento, Jesus Yujuico, Zamora Enterprises, Inc., Industrial and Commercial Factors, Inc., Metropolitan Distributors of the Philippines, and Bayview Hotel, Inc. stating inter alia that they were buyers of lots in the Manila Bay area being reclaimed by RREC, whose rights would be affected by whatever decision to be rendered in the case. The Motion was granted by the trial court and the Answer attached thereto admitted. ix The defendants and the intervenors then moved to dismiss x the Complaint of the Republic, placing reliance on Section 3 of Republic Act No. 5187, which reads: Sec. 3. Miscellaneous Projects xxx 158

m. For the construction of seawall and limited access highway from the south boundary of the City of Manila to Cavite City, to the south, and from the north boundary of the City of Manila to the municipality of Mariveles, province of Bataan, to the north, including the reclamation of the foreshore and submerged areas: Provided, That priority in the construction of such seawalls, highway and attendant reclamation works shall be given to any corporation and/or corporations that may offer to undertake at its own expense such projects, in which case the President of the Philippines may, after competitive bidding, award contracts for the construction of such projects, with the winning bidder shouldering all costs thereof, the same to be paid in terms of percentage fee of the contractor which shall not exceed fifty percent of the area reclaimed by the contractor and shall represent full compensation for the purpose, the provisions of the Public Land Law concerning disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided, finally, that the foregoing provisions and those of other laws, executive orders, rules and regulations to the contrary notwithstanding, existing rights, projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected. x x x. (underscoring ours) Since the aforecited law provides that existing contracts shall be respected, movants contended that the issues raised by the pleadings have become moot, academic and of no further validity or effect. Meanwhile, the Pasay Law and Conscience Union, Inc. (PLCU) moved to intervenexi, alleging as legal interest in the matter in litigation the avowed purpose of the organization for the promotion of good government in Pasay City. In its Order of June 10, 1969, the lower court of origin allowed the said interventionxii. On March 24, 1972, the trial court of origin came out with a Decision, disposing, thus: WHEREFORE, after carefully considering (1) the original complaint, (2) the first Amended Complaint, (3) the Answer of Defendant Republic Real Estate Corporation to the first Amended Complaint, (4) the Answer of Defendant Pasay City to the first Amended Complaint, (5) the Second Amended Complaint, (6) the Answer of Defendant Republic Real Estate Corporation to the Second Amended Complaint, (7) the Answer of Defendant Pasay City to the Second Amended Complaint, (8) the Memorandum in Support of Preliminary Injunction of Plaintiff, (9) the Memorandum In Support of the Opposition to the Issuance of Preliminary Injunction of Defendant Pasay City and Defendant Republic Real Estate Corporation, (10) the Answer in Intervention of Intervenors Bautista, et. al., (11) Plaintiffs Opposition to Motion to Intervene, (12) the Reply to Opposition to Motion to Intervene of Intervenors Bautista, et. al. , (13) the Stipulation of Facts by all the parties, (14) the Motion for Leave to Intervene of Intervenor Pasay Law and Conscience Union, Inc., (15) the Opposition to Motion For Leave to Intervene of Intervenors Bautista, et. al., (16) the Reply of Intervenor Pasay Law and Conscience Union, Inc., (17) the Supplement to Opposition to Motion to Intervene of Defendant Pasay City and Republic Real Estate Corporation, (18) the Complaint in Intervention of Intervenor Pasay Law and Conscience Union, Inc., (19) the Answer of Defendant Republic Real Estate Corporation, (20) the Answer of 159

Intervenor Jose L. Bautista, et. al., to Complaint in Intervention, (21) the Motion to Dismiss of Defendant Republic Real Estate Corporation, and Intervenors Bautista, et. al., (22) the Opposition of Plaintiff to said Motion to Dismiss, (23) the Opposition of Intervenor Pasay Law and Conscience Union, Inc., (24) the Memorandum of the Defendant Republic Real Estate Corporation, (25) the Memorandum for the Intervenor Pasay Law and Conscience Union, Inc., (26) the Manifestation of Plaintiff filed by the Office of the Solicitor General, and all the documentary evidence by the parties to wit: (a) Plaintiffs Exhibits A to YYY-4, (b) Defendant Republic Real Estate Corporations Exhibits 1-RREC to 40-a and (c) Intervenor Pasay Law and Conscience Union, Incs., Exhibits A-PLACU to C-PLACU, the Court hereby: (1) Denies the Motion to Dismiss filed on January 10, 1968, by Defendant Republic Real Estate Corporation and Intervenors Bautista, et. al., as it is the finding of this Court that Republic Act No. 5187 was not passed by Congress to cure any defect in the ordinance and agreement in question and that the passage of said Republic Act No. 5187 did not make the legal issues raised in the pleadings moot, academic and of no further validity or effect; and (2) Renders judgment: (a) dismissing the Plaintiffs Complaint; (b) Dismissing the Complaint in Intervention of Intervenor Pasay Law and Conscience Union, Inc., (c)Enjoining Defendant Republic Real Estate Corporation and Defendant Pasay City to have all the plans and specifications in the reclamation approved by the Director of Public Works and to have all the contracts and sub-contracts for said reclamation awarded by means of, and only after, public bidding; and (d) Lifting the preliminary Injunction issued by the Court on April 26, 1962, as soon as Defendant Republic Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans and specifications to the Director of Public Works, and shall have obtained approval thereof, and as soon as the corresponding public bidding for the award to the contractor and sub-contractor that will undertake the reclamation project shall have been effected. No pronouncement as to costs. SO ORDERED. (See Court of Appeals Decision dated January 28, 1992; pp. 6-8) Dissatisfied with the said judgment, the Republic appealed therefrom to the Court of Appeals. However, on January 11, 1973, before the appeal could be resolved, Presidential Decree No. 3-A issued, amending Presidential Decree No. 3, thus: SECTION 1. Section 7 of Presidential Decree No. 3, dated September 26, 1972, is 160

hereby amended by the addition of the following paragraphs: The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under a proper contract. All reclamations made in violation of this provision shall be forfeited to the State without need of judicial action. Contracts for reclamation still legally existing or whose validity has been accepted by the National Government shall be taken over by the National Government on the basis of quantum meruit, for proper prosecution of the project involved by administration. On November 20, 1973, the Republic and the Construction Development Corporation of the Philippines (CDCP) signed a Contractxiii for the Manila-Cavite Coastal Road Project (Phases I and II) which contract included the reclamation and development of areas covered by the Agreement between Pasay City and RREC. Then, there was issued Presidential Decree No. 1085 which transferred to the Public Estate Authority (PEA) the rights and obligations of the Republic of the Philippines under the contract between the Republic and CDCP. Attempts to settle amicably the dispute between representatives of the Republic, on the one hand, and those of Pasay City and RREC, on the other, did not work out. The parties involved failed to hammer out a compromise. On January 28, 1992, the Court of Appeals came out with a Decision xiv dismissing the appeal of the Republic and holding, thus: WHEREFORE, the decision appealed from is hereby AFFIRMED with the following modifications: 1. The requirement by the trial court on public bidding and the submission of RRECs plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic; 2. Ordering the plaintiff-appellant to turn over to Pasay City the ownership and possession over all vacant spaces in the twenty-one hectare area already reclaimed by Pasay City and RREC at the time it took over the same. Areas thereat over which permanent structures has (sic) been introduced shall, including the structures, remain in the possession of the present possessor, subject to any negotiation between Pasay City and the said present possessor, as regards the continued possession and ownership of the latter area. 3. Sustaining RRECs irrevocable option to purchase sixty (60%) percent of the Twenty-One (21) hectares of land already reclaimed by it, to be exercised within one (1) year from the finality of this decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract, 161

and enjoining appellee Pasay City to respect RRECs option. SO ORDERED. On February 14, 1992, Pasay City and RREC presented a Motion for Reconsideration of such Decision of the Court of Appeals, contending, among others, that RREC had actually reclaimed Fifty-Five (55) hectares, and not only Twenty-one (21) hectares, and the respondent Court of Appeals erred in not awarding damages to them, movants. On April 28, 1992, the Court of Appeals acted favorably on the said Motion for Reconsideration, by amending the dispositive portion of its judgment of January 28, 1992, to read as follows: WHEREFORE, the dispositive portion of our Decision dated January 28, 1992 is hereby AMENDED to read as follows: 1. The requirement by the trial court on public bidding and the submission of the RRECs plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic. 2. Ordering plaintiff-appellant to turn over to Pasay City the ownership and possession of the above enumerated lots (1 to 9). 3. Sustaining RRECs irrevocable option to purchase sixty (60%) percent of the land referred to in No. 2 of this dispositive portion, to be exercised within one (1) year from the finality of this Decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract, and enjoining Pasay City to respect RRECs irrevocable option. SO ORDERED. From the Decision and Amended Decision of the Court of Appeals aforementioned, the Republic of the Philippines, as well as Pasay City and RREC, have come to this Court to seek relief, albeit with different prayers. On September 10, 1997, the Court commissioned the former thirteenth Division of Court of Appeals to hear and receive evidence on the controversy. The corresponding Commissioners Report, dated November 25, 1997, was submitted and now forms part of the records. On October 11, 1997, the Cultural Center of the Philippines (CCP) filed a Petition in Intervention, theorizing that it has a direct interest in the case being the owner of subject nine (9) lots titled in its (CCP) name, which the respondent Court of Appeals ordered to be turned over to Pasay City. The CCP, as such intervenor, was allowed to present its evidence, as it did, before the Court of Appeals, which evidence has been considered in the formulation of this disposition. In G.R. No. 103882, the Republic of the Philippines theorizes, by way of assignment of errors, that: I 162

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF PASAY CITY ORDINANCE NO. 158 DATED APRIL 21, 1959 AND THE RECLAMATION CONTRACT ENTERED INTO BETWEEN PASAY CITY AND RREC; II THE COURT OF APPEALS ERRED IN FINDING THAT RREC HAD RECLAIMED 55 HECTARES AND IN ORDERING THE TURN-OVER TO PASAY CITY OF THE OWNERSHIP AND POSSESSION OF NINE (9) LOTS TITLED IN THE NAME OF CCP. In G.R. No. 105276, the petitioners, Pasay City and RREC, contend, that:: I THE COURT OF APPEALS ERRED IN NOT DECLARING PRESIDENTIAL DECREE NO. 3-A UNCONSTITUTIONAL; II THE COURT OF APPEALS ERRED IN NOT AWARDING DAMAGES IN FAVOR OF PASAY CITY AND RREC. Let us first tackle the issues posed in G.R. No. 103882. On the first question regarding the validity of Pasay City Ordinance No. 158 dated April 21, 1959 and the Agreement dated April 24, 1959 between Pasay City and RREC, we rule in the negative. Section 1 of RA 1899, reads: SECTION 1. Authority is hereby granted to all municipalities and chartered cities to undertake and carry out at their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications. It is the submission of the petitioner, Republic of the Philippines, that there are no foreshore lands along the seaside of Pasay Cityxv; that what Pasay City has are submerged or offshore areas outside the commerce of man which could not be a proper subject matter of the Agreement between Pasay City and RREC in question as the area affected is within the National Park, known as Manila Bay Beach Resort, established under Proclamation No. 41, dated July 5, 1954, pursuant to Act No. 3915, of which area it (Republic) has been in open, continuous and peaceful possession since time immemorial. Petitioner faults the respondent court for unduly expanding what may be considered foreshore land through the following disquisition: The former Secretary of Justice Alejo Mabanag, in response to a request for an opinion from the then Secretary of Public Works and Communications as to whether the term foreshore areas as used in Section I of the immediately aforequoted law is that defined in Websters Dictionary and the Law of Waters so as to make any 163

dredging or filling beyond its prescribed limit illegal, opined: According to the basic letter of the Director of Public Works, the law of Waters speaks of shore and defines it thus: that space movement of the tide. Its interior or terrestrial limit in the line reached by highest equinoctial tides. Websters definition of foreshore reads as follows: That part of the shore between high water and low-water marks usually fixed at the line to which the ordinary means tide flows: also, by extension, the beach, the shore near the waters edge. If we were to be strictly literal the term foreshore or foreshore lands should be confined to but a portion of the shore, in itself a very limited area. (p. 6, Intervenors-appellees brief). Bearing in mind the (Websters and Law of Waters) definitions of shore and of foreshore lands, one is struck with the apparent inconsistency between the areas thus described and the purpose to which that area, when reclaimed under the provision of Republic Act No. 1899, shall be devoted. Section I (of said Law) authorizes the construction thereat of adequate docking and harbor facilities. This purpose is repeated in Sections 3 and 4 of the Act. And yet, it is well known fact that foreshore lands normally extend only from 10 to 20 meters along the coast. Not very much more if at all. In fact, certain parts in Manila bordering on Manila Bay, has no foreshore to speak of since the sea washes the sea wall. It does not seem logical, then, that Congress had in mind. Websters limited concept of foreshore when it enacted Republic Act No. 1899, unless it intends that the wharves, piers, docks, etc. should be constructed parallel to the shore, which is impractical. Since it is to be presumed that Congress could not have intended to enact an ineffectual measure not one that would lead to absurd consequences, it would seem that it used foreshore in a sense wider in scope that that defined by Webster. xxx To said opinion on the interpretation of the R.A. 1899, plaintiff-appellant could not offer any refutation or contrary opinion. Neither can we. In fact, the above construction is consistent with the rule on context in statutory construction which provides that in construing a statute, the same must be construed as a whole. The particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole (see Araneta vs. Concepcion, 99 Phil. 709). There are two reasons for this. Firstly, the force and significance of particular expressions will largely depend upon the connection in which they are found and their relation to the general subject-matter of the law. The legislature must be understood to have expressed its whole mind on the special object to which the legislative act is directed but the vehicle for the expressions of that 164

meaning is the statute, considered as one entire and continuous act, and not as an agglomeration of unrelated clauses . Each clause or provision will be illuminated by those which are cognate to it and by the general tenor of the whole statute and thus obscurities and ambiguities may often be cleared up by the most direct and natural means. Secondly, effect must be given, if it is possible, to every word and clause of the statute, so that nothing shall be left devoid of meaning or destitute of force. To this end, each provision of the statute should be read in the light of the whole. For the general meaning of the legislature, as gathered from the entire act, may often prevail over the construction which would appear to be the most natural and obvious on the face of a particular clause. It is by this means that contradiction and repugnance between the different parts of the statute may be avoided. (See Black, Interpretation of Laws, 2nd Ed., pp. 317-319). Resorting to extrinsic aids, the Explanatory Note to House Bill No. 3630, which was subsequently enacted as Republic Act No. 1899, reads: In order to develop and expand the Maritime Commerce of the Philippines, it is necessary that harbor facilities be correspondingly improved, and, where necessary, expanded and developed. The national government is not in a financial position to handle all this work. On the other hand, with a greater autonomy, many chartered cities and provinces are financially able to have credit position which will allow them to undertake these projects. Some cities, such as the City of Bacolod under R.A. 161, has been authorized to reclaim foreshore lands bordering it. Other cities and provinces have continuously been requesting for authority to reclaim foreshore lands on the basis of the Bacolod City pattern, and to undertake work to establish, construct on the reclaimed area and maintain such port facilities as may be necessary. In order not to unduly delay the undertaking of these projects, and inorder to obviate the passage of individual pieces of legislation for every chartered city and province, it is hereby recommended that the accompanying bill be approved. It covers Authority for All chartered cities and provinces to undertake this work. x x x (underscoring supplied) Utilizing the above explanatory note in interpreting and construing the provisions of R.A. 1899, then Secretary of Justice Mabanag opined: It is clear that the Bacolod City pattern was the basis of the enactment of the aforementioned bill of general application. This so-called Bacolod City pattern appears to be composed of 3 parts, namely: Republic Act No. 161, which grants authority to Bacolod City to undertake or carry out ... the reclamation ... of any [sic] carry out the reclamation project conformably with Republic Act No. 161; and Republic Act No. 1132 authorizing Bacolod City to contract indebtedness or to issue bonds in the amount not exceeding six million pesos to finance the reclamation of land in said city. Republic Act No. 161 did not in itself specify the precise space therein 165

referred to as foreshore lands, but it provided that docking and harbor facilities should be erected on the reclaimed portions thereof, while not conclusive would indicate that Congress used the word foreshore in its broadest sense. Significantly, the plan of reclamation of foreshore drawn up by the Bureau of Public Works maps out an area of approximately 1,600,000 square meters, the boundaries of which clearly extend way beyond Websters limited concept of the term foreshore. As a contemporaneous construction by that branch of the Government empowered to oversee at least, the conduct of the work, such an interpretation deserves great weight. Finally, Congress in enacting Republic Act No. 1132 (supplement to RA 161), tacitly confirmed and approved the Bureaus interpretation of the term foreshore when instead of taking the occasion to correct the Bureau of over extending its plan, it authorized the city of Bacolod to raise the full estimated cost of reclaiming the total area covered by the plan. The explanatory note to House Bill No. 1249 which became Republic Act No. 1132 states among the things: The Bureau of Public Works already prepared a plan for the reclamation of about 1,600,000 square meters of land at an estimated costs of about P6,000,000.00. The project is selfsupporting because the proceeds from the sales or leases of lands so reclaimed will be more than sufficient to cover the cost of the project. Consequently, when Congress passed Republic Act No. 1899 in order to facilitate the reclamation by local governments of foreshore lands on the basis of the Bacolod City pattern and in order to obviate the passage of individual pieces of legislation for every chartered city and provinces requesting authority to undertake such projects, the lawmaking body could not have had in mind the limited area described by Webster as foreshore lands. x x x. If it was really the intention of Congress to limit the area to the strict literal meaning of foreshore lands which may be reclaimed by chartered cities and municipalities, Congress would have excluded the cities of Manila, Iloilo, Cebu, Zamboanga and Davao from the operation of RA 1899 as suggested by Senator Cuenco during the deliberation of the bill considering that these cities do not have foreshore lands in the strict meaning of the term. Yet, Congress did not approve the proposed amendment of Senator Cuenco, implying therefore, that Congress intended not to limit the area that may be reclaimed to the strict definition of foreshore lands. The opinion of the then Secretary of Justice Mabanag, who was at that time the chief law officer and legal adviser of the government and whose office is required by law to issue opinions for the guidance of the various departments of the government, there being then no judicial interpretation to the contrary, is entitled to respect (see Bengzon vs. Secretary of Justice and Insular Auditor, 68 Phil. 912). We are not unmindful of the Supreme Court Resolution dated February 3, 1965 in Ponce vs. Gomez (L-21870) and Ponce vs. City of Cebu (L-2266 , by a unanimous vote 166

of six (6) justices (the other five (5) members deemed it unnecessary to express their view because in their opinion the questions raised were not properly brought before the court), which in essence applied the strict dictionary meaning of foreshore lands as used in RA 1899 in the case of the city of Cebu. But this was promulgated long after the then Secretary of Justice Mabanag rendered the above opinion on November 16, 1959 and long after RREC has started the subject reclamation project. Furthermore, as held by the lower court, Congress, after the Supreme Court issued the aforementioned Resolution, enacted RA 5187. In Sec. 3 (m) of said law, Congress appropriated money for the construction of the seawall and limited access highway from the South boundary of the city of Manila to Cavite City, to the South, and from the North boundary of the city of Manila to the municipality of Mariveles, province of Bataan, to the North (including the reclamation of foreshore and submerged areas ... provided ... that ... existing projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected... This is a clear manifestation that Congress in enacting RA 1899, did not intend to limit the interpretation of the term foreshore land to its dictionary meaning. It is presumed that the legislature was acquainted with and had in mind the judicial construction given to a former statute on the subject, and that the statute on the subject, and that the statute was enacted having in mind the judicial construction that the prior enactment had received , or in the light of such existing judicial decisions as have direct bearing upon it (see 50 Am. Jur., Sec. 321, pp. 312-313). But notwithstanding said interpretation by the Supreme Court of RA 1899 in the Ponce cases, Congress enacted a law covering the same areas previously embraced in a RA 1899 (as mentioned earlier, cities without foreshore lands which were sought to be excluded from the operation of RA 1899 were not excluded), providing that respect be given the reclamation of not only foreshore lands but also of submerged lands signifying its non-conformity to the judicial construction given to RA 1899. If Congress was in accord with the interpretation and construction made by the Supreme Court on RA 1899, it would have mentioned reclamation of foreshore lands only in RA 5187, but Congress included submerged lands in order to clarify the intention on the grant of authority to cities and municipalities in the reclamation of lands bordering them as provided in RA 1899. It is, therefore, our opinion that it is actually the intention of Congress in RA 1899 not to limit the authority granted to cities and municipalities to reclaim foreshore lands in its strict dictionary meaning but rather in its wider scope as to include submerged lands. The Petition is impressed with merit. To begin with, erroneous and unsustainable is the opinion of respondent court that under RA 1899, the term foreshore lands includes submerged areas. As can be gleaned from its disquisition and rationalization aforequoted, the respondent court unduly stretched and broadened the meaning of foreshore lands, beyond the intentment of the law, and against the recognized legal connotation of foreshore lands. Well entrenched, to the point of being elementary, is the rule that when the law speaks in clear and categorical language, there is 167

no reason for interpretation or construction, but only for application. xvi So also, resort to extrinsic aids, like the records of the constitutional convention, is unwarranted, the language of the law being plain and unambiguous. xvii Then, too, opinions of the Secretary of Justice are unavailing to supplant or rectify any mistake or omission in the law. xviii To repeat, the term foreshore lands refers to: The strip of land that lies between the high and low water marks and that is alternately wet and dry according to the flow of the tide. (Words and Phrases, Foreshore) A strip of land margining a body of water (as a lake or stream); the part of a seashore between the low-water line usually at the seaward margin of a low-tide terrace and the upper limit of wave wash at high tide usually marked by a beach scarp or berm. (Websters Third New International Dictionary) The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot broaden its meaning, much less widen the coverage thereof. If the intention of Congress were to include submerged areas, it should have provided expressly. That Congress did not so provide could only signify the exclusion of submerged areas from the term foreshore lands. Neither is there any valid ground to disregard the Resolution of this Court dated February 3, 1965 in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) despite the enactment of Republic Act No. 5187 (RA 5187), the relevant portion of which, reads: Sec. 3. Miscellaneous Projects xxx m. For the construction of seawall and limited access highway from the south boundary of the City of Manila to Cavite City, to the south, and from the north boundary of the City of Manila to the municipality of Mariveles, province of Bataan, to the north, including the reclamation of the foreshore and submerged areas: Provided, That priority in the construction of such seawalls, highway and attendant reclamation works shall be given to any corporation and/or corporations that may offer to undertake at its own expense such projects, in which case the President of the Philippines may, after competitive bidding, award contracts for the construction of such projects, with the winning bidder shouldering all costs thereof, the same to be paid in terms of percentage fee of the contractor which shall not exceed fifty percent of the area reclaimed by the contractor and shall represent full compensation for the purpose, the provisions of the Public Land Law concerning disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided, finally, that the foregoing provisions and those of other laws, executive orders, rules and regulations to the contrary notwithstanding, existing rights, projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected. x x x. There is nothing in the foregoing provision of RA 5187 which can be interpreted to broaden the scope of foreshore lands. The said law is not amendatory to RA 1899. It is an 168

Appropriations Act, entitled AN ACT APPROPRIATING FUNDS FOR PUBLIC WORKS, SYNCHRONIZING THE SAME WITH PREVIOUS PUBLIC WORKS APPROPRIATIONS. All things viewed in proper perspective, we reiterate what was said in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) that the term foreshore refers to that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides. As opined by this Court in said cases: WHEREAS, six (6) members of the Court (Justices Bautista Angelo, Concepcion, Reyes, Barrera, Dizon and Jose P. Bengzon) opine that said city ordinance and contracts are ultra vires and hence, null and void, insofar as the remaining 60% of the area aforementioned, because the term foreshore lands as used in Republic Act No. 1899 should be understood in the sense attached thereto by common parlance; (underscoring ours) The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his opinion dated December 22, 1966, in a case with analogous facts as the present one, to wit: December 22, 1966 The Secretary of Agriculture and Natural Resources Diliman, Quezon City Sir: xxx I. Facts 1. On January 19, 1961, pursuant to the provisions of Republic Act No. 1899, the Municipality of Navotas enacted Ordinance No. 1 authorizing the Municipal Mayor to enter into a reclamation contract with Mr. Chuanico. 2. On March 15, 1961, a reclamation contract was concluded between the Municipality of Navotas, represented by the Municipal Mayor, and Mr. Chuanico in accordance with the above ordinance. Thereunder, Mr. Chuanico shall be the attorney-in-fact of the Municipality in prosecuting the reclamation project and shall advance the money needed therefor; that the actual expenses incurred shall be deemed a loan to the Municipality; that Mr. Chuanico shall have the irrevocable option to buy 70% of the reclaimed area at P7.00 per square meter; that he shall have the full and irrevocable powers to do any and all things necessary and proper in and about the premises, including the power to hire necessary personnel for the prosecution of the work, purchase materials and supplies, and purchase or lease construction machineries and equipment, but any and all contracts to be concluded by him in behalf of the Municipality shall be submitted to public bidding. xxx 3. On March 16, 1961, the Municipal Council of Navotas passed Resolution No. 22 approving and ratifying the contract. 169

xxx III. Comments 1. The above reclamation contract was concluded on the basis of Navotas Ordinance No. 1 which, in turn, had been enacted avowedly pursuant to Republic Act No. 1899. This being so, the contract, in order to be valid, must conform to the provisions of the said law. By authorizing local governments to execute by administration any reclamation work, (Republic Act No. 1899 impliedly forbids the execution of said project by contract. Thus, in the case of Ponce et al. vs. Gomez (February 3, 1966), five justices of the Supreme Court voted to annul the contract between Cebu Development Corporation and Cebu City for the reclamation of foreshore lands because the provisions of said ... contract are not ... in accordance with the provisions of Republic Act No. 1899, as against one Justice who opined that the contract substantially complied with the provisions of the said law. (Five Justices expressed no opinion on this point.) Inasmuch as the Navotas reclamation contract is substantially similar to the Cebu reclamation contract, it is believed that the former is likewise fatally defective. 2. The Navotas reclamation project envisages the construction of a channel along the Manila Bay periphery of that town and the reclamation of approximately 650 hectares of land from said channel to a seaward distance of one kilometer. In the basic letter it is stated that practically, all the 650 hectares of lands proposed to be reclaimed under the agreement do not constitute foreshore lands and that the greater portion of the area . . . is in fact navigable and presently being used as a fishing harbor by deep-sea fishing operators as well as a fishing ground of sustenance fisherman. Assuming the correctness of these averments, the Navotas reclamation contract evidently transcends the authority granted under Republic Act No. 1899, which empowers the local governments to reclaim nothing more than foreshore lands, i.e., that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides. (26 C.J. 890.) It was for this reason that in the cited case Ponce case, the Supreme Court, by a vote of 6-0 with five Justices abstaining, declared ultra vires and void the contractual stipulation for the reclamation of submerged lands off Cebu City, and permanently enjoined its execution under Republic Act No. 1899. xxx In accordance with the foregoing, I have the honor to submit the view that the Navotas reclamation contract is not binding and should be disregarded for noncompliance with law. Very truly yours, (SGD) CLAUDIO TEEHANKEE Secretary of Justice 170

The said opinion of Justice Secretary Teehankee who became Associate Justice, and later Chief Justice, of this Court, did, in our considered view, supersede the earlier opinion of former Justice Secretary Alejo Mabanag, aforestated, as the cases, in connection with which subject opinions were sought, were with similar facts. The said Teehankee opinion accords with RA 1899. It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended by Ordinance No. 158, and the Agreement under attack, have been found to be outside the intendment and scope of RA 1899, and therefore ultra vires and null and void. What is worse, the same Agreement was vitiated by the glaring absence of a public bidding. Obviously, there is a complete dearth of evidence to prove that RREC had really reclaimed 55 hectares. The letter of Minister Baltazar Aquino relied upon by RREC is no proof at all that RREC had reclaimed 55 hectares. Said letter was just referring to a tentative schedule of work to be done by RREC, even as it required RREC to submit the pertinent papers to show its supposed accomplishment, to secure approval by the Ministry of Public Works and Highways to the reclamation plan, and to submit to a public bidding all contracts and sub-contracts for subject reclamation project but RREC never complied with such requirements and conditions sine qua non. No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the reclamation project were presented to reflect any accomplishment. Not even any statement or itemization of works accomplished by contractors or subcontractors or vouchers and other relevant papers were introduced to describe the extent of RRECs accomplishment. Neither was the requisite certification from the City Engineer concerned that portions of the reclamation project not less than 50 hectares in area shall have been accomplished or completed obtained and presented by RREC. As a matter of fact, no witness ever testified on any reclamation work done by RREC, and extent thereof, as of April 26, 1962. Not a single contractor, sub-contractor, engineer, surveyor, or any other witness involved in the alleged reclamation work of RREC testified on the 55 hectares supposedly reclaimed by RREC. What work was done, who did the work, where was it commenced, and when was it completed, was never brought to light by any witness before the court. Certainly, onus probandi was on RREC and Pasay City to show and point out the as yet unidentified 55 hectares they allegedly reclaimed. But this burden of proof RREC and Pasay City miserably failed to discharge. So also, in the decision of the Pasay Court of First Instance dismissing the complaint of plaintiff-appellant, now petitioner Republic of the Philippines, the lifting of the writ of Preliminary Injunction issued on April 26, 1962 would become effective only as soon as Defendant Republic Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans and specifications to the Director of Public Works, and shall have obtained approval thereof, and as soon as corresponding public bidding for the award to the contractor and sub-contractor that will undertake the reclamation project shall have been effected. (Rollo, pp. 127-129, G.R. No. 103882) From the records on hand, it is abundantly clear that RREC and Pasay City never 171

complied with such prerequisites for the lifting of the writ of Preliminary Injunction. Consequently, RREC had no authority to resume its reclamation work which was stopped by said writ of preliminary injunction issued on April 26, 1962. From the Contract for Dredging Work, dated November 26, 1960, marked Exhibit 21-A for RREC before the lower court, and Exhibit EE for CCP before the Court of Appeals, it can be deduced that only on November 26, 1960 did RREC contract out the dredging work to C and A Construction Company, Inc., for the reclamation of the 55 hectares initially programmed to be reclaimed by it. But, as stated by RREC itself in the position paper filed with this Court on July 15, 1997, with reference to CDCPs reclamation work, mobilization of the reclamation team would take one year before a reclamation work could actually begin. Therefore, the reclamation work undertaken by RREC could not have started before November 26, 1961. Considering that on April 26, 1962 RREC was enjoined from proceeding any further with its reclamation work, it had barely five (5) months, from November, 1961 to April, 1962, to work on subject reclamation project. It was thus physically impossible for RREC to reclaim 55 hectares, with the stipulated specifications and elevation, in such a brief span of time. In the report of RREC (Exhibit DD for CCP), it was conceded that due to the writ of preliminary injunction issued on April 26, 1962, C and A Construction Co., Inc. had suspended its dredging operation since May, 1962. The graphical report on the Pasay Reclamation project, as of April 30, 1962, attached to the Progress Report marked Exhibit DD, is a schematic representation of the work accomplishment referred to in such Progress Report, indicating the various elevations of the land surface it embraced, ranging from 0.00 meters to the highest elevation of 2.5 meters above MLLW. Such portrayal of work accomplished is crucial in our determination of whether or not RREC had actually reclaimed any land as under its Contract for Dredging Work with C and A Construction Company (Exhibit EE), the required final elevation for a completely reclaimed land was 3.5 meters above MLLW, as explicitly provided in said Contract for Dredging Work. So, the irresistible conclusion is - when the work on subject RREC-Pasay City reclamation project stopped in April, 1962 in compliance with the writ of preliminary injunction issued by the trial court of origin, no portion of the reclamation project worked on by RREC had reached the stipulated elevation of 3.5 meters above MLLW. The entire area it worked on was only at sea level or 0.00 meter above MLLW. In short, RREC had not yet reclaimed any area when the writ of preliminary injunction issued in April 1962. On this point, the testimonies of Architect Ruben M. Protacio, Architect and Managing partner of Leandro V. Locsin and partners, Architect and City Planner Manuel T. Maoza, Jr. of Planning Resources and Operation System, Inc., Rose D. Cruz, Executive Assistant, Office of the President, from 1966 to 1970, and Dr. Lucrecia Kasilag, National Artist and member of CCP Advisory Committee, come to the fore. These credible, impartial and knowledgeable witnesses recounted on the witness stand that when the construction of the Main Building of the Cultural Center of the Philippines (CCP) began in 1966, the only surface land available was the site for the said building (TSN, Sept. 29, 1997, pages 8, 14 and 50), what could be seen in front of and behind it was all water (TSN, Sept. 29, 1997, pages 127-128). When the 172

CCP Main Building was being constructed, from 1966 to 1969, the land above sea level thereat was only where the CCP Main Building was erected and the rest of the surroundings were all under water, particularly the back portion fronting the bay. (TSN, Sept. 13, 1997, pp. 181, 182, 185, 186, 188). Dr. Lucrecia R. Kasilag stressed that on April 16, 1966, during the ground breaking for the CCP Main Building, it was water all around (TSN, Sept. 30, 1997, pp. 320, 324, 325). There was indeed no legal and factual basis for the Court of Appeals to order and declare that the requirement by the trial court on public bidding and the submission of RRECs plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic. Said requirement has never become moot and academic. It has remained indispensable, as ever, and non-compliance therewith restrained RREC from lawfully resuming the reclamation work under controversy, notwithstanding the rendition below of the decision in its favor. Verily, contrary to what the Court of Appeals found, RREC had not reclaimed any area with the prescribed elevation of 3.5 meters above MLLW, so much so that in 1978, it (RREC) opted to file with the former Ministry of Public Highways, a claim for compensation of P30,396,878.20, for reclamation work allegedly done before the CDCP started working on the reclamation of the CCP grounds. On September 7, 1979, RREC asked the Solicitor General to settle its subject claim for compensation at the same amount of P30,396,878.20. But on June 10, 1981, guided by the cost data, work volume accomplished and other relevant information gathered by the former Ministry of Public Highways, the Solicitor General informed RREC that the value of what it had accomplished, based on 1962 price levels, was only P8,344,741.29, and the expenses for mobilization of equipment amounted to P2,581,330.00. The aforesaid evaluation made by the government, through the then Minister of Public Highways, is factual and realistic, so much so that on June 25, 1981, RREC, in its reply letter to the Solicitor General, stated: We regret that we are not agreeable to the amount of P10,926,071.29, based on 1962 cost data, etc., as compensation based on quantum meruit. The least we would consider is the amount of P10.926,071.29 plus interest at the rate of 6% per annum from 1962 to the time of payment. We feel that 6% is very much less than the accepted rate of inflation that has supervened since 1962 to the present, and even less than the present legal rate of 12% per annum.xix Undoubtedly, what RREC claimed for was payment for what it had done, and for the dredge fill of 1,558,395 cubic meters it used, on subject reclamation project. Respondent Court likewise erred in ordering the turn-over to Pasay City of the following titled lots, to wit: LOT NO.

BUILDING

AREA

OCT/TCT

42

Gloria Maris Restaurant

9,516 sq.m.

OCT 159 in the name of GSIS

3

Asean Garden

76,299 sq.m. OCT 10251 in the 173

name of CCP 12

Folk Arts Theater and PICC parking space

1.7503 sq.m. TCT 18627 in the name of CCP

22

landscaped with sculpture of Asean Artists-site of Boom na Boom

132,924 sq.m.TCT 75676 in the name of CCP

23

open space, back of Philcite

34,346 sq.m. TCT 75677 in the name of CCP

24

Parking space for Star City, CCP, Philcite

10,352 sq.m. TCT 75678 in the name of CCP

25

open space, occupied by Star City

11,323 sq.m. TCT 75679 in the name of CCP

28

open space, beside PICC

27,689 sq.m. TCT 75684 in the name of CCP

29

open space, leased by El Shaddai

106,067 sq.m.TCT 75681 in the name of CCP

We discern no factual basis nor any legal justification therefor. In the first place, in their answer to the Complaint and Amended Complaint below, RREC and Pasay City never prayed for the transfer to Pasay City of subject lots, title to which had long become indefeasible in favor of the rightful title holders, CCP and GSIS, respectively. The annotation of a notice of lis pendens on the certificates of title covering the said lots is of no moment. It did not vest in Pasay City and RREC any real right superior to the absolute ownership thereover of CCP and GSIS. Besides, the nature of the action did not really warrant the issuance of a notice of lis pendens. Section 14 of Rule 13, Revised Rules of Civil Procedure, reads: Sec. 14. Notice of lis pendens. - In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of 174

filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names. The notice of lis pendens herein above mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded. Under the aforecited provision of law in point, a notice of lis pendens is necessary when the action is for recovery of possession or ownership of a parcel of land. In the present litigation, RREC and Pasay City, as defendants in the main case, did not counterclaim for the turnover to Pasay City of the titled lots aforementioned. What is more, a torrens title cannot be collaterally attacked. The issue of validity of a torrens title, whether fraudulently issued or not, may be posed only in an action brought to impugn or annul it. (Halili vs. National Labor Relations Commission, 257 SCRA 174; Cimafranca vs. Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and cannot be ignored, is the germane provision of Section 48 of P.D. 1529, that a certificate of title can never be the subject of a collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding instituted in accordance with law. Although Pasay City and RREC did not succeed in their undertaking to reclaim any area within subject reclamation project, it appearing that something compensable was accomplished by them, following the applicable provision of law and hearkening to the dictates of equity, that no one, not even the government, shall unjustly enrich oneself/itself at the expense of anotherxx, we believe; and so hold, that Pasay City and RREC should be paid for the said actual work done and dredge-fill poured in, worth P10,926,071.29, as verified by the former Ministry of Public Highways, and as claimed by RREC itself in its aforequoted letter dated June 25, 1981. It is fervently hoped that long after the end of our sojourn in this valley of tears, the court, for its herein historic disposition, will be exalted by the future generations of Filipinos, for the preservation of the national patrimony and promotion of our cultural heritage. As writer Channing rightly puts it: Whatever expands the affections, or enlarges the sphere of our sympathies - Whatever makes us feel our relation to the universe and all that it inherits in time and in eternity, and to the great and beneficent cause of all, must unquestionably refine our nature, and elevate us in the scale of being. WHEREFORE: In G.R. No. 103882, the Petition is GRANTED; the Decision, dated January 28, 1992, and Amended Decision, dated April 28, 1992, of the Court of Appeals, are both SET ASIDE; and Pasay City Ordinance No. 121, dated May 6, 1958, and Ordinance No. 158, dated April 21, 1959, as well as the Reclamation Agreements entered into by Pasay City and Republic Real Estate Corporation (RREC) as authorized by said city ordinances, are declared NULL and VOID for being ultra vires, and contrary to Rep. Act 1899. The writ of preliminary injunction issued on April 26, 1962 by the trial court a quo in 175

Civil Case No. 2229-P is made permanent, and the notice of lis pendens issued by the Court of Appeals in CA G.R. CV No. 51349 ordered CANCELLED. The Register of Deeds of Pasay City is directed to take note of and annotate on the certificates of title involved, the cancellation of subject notice of lis pendens. The petitioner, Republic of the Philippines, is hereby ordered to pay Pasay City and Republic Real Estate Corporation the sum of TEN MILLION NINE HUNDRED TWENTY-SIX THOUSAND SEVENTY-ONE AND TWENTY-NINE CENTAVOS (P10,926,071.29) PESOS, plus interest thereon of six (6%) percent per annum from May 1, 1962 until full payment, which amount shall be divided by Pasay City and RREC, share and share alike. In G.R. No. 105276, the Petition is hereby DENIED for lack of merit. No pronouncement as to costs. SO ORDERED.

5. SECOND DIVISION

BERNARDO DE LEON,

G.R. No. 181970

Petitioner,

-versus-

PUBLIC ESTATES AUTHORITY substituted by the CITY OF PARAAQUE, RAMON ARELLANO, JR., RICARDO PENA and REYMUNDO ORPILLA,

176

Respondents. x-----------------------------------------------x PUBLIC ESTATES AUTHORITY (now PHILIPPINE RECLAMATION AUTHORITY), substituted by the CITY OF PARAAQUE, G.R. No. 182678

Petitioner,

-versus-

Present:

HON. SELMA PALACIO ALARAS, in her CARPIO, J., Chairperson, capacity as the Acting Presiding Judge of * Branch 135, Regional Trial Court of CARPIO MORALES, Makati City, and BERNARDO DE LEON. PERALTA, Respondents. ABAD, and MENDOZA, JJ.

*

177

Promulgated:

August 3, 2010 x -------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Before the Court are two consolidated petitions. G.R. No. 181970 is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Bernardo de Leon seeking the reversal and setting aside of the Decision 93 of the Court of Appeals (CA), dated November 21, 2007, in CA-G.R. SP No. 90328 which dismissed his petition for certiorari. De Leon also assails the CA Resolution94 dated March 4, 2008 denying his Motion for Reconsideration. On the other hand, G.R. No. 182678 is a petition for certiorari under Rule 65 of the Rules of Court filed by the Public Estates Authority (PEA) 95 seeking the nullification of the

93

94

95

178

Orders dated December 28, 2007 and March 4, 2008 of the Regional Trial Court (RTC) of Makati City, Branch 135 in Civil Case No. 93-143. The pertinent factual and procedural antecedents of the case, as summarized by the CA, are as follows: FACTS: On [January 15, 1993], petitioner Bernardo De Leon (De Leon) filed a Complaint for Damages with Prayer for Preliminary Injunction before the Regional Trial Court [RTC] of Makati City, raffled to Branch 135, against respondent Public Estates Authority (PEA), a government-owned corporation, as well as its officers, herein private respondents Ramon Arellano, Jr., Ricardo Pena and Reymundo Orpilla. The suit for damages hinged on the alleged unlawful destruction of De Leons fence and houses constructed on Lot 5155 containing an area of 11,997 square meters, situated in San Dionisio, Paraaque, which De Leon claimed has been in the possession of his family for more than 50 years. Essentially, De Leon prayed that one, lawful possession of the land in question be awarded to him; two, PEA be ordered to pay damages for demolishing the improvements constructed on Lot 5155; and, three, an injunctive relief be issued to enjoin PEA from committing acts which would violate his lawful and peaceful possession of the subject premises. The court a quo found merit in De Leons application for writ of preliminary injunction and thus issued the Order dated 8 February 1993, pertinent portions of which read: After a careful consideration of the evidence presented and without going into the actual merits of the case, this Court finds that plaintiff (De Leon) has duly established by preponderance of evidence that he has a legal right over the subject matter of the instant case and is entitled to the injunctive relief demanded for and may suffer irreparable damage or injury if such right is not protected by Law [Rules (sic) 58, Section 3 of the Revised (Rules of Court)]. Premises considered upon plaintiffs (De Leons) filing of a bond in the amount of P500,000.00, let a writ of preliminary injunction be issued against the defendants, their agents, representatives and other persons (PEA and its officers) acting for and in their behalf are hereby enjoined from disturbing the 179

peaceful possession of plaintiff (De Leon) and his co-owners over Lot 5155 and further, from destroying and/or removing whatever other improvements thereon constructed, until further orders of this Court. SO ORDERED. (Emphasis supplied) PEA sought recourse before the Supreme Court through a Petition for Certiorari with Prayer for a Restraining Order, ascribing grave abuse of discretion against the court a quo for issuing injunctive relief. The Petition was later referred to this Court for proper determination and disposition, and was docketed as CA-G.R. SP No. 30630. On 30 September 1993, the Ninth Division of this Court rendered a Decision discerning that the court a quo did not act in a capricious, arbitrary and whimsical exercise of power in issuing the writ of preliminary injunction against PEA. The Ninth Division ruled that the court a quo was precisely careful to state in its Order that it was without going into the actual merits of the case and that the words plaintiff (De Leon) and his co-owners were used by the court a quo rather loosely and did not intend it to be an adjudication of ownership. Unfazed, PEA appealed to the Supreme Court via a Petition for Certiorari insisting that Lot 5155 was a salvage zone until it was reclaimed through government efforts in 1982. The land was previously under water on the coastline which reached nine to twenty meters deep. In 1989, PEA started constructing R-1 Toll Expressway Road for the Manila-Cavite Coastal Road, which project directly traversed Lot 5155. PEA argued that the documentary evidence presented by De Leon to bolster his fallacious claim of possession and ownership were procured only in 1992, thus negating his very own allegation that he and his predecessors-in-interest have been in occupation since time immemorial. Ruling squarely on the issue adduced before it, the Supreme Court declared that Lot 5155 was a public land so that De Leons occupation thereof, no matter how long ago, could not confer ownership or possessory rights. Prescinding therefrom, no writ of injunction may lie to protect De Leons nebulous right of possession. Accordingly, in its Decision dated 20 November 2000, the Supreme Court disposed of the controversy in this wise: WHEREFORE, the Court REVERSES the decision of the Court of Appeals in CA-G.R. SP No. 30630, and DISMISSES the 180

complaint in Civil Case No. 93-143 of the Regional Trial Court, Makati. No costs. SO ORDERED. The aforesaid Decision became final and executory as no motion for reconsideration was filed. In due course, PEA moved for the issuance of a writ of execution praying that De Leon and persons claiming rights under him be ordered to vacate and peaceably surrender possession of Lot 5155. Acting on PEAs motion, the court a quo issued the first assailed Order dated 15 September 2004, viz: Acting on the Motion For Issuance Of Writ of Execution filed by defendant Public Estate[s] Authority, and finding the same to be impressed with merit, the same is GRANTED. Let a Writ of Execution issue directing plaintiff, his agents, principals, successors-in-interest and all persons claiming rights under him to vacate and peaceably turn over possession of Lot 5155 to defendant Public Estate[s] Authority. SO ORDERED. As could well be expected, De Leon moved for reconsideration thereof and quashal of the writ of execution. He adamantly insisted that the court a quos Order for the issuance of the writ of execution completely deviated from the dispositive portion of the Supreme Courts Decision dated 20 November 2000 as it did not categorically direct him to surrender possession of Lot 5155 in favor of PEA. However, both motions met the same fate as these were denied by the court a quo in the second disputed Order dated 29 April 2005.96

96

181

Dissatisfied, De Leon filed another Motion for Reconsideration dated July 1, 2005, but the same was denied by the RTC in an Order dated July 27, 2005. De Leon then filed a special civil action for certiorari with the CA assailing the September 15, 2004 and April 29, 2005 Orders of the RTC of Makati City. This was docketed as CA-G.R. SP No. 90328. In the same proceeding, De Leon filed an Urgent-Emergency Motion for Temporary Restraining Order (TRO) and Issuance of Writ of Preliminary Injunction but the same was denied by the CA in a Resolution dated April 24, 2006.

Subsequently, De Leon filed a second special civil action for certiorari with the CA seeking to annul and set aside the same RTC Orders dated September 15, 2004 and April 29, 2005, as well as the RTC Order of July 27, 2005. The case was docketed as CA-G.R. SP No. 90984. On July 26, 2006, PEA filed a Very Urgent Motion for Issuance of Writ of Demolition 97 praying that the RTC issue a Special Order directing De Leon and persons claiming under him to remove all improvements erected inside the premises of the subject property and, in case of failure to remove the said structures, that a Special Order and Writ of Demolition be issued directing the sheriff to remove and demolish the said improvements. On October 11, 2006, the RTC issued an Order 98 holding in abeyance the Resolution of PEAs Motion. PEA filed a Motion for Reconsideration, 99 but it was denied by the RTC in an Order100 dated January 12, 2007. 97

98

99

100 182

On February 27, 2007, PEA filed an Omnibus Motion 101 to dismiss or, in the alternative, resolve the petitions in CA-G.R. SP No. 90328 and CA-G.R. SP No. 90984. In its Decision102 dated March 21, 2007, the CA dismissed De Leons petition in CAG.R. SP No. 90984 on the ground of forum shopping. Subsequently, on November 21, 2007, the CA also dismissed De Leons petition in CAG.R. SP No. 90328 holding that an earlier decision promulgated by the Supreme Court, finding the subject property to be public and that De Leon has no title and no clear legal right over the disputed lot, has already attained finality. 103 De Leon filed a Motion for Reconsideration, but the CA denied it via its Resolution104 dated March 4, 2008. Thereafter, PEA filed an Urgent Motion to Resolve (Re: Very Urgent Motion for Issuance of Writ of Demolition).105

101

102

103

104

105

183

On December 28, 2007, the RTC issued an Order 106 holding in abeyance the resolution of PEAs Motion pending receipt by the trial court of the entry of judgment pertaining to CA-G.R. SP No. 90328. PEA filed a Motion for Reconsideration. 107 In its Order dated March 4, 2008, the RTC issued an Order denying PEAs Motion for Reconsideration. On April 23, 2008, De Leon filed the present petition for review on certiorari, docketed as G.R. No. 181970, assailing the November 21, 2007 Decision of the CA. Subsequently, on May 15, 2008, PEA, on the other hand, filed the instant special civil action for certiorari, docketed as G.R. No. 182678, questioning the Orders of the RTC of Makati City, dated December 28, 2007 and March 4, 2008. In G.R. No. 181970, De Leon questions the Decision of the CA on the following grounds: (a) he can only be removed from the subject land through ejectment proceedings; (b) the Decision of this Court in G.R. No. 112172 merely ordered the dismissal of De Leons complaint for damages in Civil Case No. 93-143; and (c) even though petitioner is not the owner and has no title to the subject land, mere prior possession is only required for the establishment of his right. In G.R. No. 182678, the sole issue raised is whether respondent judge committed grave abuse of discretion in issuing the assailed Orders which held in abeyance the resolution of PEAs Motion for the Issuance of a Writ of Demolition.

106

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On February 25, 2009, PEA and the City of Paraaque filed a Joint Motion for Substitution stating that PEA had transferred its ownership and ceded its interests over the subject property to the City of Paraaque as full payment for all of the formers real property tax liabilities. As a consequence, the movants prayed that PEA be substituted by the City of Paraaque as petitioner in G.R. No. 182678 and respondent in G.R. No. 181970. 108 In a Resolution109 dated on October 14, 2009, this Court granted the Motion for Substitution filed by PEA and the City of Paraaque. The issues raised in the present petitions boil down to the question of whether PEA is really entitled to possess the subject property and, if answered in the affirmative, whether the RTC should proceed to hear PEAs Motion for the Issuance of a Writ of Demolition. The Court rules for PEA. The question of ownership and rightful possession of the subject property had already been settled and laid to rest in this Courts Decision dated November 20, 2000 in G.R. No. 112172 entitled, Public Estates Authority v. Court of Appeals (PEA v. CA).110 In the said case, the Court ruled thus: The issue raised is whether respondent and his brothers and sisters were lawful owners and possessors of Lot 5155 by mere claim of ownership by possession for a period of at least fifty (50) years. The Court of Appeals ruled that respondent Bernardo de Leon and his brothers and sisters were lawful owners and possessors of Lot 5155 entitled 108

109

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to protection by injunction against anyone disturbing their peaceful possession of said Lot. The ruling is erroneous. An applicant seeking to establish ownership of land must conclusively show that he is the owner in fee simple, for the standing presumption is that all lands belong to the public domain of the State, unless acquired from the Government either by purchase or by grant, except lands possessed by an occupant and his predecessors since time immemorial, for such possession would justify the presumption that the land had never been part of the public domain, or that it had been private property even before the Spanish conquest. In this case, the land in question is admittedly public. The respondent Bernardo de Leon has no title thereto at all. His claim of ownership is based on mere possession by himself and his predecessors-in-interests, who claim to have been in open, continuous, exclusive and notorious possession of the land in question, under a bona fide claim of ownership for a period of at least fifty (50) years. However, the survey plan for the land was approved only in 1992, and respondent paid the realty taxes thereon on October 30, 1992, shortly before the filing of the suit below for damages with injunction. Hence, respondent must be deemed to begin asserting his adverse claim to Lot 5155 only in 1992. More, Lot 5155 was certified as alienable and disposable on March 27, 1972, per certificate of the Department of Environment and Natural Resources. It is obvious that respondents possession has not ripened into ownership. xxxx Consequently, respondent De Leon has no clear legal right to the lot in question, and a writ of injunction will not lie to protect such nebulous right of possession. x x x111 The Court does not subscribe to De Leons argument that the issues of ownership and possession of the subject lot should not have been taken up by the court on the ground that his complaint is only for damages. De Leon must be aware that his action for damages is anchored on his claim that he owns and possesses the subject property. 112 On this basis, it 111

112

186

would be inevitable for the court to discuss the issues of whether he, in fact, owns the disputed property and, as such, has the right to possess the same. Moreover, it is clear from this Courts Decision in PEA v. CA that the main issue resolved therein was whether respondent [De Leon] and his brothers and sisters were the lawful owners and possessors of Lot 5155 by mere claim of ownership by possession for a period of at least fifty (50) years. De Leon insists that what this Court did in PEA v. CA was to simply dismiss his complaint for damages and nothing more, and that the RTC erred and committed grave abuse of discretion in issuing a writ of execution placing PEA in possession of the disputed property. He insists that he can only be removed from the disputed property through an ejectment proceeding. The Court is not persuaded. As a general rule, a writ of execution should conform to the dispositive portion of the decision to be executed; an execution is void if it is in excess of and beyond the original judgment or award.113 The settled general principle is that a writ of execution must conform strictly to every essential particular of the judgment promulgated, and may not vary the terms of the judgment it seeks to enforce, nor may it go beyond the terms of the judgment sought to be executed.114 However, it is equally settled that possession is an essential attribute of ownership.115 Where the ownership of a parcel of land was decreed in the judgment, the 113

114

115

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delivery of the possession of the land should be considered included in the decision, it appearing that the defeated partys claim to the possession thereof is based on his claim of ownership.116 Furthermore, adjudication of ownership would include the delivery of possession if the defeated party has not shown any right to possess the land independently of his claim of ownership which was rejected. 117 This is precisely what happened in the present case. This Court had already declared the disputed property as owned by the State and that De Leon does not have any right to possess the land independent of his claim of ownership. In addition, a judgment for the delivery or restitution of property is essentially an order to place the prevailing party in possession of the property. 118 If the defendant refuses to surrender possession of the property to the prevailing party, the sheriff or other proper officer should oust him.119 No express order to this effect needs to be stated in the decision; nor is a categorical statement needed in the decision that in such event the sheriff or other proper officer shall have the authority to remove the improvements on the property if the defendant fails to do so within a reasonable period of time. 120 The removal of the improvements on the land under these circumstances is deemed read into the decision, subject only to the issuance of a special order by the court for the removal of the improvements.121 116

117

118

119

120

121 188

It bears stressing that a judgment is not confined to what appears upon the face of the decision, but also those necessarily included therein or necessary thereto. 122 In the present case, it would be redundant for PEA to go back to court and file an ejectment case simply to establish its right to possess the subject property. Contrary to De Leons claims, the issuance of the writ of execution by the trial court did not constitute an unwarranted modification of this Courts decision in PEA v. CA, but rather, was a necessary complement thereto. Such writ was but an essential consequence of this Courts ruling affirming the nature of the subject parcel of land as public and at the same time dismissing De Leons claims of ownership and possession. To further require PEA to file an ejectment suit to oust de Leon and his siblings from the disputed property would, in effect, amount to encouraging multiplicity of suits. De Leon also contends that there was never any government infrastructure project in the subject land, much less a Manila-Cavite Coastal Road traversing it, at any time ever since, until now and that allegations of a government project in the subject land and of such Road traversing the subject land have been downright falsities and lies and mere concoctions of respondent PEA. 123 However, this Court has already ruled in PEA v. CA that it is not disputed that there is a government infrastructure project in progress traversing Lot 5155, which has been enjoined by the writ of injunction issued by the trial court. In any case, De Leons argument that there was no government infrastructure project in the subject property begs the issue of ownership and rightful possession. The subject lot was properly identified. There is no dispute as to its exact location. Hence, whether or not there is a government project existing within the premises or that which traverses it is not

122

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relevant to the issue of whether petitioner is the owner of the disputed lot and, therefore, has legal possession thereof. As to whether or not the RTC committed grave abuse of discretion in holding in abeyance the resolution of PEAs Motion for the Issuance of a Writ of Demolition, Section 7,124 Rule 65 of the Rules of Court provides the general rule that the mere pendency of a special civil action for certiorari commenced in relation to a case pending before a lower court or court of origin does not stay the proceedings therein in the absence of a writ of preliminary injunction or temporary restraining order. It is true that there are instances where, even if there is no writ of preliminary injunction or temporary restraining order issued by a higher court, it would be proper for a lower court or court of origin to suspend its proceedings on the precept of judicial courtesy. 125 The principle of judicial courtesy, however, remains to be the exception rather than the rule. As held by this Court in Go v. Abrogar,126 the precept of judicial courtesy should not be applied indiscriminately and haphazardly if we are to maintain the relevance of Section 7, Rule 65 of the Rules of Court. Indeed, in the amendments introduced by A.M. No. 07-7-12-SC, a new paragraph is now added to Section 7, Rule 65, which provides as follows: The public respondent shall proceed with the principal case within ten (10) days from the filing of a petition for certiorari with a higher court or tribunal, absent a temporary restraining order or a preliminary injunction, or upon its expiration. Failure of the public respondent to proceed with the principal case may be a ground for an administrative charge.

While the above quoted amendment may not be applied in the instant case, as A.M. No. 124

125

126

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07-7-12-SC was made effective only on December 27, 2007, the provisions of the amendatory rule clearly underscores the urgency of proceeding with the principal case in the absence of a temporary restraining order or a preliminary injunction.

This urgency is even more pronounced in the present case, considering that this Courts judgment in PEA v. CA, finding that De Leon does not own the subject property and is not entitled to its possession, had long become final and executory. As a consequence, the writ of execution, as well as the writ of demolition, should be issued as a matter of course, in the absence of any order restraining their issuance. In fact, the writ of demolition is merely an ancillary process to carry out the Order previously made by the RTC for the execution of this Courts decision in PEA v. CA. It is a logical consequence of the writ of execution earlier issued.

Neither can De Leon argue that he stands to sustain irreparable damage. The Court had already determined with finality that he is not the owner of the disputed property and that he has no right to possess the same independent of his claim of ownership. Furthermore, the Order of the RTC holding in abeyance the resolution of PEAs Motion for the Issuance of a Writ of Demolition also appears to be a circumvention of the provisions of Section 5, Rule 58 of the Rules of Court, which limit the period of effectivity of restraining orders issued by the courts. In fact, the assailed Orders of the RTC have even become more potent than a TRO issued by the CA because, under the Rules of Court, a TRO issued by the CA is effective only for sixty days. In the present case, even in the absence of a TRO issued by a higher court, the RTC, in effect, directed the maintenance of the status quo by issuing its assailed Orders. Worse, the effectivity of the said Orders was made to last for an indefinite period because the resolution of PEAs Motion for the Issuance of a Writ of Demolition was made to depend upon the finality of the judgment in G.R. No. 181970.

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Based on the foregoing, the Court finds that the RTC committed grave abuse of discretion in issuing the assailed Orders dated December 28, 2007 and March 4, 2008. Finally, the Court reminds the De Leon that it does not allow the piecemeal interpretation of its Decisions as a means to advance his case. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and read in this context, but the same must be considered in its entirety. 127 Read in this manner, PEAs right to possession of the subject property, as well as the removal of the improvements or structures existing thereon, fully follows after considering the entirety of the Courts decision in PEA v. CA. This is consistent with the provisions of Section 10, paragraphs (c) and (d), Rule 39 of the Rules of Court, which provide for the procedure for execution of judgments for specific acts, to wit: SECTION 10. Execution of judgments for specific act. xxxx (c) Delivery or restitution of real property. - The officer shall demand of the person against whom the judgment for the delivery or restitution of real property is rendered and all persons claiming rights under him to peaceably vacate the property within the three (3) working days, and restore possession thereof to the judgment obligee; otherwise, the officer shall oust all such persons therefrom with the assistance, if necessary, of appropriate peace officers, and employing such means as may be reasonably necessary to retake possession, and place the judgment obligee in possession of such property. Any costs, damages, rents or profits awarded by the judgment shall be satisfied in the same manner as a judgment for money. (d) Removal of improvements on property subject of execution. - When the property subject of execution contains improvements constructed or planted by the judgment obligor or his agent, the officer shall not destroy, demolish or remove said improvements, except upon special order of the court, issued upon motion of the judgment obligee after due hearing and after the former has failed to remove the same within a reasonable time fixed by the court. 127

192

As a final note, it bears to point out that this case has been dragging for more than 15 years and the execution of this Courts judgment in PEA v. CA has been delayed for almost ten years now simply because De Leon filed a frivolous appeal against the RTCs order of execution based on arguments that cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of the final judgment in its favor. The Court agrees with the Office of the Solicitor General in its contention that every litigation must come to an end once a judgment becomes final, executory and unappealable. Just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment, which is the life of the law. 128 To frustrate it by dilatory schemes on the part of the losing party is to frustrate all the efforts, time and expenditure of the courts. 129 It is in the interest of justice that this Court should write finis to this litigation. WHEREFORE, the Court disposes and orders the following: The petition for review on certiorari in G.R. No. 181970 is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 90328 dated November 21, 2007 and March 4, 2008, respectively, are AFFIRMED. The petition for certiorari in G.R. No. 182678 is GRANTED. The assailed Orders of the Regional Trial Court of Makati City, Branch 135, dated December 28, 2007 and March 4, 2008, are ANNULLED and SET ASIDE. The Regional Trial Court of Makati is hereby DIRECTED to hear and resolve PEAs Motion for the Issuance of a Writ of Demolition with utmost dispatch. This Decision is

128

129

193

IMMEDIATELY EXECUTORY. The Clerk of Court is DIRECTED to remand the records of the case to the court of origin. SO ORDERED.

6. G.R. No. L-3714

January 26, 1909

ISABELO MONTANO Y MARCIAL, vs. THE INSULAR GOVERNMENT, ET THE INSULAR GOVERNMENT, appellant. Attorney-General F. Buencamino, for appellee.

Araneta,

petitioner-appellee, AL., for

respondents. appellant.

TRACEY, J.: Isabelo Montano presents a petition to the Court of Land Registration for the inscription of a piece of land in the barrio of Libis, municipality of Caloocan, used as a fishery having a superficial area of 10,805 square meters, and bounded as set out in the petition; its value according to the last assessment being $505.05, United States currency. This petition was opposed by the Solicitor-General in behalf of the Director of Lands, and by the entity known as Obras Pias de la Sagrada Mitra, the former on the ground that the land in question belonged to the Government of the United States, and the latter, that it was the absolute owner of all the dry land along the eastern boundary of the said fishery. The Court of Land Registration in its decision of December 1, 1906, dismissed the said oppositions without costs and decreed, after a general entry by default, the adjudication and registration of the property described in the petition, in favor of Isabelo Montano y Marcial. From this decision only counsel for the Director of Public Lands appealed to this court. It is a kindred case to Cirilo Mapa vs. The Insular Government, decided by this court on February 19, 1908, reported in 10 Phil. Rep., 175.

194

As some discussion has arisen as to the scope of that decision, it appears opportune to reaffirm the principle there laid down. The issue was, whether the lands used as a fishery , for the growth of nipa, and as salt deposits, inland some distance from the sea, and asserted, though not clearly proved to be overflowed at high tide could be registered as private property on the strength of ten years' occupation, under paragraph 6 of section 54 of Act No. 926 of the Phil. Commission. The point decided was that such land within the meaning of the Act of Congress of July 1, 1902, was agricultural, the reasoning leading up to the conclusion being that congress having divided all the public lands of the Islands into three classes it must be included in one of the three, and being clearly neither forest nor mineral, it must of necessity fall into two division of agricultural land. In the concurring opinion, in order to avoid misapprehension on the part of those not familiar with United States land legislation and a misunderstanding of the reach of the doctrine, it was pointed out that under the decision of the Supreme Court of the United States the phrase "public lands" is held to be equivalent to "public domain," and dos not by any means include all lands of Government ownership, but only so much of said lands as are thrown open to private appropriation and settlement by homestead and other like general laws. Accordingly, "government land" and "public domain" are not synonymous items; the first includes not only the second, but also other lands of the Government already reserved or devoted to public use or subject to private right. In other words, the Government owns real estate which is part of the "public lands" and other real estate which is not part thereof. This meaning attached to the phrase "public lands" by Congress in its land legislation is settled by usage and adjudication beyond a doubt, and without variation. It is therefore doing the utmost violence to all rules of construction to contend that in this law, dealing with the same subject-matter in connection with these Islands, a different meaning had, without indication or motive, been imported into the words. They cannot have one meaning in any other statute and a different and conflicting meaning in this statute. Where property in general is referred to therein, other and apt phrases are used in order to include it; for instance, section 12 provides "that all the property and rights which have been acquired in the Phil. Islands by the United States ... are hereby placed under the control of the Government of the said Islands." Therefore, there is much real property belonging to the Government which is not affected by statutes for the settlement, prescription or sale of public lands. Examples in point are properties occupied by public buildings or devoted to municipal or other governmental uses. Among the authorities cited in the Mapa case are two, Shively vs. Bowlby (152 U.S., 1), and Mann vs. Tacoma Land Co. (153 U.S., 273), in which it was held that general public land laws did not apply to land over which the tide ebbs and flows. Mr. Justice Gray, in Shively vs. Bowlby, which is in itself an epitome of the American Law of Waters, speaking of the tide lands, said: But Congress has never undertaken by general laws to dispose of such lands. . . . The Congress of the United States, in disposing of the public lands, has constantly acted upon the theory that those lands, whether in the interior, or on the coast, 195

above high- water mark, may be taken up by actual occupants, in order to encourage the settlement of the country, but that the navigable water and the soils under them. whether within the above the ebb and flow of the tide, shall be and remain public highways; and being chiefly valuable for the public purposes of commerce, navigation, and fishery, and for the improvement necessary to secure and promote those purposes, shall not be granted away during the period of territorial government. (Pp. 48 and 49.) The conclusions of the court are in part stated as follows: Lands under tide waters are incapable of cultivation or improvement in the manner of lands above high-water mark. They are of great value to the public for the purposes of commerce, navigation, and fishery. Their improvement by individuals, when permitted, is incidental or subordinate to the public use and right. Therefore the title and the control of them are vested in the sovereign for the benefit of the whole people . . . . Upon the acquisition of a territory by the United States, whether by cession from one of the States, or by treaty with a foreign country, or by discovery and settlement, the same title and dominion passed to the United States, for the benefit of whole people, and in trust for the several States to be ultimately created out of the territory . . . . The United States, while hold the country as a territory, having all the powers both of national and municipal government, may grant, for appropriate purposes, titles or rights in the soil below high-water mark of tide waters. But that have never done so in general laws. (Pp. 57 and 58.) In Mann vs. Tacoma Land Co., it was said by Mr. Justice Brewer (p. 284); It is settled that the general legislation of Congress in respect to public lands does not extend to tide lands .... It provided that the scrip might be located on the unoccupied and unappropriated public lands. As said in Newhall vs. Sanger (92 U.S., 761, 763.) "The words "public lands" are habitually used in our legislation to described such as are subject to sale or other disposal under general laws." In Illinois Central R.R. Company vs. Illinois (146 U.S., 387) Mr. Justice Field, delivering the opinion of the court, said: That the State holds the title tot he lands under the navigable waters of lake Michigan within its limits, in the same manner that the State hold title to soils under tide water, by the common law, we have already shown, and that title necessarily carries with it control over the waters above them whenever the lands are subjected to use. But it is a title different in character from that which the States holds in lands intended for sale. It is different from the title which the United States hold in the public lands which are open to preemption and sale. It is a title held in trust for the people of the States that they may enjoy the navigation of the waters, carry on 196

commerce over them, and have liberty of fishing therein freed from the obstruction or interference of private parties. The interest of the people in the navigation of the waters and in commerce over them may be improved in many instances by the erection of wharves, docks, and piers therein, for which purpose the State may grant parcels of the submerged lands; and so long as their disposition is made for such purposes, no valid objections can be made to the grants .... The control of the State for the purposes of the trust can never be lost, except as to such parcels as are used in promoting the interests of the public therein, or can be disposed of without any substantial impairment of the public interest in the lands and waters remaining .... The State can no more abdicate its trust over property in which the whole people are interested, like navigable waters and soils under them, so as to leave them entirely under the use and control of private parties, except in the instance of parcels mentioned for the improvement of the navigation and use of the waters, or when parcels can be disposed of without impairment of the public interest in what remains, that can abdicate its police powers in the administration of government and the preservation of the peace .... So with trusts connected with public property, or property of a special character, like lands under navigable waters, they can not be placed entirely beyond the direction and control of the State. The ownership of the navigable waters of the harbor and the lands under them is a subject of public concern to the whole people of the State. The trust with which they are held, therefore, is governmental and can not be alienated, except in those instances mentioned of parcels used in the improvement of the interest thus held, or when parcels can be disposed of without detriment to the public interest in the lands and waters remaining. . . . . (Pp. 452-455.) Mr. Justice Fields quotes from an opinion by Mr. Justice Bradley, delivered in a case in the Circuit Court, speaking of lands under water, as follows (p. 457): Being subject to this trust, they were publici juris; in other words, they were held for the use of the people at large. It is true that to utilize the fisheries, especially those of shellfish, it was necessary to parcel them out to particular operators, and employ the rent or consideration for the benefit of the whole people; but this did not alter the character of the title. The land remained subject to all other public uses as before, especially to those of navigation and commerce, which are always paramount to those of public fisheries. It is also true that portions of the submerged shoals and flats, which really interfered with navigation, and could better subserve the purposes of commerce by being filled up and reclaimed, were disposed of to individuals for that purpose. But neither did these dispositions of useless parts affect the character of the title to the remainder. These citations are thus given at length in order to make clear, first, the lands under the ebb and flow of the tide of navigable waters are not in America understood to be included in the phrase "public lands" in Acts of Congress of United States; nor, perforce, can they best understood in laws of the Philippine Commission drawn immediately under the sanction of 197

those Acts; and second, that such lands are under existing Congressional legislation the subject of private ownership, any occupation therefore be subordinate to the public purpose of navigation and fishery. While as well in the original thirteen States in which there was never a national public domain to which the land laws of Congress could apply as in States more recently created out of that domain and which upon their formation became masters of their own land policy the local laws govern riparian and littoral rights, subject only to Congressional control in matters of foreign and interstate commerce ( U.S. vs. Mission Rock Co., 189 U. S., 391), yet, as to the unappropriated public lands constituting the public domain the sole power of legislation is vested in Congress, which are uniformly and consistently declined to assume the function of authorizing or regulating private appropriation of such rights. Therefore, in the absence of specific Congressional legislation, it is impossible for individuals to acquire title under the ten years provision of Act No. 926 or even through a definite grants from the local legislature of lands beneath navigable waters in which the tide ebbs and flows, except for wharf-age or other purposes auxiliary to navigation or other public uses, unless in conformity with the preexisting local law of the Archipelago. The matter is dwelt is upon for the reason that the late Attorney-General in his very able brief calls attention to the effect apprehended from the extension of the words "agricultural lands" as used in Act No. 926 to include all public lands not forest or mineral in character, specifying two acts of the Philippine Commission, the validity of which he fears might thereby be called into question. The first of these, Act No. 1039, dedicates to use of the Navy Department of the United States Government certain ground and buildings in Cavite, while the other, Act No. 1654, is a fore-shore law regulating the control and disposal of filled Government lands. If the term "agricultural lands" be held to include all government property not forest or mineral in character, he suggests that these Acts, not being in conformity with the procedure of Act No. 926, as approved by Congress, would be invalid, and moreover, that the Philippine Government would be seriously tied up in the management and disposition of other lands owned by it. Without finally passing on this question in relation to lands the owners of which are not before us parties to this action, it is appropriate, in answering the argument of the law officer of the State, to point out that this consequence appears to be avoided by the restricted sense given to the words "public lands" or "public domain" in the Act of Congress and in Act No. 926, as hereinbefore noted. Neither the property affected by Act No. 1039, already in use by the Navy Department of the United States, nor the foreshore land mentioned in Act No. 1654, which is under the ebb and flow of the tide, was, in so far as appears in the Acts before us, part of the public domain to be disposed of under sections 13, 14, 15, and 16 of the Act of congress of July 1, 1902, and for that reason it is not included in any of the three subdivisions of "public lands" as agricultural or otherwise, although it was part of the property acquired in the Philippine Islands by the United States by the treaty of peace with Spain, which by section 12 of that Act was "placed under the control of the Government of said Islands, to be administered for the benefit of the inhabitants thereof." It would seem that the validity of the Cavite Act can not be successfully assailed on this ground, while it may well be that The Fore-shore Act on examination will be found to fall, as 198

to its general purpose, within the authorization of section 11 of the Act of Congress, whereby the duty is imposed upon the Island government of improving the harbors and navigable waters in the interest of commerce. As a consequence, it follows that The Public Land Act did not apply to the fisheries in the Mapa case, if they are to be regarded as constituting, in a general sense, land under tidal waters. It becomes necessary, therefore, to refer to the character of the lands. Although argued at different times, five of these cases have been presented substantially together, all being covered by one brief of the late Attorney-General in behalf of the Government in which, with many interesting historical and graphic citations he describes that part of the marginal seashore of the Philippine Islands known as manglares, with their characteristic vegetation. In brief, it may be said that they are mud flats, alternately washed and exposed by the tide, in which grow various kindred plants which will not live except when watered by the sea, extending their roots deep into the mud and casting their seeds, which also germinate there. These constitute the mangrove flats of the tropics, which exist naturally, but which are also, to some extent, cultivated by man for the sake of the combustible wood of the mangrove and like trees as well as for the useful nipa palm propagated thereon. Although these flats are literally tidal lands, yet we are of the opinion that they can not be so regarded in the sense in which that term is used in the cases cited or in general American Jurisprudence. The waters flowing over them are not available for purpose of navigation, and they "may be disposed of without impairment of the public interest in what remains." Mr. Justice Bradley, in the passage quoted by Mr. Justice Field, makes an exception of submerged shoals and flats. In Railroad Company vs. Schurmeir (74 U.S., 272) , a Government patent of public land bordering upon a river was held to include a parcel submerge at very high water and separated from the mainland by a slough in which the water ran when ordinarily high. In Mobile vs. Hallett (41 U.S., 260), at page 266. Mr. Justice Catron remarked in his dissenting opinion: . . . and that a mud flat, flowed by tide water, is the subject of grant by the Government to an individual, I think can not well be doubted by anyone acquainted with the southern country; when such valuable portions of it are mud flats, in the constant course of reclamation. In several of the older States along the Atlantic coast such flats, either by force of ordinance, custom, judicial construction, or local laws are held to pass under private grants as appurtenant to the uplands. (Winslow vs. Patten, 34 Maine, 25; Litchfield vs. Scituate, 135 Mass., 39; People vs. New York and Staten Island Ferry Co., 68 N.Y., 71; Stevens vs. P.& N. Railroad, 5 Vroom, 34 N.J. Law, 532.) There is even stronger reason for excepting mud flats from the rule of tide lands in these Islands, owing to the peculiarities of their configuration and to the nature of the tropical growth thereon, and whatever may be action of the tide, we do not think that in the Philippines such of the shoals covered by this vegetation, whether spontaneously or by cultivation, as are not available for free navigation, or required for any other purpose of general benefit, can be considered tidal land reserved for public use alone, under the governmental trust for commerce and public fishery, but on the contrary, we 199

regard them as public property, susceptible of a sort of cultivation and of improvement, and as such, subject to occupation under paragraph 6 of section 54 of the Land Law. Instances may hereafter arise of fisheries unduly established in what are clearly navigable waters which would constitute a nuisance, and not be the subject of prescription or of grant. A brief reference to the five cases under consideration in this court, however, will serve to show that they all fairly fall within the benefits of the law. In the Mapa case 1 the property was far from the the sea, partly occupied as fish pond, as nipa land, and as a salt pit. It does not appear whether it was connected with the sea by nature or by art, or whether the tide ebbed or flowed upon it, or whether the salt was sufficient to impart to any portion of it a mineral character. In the Santiago case 2 there was a fishery about two thousand yards from the sea, with which it communicated by a river, and a portion of the inclosure was dedicated to growing the aquatic tree called bacawan. The fishery had been constructed by man, upon land heretofore sown with this tree. In the Gutierrez case 3 it was shown that the land was partly highland, growing fruit trees, and partly lowland , converted by the occupant of the upland into a fishery by this labor. In the Baello case, 4 the river running to the sea was a hundred meters away, the salt water therefrom reaching the lowland by means of an artificial canal cut by the owner of the land when he gave up cultivating bacawan thereon, an made it into a fishery. In the Montano case, although there was a considerable depth of water over the soil, yet before the fishery was made, some thirty years before the trial, bacawan had been sown and propagated in the mud by the owner who finally sold the entire cut when he built the dikes. All these lots, in their original state, whether near the sea or at a distance from it inland, and whether bare or washed by the tides, were not covered by waters practically navigable and were filled, whether naturally or artificially, with vegetation sometimes cultivated and in common use for fuel and for building purposes, and they were all adapted to fisheries or fish hatcheries by the labor of man introducing or regulating the access of salt water thereto. It is obvious that that all five cases are of the same general nature and that one rule must be applied to them all. In this discussion of the meaning which the Congress of the United States attached to the phrase "public lands" in the Philippine Bill, we have assumed that it was used in the same sense as in other laws enacted by that body. If, however, it can be considered as employed with reference to the peculiar conditions of the territory to which it was to be applied and to the local law or usage prevailing therein, the result would not be different. In many of its general features the Spanish law of public lands in the Philippines resembled the American. Government property was of two kinds — first, that of public use or service, said to be of public ownership, and second, that of having a private character or use. (Civil Code, arts. 339 and 340.) Lands of the first class, while they retain their public character are inalienable; those of the second are not. By the royal decree of February 13, 1894, it was enacted that all "the land, soil, ground not under cultivation, and forests in the Philippine Islands should be considered saleable crown lands," which are not included in the four exceptions stated, among which were "those which belonged to the forest zones which the State desires to hold for the Commonwealth." 200

This corresponds in the main to the American classification into Government property, public lands, and forest reserve. Mineral lands are elsewhere defined. It is to be noted, however, that in the two languages terms ordinarily equivalent are not in this relation employed in the same sense and that lands de dominio publico signify quite a different thing from the arbitrary English Phrases "public lands" or "public domain." The Law of Waters of 1866, which was the latest Spanish Law of Waters extended to these Islands, provides that private property can not be acquired in lands preserving the character of public ownership (title 1, art. 1, par. 29), and among the lands declared of public ownership and use by article 1 of chapter 1 of title 5 of the same law are: The seashore. — By shore is understood the land alternately covered and uncovered by the sea in its tidal movement. Its interior, or land limit, is the point reached by the highest and equinoctial tides. At those places not affected by tides, the land limit is the highest point reached by sea water in ordinary storms or hurricanes. (Par. 3.) So that under this legislation the same question also presented itself as to what constituted seashore, which was of public use and trust and therefore not alienable. This question can not be said to have been settled by official ruling at the time of the American occupation. From the official records it appears that there were then pending for registration a great number of possessory expedientes, twenty-two of which, made before April 17, 1895, were from the Province of Pampanga alone, in which the land was described as manglares. Under the royal decree of 1894 such manglares appear at the outset to have been registered and considered alienable and numbers of them were conceded by adjustment, including considerable tracts in the town of Sexmoan and Lubao in Pampanga. Claims having been made that on account of the trees growing thereon they formed part of the forest reserve and also because, being covered and uncovered by the tide, they were part of the shore, and in either case were inalienable, the engineer in chief of the forestry district of the center of Luzon addressed, on January 7, 1893, a communication to the inspector general de montes ( Forestry Department) in which he expressed an opinion that as part of the shore they were not subject to private ownership and asked for an early decision of the question. On November 26, 1893, the acting inspector-general notified the chief of the district of the Visayas in Mindanao that his excellency, the governor-general, had that they ordered all action suspended on expedientes of manglar and nipa lands and salt marshes until the questions involved in regard thereto should be determined. In this condition the matter remained until the expiration of the Spanish sovereignty. By article 14 of the Law of Waters the right of shore fishery was declared public, but by article 23 authority might be granted individuals to establish shore hatcheries for fish and shellfish, and by article 15 salt-water ponds on private ground not communicating with the sea by water navigable by boats were recognized as private property, while chapter 10 permitted and regulated the draining of swamps and marshes, both of private and of public ownership.

201

Under this uncertain and somewhat unsatisfactory condition of the law the custom had grown up of converting manglares and nipa lands into fisheries which became common feature of settlements along the coast and at the time of the change of sovereignty constituted one of the most productive industries of the Islands, the abrogation of which would destroy vested interests and prove a public disaster. In our opinion it was the object of Congress not to work such a result but, on the contrary, in furtherance of the purposes of the treaty of Paris, to recognize and safeguard such property. Therefore, the judgment of the Court of Land Registration is affirmed, without costs. Torres, Mapa, and Carson, JJ., concur.

Separate Opinions ARELLANO, C.J., concurring: I concur in the foregoing decision, but reserve my opinion as to the scope of the phrase "public lands" in the Act of Congress referred to.

WILLIARD, J., concurring in the result. In the case of Mapa vs. The Insular Government ( 10 Phil. Rep., 175 ) it is stated in the opinion, page 176, that — The only question submitted tot he court below or to this court by the AttorneyGeneral is the question whether the land in controversy is agricultural land within the meaning of the section above quoted. The section quoted is section 54, paragraph 6, Act No. 926, in which the phrase used is "agricultural public lands." Throughout the opinion the phrase "public lands" is repeatedly and exclusively used. The entire discussion was directed to the question as to whether the property there in question being "public land," it could be considered as agricultural public land, and the conclusion reached is stated at page 182, as follows: In other words, that the phrase "agricultural land," as used in Act No. 926, means those public lands acquired from Spain which are not timber or mineral lands. In that case the land in question was a long distance from the sea. In fact, the entire town of Molo was between it and the water. It could in no sense be called tidal land. Therefore, the 202

opinion was devoted to a consideration of not what were "public lands" but whether this particular tract was or was not agricultural public land. The question what the phrase "public lands" meant neither considered nor decided in that opinion, for its resolution was not necessary. In the concurring opinion, however, that question was discussed and it was stated that the phrase "public lands" used in Act No. 926 must be interpreted according to the American understanding of the words employed and the meaning of the terms as definitely fixed by the decrees of the United States Supreme Court. This statement was not necessary to the decision of the case then under discussion and was moreover, as shall attempt to show hereafter, not a correct statement made in that opinion, to the effect that there may be real property belonging to the Government which would not be included in the phrase "public lands," there can be no doubt concerning its correctness. This is and always has been apparent. It is indicated by articles 339 and 340 of the Civil Code, which are as follows: ART. 339. Property of public ownership is — 1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and banks, shores, roadsteads, and that of a similar character. 2. That belonging exclusively to the State without being for public use which is destined to some public service, or to the development of the national wealth, such as walls, fortresses, and other works for the defense of the territory, and mines, until concession has been granted. ART. 340. All other property belonging to the State which has not the conditions stated in the preceding article is considered as private property. Articles 24 and 25 of the Regulations for the Execution of the Mortgage Law also indicate it. These articles are as follows: ART. 24. All real estate and property rights thereto may be recorded, without exception, whether belonging to private parties, to the State, to the province, to the municipality, or to civil or ecclesiastical corporations. ART. 25. Exceptions to the record required by article 2 of the law are: First. Property which belongs exclusively to the eminent domain of the State, and which is for the use of all, such as the shores of the sea, islands, rivers and their borders, wagon roads, and roads of all kinds, with the exception of railroads; streets, parks, public promenades, and commons of towns. provided they are not lands of common profit to the inhabitants; walls of cities and parks, ports, and roadsteads, any other analogous property during the time they are in common and general use, always reserving the servitudes established by law on the shores of the sea and borders of navigable rivers. 203

Second. Public temples dedicated to the Catholic faith. In the Mapa case it was not necessary to decide, nor was it there decided, what the real property was which, belonging to the government, still would not come within the phrase "public lands," nor how private persons could acquire rights in such property, nor whether that phrase should have the same meaning here as it has in the United states. In the present case, it is said in the opinion that "all these five cases are of the same general character, and that the same rule should be applied to all." If it was not necessary to decide in the Mapa case the questions above mentioned, why is it necessary to discuss and decide them here? We are all agreed (1) that these lands are not tidal lands and are public lands, and (2) that they are agricultural lands. Having arrived at these conclusions, I see no reason for the question as to what the result would be if they were tidal lands. It is apparent that anything said upon that question is not necessary to the decision of these cases and is obiter dictum. Whether Act. No. 1654, relating to the reclaimed land in Manila near the Luneta, is authorized by section 11 of the Act of Congress of July 1, 1902, or by section 12, is a question outside of the issues in the case at bar, and it seems unnecessary now to commit the court to any definite resolution thereof. If it is the purpose of the decision to announce the doctrine that rights in tidal waters in the Philippines must be governed by the principles already announced by the Supreme Court in the decisions cited, this objection attains greater force. Thus construed, it decides the rights of innumerable persons in the Islands who have reclaimed land from the sea and built upon it, none of whom has had an opportunity to be heard before his rights are thus decided. These objections to the decision, on the ground that it discusses and apparently decides questions not before the court, and which affect parties not before it, would not be so serious if the conclusions reached were sound. But they are, as I believe, erroneous. The decisions of the Supreme Court of the United States cited the opinion have nothing to do either with the question as to what rights private persons can acquire in tidal lands in the Philippines or with the meaning which should be given to the phrase "public lands" found in the Act of Congress of July 1, 1902. 1. Upon the first question as to private rights in tidal lands, it has been definitely settled by the Supreme Court at Washington in many decisions, which are collected in the case of Shively vs. Bowlby (152 U.S., 1 ), cited in the opinion, that the rights of private persons in such lands depend upon the law of the State where the lands are. The court said in that case (p. 40) : VII. The later judgments of this court clearly establish that the title and rights of riparian or littoral proprietors in the soil below high water mark of navigable waters are governed by the local laws of the several States, subject, of course, to the rights granted to the United States by the Constitution. It also appears from that case that these laws vary in different States. The court said, at page 26: 204

The foregoing summary of the laws of the original States shows that there is no universal and uniform law upon the subject; but that each State has dealt with the lands under the tide waters within its borders according to its own views of justice and policy, reserving its own control over such lands, or granting rights therein to individuals or corporations, whether owners of the adjoining upland or not, as it considered for the best interests of the public. Great caution, therefore, is necessary in applying precedents in one State to cases arising in another. In Massachusetts the owner of the upland is the owner in fee to the low-water mark if not beyond 100 rods. In other States he is the owner in fee only to high-water mark. In Minnesota the owner of the upland has the exclusive right to occupy the shore in front of his land, not only to low-water mark but even into the water to the point of navigability, and to occupy it for purely private purposes. And he is so far the owner of the land under water to the point of navigability that he can sell portions thereof and retain himself the shore line. ( Hanford vs. St. Paul & D.R. Co., 43 Minn., 104.) It will be observed that some of the cases cited in support of the decision in the case at bar arose in Massachusetts and Minnesota. The result is that when the Supreme Court of the United States decides a case relating to such lands it necessarily decides it according to the law of the State from which it comes. So that if any law of American origin is to be applied here it can not be a national law of waters for none exists. It must be necessarily be the law of some one of the different States. This would require a selection of the jurisprudence of one of those States which this court should not attempt to make. At the cession of the Islands to the United States there was in force here a body of laws relating to this subject. These laws are still in force. They are found in the Law of Waters of 1866 and in articles 407 to 425 of the Civil Code. Cases which have heretofore arisen in this court have been decided with reference to these laws and not with reference to the decisions of the Supreme Court of the United States relating to cases arising there. Among others are the cases of Ker & Co. vs. Cuden (6 Phil. Rep., 732), and Jover vs. Insular Government1 (No. 2674, decided March 25, 1908). That questions relating to tidal lands should continue to be so decided seems to me free from doubt. It may be said that the decision does not intend to announce a contrary doctrine. If it does not, I see no purpose, for example, in the long citation from the case of Illinois Central R. Co. vs. Illinois (146 U.S., 387), nor in the declaration that the purpose of the citation of these decisions is to show in the second place that the rights in tidal lands are not under the legislation of Congress the subject of private property. 2. The second question relates to the meaning which should be given to the phrase "public lands" in the Act of Congress of July 1, 1902. In the concurring opinion in the Mapa case it was stated, as has been seen, that it has the same meaning here as in the United States. This doctrine seems to be reiterated in the opinion in this case. After announcing it in equivocal terms, it is said, to be sure that the result would be the same if the words were to be construed with reference to the local law. This would be true if the laws of the other two jurisdictions were the same. But it is easily demonstrated that they are not.

205

With reference to tidal lands, we have seen that in some of the States private persons are the owners of the land between high and low water mark. By the Law of Waters of 1866, and article 339 of the Civil Code, the shore or beach is public property. It not only does not belong to private persons, but it is not even the private property of the State. The difference between the two systems is more marked when we consider public roads and streets and the beds of non-navigable rivers. By the common law of England, which has been followed by and is now in force in a great many of the States, the beds of such rivers belong to the owners of the adjoining land. But by the law here in force (arts. 339 and 407, Civil Code) they are public property and can not be considered even as the private property of the State. The same is true of streets and roads. (Arts. 339 and 344, Civil Code.) When the United States issues a patent for public land owned by it situated in the State of Minnesota, for example, and bounded by a non-navigable river. the patentee becomes the owner of onehalf of the bed of the river. When the Spanish Government issued a patent for land in the Philippines bounded by river, the patentee did not become the owner of the bed of the river. His ownership extended only to low-water mark. What has been said of rivers is true of roads. If the phrase "public lands" be given the meaning here that it has in the United States, whenever the Director of Public Lands grants a patent for land bounded by a non-navigable river or road the patentee will become the owner of one-half of the bed of the river and one-half of the road. This result would be in direct conflict with the articles of the Civil Code above cited, and would amount to a repeal thereof. Such a result Congress never could have intended. Prior to the treaty of Paris the Spanish Government was the owner of the roads and the beds of streams in the Philippines in trust for the benefit of the people. The treaty itself did not change this status. On the contrary, it preserved rights of property as they then existed. By the treaty, the United States acquired interest which the Spanish Government had in roads and the beds of streams. It did not become the absolute owner thereof. The laws of Spain relating to this matter were continued in force by the proclamation of General Merritt. This would have been the result even without any proclamation.(American Ins. Co. vs. Canter, 1 Pet., 511.) They are in force now, and the Government is still the owner of roads and the beds of rivers unless Congress by the use of the phrase "public lands" in the Act of July 1, 1902, has repealed the articles of the Civil Code above cited. I do not think that such an intention can be attributed to it . It is more reasonable to say that it is intended to give to the phrase the meaning which was given to it by the laws in force in the territory where the Act was to take effect. And this intention is more apparent when we consider that there then existed article 340 of the Civil Code, which contained a complete definition of these lands belonging to the Government, which it had the right to dispose of as private property. It had no intention of disposing of property which it held in trust. The property which the Commission intended to dispose of by Act No. 926 was undoubtedly the private property of the State as defined by article 340. To say that Congress had a different purpose would be to attribute to it an intention to discriminate against the Philippines and to impose upon the Islands laws other than those 206

there in force, a thing which it has never done when legislating in regard to its land situated within a particular State. As we have seen, it has always allowed each State to determine for itself the laws which shall govern real State to determine for itself the laws which shall govern real estate within its borders. When this court is called upon to define the phrase "public lands" as used in the Act of Congress and in Act No. 926, it should in my opinion say that it includes the property described in article 340 of the Civil Code. For the reasons above stated, I agree with the result in this case, but I dissent from those parts of the opinion which I have discussed.

7. G.R. No. 191109

July 18, 2012

REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY (PRA), Petitioner, vs. CITY OF PARANAQUE, Respondent. DECISION MENDOZA, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, on pure questions of law, assailing the January 8, 2010 Order 1 of the Regional Trial Court, Branch 195, Parafiaque City (RTC), which ruled that petitioner Philippine Reclamation Authority (PRA) is a government-owned and controlled corporation (GOCC), a taxable entity, and, therefore, . not exempt from payment of real property taxes. The pertinent portion of the said order reads: In view of the finding of this court that petitioner is not exempt from payment of real property taxes, respondent Paranñ aque City Treasurer Liberato M. Carabeo did not act xxx without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing the warrants of levy on the subject properties.

207

WHEREFORE, the instant petition is dismissed. The Motion for Leave to File and Admit Attached Supplemental Petition is denied and the supplemental petition attached thereto is not admitted. The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public Estates Authority, Defining its Powers and Functions, Providing Funds Therefor and For Other Purposes) which took effect on February 4, 1977 to provide a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by, the government with the object of maximizing their utilization and hastening their development consistent with public interest. FACTS: On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then President Ferdinand Marcos, PEA was designated as the agency primarily responsible for integrating, directing and coordinating all reclamation projects for and on behalf of the National Government. On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380 transforming PEA into PRA, which shall perform all the powers and functions of the PEA relating to reclamation activities. By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including those located in Paranñ aque City, and was issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 557, and 559) and Transfer Certificates of Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed lands. On February 19, 2003, then Paranñ aque City Treasurer Liberato M. Carabeo (Carabeo) issued Warrants of Levy on PRA’s reclaimed properties (Central Business Park and Barangay San Dionisio) located in Paranñ aque City based on the assessment for delinquent real property taxes made by then Paranñ aque City Assessor Soledad Medina Cue for tax years 2001 and 2002. On March 26, 2003, PRA filed a petition for prohibition with prayer for temporary restraining order (TRO) and/or writ of preliminary injunction against Carabeo before the RTC. On April 3, 2003, after due hearing, the RTC issued an order denying PRA’s petition for the issuance of a temporary restraining order. On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to proceed with the public auction of the subject reclaimed properties on April 7, 2003. In response, Carabeo sent a letter stating that the public auction could not be deferred because the RTC had already denied PRA’s TRO application. 208

On April 25, 2003, the RTC denied PRA’s prayer for the issuance of a writ of preliminary injunction for being moot and academic considering that the auction sale of the subject properties on April 7, 2003 had already been consummated. On August 3, 2009, after an exchange of several pleadings and the failure of both parties to arrive at a compromise agreement, PRA filed a Motion for Leave to File and Admit Attached Supplemental Petition which sought to declare as null and void the assessment for real property taxes, the levy based on the said assessment, the public auction sale conducted on April 7, 2003, and the Certificates of Sale issued pursuant to the auction sale. On January 8, 2010, the RTC rendered its decision dismissing PRA’s petition. In ruling that PRA was not exempt from payment of real property taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It was organized as a stock corporation because it had an authorized capital stock divided into no par value shares. In fact, PRA admitted its corporate personality and that said properties were registered in its name as shown by the certificates of title. Therefore, as a GOCC, local tax exemption is withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160 Local Government Code (LGC) which was the prevailing law in 2001 and 2002 with respect to real property taxation. The RTC also ruled that the tax exemption claimed by PRA under E.O. No. 654 had already been expressly repealed by R.A. No. 7160 and that PRA failed to comply with the procedural requirements in Section 206 thereof. Not in conformity, PRA filed this petition for certiorari assailing the January 8, 2010 RTC Order based on the following GROUNDS I THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT RECLAIMED LANDS CONSIDERING THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE VIS-AÀ -VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT OF APPEALS. II THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE, EXEMPT FROM REAL PROPERTY TAX. PRA asserts that it is not a GOCC under Section 2(13) of the Introductory Provisions of the Administrative Code. Neither is it a GOCC under Section 16, Article XII of the 1987 Constitution because it is not required to meet the test of economic viability. Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the 209

Administrative Code. Although it has a capital stock divided into shares, it is not authorized to distribute dividends and allotment of surplus and profits to its stockholders. Therefore, it may not be classified as a stock corporation because it lacks the second requisite of a stock corporation which is the distribution of dividends and allotment of surplus and profits to the stockholders. It insists that it may not be classified as a non-stock corporation because it has no members and it is not organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers as provided in Section 88 of the Corporation Code. Moreover, PRA points out that it was not created to compete in the market place as there was no competing reclamation company operated by the private sector. Also, while PRA is vested with corporate powers under P.D. No. 1084, such circumstance does not make it a corporation but merely an incorporated instrumentality and that the mere fact that an incorporated instrumentality of the National Government holds title to real property does not make said instrumentality a GOCC. Section 48, Chapter 12, Book I of the Administrative Code of 1987 recognizes a scenario where a piece of land owned by the Republic is titled in the name of a department, agency or instrumentality. Thus, PRA insists that, as an incorporated instrumentality of the National Government, it is exempt from payment of real property tax except when the beneficial use of the real property is granted to a taxable person. PRA claims that based on Section 133(o) of the LGC, local governments cannot tax the national government which delegate to local governments the power to tax. It explains that reclaimed lands are part of the public domain, owned by the State, thus, exempt from the payment of real estate taxes. Reclaimed lands retain their inherent potential as areas for public use or public service. While the subject reclaimed lands are still in its hands, these lands remain public lands and form part of the public domain. Hence, the assessment of real property taxes made on said lands, as well as the levy thereon, and the public sale thereof on April 7, 2003, including the issuance of the certificates of sale in favor of the respondent Paranñ aque City, are invalid and of no force and effect. On the other hand, the City of Paranñ aque (respondent) argues that PRA since its creation consistently represented itself to be a GOCC. PRA’s very own charter (P.D. No. 1084) declared it to be a GOCC and that it has entered into several thousands of contracts where it represented itself to be a GOCC. In fact, PRA admitted in its original and amended petitions and pre-trial brief filed with the RTC of Paranñ aque City that it was a GOCC. Respondent further argues that PRA is a stock corporation with an authorized capital stock divided into 3 million no par value shares, out of which 2 million shares have been subscribed and fully paid up. Section 193 of the LGC of 1991 has withdrawn tax exemption privileges granted to or presently enjoyed by all persons, whether natural or juridical, including GOCCs. 210

Hence, since PRA is a GOCC, it is not exempt from the payment of real property tax. THE COURT’S RULING The Court finds merit in the petition. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC as follows: SEC. 2. General Terms Defined. – x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. On the other hand, Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows: SEC. 2. General Terms Defined. –– x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x From the above definitions, it is clear that a GOCC must be "organized as a stock or nonstock corporation" while an instrumentality is vested by law with corporate powers. Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. When the law vests in a government instrumentality corporate powers, the instrumentality does not necessarily become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a GOCC. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines, and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of 211

the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. They are not, however, GOCCs in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities. 2 Correlatively, Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." Section 87 thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." Further, Section 88 provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has capital stock divided into shares; and (2) that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation. As for non-stock corporations, they must have members and must not distribute any part of their income to said members.3 In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot be considered as a stock corporation because although it has a capital stock divided into no par value shares as provided in Section 7 4 of P.D. No. 1084, it is not authorized to distribute dividends, surplus allotments or profits to stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the subsequent executive issuances pertaining to PRA, particularly, E.O. No. 525, 5 E.O. No. 6546 and EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments or profits to its stockholders. PRA cannot be considered a non-stock corporation either because it does not have members. A non-stock corporation must have members. 8 Moreover, it was not organized for any of the purposes mentioned in Section 88 of the Corporation Code. Specifically, it was created to manage all government reclamation projects. Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16, Article XII of the 1987 Constitution provides as follows: Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The fundamental provision above authorizes Congress to create GOCCs through special charters on two conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must meet the test of economic viability. In this case, PRA may have passed the first condition of common good but failed the second one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or commercial activities. 212

Neither was it created to compete in the market place considering that there were no other competing reclamation companies being operated by the private sector. As mentioned earlier, PRA was created essentially to perform a public service considering that it was primarily responsible for a coordinated, economical and efficient reclamation, administration and operation of lands belonging to the government with the object of maximizing their utilization and hastening their development consistent with the public interest. Sections 2 and 4 of P.D. No. 1084 reads, as follows: Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by the government, with the object of maximizing their utilization and hastening their development consistent with the public interest. Section 4. Purposes. The Authority is hereby created for the following purposes: (a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land; (b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government. (c) To provide for, operate or administer such services as may be necessary for the efficient, economical and beneficial utilization of the above properties. The twin requirement of common good and economic viability was lengthily discussed in the case of Manila International Airport Authority v. Court of Appeals, 9 the pertinent portion of which reads: Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides: SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if these entities are required to meet 213

the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good — meaning for economic development purposes — these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations. In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution. Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities — known as "government-owned or controlled corporations" — must meet the test of economic viability because they compete in the market place. This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their incometo meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers. Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows: MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers' money which could have been relocated to agrarian 214

reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain. Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.1âwphi1 Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary: The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms. Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public. However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code. [Emphases supplied] This Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory Provisions of the Administrative Code or under Section 16, Article XII of the 1987 Constitution. The facts, the evidence on record and jurisprudence on the issue support the position that PRA was not organized either as a stock or a non-stock corporation. Neither was it created by Congress to operate commercially and compete in the private market. Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated government instrumentality, it is exempt from payment of real property tax. 215

Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by PRA. On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA from paying realty taxes and protects it from the taxing powers of local government units. Sections 234(a) and 133(o) of the LGC provide, as follows: SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. xxxx SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxx (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. [Emphasis supplied] It is clear from Section 234 the Local government Code that real property owned by the Republic of the Philippines (the Republic) is exempt from real property tax unless the beneficial use thereof has been granted to a taxable person. In this case, there is no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity. There is no showing on record either that PRA leased the subject reclaimed properties to a private taxable entity. This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local governments from imposing "taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. Indeed, the Republic grants the beneficial use of its real property to an agency or instrumentality of the national government. This happens when the title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption, unless "the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person."10 216

The rationale behind Section 133(o) has also been explained in the case of the Manila International Airport Authority,11 to wit: Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide." When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.: The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies. There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation: The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579) 217

This doctrine emanates from the "supremacy" of the National Government over local governments. "Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation." (U.S. v. Sanchez, 340 US 42) The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. [Emphases supplied] The Court agrees with PRA that the subject reclaimed lands are still part of the public domain, owned by the State and, therefore, exempt from payment of real estate taxes. Section 2, Article XII of the 1987 Constitution reads in part, as follows: 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 60 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 provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of the grant. Similarly, Article 420 of the Civil Code enumerates properties belonging to the State: Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; 218

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. [Emphases supplied] Here, the subject lands are reclaimed lands, specifically portions of the foreshore and offshore areas of Manila Bay. As such, these lands remain public lands and form part of the public domain. In the case of Chavez v. Public Estates Authority and AMARI Coastal Development Corporation,12 the Court held that foreshore and submerged areas irrefutably belonged to the public domain and were inalienable unless reclaimed, classified as alienable lands open to disposition and further declared no longer needed for public service. The fact that alienable lands of the public domain were transferred to the PEA (now PRA) and issued land patents or certificates of title in PEA’s name did not automatically make such lands private. This Court also held therein that reclaimed lands retained their inherent potential as areas for public use or public service. As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands. Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA's name does not automatically make such lands private. 13 Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, thus: SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.(1)The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation. Reclaimed lands such as the subject lands in issue are reserved lands for public use. They are properties of public dominion. The ownership of such lands remains with the State unless they are withdrawn by law or presidential proclamation from public use.

219

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these inalienable natural resources of the State into alienable or disposable lands of the public domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-public use. As the Court has repeatedly ruled, properties of public dominion are not subject to execution or foreclosure sale. 14 Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by respondent, as well as the issuances of certificates of title in favor of respondent, are without basis. WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court, Branch 195, Paranñ aque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine Reclamation Authority are hereby declared EXEMPT from real estate taxes. All real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Paranñ aque on the subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and the Certificates of Sale subsequently issued by the Paranñ aque City Treasurer in favor of the City of Paranñ aque, are all declared VOID. SO ORDERED.

8. G.R. No. 103882 November 25, 1998 REPUBLIC OF THE PHILIPPINES, petitioner, vs. THE HONORABLE COURT OF APPEALS AND REPUBLIC REAL ESTATE CORPORATION, respondents, CULTURAL CENTER OF THE PHILIPPINES, intervenor. G.R. No. 105276 November 25, 1998 PASAY CITY AND REPUBLIC REAL ESTATE CORPORATION, vs. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, respondents.

petitioners,

PURISIMA, J.: 220

At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised Rules of Court. Here, the Court is confronted with a case commenced before the then Court of First Instance (now Regional Trial Court) of Rizal in Pasay City, in 1961, more than 3 decades back, that has spanned six administrations of the Republic and outlasted the tenure of ten (10) Chief Justices of the Supreme Court. In G.R. No. 103882, the Republic of the Philippines, as petitioner, assails the Decision, dated January 29, 1992 and Amended Decision, dated April 28, 1992, of the Court of Appeals 1 which affirmed with modification the Decision of the former Court of First Instance of Rizal (Branch 7, Pasay City) in Civil Case No. 2229-P, entitled "Republic of the Philippines vs. Pasay City and Republic Real Estate Corporation". The facts that matter are, as follows: Republic Act No. 1899 ("RA 1899"), which was approved on June 22, 1957, authorized the reclamation of foreshore lands by chartered cities and municipalities. Section I of said law, reads: Sec. 1. Authority is hereby granted to all municipalities and chartered cities to undertake and carry out at their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications. On May 6, 1958, invoking the a forecited provision of RA 1899, the Pasay City Council passed Ordinance No. 121, for the reclamation of Three Hundred (300) hectares of foreshore lands in Pasay City, empowering the City Mayor to award and enter into reclamation contracts, and prescribing terms and conditions therefor. The said Ordinance was amended on April 21, 1959 by Ordinance No. 158, which authorized the Republic Real Estate Corporation ("RREC") to reclaim foreshore lands of Pasay City under certain terms and conditions. On April 24, 1959, Pasay City and RREC entered into an Agreement reclamation of the foreshore lands in Pasay City.

2

for the

On December 19, 1961, the Republic of the Philippines ("Republic") filed a Complaint 3 for Recovery of Possession and Damages with Writ of Preliminary Preventive injunction and Mandatory Injunction, docketed as Civil Case No. 2229-P before the former Court of First Instance of Rizal, (Branch 7, Pasay City). On March 5, 1962, the Republic of the Philippines filed an Amended Complaint 4 questioning subject Agreement between Pasay City and RREC (Exhibit "P") on the grounds that the subject-matter of such Agreement is outside the commerce of man, 221

that its terms and conditions are violative of RA 1899, and that the said Agreement was executed without any public bidding. The Answers 5 of RREC and Pasay City, dated March 10 and March 14, 1962, respectively, averred that the subject-matter of said Agreement is within the commerce of man, that the phrase "foreshore lands" within the contemplation of RA 1899 has a broader meaning than the cited definition of the term in the Words and Phrases and in the Webster's Third New International Dictionary and the plans and specifications of the reclamation involved were approved by the authorities concerned. On April 26,1962, Judge Angel H. Mojica, (now deceased) of the former Court of First Instance of Rizal (Branch 7, Pasay City) issued an Order 6 the dispositive portion of which was to the following effect: WHEREFORE, the court hereby orders the defendants, their agents, and all persons claiming under them, to refrain from "further reclaiming or committing acts of dispossession or dispoilation over any area within the Manila Bay or the Manila Bay Beach Resort", until further orders of the court. On the following day, the same trial court issued a writ of preliminary injunction 7 which enjoined the defendants, RREC and Pasay City, their agents, and all persons claiming under them "from further reclaiming or committing acts of dispossession." Thereafter, a Motion to Intervene 8, dated June 27, 1962, was filed by Jose L. Bautista, Emiliano Custodio, Renato Custodio, Roger de la Rosa, Belen Gonzales, Norma Martiner, Emilia E. Paez, Ambrosio R. Parreno, Antolin M. Oreta, Sixto L. Orosa, Pablo S. Sarmiento, Jesus Yujuico, Zamora Enterprises, Inc., Industrial and Commercial Factors, Inc., Metropolitan Distributors of the Philippines, and Bayview Hotel, Inc. stating inter alia that they were buyers of lots in the Manila Bay area being reclaimed by RREC, whose rights would be affected by whatever decision to be rendered in the case. The Motion was granted by the trial court and the Answer attached thereto admitted.9 The defendants and the intervenors then moved to dismiss 10 the Complaint of the Republic, placing reliance on Section 3 of Republic Act No. 5187, which reads: Sec. 3. Miscellaneous Projects xxx

xxx

xxx

m. For the construction of seawall and limited access highway from the south boundary of the City of Manila to Cavite City, to the south, and from the north boundary of the City of Manila to the municipality of Mariveles, province of Bataan, to the north, including the reclamation of 222

the foreshore and submerged areas: Provided, That priority in the construction of such seawalls, highway and attendant reclamation works shall be given to any corporation and/or corporations that may offer to undertake at its own expense such projects, in which case the President of the Philippines may, after competitive didding, award contracts for the construction of such project, with the winning bidder shouldering all costs thereof, the same to be paid in terms of percentage fee of the contractor which shall not exceed fifty percent of the area reclaimed by the contractor and shall represent full compensation for the purpose, the provisions of the Public Land Law concerning disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided, finally, that the foregoing provisions and those of other laws, executive orders, rules and regulations to the contrary notwithstanding, existing rights, projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected. . . . . (emphasis ours). Since the aforecited law provides that existing contracts shall be respected, movants contended that the issues raised by the pleadings have become "moot, academic and of no further validity or effect." Meanwhile, the Pasay Law and Conscience Union, Inc. ("PLCU") moved to intervene 11, alleging as legal interest in the matter in litigation the avowed purpose of the organization for the promotion of good government in Pasay City. In its Order of June 10, 1969, the lower court of origin allowed the said intervention 12. On March 24, 1972, the trial court of origin came out with a Decision, disposing, thus: WHEREFORE, after carefully considering (1) the original complaint, (2) the first Amended Complaint, (3) the Answer of Defendant Republic Real Estate Corporation to the first Amended Complaint, (4) the Answer of Defendant Pasay City to the first Amended Complaint, (5) the Second Amended Complaint, (6) the Answer of Defendant Republic Real Estate Corporation to the Second Amended Complaint, (7) the Answer of Defendant Pasay City to the Second Amended Complaint, (8) the Memorandum in Support of Preliminary Injunction of Plaintiff, (9) the Memorandum In Support of the Opposition to the Issuance of Preliminary Injunction of Defendant Pasay City and Defendant Republic Real Estate Corporation, (10) the Answer in Intervention of Intervenors Bautista, et. al., (11) Plaintiff's Opposition to Motion to Intervene, (12) the Reply to Opposition to Motion to Intervene of Intervenors Bautista, et. al., (13) the Stipulation of Facts by all the parties, (14) the Motion for Leave to Intervene of Intervenor Pasay Law and Conscience Union, Inc., (15) the Opposition to Motion For Leave to Intervene of Intervenors Bautista, et. al., (16) the Reply of Intervenor Pasay Law and Conscience 223

Union, Inc., (17) the Supplement to Opposition to Motion to Intervene of Defendant Pasay City and Republic Real Estate Corporation (18) the Complain in Intervention of Intervenor Pasay Law and Conscience Union, Inc., (19) the Answer of Defendant Republic Real Estate Corporation, (20) the Answer of Intervenor Jose L. Bautista, et. al., to Complaint in Intervention, (21) the Motion to Dismiss of Defendant Republic Real Estate Corporation, and Intervenors Bautista, et. al., (22) the Opposition of Plaintiff to said Motion to Dismiss, (23) the Opposition of Intervenor Pasay Law and Conscience Union, Inc., (24) the Memorandum of the Defendant Republic Real Estate Corporation, (25) the Memorandum for the Intervenor Pasay Law and Conscience Union, Inc., (26) the Manifestation of Plaintiff filed by the Office of the Solicitor General, and all the documentary evidence by the parties to wit: (a) Plaintiff's Exhibits "A" to "YYY- 4", (b) Defendant Republic Real Estate Corporation's Exhibits "1-RREC" to "40-a" and (c) Intervenor Pasay Law and Conscience Union, Inc's., Exhibits "A-PLACU" to "C-PLACU", the Court hereby: (1) Denies the "Motion to Dismiss" filed on January 10, 1968, by Defendant Republic Real Estate Corporation and Intervenors Bautista, et. al., as it is the finding of this Court that Republic Act No. 5187 was not passed by Congress to cure any defect in the ordinance and agreement in question and that the passage of said Republic Act No. 5187 did not make the legal issues raised in the pleadings "moot, academic and of no further validity or effect;" and (2) Renders judgment: (a) dismissing the Plaintiff's Complaint; (b) Dismissing the Complaint in Intervention of Intervenor Pasay Law and Conscience Union, Inc., (c) Enjoining Defendant Republic Real Estate Corporation and Defendant Pasay City to have all the plans and specifications in the reclamation approved by the Director of Public Works and to have all the contracts and sub-contracts for said reclamation awarded by means of, and only after, public bidding; and (d) Lifting the preliminary Injunction issued by the Court on April 26, 1962, as soon as Defendant Republic Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans and specifications to the Director of Public Works, and shall have obtained approval thereof, and as soon as the corresponding public bidding for the award to the contractor and sub-contractor that will undertake the reclamation project shall have been effected. 224

No pronouncement as to costs. SO ORDERED. (See Court of Appeals' Decision dated January 28, 1992; pp. 6-8) Dissatisfied with the said judgment, the Republic appealed therefrom to the Court of Appeals. However, on January 11, 1973, before the appeal could be resolved, Presidential Decree No. 3-A issued, amending Presidential Decree No. 3, thus: Sec. 1. Section 7 of Presidential Decree No. 3, dated September 26, 1972, is hereby amended by the addition of the following paragraphs: The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under a proper contract. All reclamations made in violation of this provision shall be forfeited to the State without need of judicial action. Contracts for reclamation still legally existing or whose validity has been accepted by the National Government shall be taken over by the National Government on the basis of quantum meruit, for proper prosecution of the project involved by administration. On November 20, 1973, the Republic and the Construction Development Corporation of the Philippines ("CDCP") signed a Contract 13 for the Manila-Cavite Coastal Road Project (Phases I and II) which contract included the reclamation and development of areas covered by the Agreement between Pasay City and RREC. Then, there was issued Presidential Decree No. 1085 which transferred to the Public Estate Authority ("PEA") the rights and obligations of the Republic of the Philippines under the contract between the Republic and CDCP. Attempts to settle amicably the dispute between representatives of the Republic, on the one hand, and those of Pasay City and RREC, on the other, did not work out. The parties involved failed to hammer out a compromise. On January 28, 1992, the Court of Appeals came out with a Decision appeal of the Republic and holding, thus:

14

dismissing the

WHEREFORE, the decision appealed from is hereby AFFIRMED with the following modifications: 1. The requirement by the trial court on public bidding and submission of RREC's plans specification to the Department Public Works and 225

Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic; 2. Ordering the plaintiff-appellant to turn over to Pasay City the ownership and possession over all vacant spaces in the twenty-one hectare area already reclaimed by Pasay City and RREC at the time it took over the same. Areas thereat over which permanent structures has (sic) been introduced shall, including the structures, remain in the possession of the present possessor, subject to any negotiation between Pasay City and the said present possessor, as regards the continued possession and ownership of the latter area. 3. Sustaining RREC's irrevocable option to purchase sixty (60%) percent of the Twenty-One (21) hectares of land already reclaimed by it, to be exercised within one (1) year from the finality of this decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract, and enjoining appellee Pasay City to respect RREC's option. SO ORDERED. On February 14, 1992, Pasay City and RREC presented a Motion for Reconsideration of such Decision of the Court of Appeals, contending, among others, that RREC had actually reclaimed Fifty-Five (55) hectares, and not only Twenty-one (21) hectares, and the respondent Court of Appeals erred in not awarding damages to them, movants. On April 28, 1992, the Court of Appeals acted favorably on the said Motion for Reconsideration, by amending the dispositive portion of its judgment of January 28, 1992, to read as follows: WHEREFORE, the dispositive portion of our Decision dated January 28, 1992 is hereby AMENDED to read as follows: 1. The requirement by the trial court on public bidding and the submission of the RREC's plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic. 2. Ordering plaintiff-appellant to turn over to Pasay City the ownership and possession of the above enumerated lots (1 to 9). 3. Sustaining RREC's irrevocable option to purchase sixty (60%) percent of the land referred to in No. 2 of this dispositive portion, to be exercised within one (1) year from the finality of this Decision, at the 226

same terms and condition embodied in the Pasay City-RREC reclamation contract, and enjoining Pasay City to respect RREC's irrevocable option. SO ORDERED. From the Decision and Amended Decision of the Court of Appeals aforementioned, the Republic of the Philippines, as well as Pasay City and RREC, have come to this Court to seek relief, albeit with different prayers. On September 10, 1997, the Court commissioned the former thirteenth Division of Court of Appeals to hear and receive evidence on the controversy. The corresponding Commissioner's Report, dated November 25, 1997, was submitted and now forms part of the records. On October 11, 1997, the Cultural Center of the Philippines ("CCP") filed a Petition in Intervention, theorizing that it has a direct interest in the case being the owner of subject nine (9) lots titled in its (CCP) name, which the respondent Court of Appeals ordered to be turned over to Pasay City. The CCP, as such intervenor, was allowed to present its evidence, as it did, before the Court of Appeals, which evidence has been considered in the formulation of this disposition. In G.R. No. 103882, the Republic of the Philippines theorizes, by way of assignment of errors, that: I THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF PASAY CITY ORDINANCE NO. 158 DATED APRIL 21, 1959 AND THE RECLAMATION CONTRACT ENTERED INTO BETWEEN PASAY CITY AND RREC; II THE COURT OF APPEALS ERRED IN FINDING THAT RREC HAD RECLAIMED 55 HECTARES AND IN ORDERING THE TURN-OVER TO PASAY CITY OF THE OWNERSHIP AND POSSESSION OF NINE (9) LOTS TITLED IN THE NAME OF CCP. In G.R. No. 105276, the petitioners, Pasay City and RREC, contend, that: I THE COURT OF APPEALS ERRED IN NOT DECLARING PRESIDENTIAL DECREE NO. 3-A UNCONSTITUTIONAL; 227

II THE COURT OF APPEALS ERRED IN NOT AWARDING DAMAGES IN FAVOR OF PASAY CITY AND RREC. Let us first tackle the issues posed in G.R. No. 103882. On the first question regarding the validity of Pasay City Ordinance No. 158 dated April 21, 1959 and the Agreement dated April 24, 1959 between Pasay City and RREC, we rule in the negative. Sec. 1 of RA 1899, reads: Sec. 1. Authority is hereby granted to all municipalities and chartered cities to undertake and carry out at their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications. It is the submission of the petitioner, Republic of the Philippines, that there are no foreshore lands along the seaside of Pasay City 15; that what Pasay City has are submerged or offshore areas outside the commerce of man which could not be a proper subject matter of the Agreement between Pasay City and RREC in question as the area affected is within the National Park, known as Manila Bay Beach Resort, established under Proclamation No. 41, dated July 5, 1954, pursuant to Act No. 3915, of which area it (Republic) has been in open, continuous and peaceful possession since time immemorial. Petitioner faults the respondent court for unduly expanding what may be considered "foreshore land" through the following disquisition: The former Secretary of Justice Alejo Mabanag, in response to a request for an opinion from the then Secretary of Public Works and Communications as to whether the term, "foreshore areas" as used in Section I of the immediately aforequoted law is that defined in Webster's Dictionary and the Law of Waters so as to make any dredging or filling beyond its prescribed limit illegal, opined: According to the basic letter of the Director of Public Works, the law of Waters speaks of 228

"shore" and defines it thus: "that space movement of the tide. Its interior or terrestrial limit in the line reached by highest equinoctial tides." Webster's definition of foreshore reads as follows: That part of the shore between high water and low-water marks usually fixed at the line to which the ordinary means tide flows: also, by extension, the beach, the shore near the water's edge. If we were to be strictly literal the term foreshore or foreshore lands should be confined to but a portion of the shore, in itself a very limited area. (p. 6, Intervenorsappellees' brief). Bearing in mind the (Webster's and Law of Waters) definitions of "shore" and of foreshore lands, one is struck with the apparent inconsistency between the areas thus described and the purpose to which that area, when reclaimed under the provision of Republic Act No. 1899, shall be devoted. Section I (of said Law) authorizes the construction thereat of "adequate docking and harbor facilities". This purpose is repeated in Sections 3 and 4 of the Act. And yet, it is well known fact that foreshore lands normally extend only from 10 to 20 meters along the coast. Not very much more if at all. In fact certain parts in Manila bordering on Manila Bay, has no foreshore to speak of since the sea washes the sea wall. It does not seem logical, then, that Congress had in mind. Webster's limited concept of foreshore when it enacted Republic Act No. 1899, unless it intends that the wharves, piers, docks, etc. should be constructed parallel to the shore, which is impractical.

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Since it is to be presumed that Congress could not have intended to enact an ineffectual measure not one that would lead to absurd consequences, it would seem that it used "foreshore" in a sense wider in scope that defined by Webster. . . . To said opinion on the interpretation of the R.A. 1899, plaintiff-appellant could not offer any refutation or contrary opinion. Neither can we. In fact, the above construction is consistent with the "rule on context" in statutory construction which provides that in construing a statute, the same must be construed as a whole. The particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole (see Araneta vs. Concepcion, 99 Phil. 709). There are two reasons for this. Firstly, the force and significance of particular expressions will largely depend upon the connection in which they are found and their relation to the general subject-matter of the law. The legislature must be understood to have expressed its whole mind on the special object to which the legislative act is directed but the vehicle for the expressions of that meaning is the statute, considered as one entire and continuous act, and not as an agglomeration of unrelated clauses. Each clause or provision will be illuminated by those which are cognate to it and by the general tenor of the whole statute and thus obscurities end ambiguities may often be cleared up by the most direct and natural means. Secondly effect must be given, if it is possible, to every word and clause of the statute, so that nothing shall be left devoid of meaning or destitute of force. To this end, each provision of the statute should be read in the light of the whole. For the general meaning of the legislature, as gathered from the entire act, may often prevail over the construction which would appear to be the most natural and obvious on the face of a particular clause. If is by this means that contradiction and repugnance between the different parts of the statute may be avoided. (See Black, Interpretation of Laws, 2nd Ed., pp. 317-319).

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Resorting to extrinsic aids, the "Explanatory Note" to House Bill No. 3830, which was subsequently enacted as Republic Act No. 1899, reads: In order to develop and expand the Maritime Commerce of the Philippines, it is necessary that harbor facilities be correspondingly improved and, where necessary, expanded and developed. The national government is not in a financial position to handle all this work. On the other hand, with a greater autonomy many chartered cities and provinces are financially able to have credit position which will allow them to undertake these projects. Some cities, such as the City of Bacolod under R.A. 161, has been authorized to reclaim foreshore lands bordering it. Other cities end provinces have continuously been requesting for authority to reclaim foreshore lands on the basis of the Bacolod City pattern, and to undertake work to establish, construct on the reclaimed area and maintain such port facilities as may be necessary. In order not to unduly delay the undertaking of these projects, and inorder to obviate the passage of individual pieces of legislation for every chartered city and province, it is hereby recommended that the accompanying bill be approved. It covers Authority for All chartered cities and provinces to undertake this work. . . . (emphasis supplied) Utilizing the above explanatory note in interpreting and construing the provisions of R.A. 1899, then Secretary of Justice Mabanag opined: It is clear that the "Bacolod City pattern" was the basis of the enactment of the aforementioned bill of general application. This so-called "Bacolod City pattern" appears to be composed of 3 parts, namely: Republic Ad No. 161, which grants authority to Bacolod City to undertake or carry out . . . the 231

reclamation . . . of any [sic] carry out the reclamation project conformably with Republic Act No. 161; and Republic Act No. 1132 authorizing Bacolod City to contract indebtedness or to issue bonds in the amount not exceeding six million pesos to finance the reclamation of land in said city. Republic Act No. 161 did not in itself specify the precise space therein referred to as "foreshore" lands, but it provided that docking and harbor facilities should be erected on the reclaimed portions thereof, while not conclusive would indicate that Congress used the word "foreshore" in its broadest sense. Significantly, the plan of reclamation of foreshore drawn up by the Bureau of Public Works maps out an area of approximately 1,600,000 square meters, the boundaries of which clearly extend way beyond Webster's limited concept of the term "foreshore". As a contemporaneous construction by that branch of the Government empowered to oversee at least, the conduct of the work, such an interpretation deserves great weight. Finally, Congress in enacting Republic Act No. 1132 (supplement to RA 161), tacitly confirmed and approved the Bureau's interpretation of the term 'foreshore' when instead of taking the occasion to correct the Bureau of over extending its plan, it authorized the city of Bacolod to raise the full estimated cost of reclaiming the total area covered by the plan. The explanatory note to House Bill No. 1249 which became Republic Act No. 1132 states among the things: The Bureau of Public Works already prepared a plan for the reclamation of about 1,600,000 square meters of land at an estimated costs of about P6,000,000.00. The project is selfsupporting because the proceeds from the sales or leases of lands so reclaimed will be

232

more than sufficient to cover the cost of the project. Consequently, when Congress passed Republic Act No. 1899 in order to facilitate the reclamation by local governments of foreshore lands on the basis of the Bacolod City pattern and in order to obviate the passage of individual pieces of legislation for every chartered city and provinces requesting authority to undertake such projects, the lawmaking body could not have had in mind the limited area described by Webster as "foreshore" lands. . . . . If it was really the intention of Congress to limit the area to the strict literal meaning of "foreshore" lands which may be reclaimed by chartered cities and municipalities, Congress would have excluded the cities of Manila, Iloilo, Cebu, Zamboanga and Davao from the operation of RA 1899 as suggested by Senator Cuenco during the deliberation of the bill considering that these cities do not have 'foreshore' lands in the strict meaning of the term. Yet, Congress did not approve the proposed amendment of Senator Cuenco, implying therefore, that Congress intended not to limit the area that may be reclaimed to the strict definition of "foreshore" lands. The opinion of the then Secretary of Justice Mabanag, who was at that time the chief law officer and legal adviser of the government and whose office is required by law to issue opinions for the guidance of the various departments of the government, there being then no judicial interpretation to the contrary, is entitled to respect (see Bengzon vs. Secretary of Justice and Insular Auditor, 68 Phil. 912). We are not unmindful of the Supreme Court Resolution dated February 3, 1965 in Ponce vs. Gomez (L-21870) and Ponce vs. City of Cebu (L-2266), by a unanimous vote of six (6) justices (the other five (5) members deemed it unnecessary to express their view because in their opinion the questions raised were not properly brought before the court), which in essence applied the strict dictionary meaning of "foreshore lands" as used in RA 1899 in the 233

case of the city of Cebu. But this was promulgated long after the then Secretary of Justice Mabanag rendered the above opinion on November 16, 1959 and long after RREC has started the subject reclamation project. Furthermore, as held by the lower court, Congress, after the Supreme Court issued the aforementioned Resolution, enacted RA 5187. In Sec. 3 (m) of said law, Congress appropriated money "for the construction of the seawall and limited access highway from the South boundary of the city of Manila to Cavite City, to the South, and from the North boundary of the city of Manila to the municipality of Mariveles, province of Bataan, to the North (including the reclamation of foreshore and submerged areas . . . provided . . . that . . . existing projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected . . ." This is a clear manifestation that Congress in enacting RA 1899, did not intend to limit the interpretation of the term "foreshore land" to its dictionary meaning. It is presumed that the legislature was acquainted with and had in mind the judicial construction given to a former statute on the subject, and that the statute on the subject, and that the statute was enacted having in mind the judicial construction that the prior enactment had received, or in the light of such existing judicial decisions as have direct bearing upon it (see 50 Am. Jur., Sec. 321, pp. 312-313). But notwithstanding said interpretation by the Supreme Court of RA 1899 in the Ponce cases, Congress enacted a law covering the same areas previously embraced in a RA 1899 (as mentioned earlier, cities without foreshore lands which were sought to be excluded from the operation of RA 1899 were not excluded), providing that respect be given the reclamation of not only foreshore lands but also of submerged lands signifying its non-conformity to the judicial construction given to RA 1899. If Congress was in accord with the interpretation and construction made by the Supreme Court on RA 1899, it would have mentioned reclamation of "foreshore lands" only in RA 5187, but Congress included "submerged lands" in order to clarify the intention on the grant of authority to cities and municipalities in the reclamation of lands bordering them as provided in RA 1899. It is, therefore, our opinion that it is actually the intention of Congress in 234

RA 1899 not to limit the authority granted to cities and municipalities to reclaim foreshore lands in its strict dictionary meaning but rather in its wider scope as to include submerged lands. The Petition is impressed with merit. To begin with, erroneous and unsustainable is the opinion of respondent court that under RA 1899, the term "foreshore lands" includes submerged areas. As can be gleaned from its disquisition and rationalization aforequoted, the respondent court unduly stretched and broadened the meaning of "foreshore lands", beyond the intentment of the law, and against the recognized legal connotation of "foreshore lands". Well entrenched, to the point of being elementary, is the rule that when the law speaks in clear and categorical language, there is no reason for interpretation or construction, but only for application. 16 So also, resort to extrinsic aids, like the records of the constitutional convention, is unwarranted, the language of the law being plain and unambiguous. 17 Then, too, opinions of the Secretary of Justice are unavailing to supplant or rectify any mistake or omission in the law. 18 To repeat, the term "foreshore lands" refers to: The strip of land that lies between the high and low water marks and that is alternately wet and dry according to the flow of the tide. (Words and Phrases, "Foreshore") A strip of land margining a body of water (as a lake or stream); the part of a seashore between the low-water line usually at the seaward margin of a low-tide terrace and the upper limit of wave wash at high tide usually marked by a beach scarp or berm. (Webster's Third New International Dictionary) The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot broaden its meaning, much less widen the coverage thereof. If the intention of Congress were to include submerged areas, it should have provided expressly. That Congress did not so provide could only signify the exclusion of submerged areas from the term "foreshore lands". Neither is there any valid ground to disregard the Resolution of this Court dated February 3, 1965 in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) despite the enactment of Republic Act No. 5187 ("RA 5187"), the relevant portion of which, reads: Sec. 3. Miscellaneous Projects xxx

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m. For the construction of seawall and limited access highway from the south boundary of the City of Manila to Cavite City, to the south, and from the north boundary of the City of Manila to the municipality of Mariveles, province of Bataan, to the north, including the reclamation of the foreshore and submerged areas: Provided, That priority in the construction of such seawalls, highway and attendant reclamation works shell be given to any corporation and/or corporations that may offer to undertake at its own expense such projects, in which case the President of the Philippines may, after competitive bidding, award contracts for the construction of such projects, with the winning bidder shouldering all costs thereof, the same to be paid in terms of percentage fee of the contractor which shall not exceed fifty percent of the area reclaimed by the contractor and shall represent full compensation for the purpose, the provisions of the Public Land Law concerning disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided, finally, that the foregoing provisions and those of other laws, executive orders, rules and regulations to the contrary notwithstanding, existing rights, projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected. . . . . There is nothing in the foregoing provision of RA 5187 which can be interpreted to broaden the scope of "foreshore lands." The said law is not amendatory to RA 1899. It is an Appropriations Act, entitled — "AN ACT APPROPRIATING FUNDS FOR PUBLIC WORKS, SYNCHRONIZING THE SAME WITH PREVIOUS PUBLIC WORKS APPROPRIATIONS." All things viewed in proper perspective, we reiterate what was said in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) that the term "foreshore" refers to "that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides." As opined by this Court in said cases: WHEREAS, six (6) members of the Court (Justices Bautista Angelo, Concepcion, Reyes, Barrera, Dizon and Jose P. Bengzon) opine that said city ordinance and contracts are ultra vires and hence, null and void, insofar as the remaining 60% of the area aforementioned, because the term "foreshore lands" as used in Republic Act No. 1899 should be understood in the sense attached thereto by common parlance; (emphasis ours) 236

The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his opinion dated December 22, 1966, in a case with analogous facts as the present one, to wit: Dece mber 22, 1966 The Secretary of Agriculture and Natural Resources Diliman, Quezon City Sir: xxx

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I. Facts — 1. On January 19, 1961, pursuant to the provisions of Republic Act No. 1899, the Municipality of Navotas enacted Ordinance No. 1 authorizing the Municipal Mayor to enter into a reclamation contract with Mr. Chuanico. 2. On March 15, 1961, a reclamation contract was concluded between the Municipality of Navotas, represented by the Municipal Mayor, and Mr. Chuanico in accordance with the above ordinance. Thereunder, Mr. Chuanico shall be the attorney-in-fact of the Municipality in prosecuting the reclamation project and shall advance the money needed therefor; that the actual expenses incurred shall be deemed a loan to the Municipality; that Mr. Chuanico shall have the irrevocable option to buy 70% of the reclaimed area at P7.00 per square meter; that he shall have the full and irrevocable powers to do any and all things necessary and proper in and about the premises," including the power to hire necessary personnel for the prosecution of the work, purchase materials and supplies, and purchase or lease construction machineries and equipment, but any and all contracts to be concluded by him in behalf of the Municipality shall be submitted to public bidding. xxx

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3. On March 16, 1961, the Municipal Council of Navotas passed Resolution No. 22 approving and ratifying the contract. xxx

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III. Comments — 1. The above reclamation contract was concluded on the basis of Navotas Ordinance No. 1 which, in turn, had been enacted avowedly pursuant to Republic Act No. 1899. This being so, the contract, in order to be valid, must conform to the provisions of the said law. By authorizing local governments "to execute by administration any reclamation work," (Republic Act No. 1899 impliedly forbids the execution of said project by contract. Thus, in the case or Ponce et al. vs. Gomez (February 3, 1966), five justices of the Supreme Court voted to annul the contract between Cebu Development Corporation and Cebu City for the reclamation of foreshore lands because "the provisions of said . . . contract are not . . . in accordance with the provisions of Republic Act No. 1899," as against one Justice who opined that the contract substantially complied with the provisions of the said law. (Five Justices expressed no opinion on this point.) Inasmuch as the Navotas reclamation contract is substantially similar to the Cebu reclamation contract, it is believed that the former is likewise fatally defective. 2. The Navotas reclamation project envisages the construction of a channel along the Manila Bay periphery of that town and the reclamation of approximately 650 hectares of land from said channel to a seaward distance of one kilometer. In the basic letter it is stated that "practically, all the 650 hectares of lands proposed to be reclaimed under the agreement" do not constitute foreshore lands and that "the greater portion of the area . . . is in fact navigable and presently being used as a fishing harbor by deep-sea fishing operators as well as a fishing ground of sustenance fisherman. Assuming the correctness of these averments, the Navotas reclamation contract evidently transcends the authority granted under Republic Act No. 1899, which empowers the local governments to reclaim nothing more than "foreshore 238

lands, i.e., "that part of the land adjacent to the see which is alternately covered and left dry by the ordinary flow of the tides." (26 C.J. 890.) It was for this reason that in the cited case Ponce case, the Supreme Court, by a vote of 6-0 with five Justices abstaining, declared ultra vires and void the contractual stipulation for the reclamation of submerged lands off Cebu City, and permanently enjoined its execution under Republic Act No. 1899. xxx

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In accordance with the foregoing, I have the honor to submit the view that the Navotas reclamation contract is not binding and should be disregarded for non-compliance with law. Very truly yours, (SGD) CLAU DIO TEEH ANKE E Secret ary of Justic e The said opinion of Justice Secretary Teehankee who became Associate Justice, and later Chief Justice, of this Court, did, in our considered view, supersede the earlier opinion of former justice Secretary Alejo Mabanag, aforestated, as the cases, in connection with which subject opinions were sought, were with similar facts. The said Teehankee opinion accords with RA 1899. It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended by Ordinance No. 158, and the Agreement under attack, have been found to be outside the intendment and scope of RA 1899, and therefore ultra vires and null and void. What is worse, the same Agreement was vitiated by the glaring absence of a public bidding. 239

Obviously, there is a complete dearth of evidence to prove that RREC had really reclaimed 55 hectares. The letter of Minister Baltazar Aquino relied upon by RREC is no proof at all that RREC had reclaimed 55 hectares. Said letter was just referring to a tentative schedule of work to be done by RREC, even as it required RREC to submit the pertinent papers to show its supposed accomplishment, to secure approval by the Ministry of Public Works and Highways to the reclamation plan, and to submit to a public bidding all contracts and sub-contracts for subject reclamation project but RREC never complied with such requirements and conditions sine qua non. No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the reclamation project were presented to reflect any accomplishment. Not even any statement or itemization of works accomplished by contractors or subcontractors or vouchers and other relevant papers were introduced to describe the extent of RREC's accomplishment. Neither was the requisite certification from the City Engineer concerned that "portions of the reclamation project not less than 50 hectares in area shall have been accomplished or completed" obtained and presented by RREC. As a matter of fact, no witness ever testified on any reclamation work done by RREC, and extent thereof, as of April 26, 1962. Not a single contractor, sub-contractor, engineer, surveyor, or any other witness involved in the alleged reclamation work of RREC testified on the 55 hectares supposedly reclaimed by RREC. What work was done, who did the work, where was it commenced, and when was it completed, was never brought to light by any witness before the court. Certainly, onus probandi was on RREC and Pasay City to show and point out the as yet unidentified 55 hectares they allegedly reclaimed. But this burden of proof RREC and Pasay City miserably failed to discharge. So also, in the decision of the Pasay Court of First Instance dismissing the complaint of plaintiff-appellant, now petitioner Republic of the Philippines, the lifting of the writ of Preliminary Injunction issued on April 26, 1962 would become effective only "as soon as Defendant Republic Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans and specifications to the Director of Public Work, and shall have obtained approval thereof, and as soon as corresponding public bidding for the award to the contractor and sub-contractor that will undertake the reclamation project shall have been effected." (Rollo, pp. 127-129, G.R. No. 103882) From the records on hand, it is abundantly clear that RREC and Pasay City never complied with such prerequisites for the lifting of the writ of Preliminary Injunction. Consequently, RREC had no authority to resume its reclamation work which was stopped by said writ of preliminary injunction issued on April 26, 1962. From the Contract for Dredging Work, dated November 26, 1960, marked Exhibit "21A" for RREC before the lower court, and Exhibit "EE" for CCP before the Court of Appeals, it can be deduced that only on November 26, 1960 did RREC contract out the 240

dredging work to C and A Construction Company, Inc., for the reclamation of the 55 hectares initially programmed to be reclaimed by it. But, as stated by RREC itself in the position paper filed with this Court on July 15, 1997, with reference to CDCP's reclamation work, mobilization of the reclamation team would take one year before a reclamation work could actually begin. Therefore, the reclamation work undertaker by RREC could not have started before November 26, 1961. Considering that on April 26, 1962 RREC was enjoined from proceeding any further with its reclamation work, it had barely five (5) months, from November, 1961 to April, 1962, to work on subject reclamation project. It was thus physically impossible for RREC to reclaim 55 hectares, with the stipulated specifications and elevation, in such a brief span of time. In the report of RREC (Exhibit "DD" for CCP), it was conceded that due to the writ of preliminary injunction issued on April 26, 1962, C and A Construction Co., Inc. had suspended its dredging operation since May, 1962. The "graphical report" on the Pasay Reclamation project, as of April 30, 1962, attached to the Progress Report marked Exhibit "DD", is a schematic representation of the work accomplishment referred to in such Progress Report, indicating the various elevations of the land surface it embraced, ranging from 0.00 meters to the highest elevation of 2.5 meters above MLLW. Such portrayal of work accomplished is crucial in our determination of whether or not RREC had actually "reclaimed" any land as under its Contract for Dredging Work with C and A Construction Company (Exhibit "EE", the required final elevation for a completely reclaimed land was 3.5 meters above MLLW, as explicitly provided in said Contract for Dredging Work. So, the irresistible conclusion is — when the work on subject RREC-Pasay City reclamation project stopped in April, 1962 in compliance with the writ of preliminary injunction issued by the trial court of origin, no portion of the reclamation project worked on by RREC had reached the stipulated elevation of 3.5 meters above MLLW. The entire area it worked on was only at sea level or 0.00 meter above MLLW. In short, RREC had not yet reclaimed any area when the writ of preliminary injunction issued in April 1962. On this point, the testimonies of Architect Ruben M. Protacio, Architect and Managing partner of Leandro V. Locsin and partners, Architect and City Planner Manuel T. Mañoza, Jr. of Planning Resources and Operation System, Inc., Rose D. Cruz, Executive Assistant, Office of the President, from 1966 to 1970, and Dr. Lucrecia Kasilag, National Artist and member of CCP Advisory Committee, come to the fore. These credible, impartial and knowledgeable witnesses recounted on the witness stand that when the construction of the Main Building of the Cultural Center of the Philippines (CCP) began in 1966, the only surface land available was the site for the said building (TSN, Sept. 29, 1997, pages 8, 14 and 50), what could be seen in front of and behind it was all water (TSN, Sept. 29, 1997 pages 127-128). When the CCP Main Building was being constructed, from 1968 to 1969, the land above sea level thereat was only where the CCP Main Building was erected and the rest of the surroundings were all under water, particularly the back portion fronting the bay. (TSN, Sept. 13, 241

1997, pp. 181, 182, 185, 186, 188). Dr. Lucrecia R. Kasilag stressed that on April 16, 1966, during the ground breaking for the CCP Main Building, it was water all around (TSN, Sept. 30, 1997, pp. 320, 324, 325). There was indeed no legal and factual basis for the Court of Appeals to order and declare that "the requirement by the trial court on public bidding and the submission of RREC's plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic." Said requirement has never become moot and academic. It has remained indispensable, as ever, and non-compliance therewith restrained RREC from lawfully resuming the reclamation work under controversy, notwithstanding the rendition below of the decision in its favor. Verily, contrary to what the Court of Appeals found, RREC had not reclaimed any area with the prescribed elevation of 3.5 meters above MLLW, so much so that in 1978, it (RREC) opted to file with the former Ministry of Public Highways, a claim for compensation of P30,396,878.20, for reclamation work allegedly done before the CDCP started working on the reclamation of the CCP grounds. On September 7, 1979, RREC asked the Solicitor General to settle its subject claim for compensation at the same amount of P30,396,878.20. But on June 10, 1981, guided by the cost data, work volume accomplished and other relevant information gathered by the former Ministry of Public Highways, the Solicitor General informed RREC that the value of what it had accomplished, based on 1962 price levels, was only P8,344,741.29, and the expenses for mobilization of equipment amounted to P2,581,330.00. The aforesaid evaluation made by the government, through the then Minister of Public Highways, is factual and realistic, so much so that on June 25, 1981, RREC, in its reply letter to the Solicitor General, stated: We regret that we are not agreeable to the amount of P10,926,071.29, based on 1962 cost data, etc., as compensation based on quantum meruit. The least we would consider is the amount of P10,926,071.29 plus interest at the rate of 6% per annum from 1962 to the time of payment. We feel that 6% is very much less than the accepted rate of inflation that has supervened since 1962 to the present, and even less than the present legal rate of 12% per annum. 19 Undoubtedly, what RREC claimed for was compensation for what it had done, and for the dredge fill of 1,558,395 cubic meters it used, on subject reclamation project. Respondent Court likewise erred in ordering the turn-over to Pasay City of the following titled lots, to wit: LOT NO. BUILDING AREA OCT/TCT 242

42 Gloria Maris 9,516 sq.m. OCT 159 in the Restaurant name of GSIS 3 Asean Garden 76,299 sq.m. OCT 10251 in the name of CCP 12 Folk Arts Theater 1.7503 hec. TCT 18627 in the and PICC parking name of CCP space 22 landscaped with 132,924 sq.m. TCT 75676 in the sculpture of Asean name of CCP Artists-site of Boom na Boom 23 open space, back 34,346 sq.m. TCT 75677 in the of Philcite name of CCP 24 Parking space for 10,352 sq.m. TCT 75678 in the Star City, CCP, name of CCP Philcite 25 open space 11,323 sq.m. TCT 75679 in the occupied by Star name of CCP City 28 open space, 27,689 sq.m. TCT 75684 in the beside PICC name of CCP 29 open space, 106,067 sq.m. TCT 75681 in the leased by El name of CCP 243

Shaddai We discern no factual basis nor any legal justification therefor. In the first place, in their answer to the Complaint and Amended Complaint below, RREC and Pasay City never prayed for the transfer to Pasay City of subject lots, title to which had long become indefeasible in favor of the rightful title holders, CCP and GSIS, respectively. The annotation of a notice of lis pendens on the certificates of title covering the said lots is of no moment. It did not vest in Pasay City and RREC any real right superior to the absolute ownership thereover of CCP and GSIS. Besides, the nature of the action did not really warrant the issuance of a notice of lis pendens. Sec. 14 of Rule 13, Revised Rules of Civil Procedure, reads: Sec. 14. Notice of lis pendens. — In an action affecting the title or the right of possession of real properly, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names. The notice of lis pendens herein above mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded. Under the aforecited provision of law in point, a notice of lis pendens is necessary when the action is for recovery of possession or ownership of a parcel of land. In the present litigation, RREC and Pasay City, as defendants in the main case, did not counterclaim for the turnover to Pasay City of the titled lots aforementioned. What is more, a torrens title cannot be collaterally attacked. The issue of validity of a torrens title, whether fraudulently issued or not, may be posed only in an action brought to impugn or annul it. (Halili vs. National Labor Relations Commission, 257 SCRA 174, Cimafranca vs. Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and cannot be ignored, is the germane provision of Section 48 of P.D. 244

1529, that a certificate of title can never be the subject of a collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding instituted in accordance with law. Although Pasay City and RREC did not succeed in their undertaking to reclaim any area within subject reclamation project, it appearing that something compensable was accomplished by them, following the applicable provision of law and hearkening to the dictates of equity, that no one, not even the government, shall unjustly enrich oneself/itself at the expense of another 20, we believe; and so hold, that Pasay City and RREC should be paid for the said actual work done and dredge-fill poured in, worth P10,926,071.29, as verified by the former Ministry of Public Highways, and as claimed by RREC itself in its aforequoted letter dated June 25, 1981. It is fervently hoped that long after the end of our sojourn in this valley of tears, the court, for its herein historic disposition, will be exalted by the future generations of Filipinos, for the preservation of the national patrimony and promotion of our cultural heritage. As writer Channing rightly puts it: "Whatever expands the affections, or enlarges the sphere of our sympathies — Whatever makes us feel our relation to the universe and all that it inherits in time and in eternity, and to the great and beneficent cause of all, must unquestionably refine our nature, and elevate us in the scale of being." WHEREFORE: In G.R. No. 103882, the Petition is GRANTED; the Decision, dated January 28, 1992, and Amended Decision, dated April 28, 1992, of the Court of Appeals, are both SET ASIDE; and Pasay City Ordinance No. 121, dated May 6, 1958, and Ordinance No. 158, dated April 21, 1959, as well as the Reclamation Agreements entered into by Pasay City and Republic Real Estate Corporation (RREC) as authorized by said city ordinances, are declared NULL and VOID for being ultra vires, and contrary to Rep. Act 1899. The writ of preliminary injunction issued on April 26, 1962 by the trial court a quo in Civil Case No. 2229-P is made permanent and the notice of lis pendens issued by the Court of Appeals in CA G.R. CV No. 51349 ordered CANCELLED. The Register of Deeds of Pasay City is directed to take note of and annotate on the certificates of title involved, the cancellation of subject notice of lis pendens. The petitioner, Republic of the Philippines, is hereby ordered to pay Pasay City and Republic Real Estate Corporation the sum of TEN MILLION NINE HUNDRED TWENTYSIX THOUSAND SEVENTY-ONE AND TWENTY-NINE CENTAVOS (P10,926,071.29) PESOS, plus interest thereon of six (6%) percent per annum from May 1, 1962 until full payment, which amount shall be divided by Pasay City and RREC, share and share alike. In G.R. No. 105276, the Petition is hereby DENIED for lack of merit. 245

No pronouncement as to costs. SO ORDERED. Bellosillo, Melo, Quisumbing and Pardo, JJ., concur. Narvasa, C.J., I DISSENT: Ponce is not binding precedent, and P.D. 3-A is in utter nullity: Davide, Jr., J., also that of the concurring opinion of Mr. Justice Puno. Romero, J., Please see Separate Opinion. Puno, J., Please see Concurring Opinion. Vitug, J., In the result. Kapunan, J., No part, having appeared for the Gov't. when I was in the OSG. Mendoza, J., I concur in this and in the concurring opinion of Justice Puno. Panganiban, J., Please see Separate Opinion. Martinez, J., I join the Chief Justice in his dissent.

Separate Opinions

ROMERO, J., separate opinion; Culture doesn't save anything or any-one, it doesn't justify. But it's a product of man: he projects himself into it, he recognizes himself in it; that critical mirror alone offers him his image." So said Jean Paul Sartre, one of the greatest philosophical thinkers of our time. Matthew Arnold referred to it as the "pursuit of our total perfection" or the "study of perfection." The English mathematican and philosopher Alfred North Whitehead, placing premium on human subjectivity, declared, "Culture is activity of thought, and receptiveness to beauty and humane feeling. Image, perfection, beauty, and feeling. These are elements which are also associated with art and creation. Yet, art in itself is a multi-faceted concept. The revered and, at times, controversial President John Fitzgerald Kennedy, in one of his numerous speeches, elevated art to the level of a pyscho-social necessity of man when he said, 246

". . . (A)rt establishes the basic human truths which ust serve as the touchstone of our judgment." Indeed, there is no question that art satisfies one of the deepest spiritual needs of man. Of course, when one speaks of art and culture, he in fact speaks of it in two ways: the abstract and the concrete. What is abstract is conditioned by time; that which is and the concrete is ravaged by it. While the concept of "culture and art" endures man's folies, amassing innumerable, priceless enhancements as it effortlessly slides through generations of human progress, its tangible counterpart, that which is preserved for our children's appreciation, is unfortunately fragile. Art works, music, architecture, literature, and other cultural embellishments which exhibit extraordinary longevity are proclaimed as national treasures, and rightly so, for they are lasting testiminials of man's boundless imagination and creativity, that single trait that places the human species above all other creatures of the Almighty. Most evidence of a culture's richness are lost, not in the tide of nature's frivolity, but through man's foolishness and capriciousness. Wars used to be the main culprit in the virtual obliteration of the works of ancient scholars. We are now, and for the past century or so, faced with a greater foe: progress. Progress and development are the hallmarks of successful governance. Our leaders, and there are so many of them now, decide "what is best" for the public. Inopportunely, what is perceived to be in the "best interest" of the majority in the name of "progress" may sometimes, and in the long run, the calamitous to the entire people in terms of cultural atrophy. This is the quandary in which this Court finds itself as it attempts to weigh once more private rights against sovereignty and the general welfare. Background Facts In a nutshell, the undisputed facts in these consolidated petitions follow. Pursuant to Republic Act No. 1899, which authorized chartered cities and municipalities to reclaim adjoining foreshore lands, the City Council of Pasay resolved to reclaim a portion of the Manila Bay covering the Manila-Pasay-Parañaque bounderies and, for this purpose, enacted Ordinance No. 121 on May 6, 1958. Two days later, on the strength of said ordinance, Pasay City Mayor Pablo Cuneta contracted with Republic Real Estate Corporation (RREC) for the reclamation of portions of the Manila Bay. On April 21, 1959, the City Council of Pasay amended Ordinance No. 121 by enacting Ordinance No. 158. A new agreement between the parties (the Reclamation Agreement) was executed three days thereafter, whcih, among other things, granted the reclamation project to RREC and gave it an irrevocable option to purchase a maximum of 60% of the area reclaimed at P10.00 per square meter, the amount of which could be set off against any outstanding obligation of the City to RREC. Such an option could only be effected within a year from the time the City Engineer certified that 50 hectares had been reclaimed. The reclamation itself was made by the RREC through third parties who were awarded 247

contracts on the various phases of the project through public bidding. To raise more funds, RREC entered into contracts to sell the reclaimed areas which it could purchase from Pasay City by exercising its option under the Reclamation Agreement. Proceedings before the trial court On December 19, 1961, the Republic of the Philippines filed a complaint (amended on March 5, 1962) against Pasay City and RREC for "Recovery of Possession and Damages with Writ of Preliminary Preventive Injunction and Mandatory Injunction" before Branch 7 of the then Court of First Instance of Rizal, Pasay City, praying for the declaration of nullity of Ordinance Nos. 121 and 158, the Reclamation Agreement, and the Contracts to Sell between RREC and the buyers of the reclaimed land. Among other things, the following matters were alleged: (a) the area reclaimed was already reserved as a national park under Proclamation No. 41, dated July 5, 1954 and Act No. 3915, hence, the subject of the Reclamation Agreement was beyond man's commerce; (b) Ordinance Nos. 121 and 158 were ultra vires and void ab initio for being violative of R.A. No. 1899, because they involved the reclamation of "submerged areas" and not "foreshore lands" as allowed by said law; and (c) the Reclamation Agreement was illegal, contrary to morals and public policy because it was executed with neither authority from the National Government nor any public bidding. In their separate answer, Pasay City and RREC set forth the following negative defenses: (a) Pasay City was empowered by R.A. No. 1899 to reclaim any portion of the Manila Bay; (b) the area reclaimed was not a portion of the Manila Bay Resort, which was the area reserved as a national park under Proclamation No. 41 and Act No. 3915; (c) under R.A. No. 1899, the term "foreshore lands" meant much more than its technical definition and extended to submerged areas beyond the water marks of the shore; and (d) all the actuations of the City RREC regarding the reclamation project were in accordance with R.A. No. 1899 and related laws. On April 26, 1962, the trial court issued a writ of preliminary injunction ordering Pasay City and RREC to refrain from their activities at the Manila Bay. On January 10, 1968, however, RREC filed a "Motion to Dismiss" the complaint on the ground that the passage of Republic Act No. 5187 (otherwise known as the Public Works Act) on September 16, 1967, rendered the issues raised by the Republic of the Philippines moot and academic. Specifically, RREC relied on Section 3 (m) thereof which stated that all "contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected" during the construction by the national government of a sea wall and limited access highway passing through the projected area of the reclamation. In the meantime, the trial court allowed Jose Bautista and others who allegedly bought in good faith and for value from RREC some portions of the reclaimed land, to intervene in the action and join cause with Pasay City and RREC. On the other hand, the Pasay Law and Conscience Union, Inc. (PLCUI), a civic

248

organization, joined with the Republic of the Philippines and filed a complaint in intervention. On May 24, 1972, the court a quo rendered a judgment on the pleadings, upholding the validity of Ordinance Nos. 121 and 158 of the Reclamation Agreement; dismissing the complaint as well as PLCUI's complaint in intervention; enjoining RREC and Pasay City "to have all the plans and specifications in the reclamation approved by the Director of Public Works, and to have all the contracts and subcontracts for said reclamation awarded by means of, and only after, public bidding"; and lifting the preliminary injunction, dated April 26, 1962, as soon as said conditions shall have been met by RREC and Pasay City. Proceedings before the Court of Appeals During the pendency of the State's appeal with the Court of Appeals, President Marcos issued on January 11, 1973, Pressidential Decree No. 3-A, providing, inter alia, that "the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person aurhorized by it under a proper contract," and that it shall take over any validly existing reclamation contract on the basis of quantum meruit. On the strength of P.D. No. 3-A, the Commission of Public Highways and the Construction Development Corporation of the Philippines (CDCP) took over the reclamation contract between Pasay City and RREC for the construction of the Manila-Cavite City Coastal Road. CDCP development the area already reclaimed by RREC and continued reclaiming where the latter left off. These areas, which came to be known as the Cultural Center Complex and the Financial Center Complex, were registered in the name of the CCP. On February 4, 1977, the Public Estates Authority (PEA) was created by virtue of Presidential Decree No. 1084. It was designated as the agency primarily responsible for all the reclaation projects of the national government. The PEA then took over the Manila Bay reclamation contract between the Republic of the Philippines and CDCP. In 1978, RREC filed a claim for P30,396,878.20 with the ten Ministry of Public Highways (MPH) for its actual reclamation in the CCP Complex before CDCP assumed authority over the project. The MPH, on the other hand, determined the amount of reclamation by RREC to be only P10,926,071.29. Later, RREC offered to settle the case with the Office of the Solicitor General for the original amount of its claim. The OSG would, however, settle only for the lesser amount assessed by the MPH. This was acceptable to RREC only with an additional 6% interest per annum from 1962 up to the time of payment. Within the decade that followed, RREC's proposals for settling the case ballooned from a P35,455,011.31 cash settlement or a property settlement of 3.5 hectares in the CCP Complex covered by TCT No. 75676, to a cash settlement of P175 million, then later, P245 million. The Office of the President, to which the proposals were referred, rejected the same. In other words, no amicable settlement was reached. 249

The first decision On January 28, 1992, the Court of Appeals rendered a decision, affirming the trial court's judgment with the following modifications: (a) the requirement on public bidding and submission of plans and specifications to the DPWH by RREC was deleted; (b) the Republic of the Philippines was ordered to turn over to Pasay City the ownership and possession of the 21 hectares already reclaimed by RREC; and (c) RREC's irrevocable option to purchase 60% of the 21 hectares it had already reclaimed was sustained. The amended decision On April 28, 1992, the appellate court rendered an amended decision. It agreed with the position of Pasay City and RREC in their motion for reconsideration that the actual the reclaimed was 55, not 21, hectares. Considering, however, that latter were willing to accept 35 hectares of open land in the CCP Complex, the court ordered the Republic of the Philippines to reconvey to Pasay City and RREC said parcels of land comprising nine lots registered in the name of CCP. This is the decision being assailed by both parties in the instant consolidated petitions. Issues raised In G.R. No. 103882 Are Ordinance Nos. 121 and 158, as well as the Reclamation Agreement between Pasay City and RREC, valid and bindings as against the National Government and the Cultural Center of the Philippines? The Republic of the Philippines claims that the Court of Appeals erred in sustaining the validity of Ordinance Nos. 121 and 158 and the Reclamation Agreement executed pursuant thereto, and in ordering the reconveyance of the nine lots titled in the name of CCP to the City of Pasay and RREC. It stresses that the reclamation project undertaken by Pasay City and RREC violated R.A. No. 1899, especially since the subject areas were "submerged lands", not "foreshore lands" which are the only lands that may be reclaimed by local governments under said law. The CCP, as intervenor in G.R. No. 103882, alleges that the appellate court's amended decision was not binding upon it because it was never made a party to the action and that it was compelled to intervene in the instant petitions to protect its proprietary interests. It claims that the Court of Appeals erred in findings that the actual area reclaimed by RREC was 55 hectares, and in ordering it to turn over to RREC and Pasay City the nine lots registered in its name. In G.R. No. 105276 Is P.D. 3-A constitutional? 250

The City of Pasay and RREC claim it is not and that the Court of Apealls erred in not ruling upon its constitutionality, considering that said decree deprived them of their property and rights of ownership without due process of law and without payment of just compensation, and that it violated the non-impairment clause of the Constitution; and in not awarding them damages for the alleged illegal takeover of the reclamation contract and the reclaimed area. Thus, they pray for the modification of the assailed amended decision by awarding them damages and conveying to them, not merely 35, but 55 hectares of the land allegedly reclaimed. The Commissioner's Report On September 10, 1997, the Court's Second Division issued a Resolution remanding the case to the Court of Appeals to receive further evidence and determine the actual area reclaimed by RREC and the arreas of the CCP Complex which are "open spaces." In its Commissioner's Report dated November 25, 1997, the appellate court conclude that the CCP and the Solicitor General failed to refute its earleir finding that RREC and Pasay City were able to reclaim 55 hectares of the Manila Bay. Discussion of Issues 1. Ordinance Nos. 121 and 158, as well as the Reclamation Agreement between Pasay City and RREC, are null and void for violating the clear and unambiguous provisions of R.A. No. 1899. In 1984, the term "foreshore lands" was defined by this Court in the case of Republic v. Court of Appeals.1 Although the subject of this case was part of the Laguna de Bay, the Court nevertheless applied Bouvier's definition of "foreshore lands," viz: "that part of the land immediately in front of the shore; the part which is between high and low water marks, and alternately covered with water and left dry by the flux and reflux of the tides. It is indicated by a middle line between the highest and lowest tides." This judicial interpretation did not escape the attention of the legislature in the enactment of later related laws. In R.A. No. 5187, for example, Congress specified the areas that may be reclaimed in the construction of the Manila-Cavite City Coastal Road to include both "foreshore and submerged areas." The Chief Executive also recognized the disparity between the two terms when he signed into law P.D. No. 3-A, authorizing the reclamation of "areas under water, whether foreshore or inland." Similarly, P.D. No. 1094, creating the Public Estates authority to "reclaim land, including foreshore and submerged areas." Initially, legislative intent and later jurisprudential usage clearly delimited the term "foreshore lands" to that part of the land where the tides literally converge, thus excluding submerged lands. This restricted explication was unquestionably ackonwledged by the other branches of government when, in passing subsequent related statutes, they added the terms "submerged areas" or "areas under water" to 251

foreshore lands." Under the principles of legal construction, since R.A No. 1899 partakes of the nature of a legislative grant of a sovereign right to municipalities and chartered cities, that is, the right "to reclaim," it must be strictly construed against the latter. R.A. No. 1899 was, therefore, enacted to apply strictly to "foreshore lands." Thus, when RREC was permitted by the City of Pasay, through Ordinance Nos. 121 and 158 and the ensuing Reclamation Agreement, to reclaim up to a one-kilometer stretch into the Manila Bay, more than just "foreshore lands" was obviously contemplated and involved. Furthermore, R.A. No. 1899 mandates that any reclamation must be carried out by the municipality or chartered city concerned 2 with the aid of funds which it may borrow from third persons or lending institution. 3 The reclamation of Manila Bay was undertaken, not by Pasay City, but by RREC itself under a special power of attorney from Pasay City using funds exclusively borrowed by the latter from RREC. To compound the anomaly of it all, the reclamation project itself was awarded by Pasay City to RREC without any public bidding. Finally, to complete Pasay City's absolute abdication of its duty to champion public over private interest, RREC was granted an irrevocable option to purchase the land reclaimed in lieu of simply paying for it using a determinable and liquadated amount "in Philippine currency or in the currency in which the principal has been originally received," 4 as required by R.A. No. 1899. In fact, RREC began disposing of the land by entering into contracts to sell with various third persons while the reclamation project was still in progress and long before it acquired any right of dominion over the lands yet to be reclaimed. These are all blatant violations of R.A. No. 1899. Hence, Ordinance Nos. 121 and 158, no less than the Reclamation Agreement and the Contracts to Sell it has spawned, should all be deemed null and void, the reclamation itself being ultra vires. 2. P.D. No. 3-A is constitutional and valid Applying the regalian doctrine, the State owns all waters and lands of the public domain, including those physically reclaimed. As a general rule, therefore, only the National Government can reclaim foreshore lands and other submerged areas. At times, though, the State, to effectuate an expressed public, policy, delagates some of its sovereign powers either to the legislature or to some of its alter egos. One such instance was R.A. No. 1899 which was intended to increase the autonomy of local governments, an innovation introduced by the Marcos administration. There is no doubt, however, that R.A. No. 1899 was a mere public grant, a privilege which may be withdrawn by the granting authority, the sovereign, in the exercise of police power. This is precisely what President Marcos did when he issued P.D. No. 3-A, a valid and effective means of regaining the State's right to reclaim. It must be noted that this decree was not revoked by President Aquino when she assumed the presidency. P.D. No. 3-A does not violate the equal protection clause, as claimed by Pasay City and RREC, because, far from singling out the latter, its terminology is simple and extensive enough to cover just about any municipality or city. The decree was signed 252

by President Marcos under his emergency powers when martial law was in effect throughout the country. Thus, it is not an undue delegation or usurpation of legislation power. Neither does it authorize the taking of property without just compensation, for it specifically allows such payment, albeit based on quantum meruit. Incidentally, while RREC attacks the constitutionality of P.D. No. 3-A, and only at this late stage in the proceedings, it relied on this "quantum meruit compensation" clause in the same decree when it filed a claim before the then Ministry of Public Works way back in 1978 and again in 1983. This is an oddity which this Court takes notice of in disallowing RREC from taking contrary positions regarding the validity of a statute in this action. It cannot take advantage of a provision of law even as it attacks the same. Finally, the Court notes that the amended decision of the Court of Appeals dated April 28, 1992, is based on inadequate evidence. Its conclusion that RREC was able to reclaim 35 hectares is totally unsupported by the dubious proof presented by Pasay City and RREC. In ruling in favor of Pasay City and RREC, the appellate court relied mostly on three documents issued by the government to the RREC, namely, the "Cost of Data for Items of Work Covered by the Republic Real Estate Corporation for Work Performed in the Manila Bay" issued by the Ministry of Public Highways, and two letters both addressed to RREC Executive Vice President Vicente Asuncion, Jr., one dated June 6, 1979, from then Minister of Public Highways Baltazar Aquino, and another, dated June 10, 1981; from then Solicitor General Estelito Mendoza. These documents, however, never proved that RREC was able to reclaim 35 hectares. In fact, the letter of Aquino, finding that RREC had reclaimed 55 hectares, was in its own words, merely "tentative, pending the submittal of corroborative documents"; hence, it does not amount to the "certification" contemplated in R.A. No. 1899. Mendoza's letter, on the other hand, far from supporting RREC's position, rejected RREC's proposal in the latter's attempt at settlement. It is puzzling why the appellate court even considered this letter in favor of RREC and Pasay City . On the other hand, there is aimple proof that RREC was not able to reclaim the 55 hectares which it claims it did, or even 35 hectares, as found by the Court of Appeals as follows: aerial photographs of the Manila Bay area in 1966 and 1968; photographs of the CCP taken 1967 and 1968 during construction of the main building; and the testimonies of the persons familiar with the circumstances under which said photographs were taken, as well as the other witnesses who were, one way or another, connected with the construction of the CCP main building, including a member of the Board of Directors of RREC. 3. RREC is entitled to some monetary award While the extent of reclamation actually done by RREC is debatable, there is no dispute that it did reclaim some portion of the Manila Bay. In the preceding 253

discussion, we declared the nullity of Ordinace Nos. 121 and 158 and the Reclamation Agreement, which are the wellsprings of RREC's right to be compensated. Its reclamation efforts were also found to be ultra vires. Equity and fairness, however, dictate that it be compensated for the work actually performed by it. After all, the State cannot deny that it did benefit from such reclamation. RREC was initially willing to settle the case for P30,396,878.20. In view of the foregoing premises, we believe that RREC should only be given the amount which the State was willing to pay, that is P10,929,071.29, without legal interest. It is axiomatic that legal interest is given either for the use of the money (a loan or forbearance of money) or as a penalty for beach of an obligation (damages). In the case of Eastern Shipping Lines, Inc. v. Court of Appeals,5 the Court had occassion to set the guidelines by which litigants may claim or be awarded interest as or by way of actual or compensatory damages. Thus, II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation not consisting of a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages can be established with reasonable certainty. Accordingly, were the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. . . . (Citations omitted) These are the only circumstances under which interest in the concept of actual or compensatory damages, liquidated or otherwise, may be justified. In the case at bar, no loan or forbearance of money is involved; neither is there any breach of obligation. Consequently, the lone commitment of the State would be the payment for 254

services allegedly rendered, services for which RREC would have the National Government cede to it its property, the value of which has been inflated to unimaginable proportions since the inception of the reclamation project. This is manifestly cupidity at its worst. Neither should the state be penalized for something for which it is entirely blameless. The circumstances which led to the filing of these twin actions have long been overtaken by supervening events, rendering the issues incipiently raised moot and academic. Thus, RREC and Pasay City are, as they should be, only entilled to P10,926,071.29. No more, no less. Conclusion For almost three decades, the Cultural Center of the Philippines has been the principal, if not the sole, purveyor of the arts in this country. It has weathered criticism, civil unrest, and "internecine" politics. It relies on the occasional beneficence of loyal patrons, the so-called "cultured" class scorned and spurned by the "masa." Otherwise, it subsists on the rental income it receives from private entities leasing portions of the CCP Complex. With the trial and appellate courts upholding their claims, Pasay City and RREC wish to dismember this bastion of cultural heritage and stunt its growth by claiming ownership over a substantial portion of its property, that which literally serves as its bloodline. This must not be countenanced. The CCP is certainly not about to draw its curtains and take a final bow. As Matthew Arnold said more than a century ago, "I am a Liberal, yet I am a Liberal tempered by experience, reflection, and renouncement, and I am, above all, a believer in culture. I vote to grant the State's petition, with the qualification adverted to above.

PANGANIBAN, J., separate opinion; I concur with the persuasive ponencia of Mr. Justice Fidel P. Purisima, as fortified by the Separate Opinion of Mr. Justice Reynato S. Puno, insofar as it (1) nullifies (a) the Reclamation Agreement between Pasay City and the Republic Real Estate Corporation (RREC) and (b) Pasay City Ordinance Nos. 121 and 158, and (2) retains ownership of the reclaimed land in favor of the Cultural Center of the Philippines. With due respect, I submit, however, that the majority has no factual basis for its determination of the compensation awarded to RREC and Pasay City. (1) Nullity of Reclamation Agreement and Ordinance Nos. 121 and 158. Pasay City justifies its execution of the Reclamation Agreement with RREC and the passage of Ordinance Nos. 121 and 158 on the basis of Republic Act No. 1899 (RA 1899), the law authorizing chartered cities and municipalities to undertake the undertake the reclamation of foreshore lands. The questioned Agreement and Ordinance, however, cover submerged areas of the Manila Bay. As explained in the 255

ponencia, with which I agree, the legal and common definition of foreshore land does not include areas that are fully submerged by the sea. The Manila Bay area is, therefore, definitely outside the scope of RA 1899. It remains part of the public domain and is, as such, outside the commerce of man. It could not be the object of ordinary contracts or ordinances. The questioned Agreement and Ordinances, the objects of which involve such public property, are thus null and void. (2) Reclained Area Belongs to CCP As a consequence, the Cultural Center of the Philippines (CCP), to which PD Nos. 15 and 774 have conveyed ownership of the reclaimed land, remains the lawful owner of the subject land. Title to the nine (9) lots, which Respondent Court wrongfully ordered to be turned over to Pasay City, had long been issued in favor of CCP (One subsequently to the GSIS as a successor-in-interest). Such titles are unaffected by the claims of RREC and cannot be collaterally attacked 1 in this litigation. (3) No Factual Basis for Determination of Compensation Even if the Agreement and Ordinances were null and void, it cannot be denied that RREC and the city government of Pasay spent time, money and effort which undoubtedly inured to the benefit of the government. It is a time-honored principle that no one, not even the government, may be enriched at the expenses of another, 2 particularly one who, like RREC and Pasay City, acted on good faith. While RREC and Pasay City should be compensated for their work on the reclamation project, I respectfully submit that the amount of such compensation must be supported by substantial and material proof of the reasonable expenses they incurred. But, the records of the case are bereft of any such factual evidence. However, the records do indicate some attempts of the parties to reach an amicable settlement as a consequence of the promulgation of PD 3-A by former President Ferdinand Marcos. Thus, in 1978, RREC sought the amount of P30,396.878.20 representing the supposed monetory value of the reclamation work that it had undertaken so far. The then Ministry of Public Highways (MPH) (and later the solicitor general also) rejected this offer in 1981 and, instead, counteroffered P10,926,071.29 as the reasonable value of such work. RREC replied that it would be consider such amount only if it would bear six (6) percent interest per annum from 1962 up to the time of payment. It submitted other proposals, but all were rejected by the government. No final extrajudicial settlement was ever reached.

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Obviously, the offers and counteroffer were made by the parties with a view to arriving at compromise agreement. At that point, they were not submitted as evidence, but only as a means of arriving at a peaceful settlemet prior to judgment. By then, the case, which had commenced in December 1961 and was still on appeal with the Court of Appeals, was already dragging on for the two decades. Nature of Compromise A compromise is an agreement between two or more parties whereby their differences are adjusted in a manner which they mutually agree on, and which they prefer to "hope of gaining, balanced by the danger of losing. 3 The parties usually make reciprocal concessions in order to avoid litigation or terminate a pending one. 4 However, basic is the rule on evidence that in civil cases, an offer of compromise cannot be taken as an admission of liability; nor can it be admissable as an evidence against the offeror.5 The offer to compromise a claim or a cause of action is not an admission that the claim is valid, but merely admits that there is a dispute and that an amount is to be paid to avoid or end the controversy. 6 I submit that an unaccepted offer or counteroffer of compromise cannot be the basis of the sum to be adjudged in favor of or against a party, more so if such sum is unsuported by competent evidence. In such case, the court itself insofar as it adopts the amount either offered or conteroffered would be bereft of factual basis for its decision. Where the proposed compromise is not accepted, the parties to the litigation would be back to square one; they have to present before the court sufficient and credible evidence to prove their respective claims. As a rule, an offer or a counteroffer given in an effort to reach a compromise should not be accorded evidentiary value on its face, because by its very nature, a compromise is concessionary. And if one of the parties does not concur, the court cannot impose an amount based on the unaccepted offer, even if culpability of a party has been duly established. The amount of any such liability must be independently ascertained with competent evidence. Otherwise, this Court would be setting a dangerous precedent. Hence, parties, would not submit offers to compromise for fear that such offers, if not accepted, would be used by the Court against them. Upon the other hand, parties may offer bloated amounts in the hope that siad sums could influence the court to eventually grant them a relief more than they deserve. In any, event, the rationale for the policy encouraging compromise would be defeated. In the case at bar, we should bear in mind that when RREC conceded in 1981 to the solicitor general's counteroffer of P10,926,071.29, provided the amount would bear 6 percent interest per annum, it was with the caveat that such interest rate was already "very much less that the accepted rate of inflation that has supervened since 1962 . . . ." Indeed, if we are to compare current prices with those of three and a half decades ago, or even seventheen years ago, such interest rate on the principal may no longer compensate the 1962 expense. In other words, what may have been a "fair and 257

reasonable" compromise in 1981 may no longer be acceptable at this time. In any event, the solicitor general's counteroffer, not being supported with factual evidence, still cannot be the basis of a judicial award. Need to Receive Evidence of Value of RREC Accomplishment In the instant case, there appears no dispute that RREC has undertaken partil work for the Manila Bay reclamation project to the extent of 1,558,395 cubic meteres of dredge-fill work. In the words of the ponencia: Undoubtedly, what RREC claimed for was the payment for what it had done on, and for dredge-fill of 1,558.395 cubic meters used for the reclamation project worked on. This case must therefore be remanded for the purpose of receiving evidence of the peso value of the 1,558,395 cubic meters of dredge-fill work undisputedly done by RREC. WHEREFORE, I vote for the following: 1. The RECLARATION of the nullity of (a) the Reclamation Agreement Between Pasay City and RREC and (b) Ordinance Nos. 121 and 158 of Pasay City. 2. The RETENTION of ownership of the reclaimed land in favor of the Cultural Center of the Philippines. 3. The REMAND of the case to the Commission composed of the former Thirteenth Division of the Court of Appeals (consisting of Associate Justices Arturo B. Buena, chairman; Minerva P. Gonzaga-Reyes and Quirino D. Abad Santos Jr.) for the sole purpose of receiving evidence of the peso value of the work accomplished by RREC and Pasay City for which they shall be paid by the national government. Separate Opinions ROMERO, J., separate opinion; Culture doesn't save anything or any-one, it doesn't justify. But it's a product of man: he projects himself into it, he recognizes himself in it; that critical mirror alone offers him his image." So said Jean Paul Sartre, one of the greatest philosophical thinkers of our time. Matthew Arnold referred to it as the "pursuit of our total perfection" or the "study of perfection." The English mathematican and philosopher Alfred North Whitehead, placing premium on human subjectivity, declared, "Culture is activity of thought, and receptiveness to beauty and humane feeling. 258

Image, perfection, beauty, and feeling. These are elements which are also associated with art and creation. Yet, art in itself is a multi-faceted concept. The revered and, at times, controversial President John Fitzgerald Kennedy, in one of his numerous speeches, elevated art to the level of a pyscho-social necessity of man when he said, ". . . (A)rt establishes the basic human truths which ust serve as the touchstone of our judgment." Indeed, there is no question that art satisfies one of the deepest spiritual needs of man. Of course, when one speaks of art and culture, he in fact speaks of it in two ways: the abstract and the concrete. What is abstract is conditioned by time; that which is and the concrete is ravaged by it. While the concept of "culture and art" endures man's folies, amassing innumerable, priceless enhancements as it effortlessly slides through generations of human progress, its tangible counterpart, that which is preserved for our children's appreciation, is unfortunately fragile. Art works, music, architecture, literature, and other cultural embellishments which exhibit extraordinary longevity are proclaimed as national treasures, and rightly so, for they are lasting testiminials of man's boundless imagination and creativity, that single trait that places the human species above all other creatures of the Almighty. Most evidence of a culture's richness are lost, not in the tide of nature's frivolity, but through man's foolishness and capriciousness. Wars used to be the main culprit in the virtual obliteration of the works of ancient scholars. We are now, and for the past century or so, faced with a greater foe: progress. Progress and development are the hallmarks of successful governance. Our leaders, and there are so many of them now, decide "what is best" for the public. Inopportunely, what is perceived to be in the "best interest" of the majority in the name of "progress" may sometimes, and in the long run, the calamitous to the entire people in terms of cultural atrophy. This is the quandary in which this Court finds itself as it attempts to weigh once more private rights against sovereignty and the general welfare. Background Facts In a nutshell, the undisputed facts in these consolidated petitions follow. Pursuant to Republic Act No. 1899, which authorized chartered cities and municipalities to reclaim adjoining foreshore lands, the City Council of Pasay resolved to reclaim a portion of the Manila Bay covering the Manila-Pasay-Parañaque bounderies and, for this purpose, enacted Ordinance No. 121 on May 6, 1958. Two days later, on the strength of said ordinance, Pasay City Mayor Pablo Cuneta contracted with Republic Real Estate Corporation (RREC) for the reclamation of portions of the Manila Bay. On April 21, 1959, the City Council of Pasay amended Ordinance No. 121 by enacting Ordinance No. 158. A new agreement between the parties (the Reclamation Agreement) was executed three days thereafter, whcih, among other things, granted the reclamation project to RREC and gave it an irrevocable option to purchase a maximum of 60% of the area reclaimed at P10.00 259

per square meter, the amount of which could be set off against any outstanding obligation of the City to RREC. Such an option could only be effected within a year from the time the City Engineer certified that 50 hectares had been reclaimed. The reclamation itself was made by the RREC through third parties who were awarded contracts on the various phases of the project through public bidding. To raise more funds, RREC entered into contracts to sell the reclaimed areas which it could purchase from Pasay City by exercising its option under the Reclamation Agreement. Proceedings before the trial court On December 19, 1961, the Republic of the Philippines filed a complaint (amended on March 5, 1962) against Pasay City and RREC for "Recovery of Possession and Damages with Writ of Preliminary Preventive Injunction and Mandatory Injunction" before Branch 7 of the then Court of First Instance of Rizal, Pasay City, praying for the declaration of nullity of Ordinance Nos. 121 and 158, the Reclamation Agreement, and the Contracts to Sell between RREC and the buyers of the reclaimed land. Among other things, the following matters were alleged: (a) the area reclaimed was already reserved as a national park under Proclamation No. 41, dated July 5, 1954 and Act No. 3915, hence, the subject of the Reclamation Agreement was beyond man's commerce; (b) Ordinance Nos. 121 and 158 were ultra vires and void ab initio for being violative of R.A. No. 1899, because they involved the reclamation of "submerged areas" and not "foreshore lands" as allowed by said law; and (c) the Reclamation Agreement was illegal, contrary to morals and public policy because it was executed with neither authority from the National Government nor any public bidding. In their separate answer, Pasay City and RREC set forth the following negative defenses: (a) Pasay City was empowered by R.A. No. 1899 to reclaim any portion of the Manila Bay; (b) the area reclaimed was not a portion of the Manila Bay Resort, which was the area reserved as a national park under Proclamation No. 41 and Act No. 3915; (c) under R.A. No. 1899, the term "foreshore lands" meant much more than its technical definition and extended to submerged areas beyond the water marks of the shore; and (d) all the actuations of the City RREC regarding the reclamation project were in accordance with R.A. No. 1899 and related laws. On April 26, 1962, the trial court issued a writ of preliminary injunction ordering Pasay City and RREC to refrain from their activities at the Manila Bay. On January 10, 1968, however, RREC filed a "Motion to Dismiss" the complaint on the ground that the passage of Republic Act No. 5187 (otherwise known as the Public Works Act) on September 16, 1967, rendered the issues raised by the Republic of the Philippines moot and academic. Specifically, RREC relied on Section 3 (m) thereof which stated that all "contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected" during the construction by the national government of a sea wall and limited access highway passing through the projected area of the reclamation. In the meantime, the trial court allowed Jose Bautista and 260

others who allegedly bought in good faith and for value from RREC some portions of the reclaimed land, to intervene in the action and join cause with Pasay City and RREC. On the other hand, the Pasay Law and Conscience Union, Inc. (PLCUI), a civic organization, joined with the Republic of the Philippines and filed a complaint in intervention. On May 24, 1972, the court a quo rendered a judgment on the pleadings, upholding the validity of Ordinance Nos. 121 and 158 of the Reclamation Agreement; dismissing the complaint as well as PLCUI's complaint in intervention; enjoining RREC and Pasay City "to have all the plans and specifications in the reclamation approved by the Director of Public Works, and to have all the contracts and subcontracts for said reclamation awarded by means of, and only after, public bidding"; and lifting the preliminary injunction, dated April 26, 1962, as soon as said conditions shall have been met by RREC and Pasay City. Proceedings before the Court of Appeals During the pendency of the State's appeal with the Court of Appeals, President Marcos issued on January 11, 1973, Pressidential Decree No. 3-A, providing, inter alia, that "the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person aurhorized by it under a proper contract," and that it shall take over any validly existing reclamation contract on the basis of quantum meruit. On the strength of P.D. No. 3-A, the Commission of Public Highways and the Construction Development Corporation of the Philippines (CDCP) took over the reclamation contract between Pasay City and RREC for the construction of the Manila-Cavite City Coastal Road. CDCP development the area already reclaimed by RREC and continued reclaiming where the latter left off. These areas, which came to be known as the Cultural Center Complex and the Financial Center Complex, were registered in the name of the CCP. On February 4, 1977, the Public Estates Authority (PEA) was created by virtue of Presidential Decree No. 1084. It was designated as the agency primarily responsible for all the reclaation projects of the national government. The PEA then took over the Manila Bay reclamation contract between the Republic of the Philippines and CDCP. In 1978, RREC filed a claim for P30,396,878.20 with the ten Ministry of Public Highways (MPH) for its actual reclamation in the CCP Complex before CDCP assumed authority over the project. The MPH, on the other hand, determined the amount of reclamation by RREC to be only P10,926,071.29. Later, RREC offered to settle the case with the Office of the Solicitor General for the original amount of its claim. The OSG would, however, settle only for the lesser amount assessed by the MPH. This was acceptable to RREC only with an additional 6% interest per annum from 1962 up to the time of payment. Within the decade that followed, RREC's proposals for settling the case ballooned from a P35,455,011.31 cash settlement or a property settlement of 3.5 hectares in the CCP Complex covered by TCT No. 75676, to a cash settlement of 261

P175 million, then later, P245 million. The Office of the President, to which the proposals were referred, rejected the same. In other words, no amicable settlement was reached. The first decision On January 28, 1992, the Court of Appeals rendered a decision, affirming the trial court's judgment with the following modifications: (a) the requirement on public bidding and submission of plans and specifications to the DPWH by RREC was deleted; (b) the Republic of the Philippines was ordered to turn over to Pasay City the ownership and possession of the 21 hectares already reclaimed by RREC; and (c) RREC's irrevocable option to purchase 60% of the 21 hectares it had already reclaimed was sustained. The amended decision On April 28, 1992, the appellate court rendered an amended decision. It agreed with the position of Pasay City and RREC in their motion for reconsideration that the actual the reclaimed was 55, not 21, hectares. Considering, however, that latter were willing to accept 35 hectares of open land in the CCP Complex, the court ordered the Republic of the Philippines to reconvey to Pasay City and RREC said parcels of land comprising nine lots registered in the name of CCP. This is the decision being assailed by both parties in the instant consolidated petitions. Issues raised In G.R. No. 103882 Are Ordinance Nos. 121 and 158, as well as the Reclamation Agreement between Pasay City and RREC, valid and bindings as against the National Government and the Cultural Center of the Philippines? The Republic of the Philippines claims that the Court of Appeals erred in sustaining the validity of Ordinance Nos. 121 and 158 and the Reclamation Agreement executed pursuant thereto, and in ordering the reconveyance of the nine lots titled in the name of CCP to the City of Pasay and RREC. It stresses that the reclamation project undertaken by Pasay City and RREC violated R.A. No. 1899, especially since the subject areas were "submerged lands", not "foreshore lands" which are the only lands that may be reclaimed by local governments under said law. The CCP, as intervenor in G.R. No. 103882, alleges that the appellate court's amended decision was not binding upon it because it was never made a party to the action and that it was compelled to intervene in the instant petitions to protect its proprietary interests. It claims that the Court of Appeals erred in findings that the actual area reclaimed by RREC was 55 hectares, and in ordering it to turn over to RREC and Pasay City the nine lots registered in its name. 262

In G.R. No. 105276 Is P.D. 3-A constitutional? The City of Pasay and RREC claim it is not and that the Court of Apealls erred in not ruling upon its constitutionality, considering that said decree deprived them of their property and rights of ownership without due process of law and without payment of just compensation, and that it violated the non-impairment clause of the Constitution; and in not awarding them damages for the alleged illegal takeover of the reclamation contract and the reclaimed area. Thus, they pray for the modification of the assailed amended decision by awarding them damages and conveying to them, not merely 35, but 55 hectares of the land allegedly reclaimed. The Commissioner's Report On September 10, 1997, the Court's Second Division issued a Resolution remanding the case to the Court of Appeals to receive further evidence and determine the actual area reclaimed by RREC and the arreas of the CCP Complex which are "open spaces." In its Commissioner's Report dated November 25, 1997, the appellate court conclude that the CCP and the Solicitor General failed to refute its earleir finding that RREC and Pasay City were able to reclaim 55 hectares of the Manila Bay. Discussion of Issues 1. Ordinance Nos. 121 and 158, as well as the Reclamation Agreement between Pasay City and RREC, are null and void for violating the clear and unambiguous provisions of R.A. No. 1899. In 1984, the term "foreshore lands" was defined by this Court in the case of Republic v. Court of Appeals.1 Although the subject of this case was part of the Laguna de Bay, the Court nevertheless applied Bouvier's definition of "foreshore lands," viz: "that part of the land immediately in front of the shore; the part which is between high and low water marks, and alternately covered with water and left dry by the flux and reflux of the tides. It is indicated by a middle line between the highest and lowest tides." This judicial interpretation did not escape the attention of the legislature in the enactment of later related laws. In R.A. No. 5187, for example, Congress specified the areas that may be reclaimed in the construction of the Manila-Cavite City Coastal Road to include both "foreshore and submerged areas." The Chief Executive also recognized the disparity between the two terms when he signed into law P.D. No. 3-A, authorizing the reclamation of "areas under water, whether foreshore or inland." Similarly, P.D. No. 1094, creating the Public Estates authority to "reclaim land, including foreshore and submerged areas."

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Initially, legislative intent and later jurisprudential usage clearly delimited the term "foreshore lands" to that part of the land where the tides literally converge, thus excluding submerged lands. This restricted explication was unquestionably ackonwledged by the other branches of government when, in passing subsequent related statutes, they added the terms "submerged areas" or "areas under water" to foreshore lands." Under the principles of legal construction, since R.A No. 1899 partakes of the nature of a legislative grant of a sovereign right to municipalities and chartered cities, that is, the right "to reclaim," it must be strictly construed against the latter. R.A. No. 1899 was, therefore, enacted to apply strictly to "foreshore lands." Thus, when RREC was permitted by the City of Pasay, through Ordinance Nos. 121 and 158 and the ensuing Reclamation Agreement, to reclaim up to a one-kilometer stretch into the Manila Bay, more than just "foreshore lands" was obviously contemplated and involved. Furthermore, R.A. No. 1899 mandates that any reclamation must be carried out by the municipality or chartered city concerned 2 with the aid of funds which it may borrow from third persons or lending institution. 3 The reclamation of Manila Bay was undertaken, not by Pasay City, but by RREC itself under a special power of attorney from Pasay City using funds exclusively borrowed by the latter from RREC. To compound the anomaly of it all, the reclamation project itself was awarded by Pasay City to RREC without any public bidding. Finally, to complete Pasay City's absolute abdication of its duty to champion public over private interest, RREC was granted an irrevocable option to purchase the land reclaimed in lieu of simply paying for it using a determinable and liquadated amount "in Philippine currency or in the currency in which the principal has been originally received," 4 as required by R.A. No. 1899. In fact, RREC began disposing of the land by entering into contracts to sell with various third persons while the reclamation project was still in progress and long before it acquired any right of dominion over the lands yet to be reclaimed. These are all blatant violations of R.A. No. 1899. Hence, Ordinance Nos. 121 and 158, no less than the Reclamation Agreement and the Contracts to Sell it has spawned, should all be deemed null and void, the reclamation itself being ultra vires. 2. P.D. No. 3-A is constitutional and valid Applying the regalian doctrine, the State owns all waters and lands of the public domain, including those physically reclaimed. As a general rule, therefore, only the National Government can reclaim foreshore lands and other submerged areas. At times, though, the State, to effectuate an expressed public, policy, delagates some of its sovereign powers either to the legislature or to some of its alter egos. One such instance was R.A. No. 1899 which was intended to increase the autonomy of local governments, an innovation introduced by the Marcos administration. There is no doubt, however, that R.A. No. 1899 was a mere public grant, a privilege which may be withdrawn by the granting authority, the sovereign, in the exercise of police power. This is precisely what President Marcos did when he issued P.D. No. 3-A, a valid and

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effective means of regaining the State's right to reclaim. It must be noted that this decree was not revoked by President Aquino when she assumed the presidency. P.D. No. 3-A does not violate the equal protection clause, as claimed by Pasay City and RREC, because, far from singling out the latter, its terminology is simple and extensive enough to cover just about any municipality or city. The decree was signed by President Marcos under his emergency powers when martial law was in effect throughout the country. Thus, it is not an undue delegation or usurpation of legislation power. Neither does it authorize the taking of property without just compensation, for it specifically allows such payment, albeit based on quantum meruit. Incidentally, while RREC attacks the constitutionality of P.D. No. 3-A, and only at this late stage in the proceedings, it relied on this "quantum meruit compensation" clause in the same decree when it filed a claim before the then Ministry of Public Works way back in 1978 and again in 1983. This is an oddity which this Court takes notice of in disallowing RREC from taking contrary positions regarding the validity of a statute in this action. It cannot take advantage of a provision of law even as it attacks the same. Finally, the Court notes that the amended decision of the Court of Appeals dated April 28, 1992, is based on inadequate evidence. Its conclusion that RREC was able to reclaim 35 hectares is totally unsupported by the dubious proof presented by Pasay City and RREC. In ruling in favor of Pasay City and RREC, the appellate court relied mostly on three documents issued by the government to the RREC, namely, the "Cost of Data for Items of Work Covered by the Republic Real Estate Corporation for Work Performed in the Manila Bay" issued by the Ministry of Public Highways, and two letters both addressed to RREC Executive Vice President Vicente Asuncion, Jr., one dated June 6, 1979, from then Minister of Public Highways Baltazar Aquino, and another, dated June 10, 1981; from then Solicitor General Estelito Mendoza. These documents, however, never proved that RREC was able to reclaim 35 hectares. In fact, the letter of Aquino, finding that RREC had reclaimed 55 hectares, was in its own words, merely "tentative, pending the submittal of corroborative documents"; hence, it does not amount to the "certification" contemplated in R.A. No. 1899. Mendoza's letter, on the other hand, far from supporting RREC's position, rejected RREC's proposal in the latter's attempt at settlement. It is puzzling why the appellate court even considered this letter in favor of RREC and Pasay City . On the other hand, there is aimple proof that RREC was not able to reclaim the 55 hectares which it claims it did, or even 35 hectares, as found by the Court of Appeals as follows: aerial photographs of the Manila Bay area in 1966 and 1968; photographs of the CCP taken 1967 and 1968 during construction of the main building; and the testimonies of the persons familiar with the circumstances under which said photographs were taken, as well as the other witnesses who were, one way or

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another, connected with the construction of the CCP main building, including a member of the Board of Directors of RREC. 3. RREC is entitled to some monetary award While the extent of reclamation actually done by RREC is debatable, there is no dispute that it did reclaim some portion of the Manila Bay. In the preceding discussion, we declared the nullity of Ordinace Nos. 121 and 158 and the Reclamation Agreement, which are the wellsprings of RREC's right to be compensated. Its reclamation efforts were also found to be ultra vires. Equity and fairness, however, dictate that it be compensated for the work actually performed by it. After all, the State cannot deny that it did benefit from such reclamation. RREC was initially willing to settle the case for P30,396,878.20. In view of the foregoing premises, we believe that RREC should only be given the amount which the State was willing to pay, that is P10,929,071.29, without legal interest. It is axiomatic that legal interest is given either for the use of the money (a loan or forbearance of money) or as a penalty for beach of an obligation (damages). In the case of Eastern Shipping Lines, Inc. v. Court of Appeals,5 the Court had occassion to set the guidelines by which litigants may claim or be awarded interest as or by way of actual or compensatory damages. Thus, II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation not consisting of a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages can be established with reasonable certainty. Accordingly, were the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification damages may be deemed to have been reasonably 266

ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. . . . (Citations omitted) These are the only circumstances under which interest in the concept of actual or compensatory damages, liquidated or otherwise, may be justified. In the case at bar, no loan or forbearance of money is involved; neither is there any breach of obligation. Consequently, the lone commitment of the State would be the payment for services allegedly rendered, services for which RREC would have the National Government cede to it its property, the value of which has been inflated to unimaginable proportions since the inception of the reclamation project. This is manifestly cupidity at its worst. Neither should the state be penalized for something for which it is entirely blameless. The circumstances which led to the filing of these twin actions have long been overtaken by supervening events, rendering the issues incipiently raised moot and academic. Thus, RREC and Pasay City are, as they should be, only entilled to P10,926,071.29. No more, no less. Conclusion For almost three decades, the Cultural Center of the Philippines has been the principal, if not the sole, purveyor of the arts in this country. It has weathered criticism, civil unrest, and "internecine" politics. It relies on the occasional beneficence of loyal patrons, the so-called "cultured" class scorned and spurned by the "masa." Otherwise, it subsists on the rental income it receives from private entities leasing portions of the CCP Complex. With the trial and appellate courts upholding their claims, Pasay City and RREC wish to dismember this bastion of cultural heritage and stunt its growth by claiming ownership over a substantial portion of its property, that which literally serves as its bloodline. This must not be countenanced. The CCP is certainly not about to draw its curtains and take a final bow. As Matthew Arnold said more than a century ago, "I am a Liberal, yet I am a Liberal tempered by experience, reflection, and renouncement, and I am, above all, a believer in culture. I vote to grant the State's petition, with the qualification adverted to above.

PANGANIBAN, J., separate opinion; I concur with the persuasive ponencia of Mr. Justice Fidel P. Purisima, as fortified by the Separate Opinion of Mr. Justice Reynato S. Puno, insofar as it (1) nullifies (a) the Reclamation Agreement between Pasay City and the Republic Real Estate Corporation (RREC) and (b) Pasay City Ordinance Nos. 121 and 158, and (2) retains ownership of the reclaimed land in favor of the Cultural Center of the Philippines. With due respect, I submit, however, that the majority has no factual basis for its determination of the compensation awarded to RREC and Pasay City. 267

(1) Nullity of Reclamation Agreement and Ordinance Nos. 121 and 158. Pasay City justifies its execution of the Reclamation Agreement with RREC and the passage of Ordinance Nos. 121 and 158 on the basis of Republic Act No. 1899 (RA 1899), the law authorizing chartered cities and municipalities to undertake the undertake the reclamation of foreshore lands. The questioned Agreement and Ordinance, however, cover submerged areas of the Manila Bay. As explained in the ponencia, with which I agree, the legal and common definition of foreshore land does not include areas that are fully submerged by the sea. The Manila Bay area is, therefore, definitely outside the scope of RA 1899. It remains part of the public domain and is, as such, outside the commerce of man. It could not be the object of ordinary contracts or ordinances. The questioned Agreement and Ordinances, the objects of which involve such public property, are thus null and void. (2) Reclained Area Belongs to CCP As a consequence, the Cultural Center of the Philippines (CCP), to which PD Nos. 15 and 774 have conveyed ownership of the reclaimed land, remains the lawful owner of the subject land. Title to the nine (9) lots, which Respondent Court wrongfully ordered to be turned over to Pasay City, had long been issued in favor of CCP (One subsequently to the GSIS as a successor-in-interest). Such titles are unaffected by the claims of RREC and cannot be collaterally attacked 1 in this litigation. (3) No Factual Basis for Determination of Compensation Even if the Agreement and Ordinances were null and void, it cannot be denied that RREC and the city government of Pasay spent time, money and effort which undoubtedly inured to the benefit of the government. It is a time-honored principle that no one, not even the government, may be enriched at the expenses of another, 2 particularly one who, like RREC and Pasay City, acted on good faith. While RREC and Pasay City should be compensated for their work on the reclamation project, I respectfully submit that the amount of such compensation must be supported by substantial and material proof of the reasonable expenses they incurred. But, the records of the case are bereft of any such factual evidence. However, the records do indicate some attempts of the parties to reach an amicable settlement as a consequence of the promulgation of PD 3-A by former President Ferdinand Marcos. Thus, in 1978, RREC sought the amount of P30,396.878.20 representing the supposed monetory value of the reclamation work that it had undertaken so far. The then Ministry of Public Highways (MPH) (and later the 268

solicitor general also) rejected this offer in 1981 and, instead, counteroffered P10,926,071.29 as the reasonable value of such work. RREC replied that it would be consider such amount only if it would bear six (6) percent interest per annum from 1962 up to the time of payment. It submitted other proposals, but all were rejected by the government. No final extrajudicial settlement was ever reached. Obviously, the offers and counteroffer were made by the parties with a view to arriving at compromise agreement. At that point, they were not submitted as evidence, but only as a means of arriving at a peaceful settlemet prior to judgment. By then, the case, which had commenced in December 1961 and was still on appeal with the Court of Appeals, was already dragging on for the two decades. Nature of Compromise A compromise is an agreement between two or more parties whereby their differences are adjusted in a manner which they mutually agree on, and which they prefer to "hope of gaining, balanced by the danger of losing. 3 The parties usually make reciprocal concessions in order to avoid litigation or terminate a pending one. 4 However, basic is the rule on evidence that in civil cases, an offer of compromise cannot be taken as an admission of liability; nor can it be admissable as an evidence against the offeror.5 The offer to compromise a claim or a cause of action is not an admission that the claim is valid, but merely admits that there is a dispute and that an amount is to be paid to avoid or end the controversy. 6 I submit that an unaccepted offer or counteroffer of compromise cannot be the basis of the sum to be adjudged in favor of or against a party, more so if such sum is unsuported by competent evidence. In such case, the court itself insofar as it adopts the amount either offered or conteroffered would be bereft of factual basis for its decision. Where the proposed compromise is not accepted, the parties to the litigation would be back to square one; they have to present before the court sufficient and credible evidence to prove their respective claims. As a rule, an offer or a counteroffer given in an effort to reach a compromise should not be accorded evidentiary value on its face, because by its very nature, a compromise is concessionary. And if one of the parties does not concur, the court cannot impose an amount based on the unaccepted offer, even if culpability of a party has been duly established. The amount of any such liability must be independently ascertained with competent evidence. Otherwise, this Court would be setting a dangerous precedent. Hence, parties, would not submit offers to compromise for fear that such offers, if not accepted, would be used by the Court against them. Upon the other hand, parties may offer bloated amounts in the hope that siad sums could influence the court to eventually grant them a relief more than they deserve. In any, event, the rationale for the policy encouraging compromise would be defeated. In the case at bar, we should bear in mind that when RREC conceded in 1981 to the solicitor general's counteroffer of P10,926,071.29, provided the amount would bear 269

6 percent interest per annum, it was with the caveat that such interest rate was already "very much less that the accepted rate of inflation that has supervened since 1962 . . . ." Indeed, if we are to compare current prices with those of three and a half decades ago, or even seventheen years ago, such interest rate on the principal may no longer compensate the 1962 expense. In other words, what may have been a "fair and reasonable" compromise in 1981 may no longer be acceptable at this time. In any event, the solicitor general's counteroffer, not being supported with factual evidence, still cannot be the basis of a judicial award. Need to Receive Evidence of Value of RREC Accomplishment In the instant case, there appears no dispute that RREC has undertaken partil work for the Manila Bay reclamation project to the extent of 1,558,395 cubic meteres of dredge-fill work. In the words of the ponencia: Undoubtedly, what RREC claimed for was the payment for what it had done on, and for dredge-fill of 1,558.395 cubic meters used for the reclamation project worked on. This case must therefore be remanded for the purpose of receiving evidence of the peso value of the 1,558,395 cubic meters of dredge-fill work undisputedly done by RREC. WHEREFORE, I vote for the following: 1. The RECLARATION of the nullity of (a) the Reclamation Agreement Between Pasay City and RREC and (b) Ordinance Nos. 121 and 158 of Pasay City. 2. The RETENTION of ownership of the reclaimed land in favor of the Cultural Center of the Philippines. 3. The REMAND of the case to the Commission composed of the former Thirteenth Division of the Court of Appeals (consisting of Associate Justices Arturo B. Buena, chairman; Minerva P. Gonzaga-Reyes and Quirino D. Abad Santos Jr.) for the sole purpose of receiving evidence of the peso value of the work accomplished by RREC and Pasay City for which they shall be paid by the national government.

9. PHILIPPINE FISHERIES

G.R. No. 150301 270

DEVELOPMENT AUTHORITY, Petitioner,

-

Present:

versus -

PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ,

THE HONORABLE COURT OF

AZCUNA,

APPEALS, THE HONORABLE

CORONA, and

REGIONAL TRIAL COURT,

GARCIA, JJ.

BRANCH 169, MALABON, METRO MANILA, THE MUNICIPALITY OF NAVOTAS, METRO MANILA,

Promulgated:

HON. FLORANTE M. BARREDO, in his official capacity as Municipal Treasurer of Navotas, Metro Manila, and HON. NORBERTO E. AZARCON,

October 2, 2007

in his capacity as Chairman of the Public Auction Sale Committee of Navotas, Metro Manila, Respondents. X -------------------------------------------------------------------------------------- X

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DECISION

AZCUNA, J.:

This is a petition for review130 of the decision and resolution of the Court of Appeals (CA), dated July 19, 2001 and September 19, 2001, respectively, in CA-G.R. CV No. 42472, entitled “Philippine Fisheries Development Authority v. The Municipality of Navotas, Metro Manila, et al.”

The facts appear as follows: The controversy arose when respondent Municipality of Navotas assessed the real estate taxes allegedly due from petitioner Philippine Fisheries Development Authority (PFDA) for the period 1981-1990 on properties under its jurisdiction, management and operation located inside the Navotas Fishing Port Complex (NFPC).

The assessed taxes had remained unpaid despite the demands made by the municipality which prompted it, through Municipal Treasurer Florante M. Barredo, to give notice to petitioner on October 29, 1990 that the NFPC will be sold at public auction on November 30, 1990 in order that the municipality will be able to collect on petitioner’s delinquent realty taxes which, as of June 30, 1990, amounted to P23,128,304.51, inclusive of penalties.

130

272

Petitioner sought the deferment of the auction sale claiming that the NFPC is owned by the Republic of the Philippines, and pursuant to Presidential Decree (P.D.) No. 977, it (PFDA) is not a taxable entity.

In view of the refusal of PFDA to pay the assessed realty taxes, the matter was referred to the Department of Finance (DOF). On July 14, 1990 the DOF stated that:

This Department takes cognizance of the allegations of [the Office of the Mayor of Navotas] that PFDA has leased its properties to beneficial users, such as “businessmen, private persons and entities who are taxable persons.” For this reason, it is imperative that the Municipality should conduct an ocular inspection on the real properties (land and building owned by PFDA) in order to identify the properties actually leased and the taxable persons enjoying the beneficial use thereof. The ocular inspection is necessary for reason that the real properties, the use of which has been granted to taxable persons, for consideration or otherwise, are subject to the payment of real property taxes which must be paid by the grantees pursuant to the provisions … of the Real Property Tax Code, as amended.

… Therefore, it is imperative to determine who the actual users of the properties concerned [are]. If used by a non-taxable person other than PFDA itself, it remains to be non-taxable. Otherwise, if said properties are being used by taxable persons, same becomes taxable properties. For this purpose, it is also incumbent upon PFDA to furnish the Municipality copies of the deed of lease or other relevant documents showing the leased properties and their beneficial users for proper assessment.131

131

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Notwithstanding the DOF’s instruction, respondent Municipality proceeded to publish the notice of sale of NFPC in the November 2, 1990 issue of Balita, a local newspaper.

On November 19, 1990, petitioner instituted Civil Case No. 1524 in the Regional Trial Court (RTC) of Malabon, Metro Manila against respondent Municipality, its Municipal Treasurer and the Chairman of the Public Auction Sale Committee. Petitioner asked the RTC to enjoin the auction of the NFPC on the ground that the properties comprising the NFPC are owned by the Republic of the Philippines and are, thus, exempt from taxation. According to petitioner, only a small portion of NFPC which had been leased to private parties may be subjected to real property tax which should be paid by the latter.

Respondent Municipality, on the other hand, insisted that: 1) the real properties within NFPC are owned entirely by petitioner which, despite the opportunity given, had failed to submit proof to the Municipal Assessor that the properties are indeed owned by the Republic of the Philippines; 2) if the properties in question really belong to the government, then the complaint should have been instituted in the name of the Republic of the Philippines, represented by the Office of the Solicitor General; and 3) the complaint is fatally defective because of non-compliance with a condition precedent, which is, payment of the disputed tax assessment under protest.

On December 8, 1990, the RTC issued a writ of preliminary injunction enjoining respondent Municipality from proceeding with the public auction.

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On February 19, 1993, however, the RTC dismissed the case and dissolved the writ of preliminary injunction, thus:

[T]he plaintiff [petitioner] failed to present convincing evidence to support its claim of realty tax exemption and ownership of the property by the Republic of the Philippines as mandated by Sec. 9 of P.D. 464. Notwithstanding receipt of the notices of tax assessments from the defendants [public respondent], the plaintiff did not avail of the remedies under the law by raising on appeal the said tax assessments to the Local Board of Assessment Appeals, then to the Central Board of Assessment Appeals and ultimately, to the Court of Tax Appeals. Instead, the plaintiff continuously ignored the notices of tax assessments on the pretext that the properties inside the NFPC are exempt from payment of real estate taxes as they are owned by the Republic of the Philippines. Assailing the validity of the tax assessments of the NFPC properties is not the proper recourse for the plaintiff but to pay first the tax assessments under protest and then raise the same on appeal to the Local Board of Assessment Appeals, then to the Central Board of Assessment Appeals, then ultimately, to the Court of Tax Appeals pursuant to the Real Property Tax Code.

The plaintiff failed in this regard, hence … the Municipality, exercising its power to assess and collect taxes on real properties within its jurisdiction, did the right thing, that is, to schedule the NFPC properties for public auction. Furthermore, while the plaintiff is insisting that the NFPC properties are owned by the Republic of the Philippines, and is therefore exempt from payment of real estate taxes, yet it admitted that there are those lessees who leased portion[s] of the complex, and [it was] even willing to submit [a] list of these lessees … for proper tax assessments.

...

WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant [public respondent Municipality of Navotas] and against the plaintiff, ordering:

275

1.

The DISMISSAL of this case;

2. The preliminary injunction previously issued in this case DISSOLVED; and 3. The plaintiff to pay the defendant [public respondent] Municipality the sum of P13,767.00 as actual damages.

SO ORDERED.132

The CA affirmed the ruling of the RTC in a Decision dated July 19, 2001, the pertinent portions of which read:

The thrust of appellant PFDA’s arguments has shoved to the fore the fact that the 67-hectare land on which the NFPC – Navotas Fishing Port Complex – stands was reclaimed from the sea which explains why it was bounded on the North by the Manila Bay, on the East by Roxas Boulevard, on the South by the Manila Bay and on the West, by the breakwater. Even the Municipality’s counsel, Atty. Victorino Landas; Assessor, Arturo Coronel; and Treasurer, Florante Barredo have admitted that much, as pointed out by PFDA.133 Such being the origin of the land, its ownership by the State as property of public dominion134 can hardly be disputed.

The “reclaimed land; breakwaters; piers; wharves and quaywalls; and, fish market building forming part of the Navotas Fish Port” were furthermore certified by the Undersecretary of Public Works and Highways 135 as belonging 132

133

134

135 276

to the national government since they were built using the proceeds of the loan agreement entered into by and between the Republic of the Philippines and the Asian Development Bank on December 12, 1971. 136

On August 11, 1976, the Philippine Fish Marketing Authority (PFMA) was created as a body corporate by P.D. No. 977 to carry out –

… the policy of the Government to promote the development of the fishing industry and improve efficiency in the handling, preserving, marketing and distribution of fish and fishery/aquatic products through the establishment and operation of fish markets and the efficient operation of fishing ports’ harbors and other marketing facilities.137

...

The PFMA was furthermore extended exemption from the payment of income tax in this tenor:

The authority shall be exempted from the payment of income tax.

The foregoing exemption may, however, be entirely or partly lifted by the President of the Philippines, upon recommendation of the Secretary of Finance, not earlier than five years from the approval of this Decree, if the President shall find the authority to be self-sustaining and financially capable to pay such tax after providing for debt service requirements of the authority and its projected capital and operating expenditures.138

136

137

138

277

Meanwhile, harbor operations at the Navotas Fishing Port Complex (NFPC) commenced on January 15, 1997 while the market operation started on April 3, 1977.

On February 8, 1982, P.D. No. 977 was amended by Executive Order No. 772. Insofar as material to the case at bar, the salient features of the amendments introduced by the E.O. are:

(a)

The creation of the Philippine Fisheries Development Authority (PFDA) … to replace the Philippine Fish Marketing Authority (PFMA).

...

(b)

The capitalization of the PFDA has included the Navotas Fishing Port Complex (NFPC).

...

(c)

The NFPC has been transferred to the exclusive jurisdiction, control, administration, and supervision of the PFDA.

...

There can, therefore, [be] no escaping the conclusion that the appellant PFDA became the owner of the Navotas Fishing Port Complex as of February 8, 1982. It cannot be any sooner because under P.D. No. 977, the NFPC was not made part of the capital of the Philippine Fish Marketing Authority (PFMA), PFDA’s predecessor, as only the Navotas Fish Landing was made part of such capital while the Navotas Fishing Port and Fish Market were transferred merely to the “exclusive jurisdiction, control, administration, and supervision” of the PFMA. It was not then altogether clear if the Navotas Fishing Port Complex (NFPC) was conveyed to the PFMA. 278

...

Indeed, it is quite true that a property continues to be part of the public domain, and not available for alienation, private appropriation or ownership, until it is withdrawn from being such by the Government through the Executive Department or the Legislative,139 and that it is not for the President to convey valuable real property of the Government on his own sole will as any such conveyance requires executive and legislative concurrence.140

But the stark reality is that at the time E.O. No, 772 was issued on February 8, 1982, President Marcos was exercising both executive and legislative powers.141 Hence, his conveyance of the NFPC to form part of the capital of PFDA cannot but be valid.

The fact that the PFDA has up to now no certificate of title to the NFPC nor has the PFDA declared it for tax purposes is of no consequence. Such a certificate is merely an evidence of ownership and not the title itself, 142 while a tax declaration does not prove nor disprove ownership. What is significant is that the PFDA has openly declared and represented that it “owns, maintains and operates” the NFPC when it leased a portion thereof to the Frabelle Fishing Corporation on March 13, 1989.

139

140

141

142

279

All told, the PFDA being the owner of the NFPC beginning February 8, 1982 is liable for the realty taxes due thereon, its tax exemption being only from the payment of income tax.143

WHEREFORE, the appealed pronouncement as to costs.

decision

is

AFFIRMED,

without

SO ORDERED.144

Petitioner filed a motion for reconsideration but the same was denied by the CA.

Petitioner now raises the following arguments:

One, the CA acknowledged that the property in question is a reclaimed land. As such, it is a property of public dominion (Art. 420, Civil Code) and is owned by the State. Notwithstanding this, the CA erroneously ruled that the government had validly transferred ownership of the land to PFDA in 1982 when P.D. No. 977 was amended by E.O. No. 772 by virtue of which the property became part of the assets of PFDA (Sec. 5 of E.O. No. 772);

143

144

280

Two, as a reclaimed land, the port complex should be considered a reserved land. In NDC v. Cebu City,145 the Supreme Court held that a reserved land is a public land that has been withheld or kept back from sale or disposition. The land remains an absolute property of the government. As its title remains with the State, the reserved land is tax exempt;

Three, in Government v. Cabangis146 and Lampria v. Director of Lands,147 this Court declared that the land reclaimed from the sea, as a result of the construction by the government of a breakwater fronting the place where it is situated, belongs to the State in accordance with Article 5 of the Law of Waters of 1866;

Four, petitioner merely operates the area or the NFPC complex in favor of the Republic of the Philippines. Section 4.A of P.D. No. 977, as amended by E.O. No. 772, provides that PFDA shall:

[M]anage, administer, operate, improve and modernize, coordinate and otherwise govern the activities, operation and facilities in the fishing ports, markets and landings that may hereinafter be placed under, or transferred to the Authority, and such other fish markets, fishing ports/harbors and infrastructure facilities as may be established under this Decree; to investigate, prepare, adopt, implement and execute a comprehensive plan for the overall development of fishing port and market complexes and update such plan as may be necessary from time to time; to construct or authorize the construction in the land area under its jurisdiction, 145

146

147

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of infrastructure facilities, factory buildings, warehouses, cold storage and ice plants, and other structures related to the fishing industry or necessary and useful in the conduct of its business or in the attainment of the purpose and objectives of this Decree; to acquire, hold and dispose real and personal property in the exercise of its functions and powers.

Lastly, the NFPC property is intended for public use and public service. As such, it is owned by the State, hence, exempt from real property tax.

The issue is whether petitioner is liable to pay real property tax.

Local government units, pursuant to the fiscal autonomy granted by the provisions of Republic Act No. 7160 or the 1991 Local Government Code, can impose realty taxes on juridical persons148 subject to the limitations enumerated in Section 133 of the Code:

SEC. 133. Common Limitations on the Taxing Power of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

…

(o)

taxes, fees, charges of any kind on the national government, its agencies and instrumentalities, and local government units.

148

282

Nonetheless, the above exemption does not apply when the beneficial use of the government property has been granted to a taxable person. Section 234 (a) of the Code states that real property owned by the Republic of the Philippines or any of its political subdivisions is exempted from payment of the real property tax “except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.”

Thus, as a rule, petitioner PFDA, being an instrumentality 149 of the national government, is exempt from real property tax but the exemption does not extend to the portions of the NFPC that were leased to taxable or private persons and entities for their beneficial use.

This is in consonance with the ruling in Philippine Fisheries Development Authority v. Court of Appeals150 where this Court held that:

On the basis of the parameters set in the MIAA [Manila International Airport Authority v. Court of Appeals] 151 case, the Authority should be classified as an instrumentality of the national government. As such, it is generally exempt from payment of real property tax, except those portions which have been leased to private entities.

149

150

151

283

In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among the instrumentalities of the national government …152

Indeed, the Authority is not a GOCC 153 but an instrumentality of the government. The Authority has a capital stock but it is not divided into shares of stocks.154 Also, it has no stockholders or voting shares. Hence, it is not a stock corporation. Neither it is a non-stock corporation because it has no members. … The real property tax assessments issued by the City of Iloilo should be upheld only with respect to the portions leased to private persons. In case the Authority fails to pay the real property taxes due thereon, said portions cannot be sold at public auction to satisfy the tax delinquency. …

The port built by the State in the Iloilo fishing complex is a property of public dominion and cannot therefore be sold at public auction. Article 420 of the Civil Code provides:

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

(1)

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

152

153

154

284

(2)

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

The Iloilo [F]ishing [P]ort [Complex/IFPC] which was constructed by the State for public use and/or public service falls within the term “port” in the aforecited provision. Being a property of public dominion the same cannot be subject to execution or foreclosure sale. 155 … Whether there are improvements in the fishing port complex that should not be construed to be embraced within the term ‘port’ involves evidentiary matters that cannot be addressed in the present case. As for now, considering that the Authority is a national government instrumentality, any doubt on whether the entire IFPC may be levied upon to satisfy the tax delinquency should be resolved against the City of Iloilo.

Similarly, for the same reason, the NFPC cannot be sold at public auction in satisfaction of the tax delinquency assessments made by the Municipality of Navotas on the entire complex.

Additionally, the land on which the NFPC property sits is a reclaimed land, which belongs to the State. In Chavez v. Public Estates Authority, 156 the Court declared that reclaimed lands are lands of the public domain and cannot, without Congressional fiat, be subject of a sale, public or private. 157 155

156

157

285

In light of the above, petitioner is only liable to pay the amount of P62,841,947.79 representing the total taxes due as of December 31, 2001 from PFDA-owned properties that were leased, as shown in the Summary of Realty Taxes Due Properties Owned and/or Managed by PFDA as per Realty Tax Order of Payment dated September 16, 2002. 158

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals, dated July 19, 2001 and September 19, 2001, respectively, in CA-G.R. CV No. 42472 are SET ASIDE. The Realty Tax Order of Payment issued by respondent Municipality of Navotas on September 16, 2002 is declared VOID EXCEPT as to the amount of P62,841,947.79 representing the total taxes due as of December 31, 2001 on the properties leased by petitioner to private parties. Respondent Municipality of Navotas is DIRECTED to refrain from levying on the Navotas Fishing Port Complex (NFPC) to satisfy the payment of the real property tax delinquency.

No costs.

SO ORDERED.

10. G.R. No. 191109

July 18, 2012

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REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY (PRA), Petitioner, vs. CITY OF PARANAQUE, Respondent. DECISION MENDOZA, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, on pure questions of law, assailing the January 8, 2010 Order 1 of the Regional Trial Court, Branch 195, Parafiaque City (RTC), which ruled that petitioner Philippine Reclamation Authority (PRA) is a government-owned and controlled corporation (GOCC), a taxable entity, and, therefore, . not exempt from payment of real property taxes. The pertinent portion of the said order reads: In view of the finding of this court that petitioner is not exempt from payment of real property taxes, respondent Paranñ aque City Treasurer Liberato M. Carabeo did not act xxx without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing the warrants of levy on the subject properties. WHEREFORE, the instant petition is dismissed. The Motion for Leave to File and Admit Attached Supplemental Petition is denied and the supplemental petition attached thereto is not admitted. The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public Estates Authority, Defining its Powers and Functions, Providing Funds Therefor and For Other Purposes) which took effect on February 4, 1977 to provide a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by, the government with the object of maximizing their utilization and hastening their development consistent with public interest. On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then President Ferdinand Marcos, PEA was designated as the agency primarily responsible for integrating, directing and coordinating all reclamation projects for and on behalf of the National Government. On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380 transforming PEA into PRA, which shall perform all the powers and functions of the PEA relating to reclamation activities. By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including those located in Paranñ aque City, and was issued Original 287

Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 557, and 559) and Transfer Certificates of Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed lands. On February 19, 2003, then Paranñ aque City Treasurer Liberato M. Carabeo (Carabeo) issued Warrants of Levy on PRA’s reclaimed properties (Central Business Park and Barangay San Dionisio) located in Paranñ aque City based on the assessment for delinquent real property taxes made by then Paranñ aque City Assessor Soledad Medina Cue for tax years 2001 and 2002. On March 26, 2003, PRA filed a petition for prohibition with prayer for temporary restraining order (TRO) and/or writ of preliminary injunction against Carabeo before the RTC. On April 3, 2003, after due hearing, the RTC issued an order denying PRA’s petition for the issuance of a temporary restraining order. On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to proceed with the public auction of the subject reclaimed properties on April 7, 2003. In response, Carabeo sent a letter stating that the public auction could not be deferred because the RTC had already denied PRA’s TRO application. On April 25, 2003, the RTC denied PRA’s prayer for the issuance of a writ of preliminary injunction for being moot and academic considering that the auction sale of the subject properties on April 7, 2003 had already been consummated. On August 3, 2009, after an exchange of several pleadings and the failure of both parties to arrive at a compromise agreement, PRA filed a Motion for Leave to File and Admit Attached Supplemental Petition which sought to declare as null and void the assessment for real property taxes, the levy based on the said assessment, the public auction sale conducted on April 7, 2003, and the Certificates of Sale issued pursuant to the auction sale. On January 8, 2010, the RTC rendered its decision dismissing PRA’s petition. In ruling that PRA was not exempt from payment of real property taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It was organized as a stock corporation because it had an authorized capital stock divided into no par value shares. In fact, PRA admitted its corporate personality and that said properties were registered in its name as shown by the certificates of title. Therefore, as a GOCC, local tax exemption is withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160 Local Government Code (LGC) which was the prevailing law in 2001 and 2002 with respect to real property taxation. The RTC also ruled that the tax exemption claimed by PRA under E.O. No. 654 had already been expressly repealed by R.A. No. 7160 and that PRA failed to comply with the procedural requirements in Section 206 thereof. Not in conformity, PRA filed this petition for certiorari assailing the January 8, 2010 RTC Order based on the following GROUNDS 288

I THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT RECLAIMED LANDS CONSIDERING THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE VIS-AÀ -VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT OF APPEALS. II THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE, EXEMPT FROM REAL PROPERTY TAX. PRA asserts that it is not a GOCC under Section 2(13) of the Introductory Provisions of the Administrative Code. Neither is it a GOCC under Section 16, Article XII of the 1987 Constitution because it is not required to meet the test of economic viability. Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Although it has a capital stock divided into shares, it is not authorized to distribute dividends and allotment of surplus and profits to its stockholders. Therefore, it may not be classified as a stock corporation because it lacks the second requisite of a stock corporation which is the distribution of dividends and allotment of surplus and profits to the stockholders. It insists that it may not be classified as a non-stock corporation because it has no members and it is not organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers as provided in Section 88 of the Corporation Code. Moreover, PRA points out that it was not created to compete in the market place as there was no competing reclamation company operated by the private sector. Also, while PRA is vested with corporate powers under P.D. No. 1084, such circumstance does not make it a corporation but merely an incorporated instrumentality and that the mere fact that an incorporated instrumentality of the National Government holds title to real property does not make said instrumentality a GOCC. Section 48, Chapter 12, Book I of the Administrative Code of 1987 recognizes a scenario where a piece of land owned by the Republic is titled in the name of a department, agency or instrumentality. Thus, PRA insists that, as an incorporated instrumentality of the National Government, it is exempt from payment of real property tax except when the beneficial use of the real property is granted to a taxable person. PRA claims that based on Section 133(o) of the LGC, local governments cannot tax the national government which delegate to local governments the power to tax. 289

It explains that reclaimed lands are part of the public domain, owned by the State, thus, exempt from the payment of real estate taxes. Reclaimed lands retain their inherent potential as areas for public use or public service. While the subject reclaimed lands are still in its hands, these lands remain public lands and form part of the public domain. Hence, the assessment of real property taxes made on said lands, as well as the levy thereon, and the public sale thereof on April 7, 2003, including the issuance of the certificates of sale in favor of the respondent Paranñ aque City, are invalid and of no force and effect. On the other hand, the City of Paranñ aque (respondent) argues that PRA since its creation consistently represented itself to be a GOCC. PRA’s very own charter (P.D. No. 1084) declared it to be a GOCC and that it has entered into several thousands of contracts where it represented itself to be a GOCC. In fact, PRA admitted in its original and amended petitions and pre-trial brief filed with the RTC of Paranñ aque City that it was a GOCC. Respondent further argues that PRA is a stock corporation with an authorized capital stock divided into 3 million no par value shares, out of which 2 million shares have been subscribed and fully paid up. Section 193 of the LGC of 1991 has withdrawn tax exemption privileges granted to or presently enjoyed by all persons, whether natural or juridical, including GOCCs. Hence, since PRA is a GOCC, it is not exempt from the payment of real property tax. THE COURT’S RULING The Court finds merit in the petition. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC as follows: SEC. 2. General Terms Defined. – x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. On the other hand, Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows: SEC. 2. General Terms Defined. –– x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, 290

endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x From the above definitions, it is clear that a GOCC must be "organized as a stock or nonstock corporation" while an instrumentality is vested by law with corporate powers. Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. When the law vests in a government instrumentality corporate powers, the instrumentality does not necessarily become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a GOCC. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines, and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. They are not, however, GOCCs in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities. 2 Correlatively, Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." Section 87 thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." Further, Section 88 provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has capital stock divided into shares; and (2) that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation. As for non-stock corporations, they must have members and must not distribute any part of their income to said members.3 In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot be considered as a stock corporation because although it has a capital stock divided into no par value shares as provided in Section 7 4 of P.D. No. 1084, it is not authorized to distribute dividends, surplus allotments or profits to stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the subsequent executive issuances 291

pertaining to PRA, particularly, E.O. No. 525, 5 E.O. No. 6546 and EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments or profits to its stockholders. PRA cannot be considered a non-stock corporation either because it does not have members. A non-stock corporation must have members. 8 Moreover, it was not organized for any of the purposes mentioned in Section 88 of the Corporation Code. Specifically, it was created to manage all government reclamation projects. Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16, Article XII of the 1987 Constitution provides as follows: Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The fundamental provision above authorizes Congress to create GOCCs through special charters on two conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must meet the test of economic viability. In this case, PRA may have passed the first condition of common good but failed the second one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or commercial activities. Neither was it created to compete in the market place considering that there were no other competing reclamation companies being operated by the private sector. As mentioned earlier, PRA was created essentially to perform a public service considering that it was primarily responsible for a coordinated, economical and efficient reclamation, administration and operation of lands belonging to the government with the object of maximizing their utilization and hastening their development consistent with the public interest. Sections 2 and 4 of P.D. No. 1084 reads, as follows: Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by the government, with the object of maximizing their utilization and hastening their development consistent with the public interest. Section 4. Purposes. The Authority is hereby created for the following purposes: (a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land; (b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government. (c) To provide for, operate or administer such services as may be necessary for the efficient, economical and beneficial utilization of the above properties. 292

The twin requirement of common good and economic viability was lengthily discussed in the case of Manila International Airport Authority v. Court of Appeals, 9 the pertinent portion of which reads: Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides: SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good — meaning for economic development purposes — these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations. In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution. Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities — known as "government-owned or controlled corporations" — must meet the test of economic viability because they compete in the market place. 293

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their incometo meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers. Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows: MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers' money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain. Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.1âwphi1 Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary: The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms. Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public.

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However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code. [Emphases supplied] This Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory Provisions of the Administrative Code or under Section 16, Article XII of the 1987 Constitution. The facts, the evidence on record and jurisprudence on the issue support the position that PRA was not organized either as a stock or a non-stock corporation. Neither was it created by Congress to operate commercially and compete in the private market. Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated government instrumentality, it is exempt from payment of real property tax. Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by PRA. On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA from paying realty taxes and protects it from the taxing powers of local government units. Sections 234(a) and 133(o) of the LGC provide, as follows: SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. xxxx SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxx (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. [Emphasis supplied] It is clear from Section 234 that real property owned by the Republic of the Philippines (the Republic) is exempt from real property tax unless the beneficial use thereof has been 295

granted to a taxable person. In this case, there is no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity. There is no showing on record either that PRA leased the subject reclaimed properties to a private taxable entity. This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local governments from imposing "taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. Indeed, the Republic grants the beneficial use of its real property to an agency or instrumentality of the national government. This happens when the title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption, unless "the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person."10 The rationale behind Section 133(o) has also been explained in the case of the Manila International Airport Authority,11 to wit: Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide." When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.: The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies.

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There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation: The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579) This doctrine emanates from the "supremacy" of the National Government over local governments. "Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation." (U.S. v. Sanchez, 340 US 42) The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. [Emphases supplied] The Court agrees with PRA that the subject reclaimed lands are still part of the public domain, owned by the State and, therefore, exempt from payment of real estate taxes. Section 2, Article XII of the 1987 Constitution reads in part, as follows:

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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 60 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 provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of the grant. Similarly, Article 420 of the Civil Code enumerates properties belonging to the State: Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. [Emphases supplied] Here, the subject lands are reclaimed lands, specifically portions of the foreshore and offshore areas of Manila Bay. As such, these lands remain public lands and form part of the public domain. In the case of Chavez v. Public Estates Authority and AMARI Coastal Development Corporation,12 the Court held that foreshore and submerged areas irrefutably belonged to the public domain and were inalienable unless reclaimed, classified as alienable lands open to disposition and further declared no longer needed for public service. The fact that alienable lands of the public domain were transferred to the PEA (now PRA) and issued land patents or certificates of title in PEA’s name did not automatically make such lands private. This Court also held therein that reclaimed lands retained their inherent potential as areas for public use or public service. As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands. 298

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA's name does not automatically make such lands private. 13 Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, thus: SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.(1)The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation. Reclaimed lands such as the subject lands in issue are reserved lands for public use. They are properties of public dominion. The ownership of such lands remains with the State unless they are withdrawn by law or presidential proclamation from public use. Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these inalienable natural resources of the State into alienable or disposable lands of the public domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-public use. As the Court has repeatedly ruled, properties of public dominion are not subject to execution or foreclosure sale. 14 Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by respondent, as well as the issuances of certificates of title in favor of respondent, are without basis. WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court, Branch 195, Paranñ aque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine Reclamation Authority are hereby declared EXEMPT from real estate taxes. All real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Paranñ aque on the subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and the Certificates of Sale subsequently issued by the Paranñ aque City Treasurer in favor of the City of Paranñ aque, are all declared VOID. SO ORDERED. 299

11. BORACAY FOUNDATION, INC.,Petitioner, vs. THE PROVINCE OF AKLAN, REPRESENTED BY GOVERNOR CARLITO S. MARQUEZ, THE PHILIPPINE RECLAMATION AUTHORITY, AND THE DENR-EMB (REGION VI),Respondents G.R. No. 196870 | 2012-06-26 LEONARDO-DE CASTRO, J.:

In resolving this controversy, the Court took into consideration that all the parties involved share common goals in pursuit of certain primordial State policies and principles that are enshrined in the Constitution and pertinent laws, such as the protection of the environment, the empowerment of the local government units, the promotion of tourism, and the encouragement of the participation of the private sector. The Court seeks to reconcile the respective roles, duties and responsibilities of the petitioner and respondents in achieving these shared goals within the context of our Constitution, laws and regulations.

Nature of the Case

This is an original petition for the issuance of an Environmental Protection Order in the nature of a continuing mandamus under A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for Environmental Cases, promulgated on April 29, 2010.

The Parties

Petitioner Boracay Foundation, Inc. (petitioner) is a duly registered, non-stock domestic corporation. Its primary purpose is “to foster a united, concerted and environmentconscious development of Boracay Island, thereby preserving and maintaining its culture, natural beauty and ecological balance, marking the island as the crown jewel of Philippine 300

tourism, a prime tourist destination in Asia and the whole world.”[1] It counts among its members at least sixty (60) owners and representatives of resorts, hotels, restaurants, and similar institutions; at least five community organizations; and several environmentallyconscious residents and advocates.[2]

Respondent Province of Aklan (respondent Province) is a political subdivision of the government created pursuant to Republic Act No. 1414, represented by Honorable Carlito S. Marquez, the Provincial Governor (Governor Marquez).

Respondent Philippine Reclamation Authority (respondent PRA), formerly called the Public Estates Authority (PEA), is a government entity created by Presidential Decree No. 1084, [3] which states that one of the purposes for which respondent PRA was created was to reclaim land, including foreshore and submerged areas. PEA eventually became the lead agency primarily responsible for all reclamation projects in the country under Executive Order No. 525, series of 1979. In June 2006, the President of the Philippines issued Executive Order No. 543, delegating the power “to approve reclamation projects to PRA through its governing Board, subject to compliance with existing laws and rules and further subject to the condition that reclamation contracts to be executed with any person or entity (must) go through public bidding.”[4]

Respondent Department of Environment and Natural Resources – Environmental Management Bureau (DENR-EMB), Regional Office VI (respondent DENR-EMB RVI), is the government agency in the Western Visayas Region authorized to issue environmental compliance certificates regarding projects that require the environment’s protection and management in the region.[5]

Summary of Antecedent Facts

Boracay Island (Boracay), a tropical paradise located in the Western Visayas region of the Philippines and one of the country’s most popular tourist destinations, was declared a tourist zone and marine reserve in 1973 under Presidential Proclamation No. 1801.[6] The island comprises the barangays of Manoc-manoc, Balabag, and Yapak, all within the municipality of Malay, in the province of Aklan.[7]

Petitioner describes Boracay as follows:

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Boracay is well-known for its distinctive powdery white-sand beaches which are the product of the unique ecosystem dynamics of the area. The island itself is known to come from the uplifted remnants of an ancient reef platform. Its beaches, the sandy land strip between the water and the area currently occupied by numerous establishments, is the primary draw for domestic and international tourists for its color, texture and other unique characteristics. Needless to state, it is the premier domestic and international tourist destination in the Philippines.[8]

More than a decade ago, respondent Province built the Caticlan Jetty Port and Passenger Terminal at Barangay Caticlan to be the main gateway to Boracay. It also built the corresponding Cagban Jetty Port and Passenger Terminal to be the receiving end for tourists in Boracay. Respondent Province operates both ports “to provide structural facilities suited for locals, tourists and guests and to provide safety and security measures.”[9]

In 2005, Boracay 2010 Summit was held and participated in by representatives from national government agencies, local government units (LGUs), and the private sector. Petitioner was one of the organizers and participants thereto. The Summit aimed “to reestablish a common vision of all stakeholders to ensure the conservation, restoration, and preservation of Boracay Island” and “to develop an action plan that [would allow] all sectors to work in concert among and with each other for the long term benefit and sustainability of the island and the community.”[10] The Summit yielded a Terminal Report[11] stating that the participants had shared their dream of having world-class land, water and air infrastructure, as well as given their observations that government support was lacking, infrastructure was poor, and, more importantly, the influx of tourists to Boracay was increasing. The Report showed that there was a need to expand the port facilities at Caticlan due to congestion in the holding area of the existing port, caused by inadequate facilities, thus tourists suffered long queues while waiting for the boat ride going to the island.[12]

Respondent Province claimed that tourist arrivals to Boracay reached approximately 649,559 in 2009 and 779,666 in 2010, and this was expected to reach a record of 1 million tourist arrivals in the years to come. Thus, respondent Province conceptualized the expansion of the port facilities at Barangay Caticlan.[13]

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The Sangguniang Barangay of Caticlan, Malay Municipality, issued Resolution No. 13, s. 2008[14] on April 25, 2008 stating that it had learned that respondent Province had filed an application with the DENR for a foreshore lease of areas along the shorelines of Barangay Caticlan, and manifesting its strong opposition to said application, as the proposed foreshore lease practically covered almost all the coastlines of said barangay, thereby technically diminishing its territorial jurisdiction, once granted, and depriving its constituents of their statutory right of preference in the development and utilization of the natural resources within its jurisdiction. The resolution further stated that respondent Province did not conduct any consultations with the Sangguniang Barangay of Caticlan regarding the proposed foreshore lease, which failure the Sanggunian considered as an act of bad faith on the part of respondent Province.[15]

On November 20, 2008, the Sangguniang Panlalawigan of respondent Province approved Resolution No. 2008-369,[16] formally authorizing Governor Marquez to enter into negotiations towards the possibility of effecting self-liquidating and income-producing development and livelihood projects to be financed through bonds, debentures, securities, collaterals, notes or other obligations as provided under Section 299 of the Local Government Code, with the following priority projects: (a) renovation/rehabilitation of the Caticlan/Cagban Passenger Terminal Buildings and Jetty Ports; and (b) reclamation of a portion of Caticlan foreshore for commercial purposes.[17] This step was taken as respondent Province’s existing jetty port and passenger terminal was funded through bond flotation, which was successfully redeemed and paid ahead of the target date. This was allegedly cited as one of the LGU’s Best Practices wherein respondent Province was given the appropriate commendation.[18]

Respondent Province included the proposed expansion of the port facilities at Barangay Caticlan in its 2009 Annual Investment Plan,[19] envisioned as its project site the area adjacent to the existing jetty port, and identified additional areas along the coastline of Barangay Caticlan as the site for future project expansion.[20]

Governor Marquez sent a letter to respondent PRA on March 12, 2009[21] expressing the interest of respondent Province to reclaim about 2.64 hectares of land along the foreshores of Barangay Caticlan, Municipality of Malay, Province of Aklan.

Sometime in April 2009, respondent Province entered into an agreement with the Financial Advisor/Consultant that won in the bidding process held a month before, to conduct the necessary feasibility study of the proposed project for the Renovation/Rehabilitation of the Caticlan Passenger Terminal Building and Jetty Port, Enhancement and Recovery of Old 303

Caticlan Coastline, and Reclamation of a Portion of Foreshore for Commercial Purposes (the Marina Project), in Malay, Aklan.[22]

Subsequently, on May 7, 2009, the Sangguniang Panlalawigan of respondent Province issued Resolution No. 2009–110,[23] which authorized Governor Marquez to file an application to reclaim the 2.64 hectares of foreshore area in Caticlan, Malay, Aklan with respondent PRA.

Sometime in July 2009, the Financial Advisor/Consultant came up with a feasibility study which focused on the land reclamation of 2.64 hectares by way of beach enhancement and recovery of the old Caticlan coastline for the rehabilitation and expansion of the existing jetty port, and for its future plans – the construction of commercial building and wellness center. The financial component of the said study was Two Hundred Sixty Million Pesos (P260,000,000.00). Its suggested financing scheme was bond flotation.[24]

Meanwhile, the Sangguniang Bayan of the Municipality of Malay expressed its strong opposition to the intended foreshore lease application, through Resolution No. 044, [25] approved on July 22, 2009, manifesting therein that respondent Province’s foreshore lease application was for business enterprise purposes for its benefit, at the expense of the local government of Malay, which by statutory provisions was the rightful entity “to develop, utilize and reap benefits from the natural resources found within its jurisdiction.”[26]

In August 2009, a Preliminary Geohazard Assessment[27] for the enhancement/expansion of the existing Caticlan Jetty Port and Passenger Terminal through beach zone restoration and Protective Marina Developments in Caticlan, Malay, Aklan was completed.

Thereafter, Governor Marquez submitted an Environmental Performance Report and Monitoring Program (EPRMP)[28] to DENR-EMB RVI, which he had attached to his letter[29] dated September 19, 2009, as an initial step for securing an Environmental Compliance Certificate (ECC). The letter reads in part:

With the project expected to start its construction implementation next month, the province hereby assures your good office that it will give preferential attention to and shall comply with whatever comments that you may have on this EPRMP.[30] (Emphasis added.)

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Respondent Province was then authorized to issue “Caticlan Super Marina Bonds” for the purpose of funding the renovation of the Caticlan Jetty Port and Passenger Terminal Building, and the reclamation of a portion of the foreshore lease area for commercial purposes in Malay, Aklan through Provincial Ordinance No. 2009-013, approved on September 10, 2009. The said ordinance authorized Governor Marquez to negotiate, sign and execute agreements in relation to the issuance of the Caticlan Super Marina Bonds in the amount not exceeding P260,000,000.00.[31]

Subsequently, the Sangguniang Panlalawigan of the Province of Aklan issued Provincial Ordinance No. 2009-015[32] on October 1, 2009, amending Provincial Ordinance No. 2009013, authorizing the bond flotation of the Province of Aklan through Governor Marquez to fund the Marina Project and appropriate the entire proceeds of said bonds for the project, and further authorizing Governor Marquez to negotiate, sign and execute contracts or agreements pertinent to the transaction.[33]

Within the same month of October 2009, respondent Province deliberated on the possible expansion from its original proposed reclamation area of 2.64 hectares to forty (40) hectares in order to maximize the utilization of its resources and as a response to the findings of the Preliminary Geohazard Assessment study which showed that the recession and retreat of the shoreline caused by coastal erosion and scouring should be the first major concern in the project site and nearby coastal area. The study likewise indicated the vulnerability of the coastal zone within the proposed project site and the nearby coastal area due to the effects of sea level rise and climate change which will greatly affect the social, economic, and environmental situation of Caticlan and nearby Malay coastal communities.[34]

In his letter dated October 22, 2009 addressed to respondent PRA, Governor Marquez wrote:

With our substantial compliance with the requirements under Administrative Order No. 2007-2 relative to our request to PRA for approval of the reclamation of the [proposed Beach Zone Restoration and Protection Marine Development in Barangays Caticlan and Manoc-Manoc] and as a result of our discussion during the [meeting with the respondent PRA on October 12, 2009], may we respectfully submit a revised Reclamation Project Description embodying certain revisions/changes in the size and location of the areas to be reclaimed. x x x. 305

On another note, we are pleased to inform your Office that the bond flotation we have secured with the Local Government Unit Guarantee Corporation (LGUGC) has been finally approved last October 14, 2009. This will pave the way for the implementation of said project. Briefly, the Province has been recognized by the Bureau of Local Government Finance (BLGF) for its capability to meet its loan obligations. x x x.

With the continued increase of tourists coming to Boracay through Caticlan, the Province is venturing into such development project with the end in view of protection and/or restoring certain segments of the shoreline in Barangays Caticlan (Caticlan side) and Manoc-manoc (Boracay side) which, as reported by experts, has been experiencing tremendous coastal erosion.

For the project to be self-liquidating, however, we will be developing the reclaimed land for commercial and tourism-related facilities and for other complementary uses. [35] (Emphasis ours.)

Then, on November 19, 2009, the Sangguniang Panlalawigan enacted Resolution No. 2009299[36] authorizing Governor Marquez to enter into a Memorandum of Agreement (MOA) with respondent PRA in the implementation of the Beach Zone Restoration and Protection Marina Development Project, which shall reclaim a total of 40 hectares in the areas adjacent to the jetty ports at Barangay Caticlan and Barangay Manoc-manoc. The Sangguniang Panlalawigan approved the terms and conditions of the necessary agreements for the implementation of the bond flotation of respondent Province to fund the renovation/rehabilitation of the existing jetty port by way of enhancement and recovery of the Old Caticlan shoreline through reclamation of an area of 2.64 hectares in the amount of P260,000,000.00 on December 1, 2009.[37]

Respondent Province gave an initial presentation of the project with consultation to the Sangguniang Bayan of Malay[38] on December 9, 2009.

Respondent PRA approved the reclamation project on April 20, 2010 in its Resolution No. 4094 and authorized its General Manager/Chief Executive Officer (CEO) to enter into a MOA with respondent Province for the implementation of the reclamation project.[39]

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On April 27, 2010, DENR-EMB RVI issued to respondent Province ECC-R6-1003-0967100 (the questioned ECC) for Phase 1 of the Reclamation Project to the extent of 2.64 hectares to be done along the Caticlan side beside the existing jetty port.[40]

On May 17, 2010, respondent Province entered into a MOA[41] with respondent PRA. Under Article III, the Project was described therein as follows:

The proposed Aklan Beach Zone Restoration and Protection Marina Development Project involves the reclamation and development of approximately forty (40) hectares of foreshore and offshore areas of the Municipality of Malay x x x.

The land use development of the reclamation project shall be for commercial, recreational and institutional and other applicable uses.[42] (Emphases supplied.)

It was at this point that respondent Province deemed it necessary to conduct a series of what it calls “information-education campaigns,” which provided the venue for interaction and dialogue with the public, particularly the Barangay and Municipal officials of the Municipality of Malay, the residents of Barangay Caticlan and Boracay, the stakeholders, and the non-governmental organizations (NGOs). The details of the campaign are summarized as follows[43]:

a. June 17, 2010 at Casa Pilar Beach Resort, Boracay Island, Malay, Aklan;[44]

b. July 28, 2010 at Caticlan Jetty Port and Passenger Terminal;[45]

c. July 31, 2010 at Barangay Caticlan Plaza;[46]

d. September 15, 2010 at the Office of the Provincial Governor with Municipal Mayor of Malay – Mayor John P. Yap;[47]

e. October 12, 2010 at the Office of the Provincial Governor with the Provincial Development Council Executive Committee;[48] and 307

f. October 29, 2010 at the Office of the Provincial Governor with Officials of LGU-Malay and Petitioner.[49]

Petitioner claims that during the “public consultation meeting” belatedly called by respondent Province on June 17, 2010, respondent Province presented the Reclamation Project and only then detailed the actions that it had already undertaken, particularly: the issuance of the Caticlan Super Marina Bonds; the execution of the MOA with respondent PRA; the alleged conduct of an Environmental Impact Assessment (EIA) study for the reclamation project; and the expansion of the project to forty (40) hectares from 2.64 hectares.[50]

In Resolution No. 046, Series of 2010, adopted on June 23, 2010, the Malay Municipality reiterated its strong opposition to respondent Province’s project and denied its request for a favorable endorsement of the Marina Project.[51]

The Malay Municipality subsequently issued Resolution No. 016, Series of 2010, adopted on August 3, 2010, to request respondent PRA “not to grant reclamation permit and notice to proceed to the Marina Project of the [respondent] Provincial Government of Aklan located at Caticlan, Malay, Aklan.”[52]

In a letter[53] dated October 12, 2010, petitioner informed respondent PRA of its opposition to the reclamation project, primarily for the reason that, based on the opinion of Dr. Porfirio M. Alinñ o, an expert from the University of the Philippines Marine Science Institute (UPMSI), which he rendered based on the documents submitted by respondent Province to obtain the ECC, a full EIA study is required to assess the reclamation project’s likelihood of rendering critical and lasting effect on Boracay considering the proximity in distance, geographical location, current and wind direction, and many other environmental considerations in the area. Petitioner noted that said documents had failed to deal with coastal erosion concerns in Boracay. It also noted that respondent Province failed to comply with certain mandatory provisions of the Local Government Code, particularly, those requiring the project proponent to conduct consultations with stakeholders.

Petitioner likewise transmitted its Resolution No. 001, Series of 2010, registering its opposition to the reclamation project to respondent Province, respondent PRA, respondent

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DENR-EMB, the National Economic Development Authority Region VI, the Malay Municipality, and other concerned entities.[54]

Petitioner alleges that despite the Malay Municipality’s denial of respondent Province’s request for a favorable endorsement, as well as the strong opposition manifested both by Barangay Caticlan and petitioner as an NGO, respondent Province still continued with the implementation of the Reclamation Project.[55]

On July 26, 2010, the Sangguniang Panlalawigan of respondent Province set aside Resolution No. 046, s. 2010, of the Municipality of Malay and manifested its support for the implementation of the aforesaid project through its Resolution No. 2010-022.[56]

On July 27, 2010, the MOA was confirmed by respondent PRA Board of Directors under its Resolution No. 4130. Respondent PRA wrote to respondent Province on October 19, 2010, informing the latter toproceed with the reclamation and development of phase 1 of site 1 of its proposed project. Respondent PRA attached to said letter its Evaluation Report dated October 18, 2010.[57]

Petitioner likewise received a copy of respondent PRA’s letter dated October 19, 2010, which authorized respondent Province to proceed with phase 1 of the reclamation project, subject to compliance with the requirements of its Evaluation Report. The reclamation project was described as:

“[A] seafront development involving reclamation of an aggregate area of more or less, forty (40) hectares in two (2) separate sites both in Malay Municipality, Aklan Province. Site 1 is in Brgy. Caticlan with a total area of 36.82 hectares and Site 2 in Brgy. Manoc-Manoc, Boracay Island with a total area of 3.18 hectares. Sites 1 and 2 are on the opposite sides of Tabon Strait, about 1,200 meters apart. x x x.” [58] (Emphases added.)

The Sangguniang Panlalawigan of Aklan, through Resolution No. 2010-034,[59] addressed the apprehensions of petitioner embodied in its Resolution No. 001, s. 2010, and supported the implementation of the project. Said resolution stated that the apprehensions of petitioner with regard to the economic, social and political negative impacts of the projects were mere perceptions and generalities and were not anchored on definite scientific, social and political studies.

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In the meantime, a study was commissioned by the Philippine Chamber of Commerce and Industry-Boracay (PCCI-Boracay), funded by the Department of Tourism (DOT) with the assistance of, among others, petitioner. The study was conducted in November 2010 by several marine biologists/experts from the Marine Environmental Resources Foundation (MERF) of the UPMSI. The study was intended to determine the potential impact of a reclamation project in the hydrodynamics of the strait and on the coastal erosion patterns in the southern coast of Boracay Island and along the coast of Caticlan.[60]

After noting the objections of the respective LGUs of Caticlan and Malay, as well as the apprehensions of petitioner, respondent Province issued a notice to the contractor on December 1, 2010 to commence with the construction of the project.[61]

On April 4, 2011, the Sangguniang Panlalawigan of Aklan, through its Committee on Cooperatives, Food, Agriculture, and Environmental Protection and the Committee on Tourism, Trade, Industry and Commerce, conducted a joint committee hearing wherein the study undertaken by the MERF-UPMSI was discussed.[62] In attendance were Mr. Ariel Abriam, President of PCCI-Boracay, representatives from the Provincial Government, and Dr. Cesar Villanoy, a professor from the UPMSI. Dr. Villanoy said that the subject project, consisting of 2.64 hectares, would only have insignificant effect on the hydrodynamics of the strait traversing the coastline of Barangay Caticlan and Boracay, hence, there was a distant possibility that it would affect the Boracay coastline, which includes the famous white-sand beach of the island.[63]

Thus, on April 6, 2011, the Sangguniang Panlalawigan of Aklan enacted Resolution No. 2011-065[64] noting the report on the survey of the channel between Caticlan and Boracay conducted by the UPMSI in relation to the effects of the ongoing reclamation to Boracay beaches, and stating that Dr. Villanoy had admitted that nowhere in their study was it pointed out that there would be an adverse effect on the white-sand beach of Boracay.

During the First Quarter Regular Meeting of the Regional Development Council, Region VI (RDC-VI) on April 16, 2011, it approved and supported the subject project (covering 2.64 hectares) through RDC-VI Resolution No. VI-26, series of 2011.[65]

Subsequently, Mr. Abriam sent a letter to Governor Marquez dated April 25, 2011 stating that the study conducted by the UPMSI confirms that the water flow across the Caticlan310

Boracay channel is primarily tide-driven, therefore, the marine scientists believe that the 2.64-hectare project of respondent Province would not significantly affect the flow in the channel and would unlikely impact the Boracay beaches. Based on this, PCCI-Boracay stated that it was not opposing the 2.64-hectare Caticlan reclamation project on environmental grounds.[66]

On June 1, 2011, petitioner filed the instant Petition for Environmental Protection Order/Issuance of the Writ of Continuing Mandamus. On June 7, 2011, this Court issued a Temporary Environmental Protection Order (TEPO) and ordered the respondents to file their respective comments to the petition.[67]

After receiving a copy of the TEPO on June 9, 2011, respondent Province immediately issued an order to the Provincial Engineering Office and the concerned contractor to cease and desist from conducting any construction activities until further orders from this Court.

The petition is premised on the following grounds:

I. THE RESPONDENT PROVINCE, PROPONENT OF THE RECLAMATION PROJECT, FAILED TO COMPLY WITH RELEVANT RULES AND REGULATIONS IN THE ACQUISITION OF AN ECC.

A. THE RECLAMATION PROJECT IS CO-LOCATED WITHIN ENVIRONMENTALLY CRITICAL AREAS REQUIRING THE PERFORMANCE OF A FULL, OR PROGRAMMATIC, ENVIRONMENTAL IMPACT ASSESSMENT.

B. RESPONDENT PROVINCE FAILED TO OBTAIN THE FAVORABLE ENDORSEMENT OF THE LGU CONCERNED.

C. RESPONDENT PROVINCE FAILED TO CONDUCT THE REQUIRED CONSULTATION PROCEDURES AS REQUIRED BY THE LOCAL GOVERNMENT CODE.

D. RESPONDENT PROVINCE FAILED TO PERFORM A FULL ENVIRONMENTAL IMPACT ASSESSMENT AS REQUIRED BY LAW AND RELEVANT REGULATIONS.

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II. THE RECLAMATION OF LAND BORDERING THE STRAIT BETWEEN CATICLAN AND BORACAY SHALL ADVERSELY AFFECT THE FRAIL ECOLOGICAL BALANCE OF THE AREA. [68]

Petitioner objects to respondent Province’s classification of the reclamation project as single instead of co-located, as “non-environmentally critical,” and as a mere “rehabilitation” of the existing jetty port. Petitioner points out that the reclamation project is on two sites (which are situated on the opposite sides of Tabon Strait, about 1,200 meters apart): ]

· 36.82 hectares – Site 1, in Bgy. Caticlan · 3.18 hectares – Site 2, in Manoc-manoc, Boracay Island[69]

Phase 1, which was started in December 2010 without the necessary permits,[70] is located on the Caticlan side of a narrow strait separating mainland Aklan from Boracay. In the implementation of the project, respondent Province obtained only an ECC to conduct Phase 1, instead of an ECC on the entire 40 hectares. Thus, petitioner argues that respondent Province abused and exploited the Revised Procedural Manual forDENR Administrative Order No. 30, Series of 2003 (DENR DAO 2003-30)[71] relating to the acquisition of an ECC by:

1. Declaring the reclamation project under “Group II Projects-Non-ECP (environmentally critical project) in ECA (environmentally critical area) based on the type and size of the area,” and

2. Failing to declare the reclamation project as a co-located project application which would have required the Province to submit a Programmatic Environmental Impact Statement (PEIS)[72] orProgrammatic Environmental [Performance] Report Management Plan (PE[P]RMP).[73] (Emphases ours.)

Petitioner further alleges that the Revised Procedural Manual (on which the classification above is based, which merely requires an Environmental Impact Statement [EIS] for Group II projects) is patently ultra vires, and respondent DENR-EMB RVI committed grave abuse of discretion because the laws on EIS, namely, Presidential Decree Nos. 1151 and 1586, as 312

well as Presidential Proclamation No. 2146, clearly indicate that projects in environmentally critical areas are to be immediately considered environmentally critical.

Petitioner complains that respondent Province applied for an ECC only for Phase 1; hence, unlawfully evading the requirement that co-located projects[74] within Environmentally Critical Areas (ECAs) must submit a PEIS and/or a PEPRMP.

Petitioner argues that respondent Province fraudulently classified and misrepresented the project as a Non-ECP in an ECA, and as a single project instead of a co-located one. The impact assessment allegedly performed gives a patently erroneous and wrongly-premised appraisal of the possible environmental impact of the reclamation project. Petitioner contends that respondent Province’s choice of classification was designed to avoid a comprehensive impact assessment of the reclamation project.

Petitioner further contends that respondent DENR-EMB RVI willfully and deliberately disregarded its duty to ensure that the environment is protected from harmful developmental projects because it allegedly performed only a cursory and superficial review of the documents submitted by the respondent Province for an ECC, failing to note that all the information and data used by respondent Province in its application for the ECC were all dated and not current, as data was gathered in the late 1990s for the ECC issued in 1999 for the first jetty port. Thus, petitioner alleges that respondent DENR-EMB RVI ignored the environmental impact to Boracay, which involves changes in the structure of the coastline that could contribute to the changes in the characteristics of the sand in the beaches of both Caticlan and Boracay.

Petitioner insists that reclamation of land at the Caticlan side will unavoidably adversely affect the Boracay side and notes that the declared objective of the reclamation project is for the exploitation of Boracay’s tourist trade, since the project is intended to enhance support services thereto. But, petitioner argues, the primary reason for Boracay’s popularity is its white-sand beaches which will be negatively affected by the project.

Petitioner alleges that respondent PRA had required respondent Province to obtain the favorable endorsement of the LGUs of Barangay Caticlan and Malay Municipality pursuant to the consultation procedures as required by the Local Government Code.[75] Petitioner asserts that the reclamation project is in violation not only of laws on EIS but also of the Local Government Code as respondent Province failed to enter into proper consultations 313

with the concerned LGUs. In fact, the Liga ng mga Barangay-Malay Chapter also expressed strong opposition against the project.[76]

Petitioner cites Sections 26 and 27 of the Local Government Code, which require consultations if the project or program may cause pollution, climactic change, depletion of non-renewable resources, etc. According to petitioner, respondent Province ignored the LGUs’ opposition expressed as early as 2008. Not only that, respondent Province belatedly called for public “consultation meetings” on June 17 and July 28, 2010, after an ECC had already been issued and the MOA between respondents PRA and Province had already been executed. As the petitioner saw it, these were not consultations but mere “project presentations.”

Petitioner claims that respondent Province, aided and abetted by respondents PRA and DENR-EMB, ignored the spirit and letter of the Revised Procedural Manual, intended to implement the various regulations governing the Environmental Impact Assessments (EIAs) to ensure that developmental projects are in line with sustainable development of natural resources. The project was conceptualized without considering alternatives.

Further, as to its allegation that respondent Province failed to perform a full EIA, petitioner argues that while it is true that as of now, only the Caticlan side has been issued an ECC, the entire project involves the Boracay side, which should have been considered a co-located project. Petitioner claims that any project involving Boracay requires a full EIA since it is an ECA. Phase 1 of the project will affect Boracay and Caticlan as they are separated only by a narrow strait; thus, it should be considered an ECP. Therefore, the ECC and permit issued must be invalidated and cancelled.

Petitioner contends that a study shows that the flow of the water through a narrower channel due to the reclamation project will likely divert sand transport off the southwest part of Boracay, whereas the characteristic coast of the Caticlan side of the strait indicate stronger sediment transport.[77] The white-sand beaches of Boracay and its surrounding marine environment depend upon the natural flow of the adjacent waters.

Regarding its claim that the reclamation of land bordering the strait between Caticlan and Boracay shall adversely affect the frail ecological balance of the area, petitioner submits that while the study conducted by the MERF-UPMSI only considers the impact of the reclamation project on the land, it is undeniable that it will also adversely affect the already

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frail ecological balance of the area. The effect of the project would have been properly assessed if the proper EIA had been performed prior to any implementation of the project.

According to petitioner, respondent Province’s intended purposes do not prevail over its duty and obligation to protect the environment. Petitioner believes that rehabilitation of the Jetty Port may be done through other means.

In its Comment[78] dated June 21, 2011, respondent Province claimed that application for reclamation of 40 hectares is advantageous to the Provincial Government considering that its filing fee would only cost Php20,000.00 plus Value Added Tax (VAT) which is also the minimum fee as prescribed under Section 4.2 of Administrative Order No. 2007-2.[79]

Respondent Province considers the instant petition to be premature; thus, it must necessarily fail for lack of cause of action due to the failure of petitioner to fully exhaust the available administrative remedies even before seeking judicial relief. According to respondent Province, the petition primarily assailed the decision of respondent DENR-EMB RVI in granting the ECC for the subject project consisting of 2.64 hectares and sought the cancellation of the ECC for alleged failure of respondent Province to submit proper documentation as required for its issuance. Hence, the grounds relied upon by petitioner can be addressed within the confines of administrative processes provided by law.

Respondent Province believes that under Section 5.4.3 of DENR Administrative Order No. 2003-30 (DAO 2003-30),[80] the issuance of an ECC[81] is an official decision of DENREMB RVI on the application of a project proponent.[82] It cites Section 6 of DENR DAO 2003-30, which provides for a remedy available to the party aggrieved by the final decision on the proponent’s ECC applications.

Respondent Province argues that the instant petition is anchored on a wrong premise that results to petitioner’s unfounded fears and baseless apprehensions. It is respondent Province’s contention that its 2.64-hectare reclamation project is considered as a “stand alone project,” separate and independent from the approved area of 40 hectares. Thus, petitioner should have observed the difference between the “future development plan” of respondent Province from its “actual project” being undertaken.[83]

Respondent Province clearly does not dispute the fact that it revised its original application to respondent PRA from 2.64 hectares to 40 hectares. However, it claims that such revision 315

is part of its future plan, and implementation thereof is “still subject to availability of funds, independent scientific environmental study, separate application of ECC and notice to proceed to be issued by respondent PRA.”[84]

Respondent Province goes on to claim that “[p]etitioner’s version of the Caticlan jetty port expansion project is a bigger project which is still at the conceptualization stage. Although this project was described in theNotice to Proceed issued by respondent PRA to have two phases, 36.82 hectares in Caticlan and 3.18 hectares in Boracay [Island,] it is totally different from the [ongoing] Caticlan jetty port expansion project.”[85]

Respondent Province says that the Accomplishment Report[86] of its Engineering Office would attest that the actual project consists of 2.64 hectares only, as originally planned and conceptualized, which was even reduced to 2.2 hectares due to some construction and design modifications.

Thus, respondent Province alleges that from its standpoint, its capability to reclaim is limited to 2.64 hectares only, based on respondent PRA’s Evaluation Report[87] dated October 18, 2010, which was in turn the basis of the issuance of the Notice to Proceed dated October 19, 2010, because the project’s financial component is P260,000,000.00 only. Said Evaluation Report indicates that the implementation of the other phases of the project including site 2, which consists of the other portions of the 40-hectare area that includes a portion in Boracay, is still within the 10-year period and will depend largely on the availability of funds of respondent Province.[88]

So, even if respondent PRA approved an area that would total up to 40 hectares, it was divided into phases in order to determine the period of its implementation. Each phase was separate and independent because the source of funds was also separate. The required documents and requirements were also specific for each phase. The entire approved area of 40 hectares could be implemented within a period of 10 years but this would depend solely on the availability of funds.[89]

As far as respondent Province understands it, additional reclamations not covered by the ECC, which only approved 2.64 hectares, should undergo another EIA. If respondent Province intends to commence the construction on the other component of the 40 hectares, then it agrees that it is mandated to secure a new ECC.[90]

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Respondent Province admits that it dreamt of a 40-hectare project, even if it had originally planned and was at present only financially equipped and legally compliant to undertake 2.64 hectares of the project, and only as an expansion of its old jetty port.[91]

Respondent Province claims that it has complied with all the necessary requirements for securing an ECC. On the issue that the reclamation project is within an ECA requiring the performance of a full or programmatic EIA, respondent Province reiterates that the idea of expanding the area to 40 hectares is only a future plan. It only secured an ECC for 2.64 hectares, based on the limits of its funding and authority. From the beginning, its intention was to rehabilitate and expand the existing jetty port terminal to accommodate an increasing projected traffic. The subject project is specifically classified under DENR DAO 2003-30 on its Project Grouping Matrix for Determination of EIA Report Type considered as Minor Reclamation Projects falling under Group II – Non ECP in an ECA. Whether 2.64 or 40 hectares in area, the subject project falls within this classification.

Consequently, respondent Province claims that petitioner erred in considering the ongoing reclamation project at Caticlan, Malay, Aklan, as co-located within an ECA.

Respondent Province, likewise argues that the 2.64-hectare project is not a component of the approved 40-hectare area as it is originally planned for the expansion site of the existing Caticlan jetty port. At present, it has no definite conceptual construction plan of the said portion in Boracay and it has no financial allocation to initiate any project on the said Boracay portion.

Furthermore, respondent Province contends that the present project is located in Caticlan while the alleged component that falls within an ECA is in Boracay. Considering its geographical location, the two sites cannot be considered as a contiguous area for the reason that it is separated by a body of water – a strait that traverses between the mainland Panay wherein Caticlan is located and Boracay. Hence, it is erroneous to consider the two sites as a co-located project within an ECA. Being a “stand alone project” and an expansion of the existing jetty port, respondent DENR-EMB RVI had required respondent Province to perform an EPRMP to secure an ECC as sanctioned by Item No. 8(b), page 7 of DENR DAO 2003-30.

Respondent Province contends that even if, granting for the sake of argument, it had erroneously categorized its project as Non-ECP in an ECA, this was not a final determination. Respondent DENR-EMB RVI, which was the administrator of the EIS 317

system, had the final decision on this matter. Under DENR DAO 2003-30, an application for ECC, even for a Category B2 project where an EPRMP is conducted, shall be subjected to a review process. Respondent DENR-EMB RVI had the authority to deny said application. Its Regional Director could either issue an ECC for the project or deny the application. He may also require a more comprehensive EIA study. The Regional Director issued the ECC based on the EPRMP submitted by respondent Province and after the same went through the EIA review process.

Thus, respondent Province concludes that petitioner’s allegation of this being a “co-located project” is premature if not baseless as the bigger reclamation project is still on the conceptualization stage. Both respondents PRA and Province are yet to complete studies and feasibility studies to embark on another project.

Respondent Province claims that an ocular survey of the reclamation project revealed that it had worked within the limits of the ECC.[92]

With regard to petitioner’s allegation that respondent Province failed to get the favorable endorsement of the concerned LGUs in violation of the Local Government Code, respondent Province contends that consultation vis-aà -vis the favorable endorsement from the concerned LGUs as contemplated under the Local Government Code are merely tools to seek advice and not a power clothed upon the LGUs to unilaterally approve or disapprove any government projects. Furthermore, such endorsement is not necessary for projects falling under Category B2 unless required by the DENR-EMB RVI, under Section 5.3 of DENR DAO 2003-30.

Moreover, DENR Memorandum Circular No. 08-2007 no longer requires the issuance of permits and certifications as a pre-requisite for the issuance of an ECC. Respondent Province claims to have conducted consultative activities with LGUs in connection with Sections 26 and 27 of the Local Government Code. The vehement and staunch objections of both the Sangguniang Barangay of Caticlan and the Sangguniang Bayanof Malay, according to respondent Province, were not rooted on its perceived impact upon the people and the community in terms of environmental or ecological balance, but due to an alleged conflict with their “principal position to develop, utilize and reap benefits from the natural resources found within its jurisdiction.”[93] Respondent Province argues that these concerns are not within the purview of the Local Government Code. Furthermore, the Preliminary Geohazard Assessment Report and EPRMP as well as Sangguniang Panlalawigan Resolution Nos. 2010-022 and 2010-034 should address any environmental issue they may raise. 318

Respondent Province posits that the spirit and intent of Sections 26 and 27 of the Local Government Code is to create an avenue for parties, the proponent and the LGU concerned, to come up with a tool in harmonizing its views and concerns about the project. The duty to consult does not automatically require adherence to the opinions during the consultation process. It is allegedly not within the provisions to give the full authority to the LGU concerned to unilaterally approve or disapprove the project in the guise of requiring the proponent of securing its favorable endorsement. In this case, petitioner is calling a halt to the project without providing an alternative resolution to harmonize its position and that of respondent Province.

Respondent Province claims that the EPRMP[94] would reveal that:

[T]he area fronting the project site is practically composed of sand. Dead coral communities may be found along the vicinity. Thus, fish life at the project site is quite scarce due to the absence of marine support systems like the sea grass beds and coral reefs.

x x x [T]here is no coral cover at the existing Caticlan jetty port. [From] the deepest point of jetty to the shallowest point, there was no more coral patch and the substrate is sandy. It is of public knowledge that the said foreshore area is being utilized by the residents ever since as berthing or anchorage site of their motorized banca. There will be no possibility of any coral development therein because of its continuous utilization. Likewise, the activity of the strait that traverses between the main land Caticlan and Boracay Island would also be a factor of the coral development. Corals [may] only be formed within the area if there is scientific human intervention, which is absent up to the present.

In light of the foregoing premise, it casts serious doubt on petitioner’s allegations pertaining to the environmental effects of Respondent-LGU’s 2.64 hectares reclamation project. The alleged environmental impact of the subject project to the beaches of Boracay Island remains unconfirmed. Petitioner had unsuccessfully proven that the project would cause imminent, grave and irreparable injury to the community.[95]

Respondent Province prayed for the dissolution of the TEPO, claiming that the rules provide that the TEPO may be dissolved if it appears after hearing that its issuance or continuance would cause irreparable damage to the party or person enjoined, while the applicant may be fully compensated for such damages as he may suffer and subject to the posting of a 319

sufficient bond by the party or person enjoined. Respondent Province contends that the TEPO would cause irreparable damage in two aspects:

a. Financial dislocation and probable bankruptcy; and b. Grave and imminent danger to safety and health of inhabitants of immediate area, including tourists and passengers serviced by the jetty port, brought about by the abrupt cessation of development works.

As regards financial dislocation, the arguments of respondent Province are summarized below:

1. This project is financed by bonds which the respondent Province had issued to its creditors as the financing scheme in funding the present project is by way of credit financing through bond flotation.

2. The funds are financed by a Guarantee Bank – getting payment from bonds, being sold to investors, which in turn would be paid by the income that the project would realize or incur upon its completion.

3. While the project is under construction, respondent Province is appropriating a portion of its Internal Revenue Allotment (IRA) budget from the 20% development fund to defray the interest and principal amortization due to the Guarantee Bank.

4. The respondent Province’s IRA, regular income, and/or such other revenues or funds, as may be permitted by law, are being used as security for the payment of the said loan used for the project’s construction.

5. The inability of the subject project to earn revenues as projected upon completion will compel the Province to shoulder the full amount of the obligation, starting from year 2012.

6. Respondent province is mandated to assign its IRA, regular income and/or such other revenues or funds as permitted by law; if project is stopped, detriment of the public welfare and its constituents.[96] 320

As to the second ground for the dissolution of the TEPO, respondent Province argues:

1. Non-compliance with the guidelines of the ECC may result to environmental hazards most especially that reclaimed land if not properly secured may be eroded into the sea.

2. The construction has accomplished 65.26 percent of the project. The embankment that was deposited on the project has no proper concrete wave protection that might be washed out in the event that a strong typhoon or big waves may occur affecting the strait and the properties along the project site. It is already the rainy season and there is a big possibility of typhoon occurrence.

3. If said incident occurs, the aggregates of the embankment that had been washed out might be transferred to the adjoining properties which could affect its natural environmental state.

4. It might result to the total alteration of the physical landscape of the area attributing to environmental disturbance.

5. The lack of proper concrete wave protection or revetment would cause the total erosion of the embankment that has been dumped on the accomplished area.[97]

Respondent Province claims that petitioner will not stand to suffer immediate, grave and irreparable injury or damage from the ongoing project. The petitioner’s perceived fear of environmental destruction brought about by its erroneous appreciation of available data is unfounded and does not translate into a matter of extreme urgency. Thus, under the Rules of Procedure on Environmental Cases, the TEPO may be dissolved.

Respondent PRA filed its Comment[98] on June 22, 2011. It alleges that on June 24, 2006, Executive Order No. 543 delegated the power “to approve reclamation projects to respondent PRA through its governing Board, subject to compliance with existing laws and rules and further subject to the condition that reclamation contracts to be executed with any person or entity (must) go through public bidding.”

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Section 4 of respondent PRA’s Administrative Order No. 2007-2 provides for the approval process and procedures for various reclamation projects to be undertaken. Respondent PRA prepared an Evaluation Report on November 5, 2009[99] regarding Aklan’s proposal to increase its project to 40 hectares.

Respondent PRA contends that it was only after respondent Province had complied with the requirements under the law that respondent PRA, through its Board of Directors, approved the proposed project under its Board Resolution No. 4094.[100] In the same Resolution, respondent PRA Board authorized the General Manager/CEO to execute a MOA with the Aklan provincial government to implement the reclamation project under certain conditions.

The issue for respondent PRA was whether or not it approved the respondent Province’s 2.64-hectare reclamation project proposal in willful disregard of alleged “numerous irregularities” as claimed by petitioner.[101]

Respondent PRA claims that its approval of the Aklan Reclamation Project was in accordance with law and its rules. Indeed, it issued the notice to proceed only after Aklan had complied with all the requirements imposed by existing laws and regulations. It further contends that the 40 hectares involved in this project remains a plan insofar as respondent PRA is concerned. What has been approved for reclamation by respondent PRA thus far is only the 2.64-hectare reclamation project. Respondent PRA reiterates that it approved this reclamation project after extensively reviewing the legal, technical, financial, environmental, and operational aspects of the proposed reclamation.[102]

One of the conditions that respondent PRA Board imposed before approving the Aklan project was that no reclamation work could be started until respondent PRA has approved the detailed engineering plans/methodology, design and specifications of the reclamation. Part of the required submissions to respondent PRA includes the drainage design as approved by the Public Works Department and the ECC as issued by the DENR, all of which the Aklan government must submit to respondent PRA before starting any reclamation works.[103] Under Article IV(B)(3) of the MOA between respondent PRA and Aklan, the latter is required to submit, apart from the ECC, the following requirements for respondent PRA’s review and approval, as basis for the issuance of a Notice to Proceed (NTP) for Reclamation Works:

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(a) Land-form plan with technical description of the metes and bounds of the same landform; (b) Final master development and land use plan for the project; (c) Detailed engineering studies, detailed engineering design, plans and specification for reclamation works, reclamation plans and methodology, plans for the sources of fill materials; (d) Drainage plan vis-a-vis the land-form approved by DPWH Regional Office to include a cost effective and efficient drainage system as may be required based on the results of the studies; (e) Detailed project cost estimates and quantity take-off per items of work of the rawland reclamation components, e.g. reclamation containment structures and soil consolidation; (f) Organizational chart of the construction arm, manning table, equipment schedule for the project; and, (g) Project timetable (PERT/CPM) for the entire project construction period.[104]

In fact, respondent PRA further required respondent Province under Article IV (B)(24) of the MOA to strictly comply with all conditions of the DENR-EMB-issued ECC “and/or comply with pertinent local and international commitments of the Republic of the Philippines to ensure environmental protection.”[105]

In its August 11, 2010 letter,[106] respondent PRA referred for respondent Province’s appropriate action petitioner’s Resolution 001, series of 2010 and Resolution 46, series of 2010, of the Sangguniang Bayan of Malay. Governor Marquez wrote respondent PRA[107] on September 16, 2010 informing it that respondent Province had already met with the different officials of Malay, furnishing respondent PRA with the copies of the minutes of such meetings/presentations. Governor Marquez also assured respondent PRA that it had complied with the consultation requirements as far as Malay was concerned.

Respondent PRA claims that in evaluating respondent Province’s project and in issuing the necessary NTP for Phase 1 of Site 1 (2.64 hectares) of the Caticlan Jetty Port expansion and modernization, respondent PRA gave considerable weight to all pertinent issuances, especially the ECC issued by DENR-EMB RVI.[108] Respondent PRA stresses that its earlier approval of the 40-hectare reclamation project under its Resolution No. 4094, series of 2010, still requires a second level of compliance requirements from the proponent. Respondent Province could not possibly begin its reclamation works since respondent PRA had yet to issue an NTP in its favor. 323

Respondent PRA alleges that prior to the issuance of the NTP to respondent Province for Phase 1 of Site 1, it required the submission of the following pre-construction documents:

(a) Land-Form Plan (with technical description); (b) Site Development Plan/Land Use Plan including, (i) sewer and drainage systems and (ii) waste water treatment; (c) Engineering Studies and Engineering Design; (d) Reclamation Methodology; (e) Sources of Fill Materials, and, (f) The ECC.[109]

Respondent PRA claims that it was only after the evaluation of the above submissions that it issued to respondent Province the NTP, limited to the 2.64-hectare reclamation project. Respondent PRA even emphasized in its evaluation report that should respondent Province pursue the other phases of its project, it would still require the submission of an ECC for each succeeding phases before the start of any reclamation works.[110]

Respondent PRA, being the national government’s arm in regulating and coordinating all reclamation projects in the Philippines – a mandate conferred by law – manifests that it is incumbent upon it, in the exercise of its regulatory functions, to diligently evaluate, based on its technical competencies, all reclamation projects submitted to it for approval. Once the reclamation project’s requirements set forth by law and related rules have been complied with, respondent PRA is mandated to approve the same. Respondent PRA claims, “[w]ith all the foregoing rigorous and detailed requirements submitted and complied with by Aklan, and the attendant careful and meticulous technical and legal evaluation by respondent PRA, it cannot be argued that the reclamation permit it issued to Aklan is ‘founded upon numerous irregularities;’ as recklessly and baselessly imputed by BFI.”[111]

In its Comment[112] dated July 1, 2011, respondent DENR-EMB RVI asserts that its act of issuing the ECC certifies that the project had undergone the proper EIA process by assessing, among others, the direct and indirect impact of the project on the biophysical and human environment and ensuring that these impacts are addressed by appropriate 324

environmental protection and enhancement measures, pursuant to Presidential Decree No. 1586, the Revised Procedural Manual for DENR DAO 2003-30, and the existing rules and regulations.[113]

Respondent DENR-EMB RVI stresses that the declaration in 1978 of several islands, which includes Boracay as tourist zone and marine reserve under Proclamation No. 1801, has no relevance to the expansion project of Caticlan Jetty Port and Passenger Terminal for the very reason that the project is not located in the Island of Boracay, being located in Barangay Caticlan, Malay, which is not a part of mainland Panay. It admits that the site of the subject jetty port falls within the ECA under Proclamation No. 2146 (1981), being within the category of a water body. This was why respondent Province had faithfully secured an ECC pursuant to the Revised Procedural Manual for DENR DAO 2003-30 by submitting the necessary documents as contained in the EPRMP on March 19, 2010, which were the bases in granting ECC No. R6-1003-096-7100 (amended) on April 27, 2010 for the expansion of Caticlan Jetty Port and Passenger Terminal, covering 2.64 hectares.[114]

Respondent DENR-EMB RVI claims that the issues raised by the LGUs of Caticlan and Malay had been considered by the DENR-Provincial Environment and Natural Resources Office (PENRO), Aklan in the issuance of the Order[115] dated January 26, 2010, disregarding the claim of the Municipality of Malay, Aklan of a portion of the foreshore land in Caticlan covered by the application of the Province of Aklan; and another Order of Rejection dated February 5, 2010 of the two foreshore applications, namely FLA No. 060412-43A and FLA No. 060412-43B, of the Province of Aklan.[116]

Respondent DENR-EMB RVI contends that the supporting documents attached to the EPRMP for the issuance of an ECC were merely for the expansion and modernization of the old jetty port in Barangay Caticlan covering 2.64 hectares, and not the 40-hectare reclamation project in Barangay Caticlan and Boracay. The previous letter of respondent Province dated October 14, 2009 addressed to DENR-EMB RVI Regional Executive Director, would show that the reclamation project will cover approximately 2.6 hectares.[117] This application for ECC was not officially accepted due to lack of requirements or documents.

Although petitioner insists that the project involves 40 hectares in two sites, respondent DENR-EMB RVI looked at the documents submitted by respondent Province and saw that the subject area covered by the ECC application and subsequently granted with ECC-R61003-096-7100 consists only of 2.64 hectares; hence, respondent DENR-EMB RVI could not comment on the excess area.[118]

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Respondent DENR-EMB RVI admits that as regards the classification of the 2.64-hectare reclamation project under “Non ECP in ECA,” this does not fall within the definition of a colocated project because the subject project is merely an expansion of the old Caticlan Jetty Port, which had a previously issued ECC (ECC No. 0699-1012-171 on October 12, 1999). Thus, only an EPRMP, not a PEIS or PEPRMP, is required.[119]

Respondent Province submitted to respondent DENR-EMB RVI the following documents contained in the EPRMP:

a. The Observations on the Floor Bottom and its Marine Resources at the Proposed Jetty Ports at Caticlan and Manok-manok, Boracay, Aklan, conducted in 1999 by the Bureau of Fisheries Aquatic Resources (BFAR) Central Office, particularly in Caticlan site, and

b. The Study conducted by Dr. Ricarte S. Javelosa, Ph. D, Mines and Geosciences Bureau (MGB), Central Office and Engr. Roger Esto, Provincial Planning and Development Office (PPDO), Aklan in 2009 entitled “Preliminary Geo-hazard Assessment for the Enhancement of the Existing Caticlan Jetty Port Terminal through Beach Zone Restoration and Protective Marina Development in Malay, Aklan.”

Respondent DENR-EMB RVI claims that the above two scientific studies were enough for it to arrive at a best professional judgment to issue an amended ECC for the Aklan Marina Project covering 2.64 hectares.[120] Furthermore, to confirm that the 2.64-hectare reclamation has no significant negative impact with the surrounding environment particularly in Boracay, a more recent study was conducted, and respondent DENR-EMB RVI alleges that “[i]t is very important to highlight that the input data in the [MERF- UPMSI] study utilized the [40-hectare] reclamation and [200-meter] width seaward using the tidal and wave modelling.”[121] The study showed that the reclamation of 2.64 hectares had no effect to the hydrodynamics of the strait between Barangay Caticlan and Boracay.

Respondent DENR-EMB RVI affirms that no permits and/or clearances from National Government Agencies (NGAs) and LGUs are required pursuant to the DENR Memorandum Circular No. 2007-08, entitled “Simplifying the Requirements of ECC or CNC Applications;” that the EPRMP was evaluated and processed based on the Revised Procedural Manual for DENR DAO 2003-30 which resulted to the issuance of ECC-R6-1003-

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096-7100; and that the ECC is not a permit per se but a planning tool for LGUs to consider in its decision whether or not to issue a local permit.[122]

Respondent DENR-EMB RVI concludes that in filing this case, petitioner had bypassed and deprived the DENR Secretary of the opportunity to review and/or reverse the decision of his subordinate office, EMB RVI pursuant to the Revised Procedural Manual for DENR DAO 2003-30. There is no “extreme urgency that necessitates the granting of Mandamus or issuance of TEPO that put to balance between the life and death of the petitioner or present grave or irreparable damage to environment.”[123]

After receiving the above Comments from all the respondents, the Court set the case for oral arguments on September 13, 2011.

Meanwhile, on September 8, 2011, respondent Province filed a Manifestation and Motion[124] praying for the dismissal of the petition, as the province was no longer pursuing the implementation of the succeeding phases of the project due to its inability to comply with Article IV B.2(3) of the MOA; hence, the issues and fears expressed by petitioner had become moot. Respondent Province alleges that the petition is “premised on a serious misappreciation of the real extent of the contested reclamation project” as certainly the ECC covered only a total of 2,691 square meters located in Barangay Caticlan, Malay, Aklan; and although the MOA spoke of 40 hectares, respondent Province’s submission of documents to respondent PRA pertaining to said area was but the first of a two-step process of approval. Respondent Province claims that its failure to comply with the documentary requirements of respondent PRA within the period provided, or 120 working days from the effectivity of the MOA, indicated its waiver to pursue the remainder of the project.[125] Respondent Province further manifested:

Confirming this in a letter dated 12 August 2011,[126] Governor Marquez informed respondent PRA that the Province of Aklan is no longer “pursuing the implementation of the succeeding phases of the project with a total area of 37.4 hectares for our inability to comply with Article IV B.2 (3) of the MOA; hence, the existing MOA will cover only the project area of 2.64 hectares.”

In his reply-letter dated August 22, 2011,[127] [respondent] PRA General Manager informed Governor Marquez that the [respondent] PRA Board of Directors has given [respondent] PRA the authority to confirm the position of the Province of Aklan that the

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“Aklan Beach Zone Restoration and Protection Marine Development Project will now be confined to the reclamation and development of the 2.64 hectares, more or less.

It is undisputed from the start that the coverage of the Project is in fact limited to 2.64 hectares, as evidenced by the NTP issued by respondent PRA. The recent exchange of correspondence between respondents Province of Aklan and [respondent] PRA further confirms the intent of the parties all along. Hence, the Project subject of the petition, without doubt, covers only 2.64 and not 40 hectares as feared. This completely changes the extent of the Project and, consequently, moots the issues and fears expressed by the petitioner.[128] (Emphasis supplied.)

Based on the above contentions, respondent Province prays that the petition be dismissed as no further justiciable controversy exists since the feared adverse effect to Boracay Island’s ecology had become academic all together.[129]

The Court heard the parties’ oral arguments on September 13, 2011 and gave the latter twenty (20) days thereafter to file their respective memoranda.

Respondent Province filed another Manifestation and Motion,[130] which the Court received on April 2, 2012 stating that:

1. it had submitted the required documents and studies to respondent DENR-EMB RVI before an ECC was issued in its favor; 2. it had substantially complied with the requirements provided under PRA Administrative Order 2007-2, which compliance caused respondent PRA’s Board to approve the reclamation project; and 3. it had conducted a series of “consultative [presentations]” relative to the reclamation project before the LGU of Malay Municipality, the Barangay Officials of Caticlan, and stakeholders of Boracay Island.

Respondent Province further manifested that the Barangay Council of Caticlan, Malay, Aklan enacted on February 13, 2012 Resolution No. 003, series of 2012, entitled “Resolution Favorably Endorsing the 2.6 Hectares Reclamation/MARINA Project of the Aklan Provincial 328

Government at Caticlan Coastline”[131] and that the Sangguniang Bayan of the Municipality of Malay, Aklan enacted Resolution No. 020, series of 2012, entitled “Resolution Endorsing the 2.6 Hectares Reclamation Project of the Provincial Government of Aklan Located at Barangay Caticlan, Malay, Aklan.”[132]

Respondent Province claims that its compliance with the requirements of respondents DENR-EMB RVI and PRA that led to the approval of the reclamation project by the said government agencies, as well as the recent enactments of the Barangay Council of Caticlan and the Sangguniang Bayan of the Municipality of Malay favorably endorsing the said project, had “categorically addressed all the issues raised by the Petitioner in its Petition dated June 1, 2011.” Respondent Province prays as follows:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that after due proceedings, the following be rendered: 1. The Temporary Environmental Protection Order (TEPO) it issued on June 7, 2011 be lifted/dissolved. 2.

The instant petition be dismissed for being moot and academic.

3. Respondent Province of Aklan prays for such other reliefs that are just and equitable under the premises. (Emphases in the original.)

ISSUES

The Court will now resolve the following issues:

I. Whether or not the petition should be dismissed for having been rendered moot and academic II. Whether or not the petition is premature because petitioner failed to exhaust administrative remedies before filing this case III. Whether or not respondent Province failed to perform a full EIA as required by laws and regulations based on the scope and classification of the project IV. Whether or not respondent Province complied with all the requirements under the pertinent laws and regulations

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V. Whether or not there was proper, timely, and sufficient public consultation for the project

DISCUSSION

On the issue of whether or not the Petition should be dismissed for having been rendered moot and academic

Respondent Province claims in its Manifestation and Motion filed on April 2, 2012 that with the alleged favorable endorsement of the reclamation project by theSangguniang Barangay of Caticlan and the Sangguniang Bayan of the Municipality of Malay, all the issues raised by petitioner had already been addressed, and this petition should be dismissed for being moot and academic.

On the contrary, a close reading of the two LGUs’ respective resolutions would reveal that they are not sufficient to render the petition moot and academic, as there are explicit conditions imposed that must be complied with by respondent Province. In Resolution No. 003, series of 2012, of the Sangguniang Barangay of Caticlan it is stated that“any vertical structures to be constructed shall be subject for barangay endorsement.”[133] Clearly, what the barangay endorsed was the reclamation only, and not the entire project that includes the construction of a commercial building and wellness center, and other tourism-related facilities. Petitioner’s objections, as may be recalled, pertain not only to the reclamation per se, but also to the building to be constructed and the entire project’s perceived ill effects to the surrounding environment.

Resolution No. 020, series of 2012, of the Sangguniang Bayan of Malay[134] is even more specific. It reads in part:

WHEREAS, noble it seems the reclamation project to the effect that it will generate scores of benefits for the Local Government of Malay in terms of income and employment for its constituents, but the fact cannot be denied that the project will take its toll on the environment especially on the nearby fragile island of Boracay and the fact also remains that the project will eventually displace the local transportation operators/cooperatives;

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WHEREAS, considering the sensitivity of the project, this Honorable Body through the Committee where this matter was referred conducted several consultations/committee hearings with concerned departments and the private sector specifically Boracay Foundation, Inc. and they are one in its belief that this Local Government Unit has never been against development so long as compliance with the law and proper procedures have been observed and that paramount consideration have been given to the environment lest we disturb the balance of nature to the end that progress will be brought to naught;

WHEREAS, time and again, to ensure a healthy intergovernmental relations, this August Body requires no less than transparency and faithful commitment from the Provincial Government of Aklan in the process of going through these improvements in the Municipality because it once fell prey to infidelities in matters of governance;

WHEREAS, as a condition for the grant of this endorsement and to address all issues and concerns, this Honorable Council necessitates a sincere commitment from the Provincial Government of Aklan to the end that:

1.

To allocate an office space to LGU-Malay within the building in the reclaimed area;

2. To convene the Cagban and Caticlan Jetty Port Management Board before the resumption of the reclamation project; 3. That the reclamation project shall be limited only to 2.6 hectares in Barangay Caticlan and not beyond; 4.

That the local transportation operators/cooperatives will not be displaced; and

5. The Provincial Government of Aklan conduct a simultaneous comprehensive study on the environmental impact of the reclamation project especially during Habagat and Amihan seasons and put in place as early as possible mitigating measures on the effect of the project to the environment.

WHEREAS, having presented these stipulations, failure to comply herewith will leave this August Body no choice but to revoke this endorsement, hence faithful compliance of the commitment of the Provincial Government is highly appealed for[.][135] (Emphases added.)

The Sangguniang Bayan of Malay obviously imposed explicit conditions for respondent Province to comply with on pain of revocation of its endorsement of the project, including 331

the need to conduct a comprehensive study on the environmental impact of the reclamation project, which is the heart of the petition before us. Therefore, the contents of the two resolutions submitted by respondent Province do not support its conclusion that the subsequent favorable endorsement of the LGUs had already addressed all the issues raised and rendered the instant petition moot and academic.

On the issue of failure to exhaust administrative remedies

Respondents, in essence, argue that the present petition should be dismissed for petitioner’s failure to exhaust administrative remedies and even to observe the hierarchy of courts. Furthermore, as the petition questions the issuance of the ECC and the NTP, this involves factual and technical verification, which are more properly within the expertise of the concerned government agencies.

Respondents anchor their argument on Section 6, Article II of DENR DAO 2003-30, which provides:

Section 6. Appeal

Any party aggrieved by the final decision on the ECC / CNC applications may, within 15 days from receipt of such decision, file an appeal on the following grounds:

a. Grave abuse of discretion on the part of the deciding authority, or b. Serious errors in the review findings.

The DENR may adopt alternative conflict/dispute resolution procedures as a means to settle grievances between proponents and aggrieved parties to avert unnecessary legal action. Frivolous appeals shall not be countenanced.

The proponent or any stakeholder may file an appeal to the following:

Deciding Authority

Where to file the appeal 332

EMB Regional Office Director

Office of the EMB Director

EMB Central Office Director

Office of the DENR Secretary

DENR Secretary

Office of the President

(Emphases supplied.)

Respondents argue that since there is an administrative appeal provided for, then petitioner is duty bound to observe the same and may not be granted recourse to the regular courts for its failure to do so.

We do not agree with respondents’ appreciation of the applicability of the rule on exhaustion of administrative remedies in this case. We are reminded of our ruling inPagara v. Court of Appeals,[136] which summarized our earlier decisions on the procedural requirement of exhaustion of administrative remedies, to wit:

The rule regarding exhaustion of administrative remedies is not a hard and fast rule. It is not applicable (1) where the question in dispute is purely a legal one, or (2) where the controverted act is patently illegal or was performed without jurisdiction or in excess of jurisdiction; or (3) where the respondent is a department secretary, whose acts as an alter ego of the President bear the implied or assumed approval of the latter, unless actually disapproved by him, or (4) where there are circumstances indicating the urgency of judicial intervention, - Gonzales vs. Hechanova, L-21897, October 22, 1963, 9 SCRA 230; Abaya vs. Villegas, L-25641, December 17, 1966, 18 SCRA; Mitra vs. Subido, L-21691, September 15, 1967, 21 SCRA 127.

Said principle may also be disregarded when it does not provide a plain, speedy and adequate remedy, (Cipriano vs. Marcelino, 43 SCRA 291), when there is no due process observed (Villanos vs. Subido, 45 SCRA 299), or where the protestant has no other recourse (Sta. Maria vs. Lopez, 31 SCRA 637).[137] (Emphases supplied.)

As petitioner correctly pointed out, the appeal provided for under Section 6 of DENR DAO 2003-30 is only applicable, based on the first sentence thereof, if the person or entity charged with the duty to exhaust the administrative remedy of appeal to the appropriate 333

government agency has been a party or has been made a party in the proceedings wherein the decision to be appealed was rendered. It has been established by the facts that petitioner was never made a party to the proceedings before respondent DENR-EMB RVI. Petitioner was only informed that the project had already been approved after the ECC was already granted.[138] Not being a party to the said proceedings, it does not appear that petitioner was officially furnished a copy of the decision, from which the 15-day period to appeal should be reckoned, and which would warrant the application of Section 6, Article II of DENR DAO 2003-30.

Although petitioner was not a party to the proceedings where the decision to issue an ECC was rendered, it stands to be aggrieved by the decision,[139] because it claims that the reclamation of land on the Caticlan side would unavoidably adversely affect the Boracay side, where petitioner’s members own establishments engaged in the tourism trade. As noted earlier, petitioner contends that the declared objective of the reclamation project is to exploit Boracay’s tourism trade because the project is intended to enhance support services thereto; however, this objective would not be achieved since the white-sand beaches for which Boracay is famous might be negatively affected by the project. Petitioner’s conclusion is that respondent Province, aided and abetted by respondents PRA and DENR-EMB RVI, ignored the spirit and letter of our environmental laws, and should thus be compelled to perform their duties under said laws.

The new Rules of Procedure for Environmental Cases, A.M. No. 09-6-8-SC, provides a relief for petitioner under the writ of continuing mandamus, which is a special civil action that may be availed of “to compel the performance of an act specifically enjoined by law”[140] and which provides for the issuance of a TEPO “as an auxiliary remedy prior to the issuance of the writ itself.”[141] The Rationale of the said Rules explains the writ in this wise:

Environmental law highlights the shift in the focal-point from the initiation of regulation by Congress to the implementation of regulatory programs by the appropriate government agencies.

Thus, a government agency’s inaction, if any, has serious implications on the future of environmental law enforcement. Private individuals, to the extent that they seek to change the scope of the regulatory process, will have to rely on such agencies to take the initial incentives, which may require a judicial component. Accordingly, questions regarding the propriety of an agency’s action or inaction will need to be analyzed.

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This point is emphasized in the availability of the remedy of the writ of mandamus, which allows for the enforcement of the conduct of the tasks to which the writ pertains: the performance of a legal duty.[142] (Emphases added.)

The writ of continuing mandamus “permits the court to retain jurisdiction after judgment in order to ensure the successful implementation of the reliefs mandated under the court’s decision” and, in order to do this, “the court may compel the submission of compliance reports from the respondent government agencies as well as avail of other means to monitor compliance with its decision.”[143]

According to petitioner, respondent Province acted pursuant to a MOA with respondent PRA that was conditioned upon, among others, a properly-secured ECC from respondent DENR-EMB RVI. For this reason, petitioner seeks to compel respondent Province to comply with certain environmental laws, rules, and procedures that it claims were either circumvented or ignored. Hence, we find that the petition was appropriately filed with this Court under Rule 8, Section 1, A.M. No. 09-6-8-SC, which reads:

SECTION 1. Petition for continuing mandamus.—When any agency or instrumentality of the government or officer thereof unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust or station in connection with the enforcement or violation of an environmental law rule or regulation or a right therein, or unlawfully excludes another from the use or enjoyment of such right and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty, attaching thereto supporting evidence, specifying that the petition concerns an environmental law, rule or regulation, and praying that judgment be rendered commanding the respondent to do an act or series of acts until the judgment is fully satisfied, and to pay damages sustained by the petitioner by reason of the malicious neglect to perform the duties of the respondent, under the law, rules or regulations. The petition shall also contain a sworn certification of non-forum shopping.

SECTION 2. Where to file the petition.—The petition shall be filed with the Regional Trial Court exercising jurisdiction over the territory where the actionable neglect or omission occurred or with the Court of Appeals or the Supreme Court.

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Petitioner had three options where to file this case under the rule: the Regional Trial Court exercising jurisdiction over the territory where the actionable neglect or omission occurred, the Court of Appeals, or this Court.

Petitioner had no other plain, speedy, or adequate remedy in the ordinary course of law to determine the questions of unique national and local importance raised here that pertain to laws and rules for environmental protection, thus it was justified in coming to this Court.

Having resolved the procedural issue, we now move to the substantive issues.

On the issues of whether, based on the scope and classification of the project, a full EIA is required by laws and regulations, and whether respondent Province complied with all the requirements under the pertinent laws and regulations

Petitioner’s arguments on this issue hinges upon its claim that the reclamation project is misclassified as a single project when in fact it is co-located. Petitioner also questions the classification made by respondent Province that the reclamation project is merely an expansion of the existing jetty port, when the project descriptions embodied in the different documents filed by respondent Province describe commercial establishments to be built, among others, to raise revenues for the LGU; thus, it should have been classified as a new project. Petitioner likewise cries foul to the manner by which respondent Province allegedly circumvented the documentary requirements of the DENR-EMB RVI by the act of connecting the reclamation project with its previous project in 1999 and claiming that the new project is a mere expansion of the previous one.

As previously discussed, respondent Province filed a Manifestation and Motion stating that the ECC issued by respondent DENR-EMB RVI covered an area of 2,691 square meters in Caticlan, and its application for reclamation of 40 hectares with respondent PRA was conditioned on its submission of specific documents within 120 days. Respondent Province claims that its failure to comply with said condition indicated its waiver to pursue the succeeding phases of the reclamation project and that the subject matter of this case had thus been limited to 2.64 hectares. Respondent PRA, for its part, declared through its General Manager that the “Aklan Beach Zone Restoration and Protection Marine Development Project will now be confined to the reclamation and development of the 2.64 hectares, more or less.”[144]

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The Court notes such manifestation of respondent Province. Assuming, however, that the area involved in the subject reclamation project has been limited to 2.64 hectares, this case has not become moot and academic, as alleged by respondents, because the Court still has to check whether respondents had complied with all applicable environmental laws, rules, and regulations pertaining to the actual reclamation project.

We recognize at this point that the DENR is the government agency vested with delegated powers to review and evaluate all EIA reports, and to grant or deny ECCs to project proponents.[145] It is the DENR that has the duty to implement the EIS system. It appears, however, that respondent DENR-EMB RVI’s evaluation of this reclamation project was problematic, based on the valid questions raised by petitioner.

Being the administrator of the EIS System, respondent DENR-EMB RVI’s submissions bear great weight in this case. However, the following are the issues that put in question the wisdom of respondent DENR-EMB RVI in issuing the ECC:

1. Its approval of respondent Province’s classification of the project as a mere expansion of the existing jetty port in Caticlan, instead of classifying it as a new project; 2.

Its classification of the reclamation project as a single instead of a co-located project;

3.

The lack of prior public consultations and approval of local government agencies; and

4. The lack of comprehensive studies regarding the impact of the reclamation project to the environment.

The above issues as raised put in question the sufficiency of the evaluation of the project by respondent DENR-EMB RVI.

Nature of the project

The first question must be answered by respondent DENR-EMB RVI as the agency with the expertise and authority to state whether this is a new project, subject to the more rigorous environmental impact study requested by petitioner, or it is a mere expansion of the existing jetty port facility.

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The second issue refers to the classification of the project by respondent Province, approved by respondent DENR-EMB RVI, as single instead of co-located. Under the Revised Procedural Manual, the “Summary List of Additional Non-Environmentally-Critical Project (NECP) Types in ECAs Classified under Group II” (Table I-2)lists “buildings, storage facilities and other structures” as a separate item from “transport terminal facilities.” This creates the question of whether this project should be considered as consisting of more than one type of activity, and should more properly be classified as “co-located,” under the following definition from the same Manual, which reads:

f) Group IV (Co-located Projects in either ECA or NECA): A co-located project is a group of single projects, under one or more proponents/locators, which are located in a contiguous area and managed by one administrator, who is also the ECC applicant. The co-located project may be an economic zone or industrial park, or a mix of projects within a catchment, watershed or river basin, or any other geographical, political or economic unit of area. Since the location or threshold of specific projects within the contiguous area will yet be derived from the EIA process based on the carrying capacity of the project environment, the nature of the project is called “programmatic.” (Emphasis added.)

Respondent DENR-EMB RVI should conduct a thorough and detailed evaluation of the project to address the question of whether this could be deemed as a group of single projects (transport terminal facility, building, etc.) in a contiguous area managed by respondent Province, or as a single project.

The third item in the above enumeration will be discussed as a separate issue.

The answer to the fourth question depends on the final classification of the project under items 1 and 3 above because the type of EIA study required under the Revised Procedural Manual depends on such classification.

The very definition of an EIA points to what was most likely neglected by respondent Province as project proponent, and what was in turn overlooked by respondent DENR-EMB RVI, for it is defined as follows:

An [EIA] is a ‘process that involves predicting and evaluating the likely impacts of a project (including cumulative impacts) on the environment during construction, commissioning, operation and abandonment. It also includes designing appropriate preventive, mitigating 338

and enhancement measures addressing these consequences to protect the environment and the community’s welfare.[146] (Emphases supplied.)

Thus, the EIA process must have been able to predict the likely impact of the reclamation project to the environment and to prevent any harm that may otherwise be caused.

The project now before us involves reclamation of land that is more than five times the size of the original reclaimed land. Furthermore, the area prior to construction merely contained a jetty port, whereas the proposed expansion, as described in the EPRMP submitted by respondent Province to respondent DENR-EMB RVI involves so much more, and we quote:

The expansion project will be constructed at the north side of the existing jetty port and terminal that will have a total area of 2.64 hectares, more or less, after reclamation. The Phase 1 of the project construction costing around P260 million includes the following:

1.

Reclamation

- 3,000 sq m (expansion of jetty port)

2.

Reclamation

- 13,500 sq m (buildable area)

3.

Terminal annex building

4.

2-storey commercial building – 2,500 sq m (1,750 sq m of leasable space)

5.

Health and wellness center

6.

Access road

7.

Parking, perimeter fences, lighting and water treatment sewerage system

8.

Rehabilitation of existing jetty port and terminal

- 250 sq m

- 12 m (wide)

xxxx

The succeeding phases of the project will consist of [further] reclamation, completion of the commercial center building, bay walk commercial strip, staff building, ferry terminal, a cable car system and wharf marina. This will entail an additional estimated cost of P785 339

million bringing the total investment requirement to about P1.0 billion.[147] (Emphases added.)

As may be gleaned from the breakdown of the 2.64 hectares as described by respondent Province above, a significant portion of the reclaimed area would be devoted to the construction of a commercial building, and the area to be utilized for the expansion of the jetty port consists of a mere 3,000 square meters (sq. m). To be true to its definition, the EIA report submitted by respondent Province should at the very least predict the impact that the construction of the new buildings on the reclaimed land would have on the surrounding environment. These new constructions and their environmental effects were not covered by the old studies that respondent Province previously submitted for the construction of the original jetty port in 1999, and which it re-submitted in its application for ECC in this alleged expansion, instead of conducting updated and more comprehensive studies.

Any impact on the Boracay side cannot be totally ignored, as Caticlan and Boracay are separated only by a narrow strait. This becomes more imperative because of the significant contributions of Boracay’s white-sand beach to the country’s tourism trade, which requires respondent Province to proceed with utmost caution in implementing projects within its vicinity.

We had occasion to emphasize the duty of local government units to ensure the quality of the environment under Presidential Decree No. 1586 in Republic of the Philippines v. The City of Davao,[148] wherein we held:

Section 15 of Republic Act 7160, otherwise known as the Local Government Code, defines a local government unit as a body politic and corporate endowed with powers to be exercised by it in conformity with law. As such, it performs dual functions, governmental and proprietary. Governmental functions are those that concern the health, safety and the advancement of the public good or welfare as affecting the public generally. Proprietary functions are those that seek to obtain special corporate benefits or earn pecuniary profit and intended for private advantage and benefit. When exercising governmental powers and performing governmental duties, an LGU is an agency of the national government. When engaged in corporate activities, it acts as an agent of the community in the administration of local affairs.

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Found in Section 16 of the Local Government Code is the duty of the LGUs to promote the people’s right to a balanced ecology. Pursuant to this, an LGU, like the City of Davao, can not claim exemption from the coverage of PD 1586. As a body politic endowed with governmental functions, an LGU has the duty to ensure the quality of the environment, which is the very same objective of PD 1586.

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Section 4 of PD 1586 clearly states that “no person, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate issued by the President or his duly authorized representative.” The Civil Code defines a person as either natural or juridical. The state and its political subdivisions, i.e., the local government units are juridical persons. Undoubtedly therefore, local government units are not excluded from the coverage of PD 1586.

Lastly, very clear in Section 1 of PD 1586 that said law intends to implement the policy of the state to achieve a balance between socio-economic development and environmental protection, which are the twin goals of sustainable development. The above-quoted first paragraph of the Whereas clause stresses that this can only be possible if we adopt a comprehensive and integrated environmental protection program where all the sectors of the community are involved, i.e., the government and the private sectors. The local government units, as part of the machinery of the government, cannot therefore be deemed as outside the scope of the EIS system.[149] (Emphases supplied.)

The Court chooses to remand these matters to respondent DENR-EMB RVI for it to make a proper study, and if it should find necessary, to require respondent Province to address these environmental issues raised by petitioner and submit the correct EIA report as required by the project’s specifications. The Court requires respondent DENR-EMB RVI to complete its study and submit a report within a non-extendible period of three months. Respondent DENR-EMB RVI should establish to the Court in said report why the ECC it issued for the subject project should not be canceled.

Lack of prior public consultation

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The Local Government Code establishes the duties of national government agencies in the maintenance of ecological balance, and requires them to secure prior public consultation and approval of local government units for the projects described therein.

In the case before us, the national agency involved is respondent PRA. Even if the project proponent is the local government of Aklan, it is respondent PRA which authorized the reclamation, being the exclusive agency of the government to undertake reclamation nationwide. Hence, it was necessary for respondent Province to go through respondent PRA and to execute a MOA, wherein respondent PRA’s authority to reclaim was delegated to respondent Province. Respondent DENR-EMB RVI, regional office of the DENR, is also a national government institution which is tasked with the issuance of the ECC that is a prerequisite to projects covered by environmental laws such as the one at bar.

This project can be classified as a national project that affects the environmental and ecological balance of local communities, and is covered by the requirements found in the Local Government Code provisions that are quoted below:

Section 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. - It shall be the duty of every national agency or government-owned or controlled corporation authorizing or involved in the planning and implementation of any project or program that may cause pollution, climatic change, depletion of non-renewable resources, loss of crop land, rangeland, or forest cover, and extinction of animal or plant species, to consult with the local government units, nongovernmental organizations, and other sectors concerned and explain the goals and objectives of the project or program, its impact upon the people and the community in terms of environmental or ecological balance, and the measures that will be undertaken to prevent or minimize the adverse effects thereof.

Section 27. Prior Consultations Required. - No project or program shall be implemented by government authorities unless the consultations mentioned in Sections 2 (c) and 26 hereof are complied with, and prior approval of the sanggunian concerned is obtained: Provided, That occupants in areas where such projects are to be implemented shall not be evicted unless appropriate relocation sites have been provided, in accordance with the provisions of the Constitution.

In Lina, Jr. v. Panñ o,[150] we held that Section 27 of the Local Government Code applies only to “national programs and/or projects which are to be implemented in a particular local

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community”[151] and that it should be read in conjunction with Section 26. We held further in this manner:

Thus, the projects and programs mentioned in Section 27 should be interpreted to mean projects and programs whose effects are among those enumerated in Section 26 and 27, to wit, those that: (1) may cause pollution; (2) may bring about climatic change; (3) may cause the depletion of non-renewable resources; (4) may result in loss of crop land, range-land, or forest cover; (5) may eradicate certain animal or plant species from the face of the planet; and (6) other projects or programs that may call for the eviction of a particular group of people residing in the locality where these will be implemented. Obviously, none of these effects will be produced by the introduction of lotto in the province of Laguna. [152] (Emphasis added.)

During the oral arguments held on September 13, 2011, it was established that this project as described above falls under Section 26 because the commercial establishments to be built on phase 1, as described in the EPRMP quoted above, could cause pollution as it could generate garbage, sewage, and possible toxic fuel discharge.[153]

Our ruling in Province of Rizal v. Executive Secretary[154] is instructive:

We reiterated this doctrine in the recent case of Bangus Fry Fisherfolk v. Lanzanas, where we held that there was no statutory requirement for the sangguniang bayan of Puerto Galera to approve the construction of a mooring facility, as Sections 26 and 27 are inapplicable to projects which are not environmentally critical.

Moreover, Section 447, which enumerates the powers, duties and functions of the municipality, grants the sangguniang bayan the power to, among other things, “enact ordinances, approve resolutions and appropriate funds for the general welfare of the municipality and its inhabitants pursuant to Section 16 of th(e) Code.” These include:

(1) Approving ordinances and passing resolutions to protect the environment and impose appropriate penalties for acts which endanger the environment, such as dynamite fishing and other forms of destructive fishing, illegal logging and smuggling of logs, smuggling of natural resources products and of endangered species of flora and fauna, slash and burn farming, and such other activities which result in pollution, acceleration of eutrophication of rivers and lakes, or of ecological imbalance; [Section 447 (1)(vi)] 343

(2) Prescribing reasonable limits and restraints on the use of property within the jurisdiction of the municipality, adopting a comprehensive land use plan for the municipality, reclassifying land within the jurisdiction of the city, subject to the pertinent provisions of this Code, enacting integrated zoning ordinances in consonance with the approved comprehensive land use plan, subject to existing laws, rules and regulations; establishing fire limits or zones, particularly in populous centers; and regulating the construction, repair or modification of buildings within said fire limits or zones in accordance with the provisions of this Code; [Section 447 (2)(vi-ix)]

(3) Approving ordinances which shall ensure the efficient and effective delivery of the basic services and facilities as provided for under Section 17 of this Code, and in addition to said services and facilities, …providing for the establishment, maintenance, protection, and conservation of communal forests and watersheds, tree parks, greenbelts, mangroves, and other similar forest development projects …and, subject to existing laws, establishing and providing for the maintenance, repair and operation of an efficient waterworks system to supply water for the inhabitants and purifying the source of the water supply; regulating the construction, maintenance, repair and use of hydrants, pumps, cisterns and reservoirs; protecting the purity and quantity of the water supply of the municipality and, for this purpose, extending the coverage of appropriate ordinances over all territory within the drainage area of said water supply and within one hundred (100) meters of the reservoir, conduit, canal, aqueduct, pumping station, or watershed used in connection with the water service; and regulating the consumption, use or wastage of water.” [Section 447 (5)(i) & (vii)]

Under the Local Government Code, therefore, two requisites must be met before a national project that affects the environmental and ecological balance of local communities can be implemented: prior consultation with the affected local communities, and prior approval of the project by the appropriate sanggunian. Absent either of these mandatory requirements, the project’s implementation is illegal.[155] (Emphasis added.)

Based on the above, therefore, prior consultations and prior approval are required by law to have been conducted and secured by the respondent Province. Accordingly, the information dissemination conducted months after the ECC had already been issued was insufficient to comply with this requirement under the Local Government Code. Had they been conducted properly, the prior public consultation should have considered the ecological or environmental concerns of the stakeholders and studied measures alternative to the project, to avoid or minimize adverse environmental impact or damage. In fact, 344

respondent Province once tried to obtain the favorable endorsement of the Sangguniang Bayan of Malay, but this was denied by the latter.

Moreover, DENR DAO 2003-30 provides:

5.3 Public Hearing / Consultation Requirements

For projects under Category A-1, the conduct of public hearing as part of the EIS review is mandatory unless otherwise determined by EMB. For all other undertakings, a public hearing is not mandatory unless specifically required by EMB.

Proponents should initiate public consultations early in order to ensure that environmentally relevant concerns of stakeholders are taken into consideration in the EIA study and the formulation of the management plan. All public consultations and public hearings conducted during the EIA process are to be documented. The public hearing/consultation Process reportshall be validated by the EMB/EMB RD and shall constitute part of the records of the EIA process. (Emphasis supplied.)

In essence, the above-quoted rule shows that in cases requiring public consultations, the same should be initiated early so that concerns of stakeholders could be taken into consideration in the EIA study. In this case, respondent Province had already filed its ECC application before it met with the local government units of Malay and Caticlan.

The claim of respondent DENR-EMB RVI is that no permits and/or clearances from National Government Agencies (NGAs) and LGUs are required pursuant to the DENR Memorandum Circular No. 2007-08. However, we still find that the LGC requirements of consultation and approval apply in this case. This is because a Memorandum Circular cannot prevail over the Local Government Code, which is a statute and which enjoys greater weight under our hierarchy of laws.

Subsequent to the information campaign of respondent Province, the Municipality of Malay and the Liga ng mga Barangay-Malay Chapter still opposed the project. Thus, when respondent Province commenced the implementation project, it violated Section 27 of the LGC, which clearly enunciates that “[no] project or program shall be implemented by

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government authorities unless the consultations mentioned in Sections 2(c) and 26 hereof are complied with, and prior approval of the sanggunian concerned is obtained.”

The lack of prior public consultation and approval is not corrected by the subsequent endorsement of the reclamation project by the Sangguniang Barangay of Caticlan on February 13, 2012, and the Sangguniang Bayan of the Municipality of Malay on February 28, 2012, which were both undoubtedly achieved at the urging and insistence of respondent Province. As we have established above, the respective resolutions issued by the LGUs concerned did not render this petition moot and academic.

It is clear that both petitioner and respondent Province are interested in the promotion of tourism in Boracay and the protection of the environment, lest they kill the proverbial hen that lays the golden egg. At the beginning of this decision, we mentioned that there are common goals of national significance that are very apparent from both the petitioner’s and the respondents’ respective pleadings and memoranda.

The parties are evidently in accord in seeking to uphold the mandate found in Article II, Declaration of Principles and State Policies, of the 1987 Constitution, which we quote below:

SECTION 16. The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature.

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SECTION 20. The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments.

The protection of the environment in accordance with the aforesaid constitutional mandate is the aim, among others, of Presidential Decree No. 1586, “Establishing an Environmental Impact Statement System, Including Other Environmental Management Related Measures and For Other Purposes,” which declared in its first Section that it is “the policy of the State to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection.”

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The parties undoubtedly too agree as to the importance of promoting tourism, pursuant to Section 2 of Republic Act No. 9593, or “The Tourism Act of 2009,” which reads:

SECTION 2. Declaration of Policy. – The State declares tourism as an indispensable element of the national economy and an industry of national interest and importance, which must be harnessed as an engine of socioeconomic growth and cultural affirmation to generate investment, foreign exchange and employment, and to continue to mold an enhanced sense of national pride for all Filipinos. (Emphasis ours.)

The primordial role of local government units under the Constitution and the Local Government Code of 1991 in the subject matter of this case is also unquestionable. The Local Government Code of 1991 (Republic Act No. 7160) pertinently provides:

Section 2. Declaration of Policy. - (a) It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. Toward this end, the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units shall be given more powers, authority, responsibilities, and resources. The process of decentralization shall proceed from the national government to the local government units. [156] (Emphases ours.)

As shown by the above provisions of our laws and rules, the speedy and smooth resolution of these issues would benefit all the parties. Thus, respondent Province’s cooperation with respondent DENR-EMB RVI in the Court-mandated review of the proper classification and environmental impact of the reclamation project is of utmost importance.

WHEREFORE, premises considered, the petition is hereby PARTIALLY GRANTED. The TEPO issued by this Court is hereby converted into a writ of continuing mandamus specifically as follows:

1. Respondent Department of Environment and Natural Resources-Environmental Management Bureau Regional Office VI shall revisit and review the following matters: 347

a.

its classification of the reclamation project as a single instead of a co-located project;

b. its approval of respondent Province’s classification of the project as a mere expansion of the existing jetty port in Caticlan, instead of classifying it as a new project; and c. the impact of the reclamation project to the environment based on new, updated, and comprehensive studies, which should forthwith be ordered by respondent DENR-EMB RVI.

2.

Respondent Province of Aklan shall perform the following:

a. fully cooperate with respondent DENR-EMB RVI in its review of the reclamation project proposal and submit to the latter the appropriate report and study; and b. secure approvals from local government units and hold proper consultations with nongovernmental organizations and other stakeholders and sectors concerned as required by Section 27 in relation to Section 26 of the Local Government Code.

3. Respondent Philippine Reclamation Authority shall closely monitor the submission by respondent Province of the requirements to be issued by respondent DENR-EMB RVI in connection to the environmental concerns raised by petitioner, and shall coordinate with respondent Province in modifying the MOA, if necessary, based on the findings of respondent DENR-EMB RVI.

4. The petitioner Boracay Foundation, Inc. and the respondents The Province of Aklan, represented by Governor Carlito S. Marquez, The Philippine Reclamation Authority, and The DENR-EMB (Region VI) are mandated to submit their respective reports to this Court regarding their compliance with the requirements set forth in this Decision no later than three (3) months from the date of promulgation of this Decision.

5. In the meantime, the respondents, their concerned contractor/s, and/or their agents, representatives or persons acting in their place or stead, shall immediately cease and desist from continuing the implementation of the project covered by ECC-R6-1003-096-7100 until further orders from this Court. For this purpose, the respondents shall report within five (5) days to this Court the status of the project as of their receipt of this Decision, copy furnished the petitioner.

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This Decision is immediately executory.

SO ORDERED.

12. BERNARDO DE LEON,

G.R. No. 181970

Petitioner,

-versus-

PUBLIC ESTATES AUTHORITY substituted by the CITY OF PARAAQUE, RAMON ARELLANO, JR., RICARDO PENA and REYMUNDO ORPILLA, Respondents. x-----------------------------------------------x PUBLIC ESTATES AUTHORITY (now PHILIPPINE RECLAMATION AUTHORITY), substituted by the CITY OF PARAAQUE, Petitioner,

G.R. No. 182678

-versus-

Present:

HON. SELMA PALACIO ALARAS, in her 349

capacity as the Acting Presiding Judge of CARPIO, J., Chairperson, Branch 135, Regional Trial Court of CARPIO MORALES,* Makati City, and BERNARDO DE LEON. Respondents.

PERALTA, ABAD, and MENDOZA, JJ.

Promulgated:

August 3, 2010 x -------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Before the Court are two consolidated petitions. G.R. No. 181970 is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Bernardo de Leon seeking the reversal and setting aside of the Decision 159 of *

159 350

the Court of Appeals (CA), dated November 21, 2007, in CA-G.R. SP No. 90328 which dismissed his petition for certiorari. De Leon also assails the CA Resolution 160 dated March 4, 2008 denying his Motion for Reconsideration. On the other hand, G.R. No. 182678 is a petition for certiorari under Rule 65 of the Rules of Court filed by the Public Estates Authority (PEA) 161 seeking the nullification of the Orders dated December 28, 2007 and March 4, 2008 of the Regional Trial Court (RTC) of Makati City, Branch 135 in Civil Case No. 93-143. The pertinent factual and procedural antecedents of the case, as summarized by the CA, are as follows: On [January 15, 1993], petitioner Bernardo De Leon (De Leon) filed a Complaint for Damages with Prayer for Preliminary Injunction before the Regional Trial Court [RTC] of Makati City, raffled to Branch 135, against respondent Public Estates Authority (PEA), a government-owned corporation, as well as its officers, herein private respondents Ramon Arellano, Jr., Ricardo Pena and Reymundo Orpilla. The suit for damages hinged on the alleged unlawful destruction of De Leons fence and houses constructed on Lot 5155 containing an area of 11,997 square meters, situated in San Dionisio, Paraaque, which De Leon claimed has been in the possession of his family for more than 50 years. Essentially, De Leon prayed that one, lawful possession of the land in question be awarded to him; two, PEA be ordered to pay damages for demolishing the improvements constructed on Lot 5155; and, three, an injunctive relief be issued to enjoin PEA from committing acts which would violate his lawful and peaceful possession of the subject premises.

160

161

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The court a quo found merit in De Leons application for writ of preliminary injunction and thus issued the Order dated 8 February 1993, pertinent portions of which read: After a careful consideration of the evidence presented and without going into the actual merits of the case, this Court finds that plaintiff (De Leon) has duly established by preponderance of evidence that he has a legal right over the subject matter of the instant case and is entitled to the injunctive relief demanded for and may suffer irreparable damage or injury if such right is not protected by Law [Rules (sic) 58, Section 3 of the Revised (Rules of Court)]. Premises considered upon plaintiffs (De Leons) filing of a bond in the amount of P500,000.00, let a writ of preliminary injunction be issued against the defendants, their agents, representatives and other persons (PEA and its officers) acting for and in their behalf are hereby enjoined from disturbing the peaceful possession of plaintiff (De Leon) and his co-owners over Lot 5155 and further, from destroying and/or removing whatever other improvements thereon constructed, until further orders of this Court. SO ORDERED. (Emphasis supplied) PEA sought recourse before the Supreme Court through a Petition for Certiorari with Prayer for a Restraining Order, ascribing grave abuse of discretion against the court a quo for issuing injunctive relief. The Petition was later referred to this Court for proper determination and disposition, and was docketed as CA-G.R. SP No. 30630. On 30 September 1993, the Ninth Division of this Court rendered a Decision discerning that the court a quo did not act in a capricious, arbitrary and whimsical exercise of power in issuing the writ of preliminary injunction against PEA. The Ninth Division ruled that the court a quo was precisely careful to state in its Order that it was without going into the actual merits of the case and that the words plaintiff (De Leon) and his co-owners were used by the court a quo rather loosely and did not intend it to be an adjudication of ownership. Unfazed, PEA appealed to the Supreme Court via a Petition for Certiorari insisting that Lot 5155 was a salvage zone until it was reclaimed through government efforts in 1982. The land was previously under water on 352

the coastline which reached nine to twenty meters deep. In 1989, PEA started constructing R-1 Toll Expressway Road for the Manila-Cavite Coastal Road, which project directly traversed Lot 5155. PEA argued that the documentary evidence presented by De Leon to bolster his fallacious claim of possession and ownership were procured only in 1992, thus negating his very own allegation that he and his predecessors-in-interest have been in occupation since time immemorial. Ruling squarely on the issue adduced before it, the Supreme Court declared that Lot 5155 was a public land so that De Leons occupation thereof, no matter how long ago, could not confer ownership or possessory rights. Prescinding therefrom, no writ of injunction may lie to protect De Leons nebulous right of possession. Accordingly, in its Decision dated 20 November 2000, the Supreme Court disposed of the controversy in this wise: WHEREFORE, the Court REVERSES the decision of the Court of Appeals in CA-G.R. SP No. 30630, and DISMISSES the complaint in Civil Case No. 93-143 of the Regional Trial Court, Makati. No costs. SO ORDERED. The aforesaid Decision became final and executory as no motion for reconsideration was filed. In due course, PEA moved for the issuance of a writ of execution praying that De Leon and persons claiming rights under him be ordered to vacate and peaceably surrender possession of Lot 5155. Acting on PEAs motion, the court a quo issued the first assailed Order dated 15 September 2004, viz: Acting on the Motion For Issuance Of Writ of Execution filed by defendant Public Estate[s] Authority, and finding the same to be impressed with merit, the same is GRANTED. Let a Writ of Execution issue directing plaintiff, his agents, principals, successors-in-interest and all persons claiming rights under him to vacate and peaceably turn over possession of Lot 5155 to defendant Public Estate[s] Authority. SO ORDERED. 353

As could well be expected, De Leon moved for reconsideration thereof and quashal of the writ of execution. He adamantly insisted that the court a quos Order for the issuance of the writ of execution completely deviated from the dispositive portion of the Supreme Courts Decision dated 20 November 2000 as it did not categorically direct him to surrender possession of Lot 5155 in favor of PEA. However, both motions met the same fate as these were denied by the court a quo in the second disputed Order dated 29 April 2005.162

Dissatisfied, De Leon filed another Motion for Reconsideration dated July 1, 2005, but the same was denied by the RTC in an Order dated July 27, 2005. De Leon then filed a special civil action for certiorari with the CA assailing the September 15, 2004 and April 29, 2005 Orders of the RTC of Makati City. This was docketed as CA-G.R. SP No. 90328. In the same proceeding, De Leon filed an Urgent-Emergency Motion for Temporary Restraining Order (TRO) and Issuance of Writ of Preliminary Injunction but the same was denied by the CA in a Resolution dated April 24, 2006.

Subsequently, De Leon filed a second special civil action for certiorari with the CA seeking to annul and set aside the same RTC Orders dated September 15, 2004 and April 29, 2005, as well as the RTC Order of July 27, 2005. The case was docketed as CA-G.R. SP No. 90984. On July 26, 2006, PEA filed a Very Urgent Motion for Issuance of Writ of Demolition163 praying that the RTC issue a Special Order directing De Leon and persons claiming under him to remove all improvements erected inside the premises of the subject 162

163

354

property and, in case of failure to remove the said structures, that a Special Order and Writ of Demolition be issued directing the sheriff to remove and demolish the said improvements. On October 11, 2006, the RTC issued an Order 164 holding in abeyance the Resolution of PEAs Motion. PEA filed a Motion for Reconsideration, 165 but it was denied by the RTC in an Order166 dated January 12, 2007. On February 27, 2007, PEA filed an Omnibus Motion 167 to dismiss or, in the alternative, resolve the petitions in CA-G.R. SP No. 90328 and CA-G.R. SP No. 90984. In its Decision168 dated March 21, 2007, the CA dismissed De Leons petition in CAG.R. SP No. 90984 on the ground of forum shopping. Subsequently, on November 21, 2007, the CA also dismissed De Leons petition in CAG.R. SP No. 90328 holding that an earlier decision promulgated by the Supreme Court, finding the subject property to be public and that De Leon has no title and no clear legal

164

165

166

167

168

355

right over the disputed lot, has already attained finality. 169 De Leon filed a Motion for Reconsideration, but the CA denied it via its Resolution170 dated March 4, 2008. Thereafter, PEA filed an Urgent Motion to Resolve (Re: Very Urgent Motion for Issuance of Writ of Demolition).171 On December 28, 2007, the RTC issued an Order 172 holding in abeyance the resolution of PEAs Motion pending receipt by the trial court of the entry of judgment pertaining to CA-G.R. SP No. 90328. PEA filed a Motion for Reconsideration. 173 In its Order dated March 4, 2008, the RTC issued an Order denying PEAs Motion for Reconsideration. On April 23, 2008, De Leon filed the present petition for review on certiorari, docketed as G.R. No. 181970, assailing the November 21, 2007 Decision of the CA. Subsequently, on May 15, 2008, PEA, on the other hand, filed the instant special civil action for certiorari, docketed as G.R. No. 182678, questioning the Orders of the RTC of Makati City, dated December 28, 2007 and March 4, 2008.

169

170

171

172

173

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In G.R. No. 181970, De Leon questions the Decision of the CA on the following grounds: (a) he can only be removed from the subject land through ejectment proceedings; (b) the Decision of this Court in G.R. No. 112172 merely ordered the dismissal of De Leons complaint for damages in Civil Case No. 93-143; and (c) even though petitioner is not the owner and has no title to the subject land, mere prior possession is only required for the establishment of his right. In G.R. No. 182678, the sole issue raised is whether respondent judge committed grave abuse of discretion in issuing the assailed Orders which held in abeyance the resolution of PEAs Motion for the Issuance of a Writ of Demolition. On February 25, 2009, PEA and the City of Paraaque filed a Joint Motion for Substitution stating that PEA had transferred its ownership and ceded its interests over the subject property to the City of Paraaque as full payment for all of the formers real property tax liabilities. As a consequence, the movants prayed that PEA be substituted by the City of Paraaque as petitioner in G.R. No. 182678 and respondent in G.R. No. 181970. 174 In a Resolution175 dated on October 14, 2009, this Court granted the Motion for Substitution filed by PEA and the City of Paraaque. The issues raised in the present petitions boil down to the question of whether PEA is really entitled to possess the subject property and, if answered in the affirmative, whether the RTC should proceed to hear PEAs Motion for the Issuance of a Writ of Demolition. The Court rules for PEA. 174

175

357

The question of ownership and rightful possession of the subject property had already been settled and laid to rest in this Courts Decision dated November 20, 2000 in G.R. No. 112172 entitled, Public Estates Authority v. Court of Appeals (PEA v. CA).176 In the said case, the Court ruled thus: The issue raised is whether respondent and his brothers and sisters were lawful owners and possessors of Lot 5155 by mere claim of ownership by possession for a period of at least fifty (50) years. The Court of Appeals ruled that respondent Bernardo de Leon and his brothers and sisters were lawful owners and possessors of Lot 5155 entitled to protection by injunction against anyone disturbing their peaceful possession of said Lot. The ruling is erroneous. An applicant seeking to establish ownership of land must conclusively show that he is the owner in fee simple, for the standing presumption is that all lands belong to the public domain of the State, unless acquired from the Government either by purchase or by grant, except lands possessed by an occupant and his predecessors since time immemorial, for such possession would justify the presumption that the land had never been part of the public domain, or that it had been private property even before the Spanish conquest. In this case, the land in question is admittedly public. The respondent Bernardo de Leon has no title thereto at all. His claim of ownership is based on mere possession by himself and his predecessors-in-interests, who claim to have been in open, continuous, exclusive and notorious possession of the land in question, under a bona fide claim of ownership for a period of at least fifty (50) years. However, the survey plan for the land was approved only in 1992, and respondent paid the realty taxes thereon on October 30, 1992, shortly before the filing of the suit below for damages with injunction. Hence, respondent must be deemed to begin asserting his adverse claim to Lot 5155 only in 1992. More, Lot 5155 was certified as alienable and disposable on March 27, 1972, per certificate of the Department of Environment and Natural Resources. It is obvious that respondents possession has not ripened into ownership. xxxx 176

358

Consequently, respondent De Leon has no clear legal right to the lot in question, and a writ of injunction will not lie to protect such nebulous right of possession. x x x177 The Court does not subscribe to De Leons argument that the issues of ownership and possession of the subject lot should not have been taken up by the court on the ground that his complaint is only for damages. De Leon must be aware that his action for damages is anchored on his claim that he owns and possesses the subject property. 178 On this basis, it would be inevitable for the court to discuss the issues of whether he, in fact, owns the disputed property and, as such, has the right to possess the same. Moreover, it is clear from this Courts Decision in PEA v. CA that the main issue resolved therein was whether respondent [De Leon] and his brothers and sisters were the lawful owners and possessors of Lot 5155 by mere claim of ownership by possession for a period of at least fifty (50) years. De Leon insists that what this Court did in PEA v. CA was to simply dismiss his complaint for damages and nothing more, and that the RTC erred and committed grave abuse of discretion in issuing a writ of execution placing PEA in possession of the disputed property. He insists that he can only be removed from the disputed property through an ejectment proceeding. The Court is not persuaded. As a general rule, a writ of execution should conform to the dispositive portion of the decision to be executed; an execution is void if it is in excess of and beyond the original judgment or award.179 The settled general principle is that a writ of execution must 177

178

179 359

conform strictly to every essential particular of the judgment promulgated, and may not vary the terms of the judgment it seeks to enforce, nor may it go beyond the terms of the judgment sought to be executed.180 However, it is equally settled that possession is an essential attribute of ownership.181 Where the ownership of a parcel of land was decreed in the judgment, the delivery of the possession of the land should be considered included in the decision, it appearing that the defeated partys claim to the possession thereof is based on his claim of ownership.182 Furthermore, adjudication of ownership would include the delivery of possession if the defeated party has not shown any right to possess the land independently of his claim of ownership which was rejected. 183 This is precisely what happened in the present case. This Court had already declared the disputed property as owned by the State and that De Leon does not have any right to possess the land independent of his claim of ownership. In addition, a judgment for the delivery or restitution of property is essentially an order to place the prevailing party in possession of the property. 184 If the defendant refuses to surrender possession of the property to the prevailing party, the sheriff or other proper

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officer should oust him.185 No express order to this effect needs to be stated in the decision; nor is a categorical statement needed in the decision that in such event the sheriff or other proper officer shall have the authority to remove the improvements on the property if the defendant fails to do so within a reasonable period of time. 186 The removal of the improvements on the land under these circumstances is deemed read into the decision, subject only to the issuance of a special order by the court for the removal of the improvements.187 It bears stressing that a judgment is not confined to what appears upon the face of the decision, but also those necessarily included therein or necessary thereto. 188 In the present case, it would be redundant for PEA to go back to court and file an ejectment case simply to establish its right to possess the subject property. Contrary to De Leons claims, the issuance of the writ of execution by the trial court did not constitute an unwarranted modification of this Courts decision in PEA v. CA, but rather, was a necessary complement thereto. Such writ was but an essential consequence of this Courts ruling affirming the nature of the subject parcel of land as public and at the same time dismissing De Leons claims of ownership and possession. To further require PEA to file an ejectment suit to oust de Leon and his siblings from the disputed property would, in effect, amount to encouraging multiplicity of suits. De Leon also contends that there was never any government infrastructure project in the subject land, much less a Manila-Cavite Coastal Road traversing it, at any time ever 185

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since, until now and that allegations of a government project in the subject land and of such Road traversing the subject land have been downright falsities and lies and mere concoctions of respondent PEA. 189 However, this Court has already ruled in PEA v. CA that it is not disputed that there is a government infrastructure project in progress traversing Lot 5155, which has been enjoined by the writ of injunction issued by the trial court. In any case, De Leons argument that there was no government infrastructure project in the subject property begs the issue of ownership and rightful possession. The subject lot was properly identified. There is no dispute as to its exact location. Hence, whether or not there is a government project existing within the premises or that which traverses it is not relevant to the issue of whether petitioner is the owner of the disputed lot and, therefore, has legal possession thereof. As to whether or not the RTC committed grave abuse of discretion in holding in abeyance the resolution of PEAs Motion for the Issuance of a Writ of Demolition, Section 7,190 Rule 65 of the Rules of Court provides the general rule that the mere pendency of a special civil action for certiorari commenced in relation to a case pending before a lower court or court of origin does not stay the proceedings therein in the absence of a writ of preliminary injunction or temporary restraining order. It is true that there are instances where, even if there is no writ of preliminary injunction or temporary restraining order issued by a higher court, it would be proper for a lower court or court of origin to suspend its proceedings on the precept of judicial courtesy. 191 The principle of judicial courtesy, however, remains to be the exception rather than the rule. As held by this Court in Go v.

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Abrogar,192 the precept of judicial courtesy should not be applied indiscriminately and haphazardly if we are to maintain the relevance of Section 7, Rule 65 of the Rules of Court. Indeed, in the amendments introduced by A.M. No. 07-7-12-SC, a new paragraph is now added to Section 7, Rule 65, which provides as follows: The public respondent shall proceed with the principal case within ten (10) days from the filing of a petition for certiorari with a higher court or tribunal, absent a temporary restraining order or a preliminary injunction, or upon its expiration. Failure of the public respondent to proceed with the principal case may be a ground for an administrative charge.

While the above quoted amendment may not be applied in the instant case, as A.M. No. 07-7-12-SC was made effective only on December 27, 2007, the provisions of the amendatory rule clearly underscores the urgency of proceeding with the principal case in the absence of a temporary restraining order or a preliminary injunction.

This urgency is even more pronounced in the present case, considering that this Courts judgment in PEA v. CA, finding that De Leon does not own the subject property and is not entitled to its possession, had long become final and executory. As a consequence, the writ of execution, as well as the writ of demolition, should be issued as a matter of course, in the absence of any order restraining their issuance. In fact, the writ of demolition is merely an ancillary process to carry out the Order previously made by the RTC for the execution of this Courts decision in PEA v. CA. It is a logical consequence of the writ of execution earlier issued.

192

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Neither can De Leon argue that he stands to sustain irreparable damage. The Court had already determined with finality that he is not the owner of the disputed property and that he has no right to possess the same independent of his claim of ownership. Furthermore, the Order of the RTC holding in abeyance the resolution of PEAs Motion for the Issuance of a Writ of Demolition also appears to be a circumvention of the provisions of Section 5, Rule 58 of the Rules of Court, which limit the period of effectivity of restraining orders issued by the courts. In fact, the assailed Orders of the RTC have even become more potent than a TRO issued by the CA because, under the Rules of Court, a TRO issued by the CA is effective only for sixty days. In the present case, even in the absence of a TRO issued by a higher court, the RTC, in effectf, directed the maintenance of the status quo by issuing its assailed Orders. Worse, the effectivity of the said Orders was made to last for an indefinite period because the resolution of PEAs Motion for the Issuance of a Writ of Demolition was made to depend upon the finality of the judgment in G.R. No. 181970. Based on the foregoing, the Court finds that the RTC committed grave abuse of discretion in issuing the assailed Orders dated December 28, 2007 and March 4, 2008. Finally, the Court reminds the De Leon that it does not allow the piecemeal interpretation of its Decisions as a means to advance his case. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and read in this context, but the same must be considered in its entirety. 193 Read in this manner, PEAs right to possession of the subject property, as well as the removal of the improvements or structures existing thereon, fully follows after considering the entirety of the Courts decision in PEA v. CA. This is consistent with the provisions of Section 10, paragraphs (c) and (d), Rule 39 of the Rules of Court, which provide for the procedure for execution of judgments for specific acts, to wit: SECTION 10. Execution of judgments for specific act. 193

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xxxx (c) Delivery or restitution of real property. - The officer shall demand of the person against whom the judgment for the delivery or restitution of real property is rendered and all persons claiming rights under him to peaceably vacate the property within the three (3) working days, and restore possession thereof to the judgment obligee; otherwise, the officer shall oust all such persons therefrom with the assistance, if necessary, of appropriate peace officers, and employing such means as may be reasonably necessary to retake possession, and place the judgment obligee in possession of such property. Any costs, damages, rents or profits awarded by the judgment shall be satisfied in the same manner as a judgment for money. (d) Removal of improvements on property subject of execution. - When the property subject of execution contains improvements constructed or planted by the judgment obligor or his agent, the officer shall not destroy, demolish or remove said improvements, except upon special order of the court, issued upon motion of the judgment obligee after due hearing and after the former has failed to remove the same within a reasonable time fixed by the court. As a final note, it bears to point out that this case has been dragging for more than 15 years and the execution of this Courts judgment in PEA v. CA has been delayed for almost ten years now simply because De Leon filed a frivolous appeal against the RTCs order of execution based on arguments that cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of the final judgment in its favor. The Court agrees with the Office of the Solicitor General in its contention that every litigation must come to an end once a judgment becomes final, executory and unappealable. Just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment, which is the life of the law. 194 To frustrate it by dilatory schemes on the part of the losing party is to frustrate all the efforts, time and expenditure of the courts. 195 It is in the interest of justice that this Court should write finis to this litigation. 194

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WHEREFORE, the Court disposes and orders the following: The petition for review on certiorari in G.R. No. 181970 is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 90328 dated November 21, 2007 and March 4, 2008, respectively, are AFFIRMED. The petition for certiorari in G.R. No. 182678 is GRANTED. The assailed Orders of the Regional Trial Court of Makati City, Branch 135, dated December 28, 2007 and March 4, 2008, are ANNULLED and SET ASIDE. The Regional Trial Court of Makati is hereby DIRECTED to hear and resolve PEAs Motion for the Issuance of a Writ of Demolition with utmost dispatch. This Decision is IMMEDIATELY EXECUTORY. The Clerk of Court is DIRECTED to remand the records of the case to the court of origin. SO ORDERED.

13. MALAYAN INTEGRATED INDUSTRIES, CORPORATION, petitioner, vs. THE HON. COURT OF APPEALS, CITY OF MANDAUE, MAYOR ALFREDO M. OUANO, VICE-MAYOR PATERNO P. CANETE, SANGGUNIANG PANLUNGSOD MEMBERS MANUEL M. MASANGKAY, NOEL C. SOON, CESAR CABAHUG, JR., RAYMUNDO A. CENIZA, CYNTHIA S. BLANCO, PONTICO E. FORTUNA, RAFAEL J. MAYOL and PAULINO P. DY, F.F. CRUZ & CO., INC., CEBU CONTRACTORS ASSOCIATION, MANDAUE REALTY & RESOURCES CORPORATION and PHILIPPINE ORION PROPERTIES, INC., respondents. G.R. No. 101469 | 1992-09-04 E

C

GRIAÃ ¡'O-AQUINO,

I

S

I

O

N

J.: 366

In this special civil action of certiorari and prohibition, Malayan Integrated Industries Corporation (hereafter MALAYAN) prays that upon the filing of its verified petition, a restraining order or a writ of preliminary injunction be issued by this Court to stop the respondents from further proceeding in CA-G.R. SP No. 25621 and, after a consideration of the merits of the petition, judgment be rendered annulling the appellate court's resolutions dated August 9, 1991 and August 28, 1991, and the writ of preliminary injunction issued by it on August 29, 1991. The only issue in this case is whether the Court of Appeals exceeded its jurisdiction, or acted with grave abuse of discretion, in issuing a writ of preliminary injunction in CA-G.R. SP No. 25621 entitled, "The City of Mandaue, et al. vs. Hon. Leonardo B. Canñ ares and Malayan Integrated Industries Corporation," "enjoining the respondents and anyone acting in their place and stead, from enforcing the Orders of December 18, 1990 and June 28, 1991 in Civil Case No. CEB-9658 until further orders . . ." (p. 1239, Rollo, Vol. II). This is a simple case which has been made to appear complicated by the over-extended pleadings of the parties. The petition and its annexes consist of 1,273 pages. The respondents are not to be outdone with their comments of 395 pages. Running true to form, the petitioner filed a reply of 307 pages. The pleadings comprise 3 volumes, each several inches thick. Such profligacy with words is hard to match. Counsels on both sides should heed the admonition of Justice Isagani A. Cruz that: "Counsel should remember that they do a disservice to the administration of justice and contribute to its delay by imposing on the time of the courts with irrelevant discussions that only clutter the record." (Arturo E. Edudela, et al. vs. Hon. Court of Appeals, et al., G.R. No. 89265, July 17, 1992.) The records show that on December 12, 1977, a reclamation contract was signed between the City of Mandaue and MALAYAN for the reclamation of some 180 (later increased to 360) hectares of offshore and foreshore land and their development into an industrial and trading center with a modern harbor and port facilities for both domestic and international commerce. The area would connect Cebu City harbor with the City of Mandaue from the Cabahug coastway up to the Cebu City Mandaue boundary. The project was supposed to be completed within four (4) years after approval of the contract by the Office of the President.

However, that transaction appeared to be unauthorized under P.D. No. 3-A dated January 11, 1973 which provides that the reclamation of areas under water, whether foreshore or inland, will be done only by the national government or any person authorized by it with a proper contract. Moreover, Executive Order No. 525 of President Marcos designated the Public Estates 367

Authority (PEA) as "the central authority primarily responsible for integrating, directing and coordinating all reclamation projects for and in behalf of the National Government. "Acting Minister of Justice Catalino Macaraig, Jr., in his Opinion No. 70, Series of 1979 dated July 16, 1979, opined that P.D. No. 3-A impliedly withdrew or repealed the right of Mandaue City under its charter (Sec. 94, R.A. 5519) to reclaim its submerged or foreshore lands. He added, however, that "if the PEA decides to authorize the City of Mandaue to reclaim its own foreshore, the former may execute a contract with the latter pursuant to the above-scored provision of Executive Order No. 3-A in connection with Sec. 1, of P.D. No. 3-A, . . ." (p. 332, Rollo, Vol. I). Accordingly, the Sangguniang Panlungsod of Mandaue, in its session of October 12, 1979, passed Resolution No. 116 authorizing the City Mayor to sign a Memorandum of Understanding with the PEA. Its Resolution No. 117 of the same date authorized the City Mayor to enter into a contract with the PEA for the reclamation of 360 hectares, more or less, of the foreshore and submerged lands of Mandaue City. On November 26, 1979, the City of Mandaue and MALAYAN signed a Confirmatory Agreement whereby MALAYAN bound itself to undertake and prepare at its own expense, the detailed and integrated development plan on land use, including technical, economic, marketing and financial feasibility studies required by the Office of the President, and to submit the completed study "not later than July 31, 1980" (p. 344, Rollo, Vol. I). On August 13, 1980, MALAYAN submitted to PEA documents relating to the Metro Cebu Reclamation and Development Project. Two days later, or on August 15, 1980, MALAYAN submitted a detailed land use and development strategy and an overview of the project. On September 29, 1980, PEA Chairman, Ruben Ancheta, recommended approval of the project. Although President Marcos "approved in principle" the reclamation and development project, the contract of reclamation and development between the City of Mandaue and MALAYAN remained hanging in the air (p. 338, Rollo, Vol. I). After the 1986 "People Power" Revolution, the project was resubmitted to President Corazon C. Aquino for approval. On June 13, 1988, the City of Mandaue reiterated its request to President Aquino "for approval and go signal to commence the reclamation work" (p. 417, Rollo, Vol. I). The letter was referred by the President to PEA. As of May 24, 1989, the detailed and integrated plan on land use, including technical, 368

economic, marketing and financial feasibility studies submitted by MALAYAN remained "still pending approval by the Office of the President." (p. 441, Rollo, Vol. I.). On February 13, 1989, PEA's General Manager, Eduardo C. Zialcita, advised MALAYAN that the feasibility study should be updated. Since the Office of the President seemed to have reservations concerning the contract between MALAYAN and the City of Mandaue, and in view of the City's desire to undertake the reclamation project without further delay, City Mayor Alfredo M. Ouano informed the PEA on April 15, 1989 that the City was negotiating with F.F. Cruz & Co., Inc., in consortium with the Cebu Contractors Association, to undertake the preparation of the detailed feasibility and development plan for the reclamation project. Mayor Ouano pointed out that F.F. Cruz & Co., Inc. is a reputable private construction firm in Manila, "with international prestige and proven capability as a reclamation contractor with its own dredging equipment and the financial capacity to undertake, on its own, the Mandaue reclamation project" (p. 483, Rollo, Vol. I). On April 19, 1989, the Sangguniang Panlungsod of Mandaue passed Resolution No. 134/89 authorizing the City Mayor to enter into a reclamation contract with F.F. Cruz & Co., Inc. subject to the President's approval. The contract with F.F. Cruz & Co., Inc. was signed a week later, on April 26, 1989. Upon learning about the City's contract with F.F. Cruz & Co., Inc., MALAYAN inquired from the Office of the President whether Section 7 of R.A. 5519, known as the Charter of the City of Mandaue, providing that the City alone shall have authority to reclaim its offshore land, had been repealed, revoked, amended or superseded by Section 1 of P.D. No. 3-A, promulgated on January 11, 1973, and Section 1 of E.O. No. 525 dated February 14, 1979. The query was answered in the affirmative on August 31, 1989 by the Chief State Counsel, Elmer T. Bautista, citing Justice Secretary Macaraig's Opinion No. 70, S. 1979, "which opinion still stands" (p. 498, Rollo, Vol. I). On May 6, 1989, the PEA recommended the approval in principle of the proposed reclamation project subject to the following conditions: "(a) Submission to PEA by the City of Mandaue, for review and approval a Master Development Plan for the planned reclamation, within six (6) months from date hereof, otherwise project approval shall be deemed automatically revoked. "(b) Undertaking of Detailed Engineering Studies for the major physical infrastructures involved. 369

"(c) Supervision by PEA of the reclamation and related infrastructure works and the cost of such supervision to be charged to the Project. "(d) Delegation of authority to Mandaue City to negotiate with a reputable Contractor that shall undertake physical reclamation works under a proper contract, which shall contain stipulations on the compensation, costs of the project and other relevant conditions subject to the review and approval of the Public Estates Authority as provided under existing laws. "(e) That the previous approval in principle granted to Malayan Integrated Industries Corporation for a similar reclamation project, jointly with the Province of Cebu, City of Cebu, City of Mandaue, Municipality of Cordova and the City of Lapu-Lapu, by former President Marcos be deemed abandoned, and set aside, by reason of the failure of Malayan Integrated Industries Corporation to execute/implement the project for a long period of time reckoned from 1979 to the present. Moreover, there appears to be a lack of indorsement by the local government of Cebu Province and Mandaue City of this undertaking by Malayan Integrated Industries Corporation." (Emphasis ours; pp. 530-531, Rollo, Vol. I.). MALAYAN filed a protest with the Office of the President against the reclamation contract between the City of Mandaue and F.F. Cruz & Co. (pp. 542-545, Rollo, Vol. I). On PEA's recommendation, Executive Secretary Catalino Macaraig, Jr., by authority of the President, approved on June 27, 1989, the proposed Mandaue reclamation project, covering approximately 180 hectares of foreshore and submerged lands, subject to certain conditions, and declared that "the Contract of Reclamation and Development entered into by and between the City of Mandaue and Malayan Integrated Industries Corporation on December 12, 1977 is hereby DISAPPROVED, and/or is hereby declared as without force and effect, it appearing from the records that the same was entered in violation of the provisions of Section 1 of Presidential Decree No. 3-A, and/or for the failure of said corporation to implement, as stipulated, the project within a reasonable period of time." (pp. 583-584, Rollo, Vol. I; emphasis supplied.) On November 26, 1990, MALAYAN filed in the Regional Trial Court, Branch 10, Cebu City (originally in the Regional Trial Court, Manila but it withdrew the case) a petition for prohibitory and mandatory preliminary injunction against the City of Mandaue, F.F. Cruz & Co., Inc., the Cebu Contractors Association, the Mandaue Realty Resources Corporation and Philippine Orion Properties, Inc. The case was docketed as Civil Case No. CEB-9658 in which MALAYAN prayed the Court to restrain the implementation of the reclamation contract between the City of Mandaue and F.F. Cruz & Co., Inc. as it would work injustice to MALAYAN and violate MALAYAN's valid and previously perfected contract with the City of Mandaue, and it would cause damages to MALAYAN which has already incurred expenses 370

and invested huge sums of money in the Mandaue Reclamation Project. MALAYAN also prayed the Court to issue a writ of preliminary mandatory injunction allowing MALAYAN to immediately undertake actual reclamation works in the Mandaue Reclamation Project. On November 29, 1990, the trial court issued a temporary restraining order enjoining the respondents "from further continuing with the implementation of the aforementioned contract being questioned, until further orders from this Court" (p. 649, Rollo, Vol. I). An Urgent Motion to Quash the Restraining Order and a separate Motion to Dismiss the petition filed by the respondents did not prosper. After a proper hearing, Judge Leonardo B. Canñ ares granted on December 18, 1990 the writ of preliminary prohibitory injunction prayed for by MALAYAN upon its posting a P5 million injunction bond. The dispositive part of his order reads as follows: "WHEREFORE, upon the filing of an injunction bond with this Court amounting to P5,000,000.00, let a writ of preliminary prohibitory injunction be issued, enjoining all of the respondents, their assigns, agents, representatives or anybody acting for them or in their behalf from implementing the Contract of Reclamation dated April 26, 1989, executed by and between Mandaue City and respondents F.F. Cruz & Co., Inc. and Cebu Contractors Association and all other reclamation contracts executed in favor of said respondents and/or assigns by the City of Mandaue and/or Public Estates Authority, and from conducting any kind of works in any part of the area covered by the Mandaue, Reclamation Project. "The motions to dismiss and other incidents filed by the respondents are hereby denied for being premature." (pp. 677-678, Rollo, Vol. I.). After the respondents' motions for reconsideration were denied by the Court, they filed in the Court of Appeals on August 9, 1991, a petition for certiorari with prohibitory and mandatory preliminary restraining order and/or preliminary injunction (CA-G.R. SP No. 25621, entitled, "City of Mandaue, F.F. Cruz & Co., Inc., et al., petitioners vs. Judge Leonardo B. Canñ ares and Malayan Integrated Industries Corporation, respondents" praying that the preliminary writ of injunction issued by Judge Canñ ares be nullified, that respondent MALAYAN be prohibited from interfering with the reclamation works of the petitioners, City of Mandaue and F.F. Cruz; that respondents Judge Canñ ares and MALAYAN be restrained from enforcing the orders dated December 19, 1990 and June 28, 1991 of respondent Judge; that the petition of MALAYAN in the Case No. CEB-9658 be dismissed; and that MALAYAN be prohibited from interfering with the contract of reclamation between the City of Mandaue and F.F. Cruz & Co., Inc., the Memorandum of Agreement between the PEA, the City of Mandaue and MARECO, and all other related contracts and activities concerning the Mandaue Reclamation Project. 371

The Court of Appeals issued on August 9, 1991 a temporary restraining order to preserve the status quo and enjoined the respondents and anyone acting in their place from enforcing Judge Canñ ares' orders of December 19, 1990 and June 28, 1991, until further orders from said court. On August 28, 1991, the Court of Appeals issued a writ of preliminary injunction upon a P10,000,000.00 bond posted by F.F. Cruz & Co., Inc. Upon the denial of its motion for reconsideration of the appellate court's resolution, MALAYAN filed a petition for certiorari and prohibition in this Court to annul it. After a careful consideration of the voluminous petition and the equally voluminous responses of the public and private respondents, the Court finds that the Court of Appeals did not abuse its discretion in stopping Judge Canñ ares and MALAYAN from interfering with the prosecution of the Mandaue reclamation project by respondents F.F. Cruz & Co., Inc. and its associates, the Cebu Contractors Association, Mandaue Realty Resources Corporation and Philippine Orion Properties, Inc. In the first place, as explained in the Appellate Court's resolution, the contract between the City of Mandaue and F.F. Cruz & Co., Inc., et al. "had been approved by the Office of the President," while the reclamation contract with MALAYAN "was disapproved" (pp. 12361237, Rollo, Vol. II). ". . . the Mandaue Reclamation Project, subject of the contract between the Mandaue local government and private petitioners, has been approved by the Office of the President of the Philippines (Annex 'M' of the Petition). In the same official document, the 'Contract of Reclamation and Development' entered into by and between the City of Mandaue and private respondent Malayan Integrated Industries Corporation on December 12, 1977 was disapproved. And pursuant to the approved reclamation project and the contract entered into by and between them, petitioners undertook the reclamation of foreshore and submerged lands from the Cabahug Causeway in Mandaue City towards the boundary with Cebu City. In the course thereof at least a total of 23.4710 hectares of said lands have been reclaimed by private petitioners after spending the sum of P181,476,690.59 as of December 31, 1990." (Emphasis supplied.) Secondly, Judge Canñ ares' writ of preliminary prohibitory injunction, halting the prosecution of the Mandaue reclamation project, violated P.D. No. 1818 which prohibits courts from issuing such writ to stop any person, entity, or government official, from proceeding with or continuing the execution or implementation of an infrastructure project, such as the reclamation of foreshore and submerged lands along the coast of Mandaue City up to the Cebu City boundary for the purpose of developing the reclaimed area into an industrial and 372

trading center with a modern harbor and port facilities for both domestic and international commerce. P.D. No. 1818 provides: "P.D. 1818 Prohibiting courts from issuing restraining orders or preliminary injunctions in cases involving infrastructure and natural resource development projects of, and public utilities operated by, the Government. "WHEREAS, Presidential Decree No. 605 prohibits the issuance by the courts of restraining orders or injunctions in cases involving concessions, licenses, and other permits issued by administrative officials or bodies for the exploitation, development and utilization of natural resources of the country; "WHEREAS, it is in the public interest to adopt a similar prohibition against the issuance of such restraining orders or injunctions in other areas of activity equally critical to the economic development effort of the nation, in order not to disrupt or hamper the pursuit of essential government projects; "NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order as follows: "SECTION 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project, or a mining, fishery, forest or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation." The Court of Appeals further observed that "in the balance of inconveniences the petitioners appear to stand to suffer grave and irreparable injury, and much more damages than MIIC (MALAYAN) which has not done any reclamation works on the area subject of the dispute." (p. 1239, Rollo, Vol. II.). Although the letter to the PEA advising it of the approval of the reclamation contract between the City of Mandaue and F.F. Cruz & Co., Inc. and the disapproval of the earlier agreement between the City of Mandaue and MALAYAN, was signed by the Executive Secretary, "by authority of the President," and not by the President's own hand, the Executive Secretary's action is presumed to be valid and to have been regularly performed in behalf of the President (Section 2[m], Rule 131, Revised Rules on Evidence) and thus should be accorded due respect (Lacson-Magallanes vs. Panñ o, 129 Phil. 123; GSIS vs. CIR, 373

December 30, 1961; Soriano vs. Ancheta, March 18, 1985; Rogue vs. Director of Lands, July 1, 1976). As head of the Executive Office, the Executive Secretary, is an alter ego of the President (Sec. 22, Chap. 8, Title II, Book II, 1987 E.O. 292, Adm. Code of 1987). One of his myriad functions is "to exercise primary authority to sign papers `By authority of the President,' attest executive orders and other presidential issuances unless attestation is specifically delegated to other officials by him or by the President; assist the President in the administration of special projects; and perform such other functions as the President may direct" (Sec. 22, subpars. 10, 14 and 18, Ibid). Paraphrasing Villena vs. Secretary of the Interior, 67 Phils. 451, his personality is in reality "but the projection of that of the President," his acts, "performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief Executive." The approval by the Office of the President of the reclamation contract in favor of F.F. Cruz & Co., Inc. and the rejection of the contract with MALAYAN, is not subject to review by the courts in view of the principle of separation of powers which accords coequal status to the three great branches of the government, absent any showing that the President, in doing so, acted with grave abuse of discretion amounting to lack or excess of jurisdiction (Sec. 1, Art. VIII, 1987 Constitution). Only on that ground may this Court justifiably intervene in a transaction that otherwise would be the exclusive preserve of the Chief Executive. In fact, while MALAYAN has asked the courts to nullify the reclamation contract between the City of Mandaue and F.F. Cruz & Co., Inc., it did not assail the Office of the President for having approved it. Its petition for prohibitory and mandatory injunction in the Regional Trial Court of Cebu City (CEB-9658), did not implead, as respondents, nor charge with grave abuse of discretion, the President of the Philippines, Executive Secretary Catalino Macaraig, Jr., Deputy Executive Secretary Magdangal Elma, Jr., and PEA General Manager Eduardo Zialcita, for having approved, or recommended the approval, by the President, of the said reclamation contract with F.F. Cruz & Co., Inc. and the disapproval of the prior agreement between the City of Mandaue and MALAYAN. WHEREFORE, finding no grave abuse of discretion in the assailed resolution dated August 28, 1991 of the Court of Appeals in CA-G.R. SP No. 25621, the petition for certiorari and prohibition is DENIED for lack of merit. Costs against the petitioner. SO ORDERED.

14. [G.R. No. 124130. June 29, 1998]

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GOVERNOR PABLO P. GARCIA, THE PROVINCE OF CEBU; TOMAS R. OSMEA; MAYOR ALVIN B. GARCIA, THE CITY OF CEBU; ALLAN C. GAVIOLA, City Administrator; JOSE A. GUISADIO, City Planning and Development Officer; METRO CEBU DEVELOPMENT PROJECT OFFICE; BASHIR D. RASUMAN, Regional Director, Department of Public Works and Highways (DPWH), Region VII; ROMEO C. ESCANDOR, Regional Director, National Economic and Development Board (NEDA), Region VII; and LANDBANK OF THE PHILIPPINES, petitioners, vs. HON. JOSE P. BURGOS in his capacity as presiding judge of the Regional Trial Court, Branch 17, Cebu City; and MALAYAN INTEGRATED INDUSTRIES CORPORATION, respondents. DECISION PANGANIBAN, J.: Presidential Decree 1818 prohibits courts from issuing an injunction against any infrastructure project, such as the Cebu South Reclamation Project, in order not to disrupt or hamper the pursuit of essential government projects or frustrate the economic development effort of the nation. This Court will not tolerate a violation of this prohibition. Statement of the Case

Petitioners, through Rule 65 of the Rules of Court, assail the validity of three Orders of Judge Jose P. Burgos of the Regional Trial Court of Cebu. xxi The first assailed Order, dated February 22, 1996, denied herein Petitioner Tomas R. Osmeas Omnibus Motion with Opposition to the Application for Writ of Preliminary Injunction, which prayed that said application be cancelled or its hearing deferred, and that the temporary restraining order already issued in favor of herein private respondent be lifted.xxii The respondent judges previous voluntary inhibition was set aside by the second assailed Order dated March 12, 1996, which reads as follows: WHEREFORE, premises considered, the motion for reconsideration is granted and accordingly, the order of the Presiding Judge in voluntarily inhibiting himself from further sitting in the case dated February 26, 1996 is reconsidered and set aside. Set this case for another hearing on the application for preliminary injunction on March 15, 1996 at 10 oclock in the morning whereby defendants are ordered to show cause if any they have why the injunction should not be granted. SO ORDERED.xxiii Meanwhile, the preliminary injunction sought by herein private respondent was granted by respondent judge who, in his third assailed Order dated March 18, 1996, ruled in this wise: 375

WHEREFORE, premises considered, and in order to preserve the status quo, upon the filing of an injunction bond with this Court in the amount of Two Million (P2,000,000.00) Pesos, let a writ of preliminary injunction be issued, hereby enjoining all the defendants, their assigns, agents and representatives or anyone acting for any or all of them or in their behalf from implementing the memorandum of agreement dated September 11, 1995, attached and marked as Annex V in the original complaint dated January 18, 1996, except the construction of the Cebu South Coastal Road, and all other agreements/contracts of defendants concerning the Cebu South Reclamation Project tending to deprive plaintiff of its prior contractual rights in the said Cebu South Reclamation Project until further orders from this Court. The amount of the required bond shall answer for all damages that the defendants may sustain by reason of the injunction should the Court finally decide that plaintiff was not entitled thereto. SO ORDERED.xxiv The Facts

In their pleadings, the parties tried their best to give detailed accounts of the factual antecedents of this case. In fairness to them, the Court hereby reproduces in toto their respective narrations. Petitioners Version

A. The Project 1. The Cebu South Reclamation Project (hereinafter referred to as the PROJECT) is a FOUR BILLION PESO (P4,000,000,000.00) project of the Government of the Republic of the Philippines (hereinafter referred to as the GOVERNMENT), funded out of a loan taken out by the government from the Government of Japan, through its international financing institution, the Overseas Economic Cooperation Fund (hereinafter referred to as the OECF). 2. The loan was made possible by virtue of an Exchange of Notes between the Governments of the Republic of the Philippines and Japan, whereby the latter extended a total loan package of ONE HUNDRED BILLION NINE HUNDRED SIXTYFOUR MILLION YEN (Y101,964,000,000.00) [sic] to finance certain specified and listed projects of the former. Among these projects to be financed by the loan is the Cebu South Reclamation Project. (Refer to Annex E- Petition) 3. The project is an integral part of the Third Phase of the Metro Cebu Development Projects (hereinafter referred to as MCDP III), which has been favorably endorsed and approved by the President of the Republic of the 376

Philippines, Fidel V. Ramos, as one of the projects of the national government. (Refer to Annex F- Petition) 4. The project has likewise been approved by the National Economic and Development Board (the NEDA), of which the President is the Chairman, as an ICC Project, by virtue of NEDA Resolution No. 1, Series of 1995. (Refer to Annex GPetition) 5. The project is further certified as a project of the Government of the Republic of the Philippines, by the Department of Foreign [Affairs], through its Secretary, Domingo E. Siazon. (Refer to Annex H- Petition) 6. In due course, loan agreements in implementation of the Exchange of Notes between the two governments were executed between the OECF and [P]etitioner Land Bank of the Philippines (the LANDBANK). Under these agreements, the City of Cebu was designated as the projects implementing agency. (Refer to Annex I- Petition) 7. In accordance with the Constitution, the loan package to finance, among others, the Cebu South Reclamation Project, was granted final approval by the Monetary Board, by virtue of Resolution No. 1260 issued on 07 November 1995. (Refer to Annex J- Petition) 8. The loan arrangements having been entered into, and the funds ready for release to the City of Cebu, the implementing agency of the project, the City of Cebu, the Department of Public Works and Highways (the DPWH) and the Metro Cebu Development Project Office (the MCDPO) executed, on 11 September 1995, the Implementing Arrangement for Metro Cebu Development Project Phase III (MCDP III) (Refer to Annex K - Petition), under which agreement is outlined the procedure for implementation of the project as well as the rights and obligations of the parties thereto. B. The Suit Filed Below by Private Respondent 9. On 19 January 1996, [P]rivate [R]espondent Malayan Integrated Industries Corporation (hereinafter referred to as MALAYAN), filed a case for Specific Performance, Declaration of Nullity, Damages and Injunction, with Writ of Preliminary Injunction and Temporary Restraining Order against herein petitioners, docketed as Civil Case No. CEB-18292, before the Regional Trial Court of Cebu City. (Refer to Annex L - Petition) The case was raffled to Branch 17 of the said court. 10. Pursuant to Supreme Court Administrative Circular No. 20-95, a summary hearing was conducted by respondent [j]udge to determine the propriety of issuing the temporary restraining order (TRO) prayed for by [R]espondent Malayan in its complaint. 11. During the summary hearing to determine whether the temporary restraining order (TRO) should issue, defendants questioned the jurisdiction of the court to issue the same, citing Section 1 of Presidential Decree No. 1818, which 377

provides: Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute,or controversy involving an infrastructure project, or a mining, fishery, forest, or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government officials from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation. (Sec. 1, P.D. 1818; emphasis supplied) 12. It was also pointed out to herein respondent [j]udge that the Supreme Court, in Administrative Circular 13-93, pursuant to P.D. 1818, and in implementation of the policy behind the law, prohibited all judges of all courts from issuing TROs and/or writs of preliminary injunction against the implementation of government infrastructure projects. 13. It was further manifested that the Supreme Court, observing noncompliance with the above-cited Circular by judges of trial courts was compelled to reiterate its earlier prohibition, with a warning against further violation, for their strict compliance, under Administrative Circular No. 68-94, issued on 3 November 1994, which states: There have been reports that despite Circular 13-93, dated March 5, 1993, some courts are still issuing temporary restraining orders and/or preliminary injunctions even in cases, disputes, or controversies involving government infrastructure projects in violation of Section 1 of P.D. 1818 x x x xxx

xxx

xxx

In order to obviate complaints against the indiscriminate issuance of restraining orders and court injunctions against government public utilities and infrastructure projects in gross violation of the aforesaid Presidential Decree, the provision of Circular No. 13-93 issued on March 5, 1993 is hereby reiterated for your strict compliance. xxx x x x x x x (Supreme Court Administrative Circular No. 68-94; emphasis supplied) 14. In gross violation of the law and the circulars of the Honorable Supreme Court, however, respondent [j]udge issued a temporary restraining order on 5 February 1996, the dispositive portion of which reads as follows: The verified complaint being sufficient in form and substance and in order to preserve the status quo, all the defendants and their agents, employees, workers 378

and all persons acting in their behalf are temporarily restrained from implementing the alleged memorandum of agreement dated September 11, 1995, and any and all such other agreements/contracts entered into by any and all of the defendants, covering the Cebu South Reclamation Project consisting of 330 hectares more or less (Refer to Annex M - Petition) 15. The hearing on [R]espondent Malayans application for the writ of preliminary injunction was set for 14 February 1996. During the said hearing, [P]etitioner Tomas R. Osmea filed an Omnibus Motion for: (a) the immediate lifting of the Temporary Restraining Order; (b) the cancellation of the hearing on the application for the writ of preliminary injunction; and (c) the outright dismissal of the complaint. The Omnibus Motion was subsequently adopted by the defendants below. (Refer to Annex N - Petition) 16. The thrust of the Omnibus Motion was that the court below had, under P.D. 1818, no jurisdiction and no compelling reason to issue any TRO and/or writ of preliminary injunction against the implementation of a government infrastructure project. Since it had no jurisdiction to issue such TRO and/or writ of preliminary injunction, much less does it have the jurisdiction to entertain any application for the injunctive writ. 17. The Omnibus Motion likewise refuted respondent [j]udges arguments in its Order dated 5 February 1996 granting the TRO, wherein he attempted to remove the case from the ambit of P.D. 1818 thus: (a) the ruling in Genaro R. Reyes Construction, Inc. v. Court of Appeals, 234 SCRA 116 applies to the case at bar; (b) plaintiff is not asking for enjoining the infrastructure project x x x [but] the enjoining of the contract to be awarded to another entity; (c) inclusion of reclamation of submerged lands as being covered under the term infrastructure project [is a] classification [that] has yet to be determined in the light of existing Presidential Proclamations, Orders and/or Executive Memorandums. 18. Respondent Judge -- apparently to verify whether the project was an infrastructure project of the national government -- required defendants below, petitioners herein, to show proof that the project had the approval of the President of the Republic of the Philippines. 19. In compliance with the order of respondent [j]udge, petitioners, during the continuation of the hearing on the Omnibus Motion, set on 16 February 1996, presented the documents mentioned above (Refer to Annexes D to J - Petition), proving that the project had the favorable recommendation and approval, not only of the President, but likewise of the NEDA, and certified as a project of the Government of the Republic of the Philippines by the Department of Foreign Affairs. Insofar as the loan agreements were concerned, the Exchange of Notes (Annex D) and the resolution of the Monetary Board (annex J) approving the loan agreement 379

were presented. All requirements for the implementation of a perfected contract are present and submitted to the court. 20. Following the presentation of the foregoing documents, respondent [j]udge gave the parties five (5) days to submit their respective memoranda on the Omnibus Motion, after which the incident would be deemed submitted for resolution. 21. On 21 February 1996, the parties filed their respective memoranda. As the memorandum for [R]espondent Malayan contained misstatements of the facts of the case, petitioner Tomas R. Osmea filed a Reply to Plaintiffs Memorandum at 9:00 oclock in the morning of the following day, 22 February 1996. 22. With unusual dispatch in a time frame of only a few hours, however, and under suspicious circumstances, in the afternoon of the same day, 22 February 1996, respondent [j]udge had issued an Order (Refer to Annex A - Petition), a quite comprehensive five-page resolution denying petitioners Omnibus Motion, received by petitioners on 23 February 1996. 23. Without having to consider the unusual haste with which the Order was issued -- considering that it was issued the day immediately after the last day for the filing of the memoranda, and on the day, and just hours after petitioner Osmeas Reply to Plaintiffs Memorandum was filed, the Order dated 22 February 1996 was highly irregular for the most obvious reasons. 24. A cursory review of the Order dated 22 February 1996 would reveal that it has practically decided the case on the merits, on a mere resolution of an incident in the main case. The Order denying the Omnibus Motion has practically ruled that: (a) [R]espondent Malayan has valid, existing and enforceable contracts of reclamation approved by the President of the Philippines; (b) petitioners reclamation project did not have the approval of the President; and (c) petitioners were violating [R]espondent Malayans contracts. These were precisely the issue[s] in the main case for specific performance. 24.1 It would be relevant to mention that in so ruling, respondent Judge practically considered evidence which were non-existent in favor of [R]espondent Malayan, and suppressed the evidence presented by petitioners. 25. [I]n view of the actions of respondent [j]udge, [P]etitioner Osmea filed, on 23 February 1996, an Omnibus Motion, praying, among other things, for the voluntary inhibition of respondent [j]udge on the ground of partiality manifested by the Order of 22 February 1996, which practically decided the case on the merits in favor of [R]espondent Malayan, in a resolution of a mere incident in the case. 26. In an Order dated 26 February 1996, respondent [j]udge voluntarily inhibited himself. (Refer to Annex O - Petition) 27. Respondent Malayan, however, filed a motion for reconsideration of the 380

Order of voluntary inhibition, to which petitioner Osmea filed an Opposition. 28. In the meantime, petitioner Osmea had filed a Motion for Reconsideration of the Order dated 22 February 1996 denying the Omnibus Motion, with the cautionary notice that it was not to be deemed as a waiver of their opposition to the motion for reconsideration filed by [R]espondent Malayan of respondent [j]udges Order of voluntary inhibition. Instead, the said Motion for Reconsideration with Cautionary Notice was to be heard by the court to which the case was to be eventually re-raffled, and scheduled for hearing on 22 March 1996. 29. On 12 March 1996, however, respondent [j]udge reversed himself and reconsidered his Order of voluntary inhibition dated 26 February 1996, and set the hearing on [R]espondent Malayans application for the writ of preliminary injunction for 15 March 1996. (Refer to Annex C - Petition) 30. Since the Motion for Reconsideration with Cautionary Notice was still pending resolution (and the hearing thereon yet to be conducted on 22 March 1996), petitioner filed an Urgent Motion for Resetting of the hearing, considering that the Motion for Reconsideration with Cautionary Notice -- which questioned the courts jurisdiction to entertain the application for the writ of preliminary injunction -- was prejudicial to the hearing set for 15 March 1996, since it would determine whether or not such proceedings should continue or not. 31. During the hearing on 15 March 1996, however, respondent [j]udge denied petitioner Osmeas Urgent Motion for Resetting. 32. Again, with unusual dispatch, on 18 March 1996, respondent [j]udge issued two (2) Orders, one granting the writ of preliminary injunction prayed for by [R]espondent Malayan (Refer to Annex B - Petition), and another one denying petitioners Motion for Reconsideration with Cautionary Notice -- both issued even before the hearing on the Motion for Reconsideration with Cautionary Notice which was yet scheduled for 22 March 1996. 33. Hence, this petition for certiorari, questioning: (a) the validity of the Orders of respondent [j]udge dated 22 February 1996 claiming it had the jurisdiction to entertain and to issue a writ of preliminary injunction against petitioners government infrastructure project, and the Order of 18 March 1996, granting the writ of preliminary injunction; and (b) the validity of the Order of respondent [j]udge dated 12 March 1996, reconsidering his earlier Order of voluntary inhibition, there being no other plain, speedy and adequate remedy in the ordinary course of law.xxv Private Respondents Version On May 22, 1967, Proclamation No. 200-A was issued which reserved for national improvement purposes, a certain parcel of land of the [p]ublic [d]omain situated in the foreshore of the District of San Nicolas, Pardo, Cebu City and Tangkey, Talisay, Cebu. This area was transferred and relinquished by the President of the Philippines to the Province of Cebu in behalf of the [n]ational [g]overnment, 381

subject to private rights, if any there be. Copy of said proclamation was attached as Annex 4 to respondents Comment. On January 11, 1973, Presidential Decree No. 3-A was issued which decreed that the reclamation of land under water, whether foreshore or inland, throughout the Philippines belong to and are owned by and limited to the [n]ational [g]overnment or to any person authorized by it under a proper contract. On October 14, 1977, pursuant to and in accordance with the above-said Proclamation No. 200-A and Sec. 1 of P.D. No. 3-A, the Sangguniang Panlalawigan of Cebu and the then Cebu Provincial Governor Eduardo R. Gullas granted, awarded and authorized private respondent to undertake the actual and physical reclamation and development works of the foreshore, submerged and offshore areas of Three Hundred Fifty (350) hectares, more or less, which is a portion of the approximate area of 5,386,800 square meters or 438.6800 hectares, as described in Proclamation No. 200-A. Copy of said Award was attached as Annex 5 to the Comment of respondents. On October 31, 1977, a Contract of Reclamation and Development was entered into, signed and executed by and between the Province of Cebu, represented by then Governor Eduardo R. Gullas, and private respondent. Copy of said Contract was attached as Annex 6 to the Comment. The said Contract of Reclamation and Development dated October 31, 1977 between Cebu Province and private respondent was authorized by Resolution No. 475 dated October 4, 1977 of the Sangguniang Bayan [sic] Panlalawigan of Cebu. On September 15, 1978, the Sangguniang Panlalawigan of Cebu and then Cebu Governor Eduardo R. Gullas considered and approved the request of private respondent dated August 25, 1978 that the reclamation area of 350 hectares, more or less be increased from 350 hectares to 625 hectares, more or less. Copy of said resolution was attached as Annex 7 to respondents Comment. On October 7, 1978, the Second Supplemental Contract of Reclamation and Development between the Province of Cebu and private respondent was entered into, signed and execu[t]ed by and between the Province of Cebu and private respondent. Copy of said contract was attached as Annex 8 to the respondents Comment. On January 15, 1979, a Contract of Reclamation and Port Development was entered into, executed and signed by and between private respondent and Amsterdam Ballast Dredging Corporation (BALLAST) in connection with and regarding the reclamation area of 625 hectares of the foreshore, submerged and offshore areas from Pasil, Cebu City, to Tangke, Talisay, Cebu to Kawit Island and then to Pasil, Cebu City. Copy of said contract was attached as Annex 9 to respondents Comment. On February 7, 1979, a Memorandum dated February 7, 1979 addressed to then President Marcos, was submitted by the Province of Cebu, represented and 382

signed by then Governor Eduardo R. Gullas, and the City of Mandaue, represented and signed by then City Mayor Demetrio M. Cortes for final consideration and approval. Copy of said memorandum was attached as Annex 10 to respondents Comment. When the Province of Cebu and the City of Mandaue submitted to the President the Cebu South Reclamation Project for approval per memorandum dated February 7, 1979, attached as Annex 10 to respondents Comment, it was premised on the following consideration as stated in the first paragraph of said memo: In our earnest desire to contribute our share to the program of Your Excellency and of our government on industrialization, industrial dispersal and regional development in the New Society, the Province of Cebu and the City of Mandaue have authorized, subject to your Excellencys reclamation of 625 and 360 hectares of foreshore and offshore lands in South Cebu from Pasil, Cebu City to Tangke, Talisay, Cebu by virtue of Presidential Proclamation No. 200-A, promulgated on May 22, 1967 (ANNEX B), which gives the Province of Cebu the authority to administer these areas within the City of Cebu, and, in Mandaue City, from Subangdaku to the Cabahug Coastways, by virtue of Sec. 94 of Republic Act No. 5519, which vests ownership and possession of all foreshore lands and submerged lands of the public domain in the City of Mandaue (ANNEX C), respectively, under contracts of Reclamation and Port Development with Malayan Integrated Industries Corporation, hereto attached as Annexes D and E, which we believe offer the most advantageous terms for the Province of Cebu, and City of Mandaue and the [n]ational [g]overnment because not a single centavo will be spent by the government in return for its share in the reclaimed areas and the operation of the international and domestic port facilities thereof, not to mention the socio-economic impact that the projects will create in the Visayas and Mindanao. (Emphasis ours) On August 13, 1979, the Cebu South Reclamation Project was presented by the Province of Cebu and Mandaue City, was considered and approved in principle by then President E. Marcos, as per Presidential Memorandum directive dated August 13, 1979 and a copy thereof is attached as Annex Q of the petition. Among the salient provisions of said presidential approval are: a. That within twelve (12) months after the issuance of [p]residential directive authorizing the Project, a detailed and integrated development plan on land use including technical, economic, marketing and financial feasibility studies be submitted to the President for approval, otherwise, project approval may be deemed automatically revoked; to enable the PEA to exercise its responsibilities as the representative of the [n]ational [g]overnment as landowner, the person or entity chosen by the contractor to undertake the detailed feasibility studies shall report directly to the PEA; x

x x 383

d. That Cebu City and Mandaue City shall enter into contract with Public Estates Authority for the reclamation project pursuant to E.O. 525. The PEA is authorized to determine the terms and conditions necessary for the implementation of the aforecited conditions including specification of the sharing scheme and other requirements of government entities on the reclaimed areas. Furthermore, the PEA is authorized to review, modify, and approve all contracts entered into or arising out of the reclamation project consistent with existing government regulations and national interests considerations. Finally, consideration of equity requires that option rights of first refusal for a period as may be determined by PEA, shall be granted to private entities which have made initial investments on the project. (Emphasis ours) In other words, herein private respondent was granted by said [p]residential directive option rights of first refusal to undertake the project because of the initial investments it made on the project. On August 1, 1980, as provided in Presidential Memorandum directive dated August 13, 1979 to submit within twelve (12) months after the issuance of the said Presidential Memorandum directive the detailed feasibility study for approval and to enable the PEA to exercise its responsibilities as the representative of the [n]ational [g]overnment as land owner, the person or entity chosen by the contractor to undertake the detailed feasibility studies shall report directly to the PEA, the Province of Cebu, the City of Mandaue, the City of Lapulapu and the Municipality of Cordova submitted said feasibility study to the President for approval, copy of which was attached as Annex 12 to respondents Comment. The Province of Cebu and private respondent entered into, signed and executed a Confirmatory Agreement dated November 1979, by virtue of which the services of MALAYAN was contracted to undertake the preparation and making of the said Detailed and Integrated Development Plan on Land use, etc., of the Cebu South Reclamation Project at no cost to the Province of Cebu. Copy of said Confirmatory Agreement was attached as Annex 13 to the respondents Comment. The said Confirmatory Agreement acknowledged that it was the private respondent which made initial investments in the Cebu South Reclamation Project and the entity granted the right of first refusal or option rights to undertake the project as follows: WHEREAS, the Memorandum dated 13 August 1979 embodied the proviso that option rights of first refusal shall be granted to private entities who have made initial investments in the reclamation projects; WHEREAS, the MALAYAN INTEGRATED INDUSTRIES CORPORATION, which had made initial investments in the projects and had, as a matter of fact, been previously bound by a contract with the PROVINCE OF CEBU to undertake the reclamation project in South Cebu evidenced by Document No. 145; Page No. 30; Book No. VI; Series of 1977 before Notary Public 384

Justino K. Hermosisima, by these presents have offered to undertake and prepare, for and in behalf of the PROVINCE OF CEBU, the detailed feasibility study for the reclamation of the areas in the Municipalities of Talisay and Cordova, Province of Cebu, in conjunction and coordination with the Cebu South and the Mandaue Reclamation Projects, and which offer had been accepted by the PROVINCE OF CEBU as the consequence of the Reclamation contract by and between the two entities similarly reconfirmed in a communication dated October 4, 1979; On January 4, 1980, a Confirmatory Agreement was entered into, executed and signed by and between the City of Cebu, and private respondent in which they confirmed, affirmed, approved and agreed that the Cebu South Reclamation Project dated January 15, 1979 between MALAYAN and BALLAST which was approved by the Province of Cebu and City of Mandaue and were approved in principle by then President Ferdinand E. Marcos, that its corresponding plan on land use, including technical, economic, marketing and financial feasibility studies of the Project be undertaken by the aforesaid Local Goverment units concerned and to be submitted to the PEA and the President of the Philippines within twelve (12) months after the issuance of the Presidential Memorandum directive dated August 13, 1979, and in compliance with the above-said requirements, the City of Cebu hired, awarded, engaged and contracted the services of private respondent to undertake and prepare in behalf of the City of Cebu the detailed and integrated development plan on land use, etc., of the Project covering the reclamation area of 400 to 625 hectares, more or less, without any single expense, funding and at no cost whatsoever to the City of Cebu. Copy of said Confirmatory Agreemen[t] was attached as Annex 14 to the respondents Comment. Again, the City of Cebu recognized the option right or right of first refusal of private respondent to undertake the project as the entity [which] had made initial investments in the project as follows: WHEREAS, the President also directed that option rights of first refusal shall be granted to private entities which have made initial investments in the reclamation projects; WHEREAS, the MALAYAN INTEGRATED INDUSTRIES CORPORATION, which has made initial investments on the project, and in fact, was previously contracted by the Province of Cebu by virtue of Proclamation No 200-A, P.D. No. 3-A and Executive Order No. 525 to undertake the reclamation project for and in the City of Cebu and the Municipality of Talisay, Province of Cebu, and prior to which MALAYAN INTEGRATED had already invested substantial sums of money, time and effort in preparatory activities on said reclamation projects, by these presents have offered to undertake the detailed and integrated development plan on land use, [including] feasibility studies as required by the President, and the CITY OF CEBU has accepted the said offer of MALAYAN INTEGRATED INDUSTRIES CORPORATION; 385

On January 24, 1980, the Public Estates Authority (PEA) and the City of Cebu entered into a Memorandum of Understanding which recognized the pre-emptive right of plaintiff to undertake the project as recognized in the Presidential directive dated August 13, 1979. 6. Pursuant to the Presidential Directive dated August 13, 1979, to accord pre-emptive rights for the actual prosecution of the reclamation project to private entities which have made initial investments on the project: Copy of said Memorandum of Understanding was attached as Annex 15 to respondents Comment. On August 1, 1980, on the basis of the Confirmatory Agreement dated November 1979 between the Province of Cebu and private respondent and the Confirmatory Agreement dated January 4, 1980 between the City of Cebu and the City of Cebu have awarded, hired, engaged and contracted the services of private respondent to undertake and prepare, in behalf of the Province of Cebu and the City of Cebu without any single expense, funding and at no cost to said Province of Cebu and City of Cebu, the detailed and integrated development plan on land use, etc., of the Cebu South Reclamation Project, the Province of Cebu thru then Eduardo R. Gullas, the City of Cebu thru then City Mayor Florentino S. S. Solon, the city of Mandaue thru then City Mayor Demetrio M. Cortes, the City of Lapulapu thru then City Mayor Maximo V. Patalingjug, Jr., and the Municipality of Cordova, Cebu thru Municipal Mayor Celedonio B. Sitoy, filed and submitted on August 1, 1980 the corresponding Detailed and Integrated Development Plan on Land use, including technical, economic, marketing and financial feasibility studies of the Cebu South Reclamation Project for the final consideration and approval by the Public Estates Authority and the Office of the President and the President of the Philippines. Copy of said document was attached as Annex 12 to respondents Comment. On August 12, 1980, private respondent, for and in behalf of the Province of Cebu, City of Cebu, City of Mandaue, City of Lapulapu, Municipality of Talisay, Municipality of Cordova, in relation to the above-said Memorandum dated August 1, 1980 as required, also filed and submitted to the Office of the President and the President of the Philippines thru the PEA the additional copies of the said complete Project Studies and the Detailed and Integrated Development Plan on Land Use, etc., of the Metro Cebu Reclamation and Development Project which includes the Cebu South Reclamation Project. Copy of said document was attached as Annex 16 to respondents Comment. On September 29, 1980, on the basis of the aforesaid Memorandum dated August 1, 1980 the PEA, in its MEMO FOR THE PRESIDENT dated September 29, 1980 indorsed and recommended to the President the final consideration and approval of the Detailed and Integrated Development Plan on Land Use of the Cebu South Reclamation Project. Copy of said document was hereto attached as Annex 17 to the respondents Comment. 386

Since Septembe[r] 19, 1980, when the PEA approved the Metro Cebu Reclamation and Development Project covering the reclamation area of 4,910 hectares, which include the Cebu South Reclamation Project covering 625 hectares, and its corresponding detailed and integrated development plan on land use, etc., as per MEMO FOR THE PRESIDENT dated September 29, 1980, the President of the Philippines has not yet approved the detailed and integrated development plan on land use, including technical, economic, marketing and financial feasibility studies of the said project. On December 29, 1995, the Office of the President thru President Staff Director Vicente A. Galang, issued 1st Indorsement to the effect that the detailed and integrated development plan on land use of the project is still pending final consideration and approval by the [O]ffice of the President until now or at the present date. Copy of said resolution was attached as Annex 18 to the respondents Comment. On January 12, 1996, the Office of the President thru Presidential Staff Director Vicente A. Galang, issued an official certification that the Cebu South Reclamation Proj[e]ct covering 360 hectares, has already long been considered and approved by the Office of the President and the President of the Philippines as per Presidential Memorandum directive dated August 13, 1979 but its corresponding detailed and integrated development plan on land use, including technical, economic, marketing and financial feasibility studies of the project which was filed and submitted by the Province of Cebu, City of Cebu, City of Mandaue, City of Lapulapu and Municipality of Cordova with the PEA and the Office of the President on August 1, 1980 per Memorandum dated August 1, 1980 and approved by the PEA in favor of the abovementioned Local Government units concerned per MEMO FOR THE PRESIDENT dated September 29, 1980, is still pending final consideration and approval by the Office of the President. Copy of said certification was attached as Annex 19 to respondents Comment. When the Province of Cebu and the City of Mandaue submitted to the President the Cebu South Reclamation Project for approval per memorandum dated February 7, 1979, it was premised on the following consideration as stated in the first paragraph of said memo: In our earnest desire to contribute our share to the program of Your Excellency and of our government on industrialization, industrial dispersal and regional development in the New Society, the Province of Cebu and the City of Mandaue have authorized, subject to your Excellencys approval, pursuant to PD 3-A (ANNEX A), the reclamation of 625 and 360 hectares of foreshore and offshore lands in South Cebu from Pasil, Cebu City to Tangke, Talisay, Cebu by virtue of Presidential Proclamation No. 200-A, promulgated on May 22, 1967 (ANNEX B), which gives the province of Cebu the authority to administer these areas within the City of Cebu, and, in Mandaue City, from Subangdaku to the Cabahug Coastways, by virtue of Sec. 94 of Republic Act No. 5519, which vests ownership and possession of all foreshore lands and 387

submerged lands of the public domain in the City of Mandaue (ANNEX C), respectively, under contracts of Reclamation and Port Development with Malayan Integrated Industries Corporation, hereto attached as Annexes D and E, which we believe offer the most advantageous terms for the Province of Cebu, and City of Mandaue and the National Government because not a single centavo will be spent by the government in return for its share in the reclaimed areas and the operation of the international and domestic port facilities thereof, not to mention the socio-economic impact that the projects will create in the Visayas and Mindanao. (Emphasis ours) This was so because under Executive Order No. 525 dated February 14, 1979, all reclamation projects are subject to approval by the President. After the reclamation project is approved by the President, the project shall be undertaken by the Public Estates Authority (PEA) or through a proper contract executed by the PEA with any person or entity. This is so provided in Section 1 of said Executive Order which reads as follows: SECTION 1 - The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; provided, that, reclamation projects of any National Government agency or entity authorized under its Charter shall be undertaken in consultation with the PEA upon approval of the President. In other words, the President does not approve reclamation contracts but approves only the reclamation project. The President approved in principle the Cebu South Reclamation Project on August 13, 1979 as shown by Exhibit A-13. The approval was in principle only pending submission and presidential approval of a detailed and integrated feasibility study on the land use of said project. What is unique in said presidential approval was that it recognized the reclamation contracts earlier entered into by plaintiff with the Province of Cebu and the City of Mandaue by giving plaintiff option rights of first refusal to undertake the project, when said presidential memorandum stated: x

x

x

x

Finally, considerations of equity requires that option rights of first refusal for a period as may be determined by PEA, shall be granted to private entities which have made initial investments on the project. The presidential memorandum also directed the PEA, City of Cebu and the City of Mandaue to enter into contracts with the PEA for the Cebu South Reclamation Project and the Mandaue Reclamation project, respectively. 388

Conformably, with said presidential directive, the PEA and the City of Cebu entered into a memorandum of understanding with respect to the Cebu South Reclamation project wherein paragraph 6 of its Section II, it [sic] provided that the City of Cebu was obliged to accord pre-emptive rights for the actual prosecution of the reclamation project to private entities which have made initial investments on the project, which entity is no other than herein plaintiff. This option of first refusal or pre-emptive rights of plaintiff to undertake the actual prosecution of the project has never been cancelled, or rescinded. The herein private respondent filed this case for injunction when the respondents issued an invitation to bidders, Exhibit A-21 particularly section 3.2 thereof which provides for the conduct of tenders and subsequent evaluation of bids for the Cebu South Reclamation Project. In other words, the petitioners were going to entertain bids from private contractors for the undertaking of the Cebu South Reclamation Project in violation of the preemptive rights or right of first refusal of private respondent to prosecute the project.xxvi In a Resolution dated March 27, 1997, the Court granted petitioners prayer and issued a temporary restraining order enjoining the trial judge from enforcing the assailed orders and from conducting further proceedings in this case.xxvii The Issues

In their Memorandum dated July 30, 1997, petitioners summarized the issues as follows:xxviii I Whether or not respondent judge gravely abused his discretion in issuing the orders dated 22 February 1996 and 18 March 1996, in contumacious violation of Presidential Decree No. 1818, and Supreme Court Administrative Circulars Nos. 1393 and 68-94. II Whether or not, in grave abuse of discretion, the order dated 22 February 1996 and the order granting the writ of preliminary injunction had the effect of practically deciding the case on the merits. III Whether or not respondent judge acted with grave abuse of discretion amounting to lack or excess of jurisdiction in granting the writ of preliminary injunction, as the applicant, [R]espondent Malayan, had no clear and unmistakable right to be protected by the injunctive writ. IV Respondent judge gravely abused his discretion in not dismissing the complaint 389

outright, the alleged cause of action being admittedly premature, and a mere expectancy, or having otherwise been barred by prescription and/or laches. V Whether respondent judge gravely abused his discretion in issuing the order dated 12 March 1996, reconsidering his earlier order of voluntary inhibition, there being strong grounds -- as respondent judge himself admits -- for his voluntary inhibition. VI Whether or not, as claimed by private respondent, the omnibus motion to dismiss filed below by petitioners was a mere scrap of paper. VII Whether or not, as claimed by private respondent, a motion for reconsideration was necessary before the filing of the present petition. The first, second, third and fourth issues are closely related and will be discussed together. The Courts Ruling

The petition is meritorious. First Issue: Preliminary Injunction Void and Improper

Section 1 of PD 1818 distinctly provides that [n]o court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project x x x of the government, x x x to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, x x x or pursuing any lawful activity necessary for such execution, implementation or operation.xxix At the risk of being repetitious, we stress that the foregoing statutory provision expressly deprives courts of jurisdiction to issue injunctive writs against the implementation or execution of an infrastructure project. xxx In the case at bar, the assailed March 18, 1996 Order of respondent judge specifically enjoined petitioners from implementing their Memorandum of Agreement dated September 11, 1995xxxi (except as to the Cebu South Coastal Road), which pertains to the implementation of the Metro Cebu Development Project, Phase III, a major component of which is the Cebu South Reclamation Project. The petitioners were also enjoined from acting on or implementing all other contracts involving the said reclamation project. The 390

issuance of said writ of preliminary injunction evidently constitutes a blatant violation of PD 1818. The assailed Order is therefore void for being issued with grave abuse of discretion and without jurisdiction. On this ground alone, the Court may already grant the petition. Nonetheless, we will proceed to discuss the other issues raised. Reclamation Is an Infrastructure Project

Private respondent claims that the Cebu South Reclamation Project is not an infrastructure project.xxxii This is erroneous and misleading. In Malayan Integrated Industries Corporation vs. Court of Appeals,xxxiii the Court unequivocally held that the reclamation of foreshore and submerged lands along the coast of Mandaue City up to the Cebu City boundary for the purpose of developing the reclaimed area into an industrial and trading center with a modern harbor and port facilities for both domestic and international commerce is an infrastructure project as contemplated under PD 1818.xxxiv Private respondent should know this not only because everyone is presumed to know the law, but also because it was a principal party in that case. Cebu South Reclamation Project Approved by the President

Private respondent further contends that, in spite of the prohibition in PD 1818, the questioned injunctive writ may still validly issue against petitioners, because the latter have not sufficiently shown that (1) [t]he City of Cebu has a contract with the Public Estates Authority (PEA) to undertake the Cebu South Reclamation Project under P.D. 3-A, (2) [t]he PEA has favorably endorsed the Cebu South Reclamation Project for approval by the President pursuant to Executive Order No. 525, and (3) [t]he President has approved the Cebu South Reclamation Project pursuant to P.D. 525.xxxv The Court is not persuaded. In the August 13, 1979xxxvi Memorandum on the Cebu South and Mandaue Reclamation Project, the President of the Philippines addressed this clear statement to the city mayors of Cebu and Mandaue, the chairman of the PEA and others concerned: Pursuant to P.D. 3-A and E.O. 525, and upon recommendation of the Public Estates Authority (PEA), the reclamation project covering 985 ha.[,] more or less, of Cebu South and Mandaue foreshore areas is hereby approved in principle; and the City of Cebu and the City of Mandaue are hereby authorized to undertake the reclamation of subject areas x x x. xxxvii Furthermore, even the certification from the Office of the President dated January 12, 1996, xxxviii presented in evidence by respondent itself, certifies that the Cebu South (and Mandaue) Reclamation Project has been previously considered and approved by the Office of the President and by the President of the Philippines, then His Excellency President Ferdinand E. Marcos, in favor of the Province of Cebu, City of Cebu, City of Mandaue, the Public Estates Authority and others concerned as the proponents x x x. xxxix The approved reclamation project is distinct from the reclamation contract itself. 391

Private Respondent Has No Vested Right Violated by a Public Bidding

Private respondent argues that PD 1818 cannot be invoked to stop the issuance of a preliminary injunction in this case, as the acts of petitioners are tantamount to a violation of its vested rights. It claims x x x a right to seek judicial intervention and relief when petitioners violated its right of first refusal by issuing invitations to bid the project to other contractors, without affording private respondent its right of first refusal. xl We disagree. Undisputed is the fact that the private respondent and the government have not entered into any validly approved and effective reclamation contract covering the Cebu South Reclamation Project. The City of Cebu and private respondents Contract of Reclamation dated October 31, 1977xli was never approved by the President. Their Confirmatory Agreement dated January 4, 1980 merely shows that the City of Cebu engaged private respondent to undertake and prepare the detailed and integrated development plan on land use, including technical, economic, marketing and financial feasibility studies x x x of the Cebu South Reclamation Project. xlii Incidentally, the aforementioned certification, issued by the Office of the President on January 12, 1996, manifests that private respondents development plan and feasibility studies, submitted pursuant to the said Confirmatory Agreement, are the items pending final consideration and approval of the President. Private respondent alleges that the injunctive writ merely protected its alleged right of first refusal which arose from the Presidents August 13, 1979 Memorandum addressed to the concerned public officials, stating that considerations of equity [require] that option rights of first refusal for a period as may be determined by the PEA shall be granted to private entities which have made initial investments on the project. xliii This memorandum, however, must be construed in harmony with the aforecited PD 1818 and PD 1594, xliv which prescribed the policies, guidelines, rules and regulations for government infrastructure contracts. Said memorandum certainly could not be construed as a law authorizing a repeal of PD 1818 and PD 1594. Indeed, laws are repealed only by subsequent ones, xlv whether expressly or impliedly. There is no express repeal of said laws, as they were not even mentioned in the memorandum, either by number or by text. Neither can there be an implied repeal, since it was not convincingly and unambiguously demonstrated that the mention in the memorandum of a right of first refusal was so repugnant and inconsistent with said laws as to defy harmonization. Basic is the rule in statutory construction that implied repeals are not favored.xlvi In addition, the memorandum was merely an expression of an executive directive to subordinates, not a legislative enactment. Hence, it cannot obviate the operation of PD 1818 and PD 1594. Section 4 of PD 1594 provides: SEC. 4. Bidding. -- Construction projects shall generally be undertaken by contract after competitive public bidding. Projects may be undertaken by administration or force account or by negotiated contract only in exceptional cases where time is of the essence, or where there is lack of qualified bidders or contractors, or where there is a conclusive evidence that greater economy and efficiency would be achieved through this arrangement, and in accordance with 392

provision of laws and acts on the matter, subject to the approval of the Ministry of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million, and of the President of the Philippines, upon the recommendation of the Minister, if the project cost is P1 Million or more. In the award of government contracts, the law requires a competitive public bidding. This is reasonable because [a] competitive public bidding aims to protect the public interest by giving the public the best possible advantages thru open competition. It is a mechanism that enables the government agency to avoid or preclude anomalies in the execution of public contracts.xlvii Lawful and laudable, therefore, is the petitioners Memorandum of Agreement mandating the City of Cebu to conduct a competitive public bidding in implementing the Cebu South Reclamation Project. The conduct of such public bidding is not violative of private respondents alleged vested right. In the Courts viewpoint, the said right may be considered for the purpose of awarding the contract of reclamation, only when the latters proposal are in all aspects equal to the bid of another proponent. In this kind of situation, the private respondents claim to a right of first refusal indeed entitles it to priority in the award of the contract. But this claimed right of first refusal cannot bar another proponent from submitting a bid or proposal. Note, however, that under Section 4 of PD 1594, a negotiated contract may be allowed in exceptional circumstances enumerated therein, subject to approval by the President. Executive Order No. 380,xlviii which took effect November 27, 1989, also provided for the Presidents approval of negotiated infrastructure contracts, the cost of which, for the Department of Transportation and Communications, amounts to P100 million and, for other departments and government corporations, P50 million. Since the project cost of the Cebu South Reclamation Project is over 4 billion pesos, xlix it is ineluctable that the Presidents approval is required. Consequently untenable is private respondents contention that its right of first refusal ipso facto entitles it to a contract of reclamation, because it fails to take into consideration the legal requirement that negotiated infrastructure contracts with costs beyond the specified ceiling must be approved by the President. Private respondent has no legal basis to claim that, because of its initial expenses in preparing its proposed plans and feasibility studies, it could dispense with or, worse, arrogate unto itself the Presidents power to ultimately decide or approve a contract of reclamation. In Malayan Integrated Industries Corporation vs. Court of Appeals,l the Court recognized the Presidents authority to disapprove the reclamation contract proposed by private respondent despite the latters initial investments; in that case, the President approved, instead, the contract between the City of Mandaue and F.F. Cruz, Inc. et al.li Issuance of Writ of Preliminary Injunction Unjustified

From the foregoing discussion, it is clear that the respondent judge gravely abused his discretion in issuing the Writ of Preliminary Injunction. Section 3, Rule 58 of the Rules of Court, enumerates the grounds for the issuance of a preliminary injunction. Although 393

private respondent alleged these grounds,lii respondent judge had the duty to take judicial noticeliii of PD 1818 and PD 1594. These laws, based on the foregoing discussion, ineludibly show that private respondent had no right to the relief it sought. It is well-settled that, before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected, and that the acts against which the writ is to be directed are violative of the said right. liv In hindsight, the respondent judges grant of the writ is truly regrettable, as it unnecessarily delayed the implementation of an important infrastructure project, a delay which had far-reaching consequences on the economic development and interest of Cebu, as well as the nation. Second Issue: Respondent Judges Voluntary Inhibition

Petitionerslv contend that the respondent judge gravely abused his discretion, when he made a volte face on his previous Order dated February 26, 1996 lvi inhibiting himself from hearing the case. In issuing said Order, Judge Burgos noted that Petitioner Tomas Osmeas Motion for Inhibition raised the ground of prejudgment on the basis of statements made in his Order dated February 22, 1996. Judge Burgos disposed as follows: WHEREFORE, premises considered, the motion is granted, and accordingly, in order to disabuse the mind of the movant and to further faithfully serve the cause of justice, the Presiding Judge of this Court hereby voluntarily inhibits himself from further sitting in the present case with instruction to the Branch Clerk of Court to send the records to the Office of the Clerk of Court for approval by the Honorable Executive Judge Priscila S. Agana for final re-raffling. The scheduled hearing for February 26, 1996 is cancelled. SO ORDERED.lvii However, respondent judge reversed his voluntary inhibition, lviii meekly stating in his Order dated March 12, 1996 that [t]he allegation of prejudgment and partiality is so bare and empty as movant Osmea failed to present sufficient ground or proof for the Presiding Judge to disqualify himself. The Judge realized the mistake in granting the motion for inhibition when defendant Osmea misled the Court in asserting that on the same day February 26, 1996, he would be filing an administrative case against the Judge for violation of PD 1818 and Supreme Court Circulars issued in relation to said decree x x x. In that eventuality, Osmea said, the Judge would be bias[ed] and partial to him because he [was] the complainant in the pending administrative case.lix We find merit in petitioners contention. Judge Burgos inhibited himself on the basis of Petitioner Osmeas allegation of prejudgment. In reversing his voluntary inhibition, respondent judge nebulously branded Osmeas allegations as so bare and empty. Judge Burgos claim that he was misled by Osmeas threat of an administrative case is obviously a mere afterthought that does not inspire belief. Although inhibition is truly discretionary lx on the part of the judge, the flimsy reasons proffered above are insufficient to justify 394

reversal of his previous voluntary inhibition. As aptly pointed out by petitioners in their Memorandum, x x x a judge may not rescind his action and reassume jurisdiction where good cause exists for the disqualification. Furthermore, because a presumption arises, by reason of the judges prior order of disqualification, of the existence of the factual reason for such disqualification, where the regular judge who has been disqualified revokes the order of disqualification, and objection is made to such revocation, it is not sufficient for the judge to enter an order merely saying that he or she is not disqualified; the record should clearly reveal the facts upon which the revocation is made. (46 Am Jur 2d 234, p. 321)lxi We deem it important to point out that a judge must preserve the trust and faith reposed in him by the parties as an impartial and objective administrator of justice. When he exhibits actions that give rise, fairly or unfairly, to perceptions of bias, such faith and confidence are eroded, and he has no choice but to inhibit himself voluntarily. It is basic that [a] judge may not be legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt [on] his honest actuations and probity in favor of either party, or incite such state of mind, he should conduct a careful self-examination. He should exercise his discretion in a way that the peoples faith in the courts of justice is not impaired. The better course for the judge is to disqualify himself. lxii Third Issue: Omnibus Motion Ineffective?

Private respondent insists that the petitioners Omnibus Motion lxiii dated February 14, 1996 is a mere scrap of paper, as it contained a notice of hearing addressed only to the clerk of court with no proof of its service to the opposing counsel. lxiv Private respondent is clutching at straws. The petitioners Omnibus Motion was filed pursuant to the trial courts own order to show cause why the injunction should not issue. It actually partakes of a brief or memorandum showing the trial courts lack of jurisdiction to issue the preliminary injunction. The Omnibus Motion raised a very important matter which the court itself could have ruled on, even motu proprio, considering that a jurisdictional question may be raised at any time, even for the first time on appeal. lxv Moreover, as expressed by petitioners, the issue is now moot, since the private respondent filed an Amended Complaint giving petitioner another fifteen days to file a responsive pleading. Within the said period, petitioners filed a Manifestation and Motion dated 7 March 1996, adopting the Omnibus Motion of 14 February 1996 and the Motion for Reconsideration with Cautionary Notice against the Amended Complaint and the application for writ of preliminary injunction therein contained.lxvi Fourth Issue: Motion for Reconsideration Actually Filed

395

Finally, private respondent alleges that the petition should be dismissed on the ground that petitioners did not file a motion for reconsideration. lxvii This allegation is negated by the simple fact that a Motion for Reconsideration with Cautionary Notice, lxviii although denied by the trial court, was actually filed by petitioners within the prescribed period. Epilogue

Litigants, lawyers and judges sometimes forget that they share the responsibility of unclogging the dockets of the judiciary. As a lamentable consequence, this Court is compelled to resolve cases which are utterly bereft of merit. This is one of those cases. Private Respondent Malayan Integrated Industries Corporation (Malayan, for brevity) was the petitioner in Malayan Integrated Industries, Corp. vs. Court of Appeals, et al.,lxix in which this Court, citing PD 1818, held that no writ of injunction may be issued to prevent the implementation of the reclamation project along the coast of Mandaue City, which was deemed an infrastructure project. In the present case, Private Respondent Malayan, nevertheless sought again the issuance of an injunctive writ to restrain the implementation of a similar reclamation project in adjacent Cebu City. In initiating the present proceedings, private respondent evidently ignored our earlier pronouncement and unnecessarily clogged the dockets of our courts. The respondent trial judge, on the other hand, abetted Malayans brazen disregard of this Courts earlier ruling. Worse, he ruled that the earlier case did not apply, because E.O. No. 380 was not presented by the parties for consideration by the High Court. lxx He maintained that EO 380, dated November 27, 1989, did not include reclamation projects in the definition of infrastructure projects. As earlier stated, the ruling of the trial court is lamentable. We note that, in the first place, EO 380 did not purport to be an exclusive enumeration of infrastructure projects. Moreover, the Supreme Court itself held -- after the effectivity of EO 380 -- that reclamation projects are deemed infrastructure projects, thereby resolving the present question with finality. It is unfortunate that the trial court cavalierly contravened a categorical ruling of the Supreme Court. But even more deplorable, it insinuated that this Court did not take into account all applicable extant laws. To propound such view is to undermine the peoples trust and confidence in the judiciary. This, we cannot countenance. It is opportune to remind judges of their sworn duty to follow the doctrines and rulings of this Court. In issuing writs of injunction, judges should observe the admonition of the Court in Olalia vs. Hizon:lxxi It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. 396

Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it. WHEREFORE, the petition is hereby GRANTED. The Orders of the Regional Trial Court in Civil Case No. CEB-18292, dated February 22, 1996, March 12, 1996 and March 18, 1996, are REVERSED and SET ASIDE. The temporary restraining order earlier issued is MADE PERMANENT. Respondent judge is ordered to INHIBIT himself from further hearing this case. Let Civil Case No. CEB-18292 be re-raffled and the proceedings therein proceed with all deliberate dispatch. SO ORDERED.

15. ROMEO J. ORDONEZ, petitioner, vs. THE HON. ALFREDO J. GUSTILO, in his capacity as presiding judge of Regional Trial Court of Cavite, Branch XVI, Cavite City, Municipality of Rosario, Cavite, former Mayor Calixto D. Enriquez of Rosario, Cavite, and Valeriano Espiritu of Mabolo, Bacoor, Cavite, respondents. G.R. No. 81835 | 1990-12-20 D

E

C

I

S

I

O

PARAS,

N

J.:

This is a petition for certiorari which seeks to annul, on the ground of grave abuse of discretion, the (1) Decision dated May 24, 1985; (2) Order dated May 27, 1987 and (3) Order dated December 24, 1987, all issued in Civil Case No. N-4367 of the Regional Trial Court of Cavite, Branch XVI, Cavite City entitled "Valeriano Espiritu v. Municipality of Rosario, Province of Cavite and Hon. Calixto D. Enriquez in his capacity as Municipal Mayor of Rosario, Cavite. The

pertinent

background

facts

are:

Valeriano Espiritu, herein private respondent filed on April 22, 1983, a complaint for Specific Performance and Damages, against respondents Municipality of Rosario, Cavite and Calixto Enriquez, the latter in his capacity as Mayor of said municipality, to enforce their agreement contained in a Reclamation Contract. In his complaint, Espiritu prayed that the Municipality of Rosario, together with Enriquez, be ordered to convey to him 323,996 397

square meters of the reclaimed portion of the foreshore land of the town. Espiritu filed the action in his capacity as the assignee of the Salinas Development Corporation (SADECO), the entity which reclaimed the area in question by virtue of a Reclamation Contract entered into between it and the Municipality of Rosario, represented by Enriquez as Municipal Mayor. The case was docketed as Civil Case No. 4367 of the Regional Trial Court of Cavite, Fourth Judicial Region, Branch XVI, Cavite City. In its answer, defendant municipality resisted plaintiff's claim stating that it was barred by the statute of limitation; the contract has been substantially amended, modified and supplemented; and plaintiff has not performed his reciprocal obligation. The barangay captain of Tejeros Convention, Rosario, Cavite, herein petitioner Romeo J. Ordonñ ez, together with seven (7) other municipal and barangay officials intervened, and in their Answer-in-Intervention, they alleged that no actual reclamation was done by the plaintiff and the area being claimed by the plaintiff came about by natural accretion; the reclamation contract between the contractor and the municipality is either void, voidable or disadvantageous to the defendant municipality. The issues having been joined the trial court set the case for the mandatory pre-trial conference on November 15, 1984. At this scheduled pre-trial conference, all the litigants including the intervenors, with their respective counsel, were present. In said conference, plaintiff Espiritu and defendant municipality, manifested to the court that having arrived at a satisfactory settlement, they would submit a compromise agreement at a latter date. On the other hand, the intervenors asked the court that they be allowed to present their evidence to prove their defense asserted in their answer-in-intervention. For the said purpose, hearing was held on December 13, 1984 wherein Ernesto Andico, vice-mayor testified. Another hearing was also held on January 24, 1985 where Vice-Governor Jose M. Ricafrente, Jr. of the Province of Cavite, and petitioner's counsel in the instant case, also testified. On May 20, 1985, the principal litigants filed with respondent trial court their promised compromise agreement. The parties agreed that 208,664 square meters of the reclaimed area were to be alloted to the plaintiff and 211,311 square meters thereof were to be given to defendant municipality. On May 24, 1985, the trial court approved the compromise agreement and rendered a decision in accordance therewith. The intervenors received their copy of the decision on September 19, 1985 thru Vice-Mayor Ernesto Andico. The decision being already final, it was duly executed to the satisfaction of the principal 398

litigants. On October 17, 1985 and July 2, 1987 additional hearings were held where the intervenors presented three (3) additional witnesses. On June 24, 1987, the intervenors filed a motion to set aside the compromise agreement dated May 15, 1985. This was denied by the trial court, thru respondent Judge Alfredo Gustilo (the former presiding judge, Judge Alejandro Silapan having already retired) in its Order dated November 27, 1987, the pertinent portion of which reads as follows: "It appears that on May 24, 1985, the former Presiding Judge of this Court approved the said Compromise Agreement and rendered a judgment on the basis thereof. It is settled that a judgment approving a compromise agreement is final and immediately executory. (Samonte v. Samonte, 64 SCRA 524). The motion in question therefore cannot be granted as it has the effect of annulling the judgment of this Court which has already become final and, according to the plaintiff, already executed. "The Motion to Set Aside Compromise Agreement cannot even be considered as a motion for reconsideration because the Court can no longer set aside, amend or modify its judgment which has become final. Neither can the said motion be deemed as a petition for relief under Rule 38 of the Rules of Court, since to set aside a judgment based upon a compromise agreement under the said Rule, the petition for relief must be filed not later than six (6) months from the date it was rendered. (Bodiongan v. Ceniza, 102 Phil. 750). The decision of the Court based on the Compromise Agreement was rendered on May 24, 1985. On the other hand, the present Motion to Set Aside Compromise Agreement was filed only on June 24, 1987. Moreover, under Section 3 of Rule 38, the petition for relief from judgment should be filed within 60 days after the petitioner learns of the judgment sought to be set aside. The intervenor in this case received a copy of the decision based on the Compromise Agreement on September 19, 1985. If the instant motion be construed as an independent action to annul a judgment, this Court would not have jurisdiction over it inasmuch as under Section 9 of Batas Pambansa Blg. 129, the Judiciary Reorganization Act of 1980, an action for the annulment of a judgment of the Regional Trial Court falls under the exclusive original jurisdiction of the Court of Appeals. Additionally, the intervenors have not convincingly shown that defendant Mayor Enriquez was not authorized to sign the Compromise Agreement in behalf of the Municipality of Rosario. On the contrary, the Mayor has in his favor the presumption that official duty has been regularly performed. (Sec. 5 [m], Rule 131, Rules of Court.) Likewise, they failed to sufficiently explain why and how the terms and conditions of the Compromise Agreement have contravened the law, morals, good customs and public policy." (pp. 41-42, Rollo). Meanwhile, on August 10, 1987, plaintiff Espiritu filed a manifestation and Motion praying that the proceedings be terminated and that the case be considered closed, which motion 399

respondent judge granted in his Order dated December 24, 1987. The pertinent portion of the said Order reads "In support of his motion to terminate the proceedings, the plaintiff argued that further trial in this case will be an exercise in futility, considering that the issues raised by the intervenors have become moot and academic in view of the decision of the Court based on the Compromise Agreement submitted by the plaintiff and the defendants. "This contention appears to be well taken. The decision of the Court based on the Compromise Agreement has in effect resolved the issues raised by the intervenors, i.e., whether the reclamation contract entered into between the town of Rosario and the Salinas Development Corporation, the predecessors-in-interest of the plaintiff, is null and void; and whether or not there was actual reclamation done by the said entity. This is so, for the decision of the Court based on the Compromise Agreement has impliedly recognized the validity of the said reclamation contract and the fact that the tract of land divided between the plaintiff and the defendant municipality of Rosario pursuant to the Compromise Agreement was the product of the reclamation efforts undertaken by the Salinas Development Corporation, which subsequently assigned its rights to the plaintiff. "The continuation of the trial in this case will be useless. Should the intervenors fail to adduce evidence showing that the reclamation contract was null and void and that no actual reclamation was undertaken by the Salinas Development Corporation, the correctness and propriety of the decision of the Court based on the Compromise Agreement would be strengthened. Even if they would succeed in proving that the reclamation contract was null and void and that the area in question came into being through the natural action of the sea and not through the reclamation done by the Salinas Development Corporation, still the said decision could no longer be set aside, inasmuch as it has already become final and, according to the plaintiff, already executed. The continuation of the reception of the evidence for the intervenors clearly appears to serve no purpose at all. xxx

xxx

xxx

"WHEREFORE, the Manifestation and Motion dated August 6, 1987, filed by the plaintiff, is granted, and the trial of this case is declared terminated and this case is considered closed. "This order modifies the pre-trial order dated November 15, 1984 of this Court, insofar as the said order has allowed the intervenors to adduce evidence in support of their contention that the land in question was not reclaimed by the plaintiff or his predecessorin-interest but the product of accretion, and that the reclamation contract between the defendants and the Salinas Development Corporation was null and void. "SO

ORDERED."

(pp.

45-47,

Rollo) 400

In assailing the aforementioned Decision and Orders of the trial court, petitioner Romeo Ordonñ ez (one of the intervenors, the other seven intervenors did not join him in this petition) raises the following issues, to wit: 1. Whether or not the lower court erred in stopping/preventing the intervenors from further presenting their evidence in support of their Answer-in-Intervention. 2. Whether or not the lower court erred in approving the compromise agreement of May 20, 1985 and rendering a decision based thereon dated May 24, 1985, inspite of the clear lack of authority on the part of respondent Calixto D. Enriquez to bind the Municipality of Rosario because of the absence of an enabling ordinance from the Sangguniang Bayan of Rosario, Cavite empowering him to enter into said compromise agreement. We

answer

both

issues

in

the

negative.

Intervention is defined as a "proceeding in a suit or action by which a third person is permitted by the court to make himself a party, either joining plaintiff in claiming what is sought by the complaint, or uniting with defendant in resisting the claims of plaintiff, or demanding something adversely to both of them; the act or proceeding by which a third person becomes a party in a suit pending between others; the admission, by leave of court, of a person not an original party to pending legal proceedings, by which such person becomes a party thereto for the protection of some right or interest alleged by him to be affected by such proceedings." (Metropolitan Bank & Trust Co. v. the Presiding Judge, RTC Manila, Branch 39, et al., G.R. No. 89909, September 21, 1990) An intervention has been regarded as "merely collateral or accessory or ancillary to the principal action and not an independent proceeding; an interlocutory proceeding dependent on or subsidiary to, the case between the original parties." (Francisco, Rules of Court, Vol. 1) The main action having ceased to exist, there is no pending proceeding whereon the intervention may be based. (Barangay Matictic v. Elbinias, 148 SCRA 83, 89). As we recently ruled in Camacho v. Hon. Court of Appeals, et al., G.R. No. 79564, December 24, 1989 "There is no question that intervention is only collateral or ancillary to the main action. Hence, it was previously ruled that the final dismissal of the principal action results in the dismissal of said ancillary action." A judgment approving a compromise agreement is final and immediately executory. (Samonte v. Samonte, 64 SCRA 524) All pending issues will become moot and academic once a compromise submitted by the parties is approved by the trial court. (Berenguer v. Arcangel, 149 SCRA 164) 401

In the case at bar, the compromise agreement submitted by the plaintiff and the defendants and the decision approving the same recognized the validity of the Reclamation Contract and the fact that the tract of land involved was the result of the reclamation done by SADECO. In their answer-in-intervention, petitioner alleges that there was no reclamation undertaken by SADECO, that the land in question was the result of accretion from the sea and that the Reclamation Contract is null and void. Clearly then, the compromise agreement and the decision had in effect resolved the aforementioned issues raised by the intervenors. As aptly observed by the trial court, the continuation of the reception of the intervenors' evidence would serve no purpose at all. Should intervenors fail to prove that the Reclamation Contract is null and void and that no actual reclamation was made, the correctness and propriety of the decision based on the compromise agreement would be strengthened. Upon the other hand, should they succeed in proving that the contract is null and void, and that the area in question came into being through the natural action of the sea, still the decision of the lower court could no longer be set aside, inasmuch as it has already become final and executed. There is, therefore, no merit to the claim of petitioner that the lower court "unceremoniously terminated the proceedings" even "without the intervenors completing their evidence." (Memorandum for Petitioner, p. 140, 143, Rollo) Precisely, the court a quo gave credence and weight to the compromise agreement and denied the claims of the intervenors which were controverting the theories of the plaintiff and the defendants. In other words, due process had been accorded the intervenors. It would have been different had the court not taken into consideration the claims of the intervenors. The petitioner cannot claim ignorance of the filing of the compromise agreement. As can be gleaned from the pre-trial order, the intervenors were represented during the pre-trial conferences, where the plaintiff and the defendants intimated that they would submit a compromise agreement. The intervenors did not interpose any opposition to the manifestation of the plaintiff and defendants that they would be amicably settling their dispute. The compromise agreement was filed in court on May 20, 1985. It was approved by the lower court on May 24, 1986. Before its approval no opposition had been filed questioning its legality. The intervenors received their copy of the decision on September 19, 1985. They did not file any motion for reconsideration to suspend its finality. It was only on June 24, 1987, or after the lapse of almost two (2) years when they filed a motion to set aside the compromise agreement. It should be emphasized at this juncture that the decision based on the compromise agreement had long been executed. Anent the other issue raised whether or not respondent mayor needed another authority from the Sangguniang Bayan to sign the compromise agreement, suffice it to state that the 402

mayor need not secure another authority from the Sandiganbayan under Section 141 (c) and (i) of the Local Government Code, which state that "Section 141. (1) The Mayor shall be the Chief Executive of the municipal government and shall exercise such powers, duties and functions as provided in this code and other laws. (2) He shall: xxx

xxx

xxx

'(c) Represent the municipality in its business transactions and sign on its behalf all contracts, obligations and official documents made in accordance with law or ordinance. '(i) Direct the formulation of municipal development plans and programs, and once approved by the Sangunian Bayan, supervise and direct the execution and implementation thereof.'" (p. 115, Rollo) because the execution of the Compromise Agreement is but an act implementing the reclamation contract duly approved by the Sangguniang Bayan. Further, the terms and conditions of the compromise agreement are beneficial to the municipality because the share of Espiritu has been reduced considerably from the 80% agreed upon in the reclamation contract. WHEREFORE, for lack of merit, the petition is DISMISSED. Costs against petitioner. SO ORDERED

16. REPUBLIC OF THE PHILIPPINES, petitioner, vs. THE HONORABLE COURT OF APPEALS AND REPUBLIC REAL ESTATE CORPORATION, respondents. CULTURAL CENTER OF THE PHILIPPINES, intervenor. G.R. No. 103882 and G.R. No. 105276 | 1998-11-25 DECISION

PURISIMA, J.:

403

At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised Rules of Court. Here, the Court is confronted with a case commenced before the then Court of First Instance (now Regional Trial Court) of Rizal in Pasay City, in 1961, more than 3 decades back, that has spanned six administrations of the Republic and outlasted the tenure

of

ten

(10)

Chief

Justices

of

the

Supreme

Court.

In G.R. No. 103882, the Republic of the Philippines, as petitioner, assails the Decision, dated January 29, 1992 and Amended Decision, dated April 28, 1992, of the Court of Appeals [1], which affirmed with modification the Decision of the former Court of First Instance of Rizal (Branch 7, Pasay City) in Civil Case No. 2229-P, entitled "Republic of the Philippines versus Pasay

City

The

facts

and that

Republic matter

Real

Estate are,

Corporation." as

follows:

Republic Act No. 1899 ("RA 1899"), which was approved on June 22, 1957, authorized the reclamation of foreshore lands by chartered cities and municipalities. Section I of said law, reads:

"SECTION 1. Authority is hereby granted to all municipalities and chartered cities to undertake and carry out at their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications."

On May 6, 1958, invoking the aforecited provision of RA 1899, the Pasay City Council passed Ordinance No. 121, for the reclamation of Three Hundred (300) hectares of foreshore lands in Pasay City, empowering the City Mayor to award and enter into reclamation contracts, and prescribing terms and conditions therefor. The said Ordinance was amended on April 21, 1959 by Ordinance No. 158, which authorized the Republic Real 404

Estate Corporation ("RREC") to reclaim foreshore lands of Pasay City under certain terms and

conditions.

On April 24, 1959, Pasay City and RREC entered into an Agreement [2] for the reclamation of the

foreshore

lands

in

Pasay

City.

On December 19, 1961, the Republic of the Philippines ("Republic") filed a Complaint [3] for Recovery of Possession and Damages with Writ of Preliminary Preventive Injunction and Mandatory Injunction, docketed as Civil Case No. 2229-P before the former Court of First Instance On

March

of 5,

Rizal,

1962,

the

(Branch

Republic

of

the

7,

Pasay

Philippines

filed

an

City). Amended

Complaint[4] questioning subject Agreement between Pasay City and RREC (Exhibit "P") on the grounds that the subject-matter of such Agreement is outside the commerce of man, that its terms and conditions are violative of RA 1899, and that the said Agreement was executed

without

any

public

bidding.

The Answers[5] of RREC and Pasay City, dated March 10 and March 14, 1962, respectively, averred that the subject-matter of said Agreement is within the commerce of man, that the phrase "foreshore lands" within the contemplation of RA 1899 has a broader meaning than the cited definition of the term in the Words and Phrases and in the Webster’s Third New International Dictionary and the plans and specifications of the reclamation involved were approved

by

the

authorities

concerned.

On April 26,1962, Judge Angel H. Mojica, (now deceased) of the former Court of First Instance of Rizal (Branch 7, Pasay City) issued an Order [6] the dispositive portion of which was to the following effect:

"WHEREFORE, the court hereby orders the defendants, their agents, and all persons claiming under them, to refrain from ‘further reclaiming or committing acts of

405

dispossession or dispoilation over any area within the Manila Bay or the Manila Bay Beach Resort", until further orders of the court."

On the following day, the same trial court issued a writ of preliminary injunction [7] which enjoined the defendants, RREC and Pasay City, their agents, and all persons claiming under them

"from

further

reclaiming

or

committing

acts

of

dispossession".

Thereafter, a Motion to Intervene[8], dated June 27, 1962, was filed by Jose L. Bautista, Emiliano Custodio, Renato Custodio, Roger de la Rosa, Belen Gonzales, Norma Martinez, Emilia E. Paez, Ambrosio R. Parreno, Antolin M. Oreta, Sixto L. Orosa, Pablo S. Sarmiento, Jesus Yujuico, Zamora Enterprises, Inc., Industrial and Commercial Factors, Inc., Metropolitan Distributors of the Philippines, and Bayview Hotel, Inc. stating inter alia that they were buyers of lots in the Manila Bay area being reclaimed by RREC, whose rights would be affected by whatever decision to be rendered in the case. The Motion was granted by

the

trial

court

and

the

Answer

attached

thereto

admitted. [9]

The defendants and the intervenors then moved to dismiss [10] the Complaint of the Republic, placing reliance on Section 3 of Republic Act No. 5187, which reads:

"Sec. x

3.

Miscellaneous x

Projects x

m. For the construction of seawall and limited access highway from the south boundary of the City of Manila to Cavite City, to the south, and from the north boundary of the City of Manila to the municipality of Mariveles, province of Bataan, to the north, including the reclamation of the foreshore and submerged areas: Provided, That priority in the construction of such seawalls, highway and attendant reclamation works shall be given to any corporation and/or corporations that may offer to undertake at its own expense such projects, in which case the President of the Philippines may, after competitive bidding, award contracts for the 406

construction of such projects, with the winning bidder shouldering all costs thereof, the same to be paid in terms of percentage fee of the contractor which shall not exceed fifty percent of the area reclaimed by the contractor and shall represent full compensation for the purpose, the provisions of the Public Land Law concerning disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided, finally, that the foregoing provisions and those of other laws, executive orders, rules and regulations to the contrary notwithstanding, existing rights, projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected. x x x." (underscoring ours)

Since the aforecited law provides that existing contracts shall be respected, movants contended that the issues raised by the pleadings have become "moot, academic and of no further

validity

or

effect."

Meanwhile, the Pasay Law and Conscience Union, Inc. ("PLCU") moved to intervene [11], alleging as legal interest in the matter in litigation the avowed purpose of the organization for the promotion of good government in Pasay City. In its Order of June 10, 1969, the lower court

of

origin

allowed

the

said

intervention[12].

On March 24, 1972, the trial court of origin came out with a Decision, disposing, thus:

"WHEREFORE, after carefully considering (1) the original complaint, (2) the first Amended Complaint, (3) the Answer of Defendant Republic Real Estate Corporation to the first Amended Complaint, (4) the Answer of Defendant Pasay City to the first Amended Complaint, (5) the Second Amended Complaint, (6) the Answer of Defendant Republic Real Estate Corporation to the Second Amended Complaint, (7) the Answer of Defendant Pasay City to the Second Amended Complaint, (8) the Memorandum in Support of Preliminary Injunction of Plaintiff, (9) the Memorandum In Support of the Opposition to the Issuance of Preliminary Injunction of Defendant Pasay City and Defendant Republic Real Estate Corporation, (10) the Answer in Intervention of Intervenors Bautista, et. al., (11) Plaintiff’s Opposition to Motion to Intervene, (12) the Reply to Opposition to Motion to Intervene of 407

Intervenors Bautista, et. al. , (13) the Stipulation of Facts by all the parties, (14) the Motion for Leave to Intervene of Intervenor Pasay Law and Conscience Union, Inc., (15) the Opposition to Motion For Leave to Intervene of Intervenors Bautista, et. al., (16) the Reply of Intervenor Pasay Law and Conscience Union, Inc., (17) the Supplement to Opposition to Motion to Intervene of Defendant Pasay City and Republic Real Estate Corporation, (18) the Complaint in Intervention of Intervenor Pasay Law and Conscience Union, Inc., (19) the Answer of Defendant Republic Real Estate Corporation, (20) the Answer of Intervenor Jose L. Bautista, et. al., to Complaint in Intervention, (21) the Motion to Dismiss of Defendant Republic Real Estate Corporation, and Intervenors Bautista, et. al., (22) the Opposition of Plaintiff to said Motion to Dismiss, (23) the Opposition of Intervenor Pasay Law and Conscience Union, Inc., (24) the Memorandum of the Defendant Republic Real Estate Corporation, (25) the Memorandum for the Intervenor Pasay Law and Conscience Union, Inc., (26) the Manifestation of Plaintiff filed by the Office of the Solicitor General, and all the documentary evidence by the parties to wit: (a) Plaintiff’s Exhibits "A" to "YYY-4", (b) Defendant Republic Real Estate Corporation’s Exhibits "1-RREC" to "40-a" and (c) Intervenor Pasay Law and Conscience Union, Inc’s., Exhibits "A-PLACU" to "C-PLACU", the Court

hereby:

(1) Denies the "Motion to Dismiss" filed on January 10, 1968, by Defendant Republic Real Estate Corporation and Intervenors Bautista, et. al., as it is the finding of this Court that Republic Act No. 5187 was not passed by Congress to cure any defect in the ordinance and agreement in question and that the passage of said Republic Act No. 5187 did not make the legal issues raised in the pleadings "moot, academic and of no further validity or effect; and (2) (a)

Renders dismissing

the

judgment: Plaintiff’s

Complaint;

(b) Dismissing the Complaint in Intervention of Intervenor Pasay Law and Conscience Union,

Inc.,

408

(c)Enjoining Defendant Republic Real Estate Corporation and Defendant Pasay City to have all the plans and specifications in the reclamation approved by the Director of Public Works and to have all the contracts and sub-contracts for said reclamation awarded by means of, and

only

after,

public

bidding;

and

(d) Lifting the preliminary Injunction issued by the Court on April 26, 1962, as soon as Defendant Republic Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans and specifications to the Director of Public Works, and shall have obtained approval thereof, and as soon as the corresponding public bidding for the award to the contractor and sub-contractor that will undertake the reclamation project shall have been

effected.

No

pronouncement

as

to

costs.

SO ORDERED." (See Court of Appeals’ Decision dated January 28, 1992; pp. 6-8)

Dissatisfied with the said judgment, the Republic appealed therefrom to the Court of Appeals. However, on January 11, 1973, before the appeal could be resolved, Presidential Decree No. 3-A issued, amending Presidential Decree No. 3, thus:

"SECTION 1. Section 7 of Presidential Decree No. 3, dated September 26, 1972, is hereby amended

by

the

addition

of

the

following

paragraphs:

The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person

authorized

by

it

under

a

proper

contract.

All reclamations made in violation of this provision shall be forfeited to the State without need

of

judicial

action.

409

Contracts for reclamation still legally existing or whose validity has been accepted by the National Government shall be taken over by the National Government on the basis of quantum meruit, for proper prosecution of the project involved by administration."

On November 20, 1973, the Republic and the Construction Development Corporation of the Philippines ("CDCP") signed a Contract[13] for the Manila-Cavite Coastal Road Project (Phases I and II) which contract included the reclamation and development of areas covered by the Agreement between Pasay City and RREC. Then, there was issued Presidential Decree No. 1085 which transferred to the Public Estate Authority ("PEA") the rights and obligations of the Republic of the Philippines under the contract between the Republic

and

CDCP.

Attempts to settle amicably the dispute between representatives of the Republic, on the one hand, and those of Pasay City and RREC, on the other, did not work out. The parties involved failed

to

hammer

out

a

compromise.

On January 28, 1992, the Court of Appeals came out with a Decision [14] dismissing the appeal of the Republic and holding, thus:

"WHEREFORE, the decision appealed from is hereby AFFIRMED with the following modifications: 1. The requirement by the trial court on public bidding and the submission of RREC’s plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic; 2. Ordering the plaintiff-appellant to turn over to Pasay City the ownership and possession over all vacant spaces in the twenty-one hectare area already reclaimed by Pasay City and RREC at the time it took over the same. Areas thereat over which permanent structures has (sic) been introduced shall, including the structures, remain in the possession of the present 410

possessor, subject to any negotiation between Pasay City and the said present possessor, as regards

the

continued

possession

and

ownership

of

the

latter

area.

3. Sustaining RREC’s irrevocable option to purchase sixty (60%) percent of the Twenty-One (21) hectares of land already reclaimed by it, to be exercised within one (1) year from the finality of this decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract, and enjoining appellee Pasay City to respect RREC’s option. SO ORDERED."

On February 14, 1992, Pasay City and RREC presented a Motion for Reconsideration of such Decision of the Court of Appeals, contending, among others, that RREC had actually reclaimed Fifty-Five (55) hectares, and not only Twenty-one (21) hectares, and the respondent Court of Appeals erred in not awarding damages to them, movants. On April 28, 1992, the Court of Appeals acted favorably on the said Motion for Reconsideration, by amending the dispositive portion of its judgment of January 28, 1992, to read as follows:

"WHEREFORE, the dispositive portion of our Decision dated January 28, 1992 is hereby AMENDED

to

read

as

follows:

1. The requirement by the trial court on public bidding and the submission of the RREC’s plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic. 2. Ordering plaintiff-appellant to turn over to Pasay City the ownership and possession of the above

enumerated

lots

(1

to

9).

3. Sustaining RREC’s irrevocable option to purchase sixty (60%) percent of the land referred 411

to in No. 2 of this dispositive portion, to be exercised within one (1) year from the finality of this Decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract,

and

enjoining

Pasay

City

to

respect

RREC’s

irrevocable

option.

SO ORDERED."

From the Decision and Amended Decision of the Court of Appeals aforementioned, the Republic of the Philippines, as well as Pasay City and RREC, have come to this Court to seek relief,

albeit

with

different

prayers.

On September 10, 1997, the Court commissioned the former thirteenth Division of Court of Appeals to hear and receive evidence on the controversy. The corresponding Commissioner’s Report, dated November 25, 1997, was submitted and now forms part of the

records.

On October 11, 1997, the Cultural Center of the Philippines ("CCP") filed a Petition in Intervention, theorizing that it has a direct interest in the case being the owner of subject nine (9) lots titled in its (CCP) name, which the respondent Court of Appeals ordered to be turned over to Pasay City. The CCP, as such intervenor, was allowed to present its evidence, as it did, before the Court of Appeals, which evidence has been considered in the formulation

of

this

disposition.

In G.R. No. 103882, the Republic of the Philippines theorizes, by way of assignment of errors, that:

I

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF PASAY CITY ORDINANCE NO. 158 DATED APRIL 21, 1959 AND THE RECLAMATION CONTRACT ENTERED INTO BETWEEN PASAY CITY AND RREC; 412

II

THE COURT OF APPEALS ERRED IN FINDING THAT RREC HAD RECLAIMED 55 HECTARES AND IN ORDERING THE TURN-OVER TO PASAY CITY OF THE OWNERSHIP AND POSSESSION OF NINE (9) LOTS TITLED IN THE NAME OF CCP.

In G.R. No. 105276, the petitioners, Pasay City and RREC, contend, that::

I

THE COURT OF APPEALS ERRED IN NOT DECLARING PRESIDENTIAL DECREE NO. 3-A UNCONSTITUTIONAL;

II

THE COURT OF APPEALS ERRED IN NOT AWARDING DAMAGES IN FAVOR OF PASAY CITY AND

RREC.Let

us

first

tackle

the

issues

posed

in

G.R.

No.

103882.

On the first question regarding the validity of Pasay City Ordinance No. 158 dated April 21, 1959 and the Agreement dated April 24, 1959 between Pasay City and RREC, we rule in the negative. Section 1 of RA 1899, reads:

"SECTION 1. Authority is hereby granted to all municipalities and chartered cities to undertake and carry out at their own expense the reclamation by dredging, filling, or other 413

means, of any foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications."

It is the submission of the petitioner, Republic of the Philippines, that there are no foreshore lands along the seaside of Pasay City[15]; that what Pasay City has are submerged or offshore areas outside the commerce of man which could not be a proper subject matter of the Agreement between Pasay City and RREC in question as the area affected is within the National Park, known as Manila Bay Beach Resort, established under Proclamation No. 41, dated July 5, 1954, pursuant to Act No. 3915, of which area it (Republic) has been in open,

continuous

and

peaceful

possession

since

time

immemorial.

Petitioner faults the respondent court for unduly expanding what may be considered "foreshore land" through the following disquisition:

"The former Secretary of Justice Alejo Mabanag, in response to a request for an opinion from the then Secretary of Public Works and Communications as to whether the term ‘foreshore areas’ as used in Section I of the immediately aforequoted law is that defined in Webster’s Dictionary and the Law of Waters so as to make any dredging or filling beyond its prescribed

limit

illegal,

opined:

‘According to the basic letter of the Director of Public Works, the law of Waters speaks of ‘shore’ and defines it thus: ‘that space movement of the tide. Its interior or terrestrial limit in

the

Webster’s

line

definition

reached

of

by

foreshore

highest

equinoctial

reads

as

tides.’

follows:

That part of the shore between high water and low-water marks usually fixed at the line to which the ordinary means tide flows: also, by extension, the beach, the shore near the 414

water’s

edge.’

If we were to be strictly literal the term foreshore or foreshore lands should be confined to but a portion of the shore, in itself a very limited area.’ (p. 6, Intervenors-appellees’ brief). Bearing in mind the (Webster’s and Law of Waters) definitions of ‘shore’ and of foreshore lands, one is struck with the apparent inconsistency between the areas thus described and the purpose to which that area, when reclaimed under the provision of Republic Act No. 1899, shall be devoted. Section I (of said Law) authorizes the construction thereat of ’adequate docking and harbor facilities’. This purpose is repeated in Sections 3 and 4 of the Act. And yet, it is well known fact that foreshore lands normally extend only from 10 to 20 meters along the coast. Not very much more if at all. In fact, certain parts in Manila bordering on Manila Bay, has no foreshore to speak of since the sea washes the sea wall. It does not seem logical, then, that Congress had in mind. Webster’s limited concept of foreshore when it enacted Republic Act No. 1899, unless it intends that the wharves, piers, docks, etc. should be constructed parallel to the shore, which is impractical. Since it is to be presumed that Congress could not have intended to enact an ineffectual measure not one that would lead to absurd consequences, it would seem that it used ‘foreshore’ in a sense wider in scope that that defined by Webster. xxx’ To said opinion on the interpretation of the R.A. 1899, plaintiff-appellant could not offer any refutation or contrary opinion. Neither can we. In fact, the above construction is consistent with the ‘rule on context’ in statutory construction which provides that in construing a statute, the same must be construed as a whole. The particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole (see Araneta vs. Concepcion, 99 Phil. 709). There are two reasons for this. Firstly, the force and significance of particular expressions will largely 415

depend upon the connection in which they are found and their relation to the general subject-matter of the law. The legislature must be understood to have expressed its whole mind on the special object to which the legislative act is directed but the vehicle for the expressions of that meaning is the statute, considered as one entire and continuous act, and not as an agglomeration of unrelated clauses . Each clause or provision will be illuminated by those which are cognate to it and by the general tenor of the whole statute and thus obscurities and ambiguities may often be cleared up by the most direct and natural means. Secondly, effect must be given, if it is possible, to every word and clause of the statute, so that nothing shall be left devoid of meaning or destitute of force. To this end, each provision of the statute should be read in the light of the whole. For the general meaning of the legislature, as gathered from the entire act, may often prevail over the construction which would appear to be the most natural and obvious on the face of a particular clause. It is by this means that contradiction and repugnance between the different parts of the statute may be avoided.’ (See Black, Interpretation of Laws, 2nd Ed., pp. 317-319). Resorting to extrinsic aids, the ‘Explanatory Note’ to House Bill No. 3630, which was subsequently

enacted

as

Republic

Act

No.

1899,

reads:

‘In order to develop and expand the Maritime Commerce of the Philippines, it is necessary that harbor facilities be correspondingly improved, and, where necessary, expanded and developed. The national government is not in a financial position to handle all this work. On the other hand, with a greater autonomy, many chartered cities and provinces are financially able to have credit position which will allow them to undertake these projects. Some cities, such as the City of Bacolod under R.A. 161, has been authorized to reclaim foreshore

lands

bordering

it.

Other cities and provinces have continuously been requesting for authority to reclaim foreshore lands on the basis of the Bacolod City pattern, and to undertake work to establish, construct on the reclaimed area and maintain such port facilities as may be necessary. In order not to unduly delay the undertaking of these projects, and inorder to obviate the passage of individual pieces of legislation for every chartered city and province, it is hereby recommended that the accompanying bill be approved. It covers Authority for 416

All chartered cities and provinces to undertake this work. x x x (underscoring supplied) Utilizing the above explanatory note in interpreting and construing the provisions of R.A. 1899,

then

Secretary

of

Justice

Mabanag

opined:

It is clear that the ‘Bacolod City pattern’ was the basis of the enactment of the aforementioned bill of general application. This so-called ‘Bacolod City pattern’ appears to be composed of 3 parts, namely: Republic Act No. 161, which grants authority to Bacolod City to undertake or carry out ... the reclamation ... of any [sic] carry out the reclamation project conformably with Republic Act No. 161; and Republic Act No. 1132 authorizing Bacolod City to contract indebtedness or to issue bonds in the amount not exceeding six million

pesos

to

finance

the

reclamation

of

land

in

said

city.

Republic Act No. 161 did not in itself specify the precise space therein referred to as ‘foreshore’ lands, but it provided that docking and harbor facilities should be erected on the reclaimed portions thereof, while not conclusive would indicate that Congress used the word ‘foreshore’ in its broadest sense. Significantly, the plan of reclamation of foreshore drawn up by the Bureau of Public Works maps out an area of approximately 1,600,000 square meters, the boundaries of which clearly extend way beyond Webster’s limited concept of the term ‘foreshore’. As a contemporaneous construction by that branch of the Government empowered to oversee at least, the conduct of the work, such an interpretation deserves great weight. Finally, Congress in enacting Republic Act No. 1132 (supplement to RA 161), ‘tacitly confirmed and approved the Bureau’s interpretation of the term ‘foreshore’ when instead of taking the occasion to correct the Bureau of over extending its plan, it authorized the city of Bacolod to raise the full estimated cost of reclaiming the total area covered by the plan. The explanatory note to House Bill No. 1249 which became Republic

Act

No.

1132

states

among

the

things:

‘The Bureau of Public Works already prepared a plan for the reclamation of about 1,600,000 square meters of land at an estimated costs of about P6,000,000.00. The project is self-supporting because the proceeds from the sales or leases of lands so reclaimed will be

more

than

sufficient

to

cover

the

cost

of

the

project.’ 417

Consequently, when Congress passed Republic Act No. 1899 in order to facilitate the reclamation by local governments of foreshore lands on the basis of the Bacolod City pattern and in order to obviate the passage of individual pieces of legislation for every chartered city and provinces requesting authority to undertake such projects, the lawmaking body could not have had in mind the limited area described by Webster as ‘foreshore’

lands.

x

x

x’.

If it was really the intention of Congress to limit the area to the strict literal meaning of "foreshore" lands which may be reclaimed by chartered cities and municipalities, Congress would have excluded the cities of Manila, Iloilo, Cebu, Zamboanga and Davao from the operation of RA 1899 as suggested by Senator Cuenco during the deliberation of the bill considering that these cities do not have ‘foreshore’ lands in the strict meaning of the term. Yet, Congress did not approve the proposed amendment of Senator Cuenco, implying therefore, that Congress intended not to limit the area that may be reclaimed to the strict definition

of

‘foreshore’

lands.

The opinion of the then Secretary of Justice Mabanag, who was at that time the chief law officer and legal adviser of the government and whose office is required by law to issue opinions for the guidance of the various departments of the government, there being then no judicial interpretation to the contrary, is entitled to respect (see Bengzon vs. Secretary of Justice

and

Insular

Auditor,

68

Phil.

912).

We are not unmindful of the Supreme Court Resolution dated February 3, 1965 in Ponce vs. Gomez (L-21870) and Ponce vs. City of Cebu (L-2266 , by a unanimous vote of six (6) justices (the other five (5) members deemed it unnecessary to express their view because in their opinion the questions raised were not properly brought before the court), which in essence applied the strict dictionary meaning of "foreshore lands" as used in RA 1899 in the case of the city of Cebu. But this was promulgated long after the then Secretary of Justice Mabanag rendered the above opinion on November 16, 1959 and long after RREC has started

the

subject

reclamation

project.

418

Furthermore, as held by the lower court, Congress, after the Supreme Court issued the aforementioned Resolution, enacted RA 5187. In Sec. 3 (m) of said law, Congress appropriated money ‘for the construction of the seawall and limited access highway from the South boundary of the city of Manila to Cavite City, to the South, and from the North boundary of the city of Manila to the municipality of Mariveles, province of Bataan, to the North (including the reclamation of foreshore and submerged areas ... provided ... that ... existing projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected...’ This is a clear manifestation that Congress in enacting RA 1899, did not intend to limit the interpretation of the term "foreshore

land"

to

its

dictionary

meaning.

It is presumed that the legislature was acquainted with and had in mind the judicial construction given to a former statute on the subject, and that the statute on the subject, and that the statute was enacted having in mind the judicial construction that the prior enactment had received , or in the light of such existing judicial decisions as have direct bearing upon it (see 50 Am. Jur., Sec. 321, pp. 312-313). But notwithstanding said interpretation by the Supreme Court of RA 1899 in the Ponce cases, Congress enacted a law covering the same areas previously embraced in a RA 1899 (as mentioned earlier, cities without foreshore lands which were sought to be excluded from the operation of RA 1899 were not excluded), providing that respect be given the reclamation of not only foreshore lands but also of submerged lands signifying its non-conformity to the judicial construction given to RA 1899. If Congress was in accord with the interpretation and construction made by the Supreme Court on RA 1899, it would have mentioned reclamation of "foreshore lands" only in RA 5187, but Congress included "submerged lands" in order to clarify the intention on the grant of authority to cities and municipalities in the reclamation of lands bordering them as provided in RA 1899. It is, therefore, our opinion that it is actually the intention of Congress in RA 1899 not to limit the authority granted to cities and municipalities to reclaim foreshore lands in its strict dictionary meaning but rather in its wider scope as to include submerged lands."

419

The

Petition

is

impressed

with

merit.

To begin with, erroneous and unsustainable is the opinion of respondent court that under RA 1899, the term "foreshore lands" includes submerged areas. As can be gleaned from its disquisition and rationalization aforequoted, the respondent court unduly stretched and broadened the meaning of "foreshore lands", beyond the intentment of the law, and against the recognized legal connotation of "foreshore lands". Well entrenched, to the point of being elementary, is the rule that when the law speaks in clear and categorical language, there is no reason for interpretation or construction, but only for application. [16] So also, resort to extrinsic aids, like the records of the constitutional convention, is unwarranted, the language of the law being plain and unambiguous. [17] Then, too, opinions of the Secretary of Justice are unavailing to supplant or rectify any mistake or omission in the law. [18] To repeat, the term "foreshore lands" refers to:

"The strip of land that lies between the high and low water marks and that is alternately wet and dry according to the flow of the tide." (Words and Phrases, "Foreshore") "A strip of land margining a body of water (as a lake or stream); the part of a seashore between the low-water line usually at the seaward margin of a low-tide terrace and the upper limit of wave wash at high tide usually marked by a beach scarp or berm." (Webster’s Third New International Dictionary)

The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot broaden its meaning, much less widen the coverage thereof. If the intention of Congress were to include submerged areas, it should have provided expressly. That Congress did not so provide could only signify the exclusion of submerged areas from the term "foreshore lands". Neither is there any valid ground to disregard the Resolution of this Court dated February

420

3, 1965 in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) despite the enactment of Republic Act No. 5187 ("RA 5187"), the relevant portion of which, reads:

"Sec.

x

3.

Miscellaneous

x

Projects

x

m. For the construction of seawall and limited access highway from the south boundary of the City of Manila to Cavite City, to the south, and from the north boundary of the City of Manila to the municipality of Mariveles, province of Bataan, to the north, including the reclamation of the foreshore and submerged areas: Provided, That priority in the construction of such seawalls, highway and attendant reclamation works shall be given to any corporation and/or corporations that may offer to undertake at its own expense such projects, in which case the President of the Philippines may, after competitive bidding, award contracts for the construction of such projects, with the winning bidder shouldering all costs thereof, the same to be paid in terms of percentage fee of the contractor which shall not exceed fifty percent of the area reclaimed by the contractor and shall represent full compensation for the purpose, the provisions of the Public Land Law concerning disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided, finally, that the foregoing provisions and those of other laws, executive orders, rules and regulations to the contrary notwithstanding, existing rights, projects and/or contracts of city or municipal governments for the reclamation of foreshore and submerged lands shall be respected. x x x."

There is nothing in the foregoing provision of RA 5187 which can be interpreted to broaden the scope of "foreshore lands." The said law is not amendatory to RA 1899. It is an Appropriations Act, entitled " "AN ACT APPROPRIATING FUNDS FOR PUBLIC WORKS, SYNCHRONIZING THE SAME WITH PREVIOUS PUBLIC WORKS APPROPRIATIONS." All things viewed in proper perspective, we reiterate what was said in Ponce v. Gomez (L21870) and Ponce v. City of Cebu (L-22669) that the term "foreshore" refers to "that part of 421

the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides." As opined by this Court in said cases:

"WHEREAS, six (6) members of the Court (Justices Bautista Angelo, Concepcion, Reyes, Barrera, Dizon and Jose P. Bengzon) opine that said city ordinance and contracts are ultra vires and hence, null and void, insofar as the remaining 60% of the area aforementioned, because the term ‘foreshore lands’ as used in Republic Act No. 1899 should be understood in the sense attached thereto by common parlance;" (underscoring ours)

The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his opinion dated December 22, 1966, in a case with analogous facts as the present one, to wit:

"December 22, 1966

The

Secretary

and

of

Agriculture

Natural

Diliman,

Resources

Quezon

City

Sir: x

x

x

I.

Facts

-

1. On January 19, 1961, pursuant to the provisions of Republic Act No. 1899, the Municipality of Navotas enacted Ordinance No. 1 authorizing the Municipal Mayor to enter into

a

reclamation

contract

with

Mr.

Chuanico.

2. On March 15, 1961, a reclamation contract was concluded between the Municipality of 422

Navotas, represented by the Municipal Mayor, and Mr. Chuanico in accordance with the above ordinance. Thereunder, Mr. Chuanico shall be the attorney-in-fact of the Municipality in prosecuting the reclamation project and shall advance the money needed therefor; that the actual expenses incurred shall be deemed a loan to the Municipality; that Mr. Chuanico shall have the irrevocable option to buy 70% of the reclaimed area at P7.00 per square meter; that he shall have the full and irrevocable powers to do any and all things necessary and proper in and about the premises," including the power to hire necessary personnel for the prosecution of the work, purchase materials and supplies, and purchase or lease construction machineries and equipment, but any and all contracts to be concluded by him in

behalf

of

the

Municipality

x

shall

be

submitted

to

public

x

bidding. x

3. On March 16, 1961, the Municipal Council of Navotas passed Resolution No. 22 approving and

ratifying

x

the

contract.

x

III.

x

Comments

-

1. The above reclamation contract was concluded on the basis of Navotas Ordinance No. 1 which, in turn, had been enacted avowedly pursuant to Republic Act No. 1899. This being so, the contract, in order to be valid, must conform to the provisions of the said law. By authorizing local governments "to execute by administration any reclamation work," (Republic Act No. 1899 impliedly forbids the execution of said project by contract. Thus, in the case of Ponce et al. vs. Gomez (February 3, 1966), five justices of the Supreme Court voted to annul the contract between Cebu Development Corporation and Cebu City for the reclamation of foreshore lands because "the provisions of said ... contract are not ... in accordance with the provisions of Republic Act No. 1899," as against one Justice who opined that the contract substantially complied with the provisions of the said law. (Five Justices

expressed

no

opinion

on

this

point.) 423

Inasmuch as the Navotas reclamation contract is substantially similar to the Cebu reclamation contract, it is believed that the former is likewise fatally defective. 2. The Navotas reclamation project envisages the construction of a channel along the Manila Bay periphery of that town and the reclamation of approximately 650 hectares of land from said channel to a seaward distance of one kilometer. In the basic letter it is stated that "practically, all the 650 hectares of lands proposed to be reclaimed under the agreement" do not constitute foreshore lands and that "the greater portion of the area . . . is in fact navigable and presently being used as a fishing harbor by deep-sea fishing operators as well as a fishing ground of sustenance fisherman. Assuming the correctness of these averments, the Navotas reclamation contract evidently transcends the authority granted under Republic Act No. 1899, which empowers the local governments to reclaim nothing more than "foreshore lands," i.e., "that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides." (26 C.J. 890.) It was for this reason that in the cited case Ponce case, the Supreme Court, by a vote of 6-0 with five Justices abstaining, declared ultra vires and void the contractual stipulation for the reclamation of submerged lands off Cebu City, and permanently enjoined its execution under

Republic

x

Act

No.

1899.

x

x

In accordance with the foregoing, I have the honor to submit the view that the Navotas reclamation contract is not binding and should be disregarded for non-compliance with law. Very (SGD)

CLAUDIO

truly

yours, TEEHANKEE

Secretary of Justice"

424

The said opinion of Justice Secretary Teehankee who became Associate Justice, and later Chief Justice, of this Court, did, in our considered view, supersede the earlier opinion of former Justice Secretary Alejo Mabanag, aforestated, as the cases, in connection with which subject opinions were sought, were with similar facts. The said Teehankee opinion accords with

RA

1899.

It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended by Ordinance No. 158, and the Agreement under attack, have been found to be outside the intendment and scope of RA 1899, and therefore ultra vires and null and void. What is worse, the same Agreement was vitiated by the glaring absence of a public bidding. Obviously, there is a complete dearth of evidence to prove that RREC had really reclaimed 55 hectares. The letter of Minister Baltazar Aquino relied upon by RREC is no proof at all that RREC had reclaimed 55 hectares. Said letter was just referring to a tentative schedule of work to be done by RREC, even as it required RREC to submit the pertinent papers to show its supposed accomplishment, to secure approval by the Ministry of Public Works and Highways to the reclamation plan, and to submit to a public bidding all contracts and subcontracts for subject reclamation project but RREC never complied with such requirements and

conditions sine

qua

non.

No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the reclamation project were presented to reflect any accomplishment. Not even any statement or itemization of works accomplished by contractors or subcontractors or vouchers and other relevant papers were introduced to describe the extent of RREC’s accomplishment. Neither was the requisite certification from the City Engineer concerned that "portions of the reclamation project not less than 50 hectares in area shall have been accomplished or completed"

obtained

and

presented

by

RREC.

As a matter of fact, no witness ever testified on any reclamation work done by RREC, and extent thereof, as of April 26, 1962. Not a single contractor, sub-contractor, engineer, surveyor, or any other witness involved in the alleged reclamation work of RREC testified 425

on the 55 hectares supposedly reclaimed by RREC. What work was done, who did the work, where was it commenced, and when was it completed, was never brought to light by any witness before the court. Certainly, onus probandi was on RREC and Pasay City to show and point out the as yet unidentified 55 hectares they allegedly reclaimed. But this burden of proof

RREC

and

Pasay

City

miserably

failed

to

discharge.

So also, in the decision of the Pasay Court of First Instance dismissing the complaint of plaintiff-appellant, now petitioner Republic of the Philippines, the lifting of the writ of Preliminary Injunction issued on April 26, 1962 would become effective only "as soon as Defendant Republic Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans and specifications to the Director of Public Works, and shall have obtained approval thereof, and as soon as corresponding public bidding for the award to the contractor and sub-contractor that will undertake the reclamation project shall have been

effected."

(Rollo,

pp.

127-129,

G.R.

No.

103882)

From the records on hand, it is abundantly clear that RREC and Pasay City never complied with such prerequisites for the lifting of the writ of Preliminary Injunction. Consequently, RREC had no authority to resume its reclamation work which was stopped by said writ of preliminary

injunction

issued

on

April

26,

1962.

From the Contract for Dredging Work, dated November 26, 1960, marked Exhibit "21-A" for RREC before the lower court, and Exhibit “EE” for CCP before the Court of Appeals, it can be deduced that only on November 26, 1960 did RREC contract out the dredging work to C and A Construction Company, Inc., for the reclamation of the 55 hectares initially programmed to be reclaimed by it. But, as stated by RREC itself in the position paper filed with this Court on July 15, 1997, with reference to CDCP’s reclamation work, mobilization of the reclamation team would take one year before a reclamation work could actually begin. Therefore, the reclamation work undertaken by RREC could not have started before November

26,

1961.

Considering that on April 26, 1962 RREC was enjoined from proceeding any further with its reclamation work, it had barely five (5) months, from November, 1961 to April, 1962, to 426

work on subject reclamation project. It was thus physically impossible for RREC to reclaim 55 hectares, with the stipulated specifications and elevation, in such a brief span of time. In the report of RREC (Exhibit "DD" for CCP), it was conceded that due to the writ of preliminary injunction issued on April 26, 1962, C and A Construction Co., Inc. had suspended

its

dredging

operation

since

May,

1962.

The "graphical report" on the Pasay Reclamation project, as of April 30, 1962, attached to the Progress Report marked Exhibit "DD", is a schematic representation of the work accomplishment referred to in such Progress Report, indicating the various elevations of the land surface it embraced, ranging from 0.00 meters to the highest elevation of 2.5 meters above MLLW. Such portrayal of work accomplished is crucial in our determination of whether or not RREC had actually "reclaimed" any land as under its Contract for Dredging Work with C and A Construction Company (Exhibit "EE"), the required final elevation for a completely reclaimed land was 3.5 meters above MLLW, as explicitly provided in said Contract for Dredging Work. So, the irresistible conclusion is - when the work on subject RREC-Pasay City reclamation project stopped in April, 1962 in compliance with the writ of preliminary injunction issued by the trial court of origin, no portion of the reclamation project worked on by RREC had reached the stipulated elevation of 3.5 meters above MLLW. The entire area it worked on was only at sea level or 0.00 meter above MLLW. In short, RREC had not yet reclaimed any area when the writ of preliminary injunction issued

in

April

1962.

On this point, the testimonies of Architect Ruben M. Protacio, Architect and Managing partner of Leandro V. Locsin and partners, Architect and City Planner Manuel T. Manñ oza, Jr. of Planning Resources and Operation System, Inc., Rose D. Cruz, Executive Assistant, Office of the President, from 1966 to 1970, and Dr. Lucrecia Kasilag, National Artist and member of CCP Advisory Committee, come to the fore. These credible, impartial and knowledgeable witnesses recounted on the witness stand that when the construction of the Main Building of the Cultural Center of the Philippines (CCP) began in 1966, the only surface land available was the site for the said building (TSN, Sept. 29, 1997, pages 8, 14 and 50), what could be seen in front of and behind it was all water (TSN, Sept. 29, 1997, pages 127-128). When the CCP Main Building was being constructed, from 1966 to 1969, the land above sea 427

level thereat was only where the CCP Main Building was erected and the rest of the surroundings were all under water, particularly the back portion fronting the bay. (TSN, Sept. 13, 1997, pp. 181, 182, 185, 186, 188). Dr. Lucrecia R. Kasilag stressed that on April 16, 1966, during the ground breaking for the CCP Main Building, it was water all around (TSN,

Sept.

30,

1997,

pp.

320,

324,

325).

There was indeed no legal and factual basis for the Court of Appeals to order and declare that "the requirement by the trial court on public bidding and the submission of RREC’s plans and specification to the Department of Public Works and Highways in order that RREC may continue the implementation of the reclamation work is deleted for being moot and academic." Said requirement has never become moot and academic. It has remained indispensable, as ever, and non-compliance therewith restrained RREC from lawfully resuming the reclamation work under controversy, notwithstanding the rendition below of the

decision

in

its

favor.

Verily, contrary to what the Court of Appeals found, RREC had not reclaimed any area with the prescribed elevation of 3.5 meters above MLLW, so much so that in 1978, it (RREC) opted to file with the former Ministry of Public Highways, a claim for compensation of P30,396,878.20, for reclamation work allegedly done before the CDCP started working on the reclamation of the CCP grounds. On September 7, 1979, RREC asked the Solicitor General to settle its subject claim for compensation at the same amount of P30,396,878.20. But on June 10, 1981, guided by the cost data, work volume accomplished and other relevant information gathered by the former Ministry of Public Highways, the Solicitor General informed RREC that the value of what it had accomplished, based on 1962 price levels, was only P8,344,741.29, and the expenses for mobilization of equipment amounted to P2,581,330.00. The aforesaid evaluation made by the government, through the then Minister of Public Highways, is factual and realistic, so much so that on June 25, 1981, RREC,

in

its

reply

letter

to

the

Solicitor

General,

stated:

"We regret that we are not agreeable to the amount of P10,926,071.29, based on 1962 cost data, etc., as compensation based on quantum meruit. The least we would consider is the amount of P10.926,071.29 plus interest at the rate of 6% per annum from 1962 to the time 428

of payment. We feel that 6% is very much less than the accepted rate of inflation that has supervened since 1962 to the present, and even less than the present legal rate of 12% per annum."[19]

Undoubtedly, what RREC claimed for was payment for what it had done, and for the dredge fill

of

1,558,395

cubic

meters

it

used,

on

subject

reclamation

project.

Respondent Court likewise erred in ordering the turn-over to Pasay City of the following titled lots, to wit:

LOT NO.

BUILDING

AREA

OCT/TCT

42

Gloria Maris Restaurant

9,516 sq.m.

OCT 159 in the name of GSIS

3

Asean Garden

76,299 sq. m.

OCT 10251 in the name of CCP

12

Folk Arts Theater and PICC parking space

1,7503 hec.

TCT 18627 in the name of CCP

22

landscaped with sculpture of Asean Artists- 132,924 site of Boom na Boom m.

23

open space, back of Philcite

34,346 sq. m.

TCT 75677 in the name of CCP

24

Parking space for Star City, CCP,Philcite

10,352 sq.m.

TCT 75678 in the name of CCP

25

open space occupied by Star City

11,323 sq.m.

TCT 75679 in the name of CCP

28

open space beside PICC

27,689 sq.m.

TCT 75684 in the name of CCP

29

open space, leased by El Shaddai

sq.TCT 75676 in the name of CCP

106,067 sq.m.

TCT 75681 in the name of CCP

429

We discern no factual basis nor any legal justification therefor. In the first place, in their answer to the Complaint and Amended Complaint below, RREC and Pasay City never prayed for the transfer to Pasay City of subject lots, title to which had long become indefeasible in favor

of

the

rightful

title

holders,

CCP

and

GSIS,

respectively.

The annotation of a notice of lis pendens on the certificates of title covering the said lots is of no moment. It did not vest in Pasay City and RREC any real right superior to the absolute ownership thereover of CCP and GSIS. Besides, the nature of the action did not really warrant

the

issuance

of

a

notice

of lis

pendens.

Section 14 of Rule 13, Revised Rules of Civil Procedure, reads:

"Sec. 14. Notice of lis pendens. - In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names. The notice of lis pendens herein above mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded."

Under the aforecited provision of law in point, a notice of lis pendens is necessary when the action is for recovery of possession or ownership of a parcel of land. In the present litigation, RREC and Pasay City, as defendants in the main case, did not counterclaim for the turnover

to

Pasay

City

of

the

titled

lots

aforementioned.

430

What is more, a torrens title cannot be collaterally attacked. The issue of validity of a torrens title, whether fraudulently issued or not, may be posed only in an action brought to impugn or annul it. (Halili vs. National Labor Relations Commission, 257 SCRA 174; Cimafranca vs. Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and cannot be ignored, is the germane provision of Section 48 of P.D. 1529, that a certificate of title can never be the subject of a collateral attack. It cannot be altered, modified, or cancelled except in

a

direct

proceeding

instituted

in

accordance

with

law.

Although Pasay City and RREC did not succeed in their undertaking to reclaim any area within subject reclamation project, it appearing that something compensable was accomplished by them, following the applicable provision of law and hearkening to the dictates of equity, that no one, not even the government, shall unjustly enrich oneself/itself at the expense of another[20], we believe; and so hold, that Pasay City and RREC should be paid for the said actual work done and dredge-fill poured in, worth P10,926,071.29, as verified by the former Ministry of Public Highways, and as claimed by RREC itself in its aforequoted

letter

dated

June

25,

1981.

It is fervently hoped that long after the end of our sojourn in this valley of tears, the court, for its herein historic disposition, will be exalted by the future generations of Filipinos, for the preservation of the national patrimony and promotion of our cultural heritage. As writer Channing rightly puts it: "Whatever expands the affections, or enlarges the sphere of our sympathies - Whatever makes us feel our relation to the universe and all that it inherits in time and in eternity, and to the great and beneficent cause of all, must unquestionably refine our

nature,

and

elevate

us

in

the

scale

of

being."

WHEREFORE: In G.R. No. 103882, the Petition is GRANTED; the Decision, dated January 28, 1992, and Amended Decision, dated April 28, 1992, of the Court of Appeals, are both SET ASIDE; and Pasay City Ordinance No. 121, dated May 6, 1958, and Ordinance No. 158, dated April 21, 1959, as well as the Reclamation Agreements entered into by Pasay City and Republic Real Estate

Corporation

(RREC)

as

authorized

by

said

city

ordinances,

are 431

declared NULL and VOID for

being ultra

vires, and

contrary

to

Rep.

Act

1899.

The writ of preliminary injunction issued on April 26, 1962 by the trial court a quo in Civil Case No. 2229-P is made permanent, and the notice of lis pendens issued by the Court of Appeals in CA G.R. CV No. 51349 orderedCANCELLED. The Register of Deeds of Pasay City is directed to take note of and annotate on the certificates of title involved, the cancellation of

subject

notice

of lis

pendens.

The petitioner, Republic of the Philippines, is hereby ordered to pay Pasay City and Republic Real Estate Corporation the sum of TEN MILLION NINE HUNDRED TWENTY-SIX THOUSAND

SEVENTY-ONE

AND

TWENTY-NINE

CENTAVOS

(P10,926,071.29)

PESOS, plus interest thereon of six (6%) percent per annum from May 1, 1962 until full payment, which amount shall be divided by Pasay City and RREC, share and share alike. In

G.R.

No.

No

105276,

the

Petition

pronouncement

is

hereby DENIED for as

to

lack

of

merit. costs.

SO ORDERED.

17. G.R. No. 207348

August 19, 2014

ROWENA R. SALONTE, Petitioner, vs. COMMISSION ON AUDIT, CHAIRPERSON MA. GRACIA PULIDO-TAN, COMMISSIONER JUANITO G. ESPINO, JR., COMMISSIONER HEIDI L. MENDOZA, and FORTUNATA M. RUBICO, DIRECTOR IV, COA COMMISSION SECRETARIAT, in their official capacities, Respondents. DECISION VELASCO, JR., J.: 432

The Case This is a petition for review filed under Rule 64 assailing the February 15, 2008 Decision 1 and November 5, 2012 Resolution,2 denominated as Decision Nos. 2008-018 and 2012-190, respectively, of the Commission on Audit (COA). The assailed issuances affirmed the Notice of Disallowance No. (ND) 2000-002-101(97) dated November 14, 2001 issued by Rexy M. Ramos, COA State Auditor IV, pursuant to COA Assignment Order No. 2000-63. 3 The Facts On April 26, 1989, the City of Mandaue and F.F. Cruz and Co., Inc. (F.F. Cruz) entered into a Contract of Reclamation4 in which F.F. Cruz, in consideration of a defined land sharing formula thus stipulated, agreed to undertake, at its own expense, the reclamation of 180 hectares, more or less, of foreshore and submerged lands fromthe Cabahug Causeway in that city. The timetables, i.e., commencement of the contract and project completion, are provided in paragraphs 2 and 15 of the Contract which state: 2. COMMENCEMENT. Work on the reclamation shall commence not later than [July 1989], after thiscontract shall be ratified by the Sanggunian Panlungsod; xxxx 15. CONTRACT DURATION. The project is estimated to be completed in six (6) years: (3 years for the dredge-filling and seawall construction and 3 years for the infrastructures completion). However, if all the infrastructures within the OWNERS’ share of the project are already completed within the six (6) year period agreed upon, any extension of time for works to bedone within the share of the DEVELOPERS, shall be at the discretion of the DEVELOPERS, as a growing city, changes in requirements of the lot buyers are inevitable. On a best effort basis, the construction of roadways, drainage system and open spaces in the area designated as share of the City of Mandaue, shall be completed not later than December 31, 1991. (emphasis supplied) Subsequently, the parties inked inrelation to the above project a Memorandum of Agreement (MOA) dated October 24, 19895 whereby the City of Mandaue allowed F.F. Cruz to put up structures on a portion of a parcel of land owned by the city for the use of and to house F.F. Cruz personnel assigned at the project site, subject to terms particularly provided in paragraphs 3, 4 and 5 of the MOA: 3) That [F.F. Cruz] desires to use a portion of a parcel of land of the [City of Mandaue] described under paragraph 1 hereof to the extent of 495 square meters x x x to be used by them in the construction of their offices to house its personnel to supervise the Mandaue City Reclamation Project x x x. xxxx 433

4) That the [City of Mandaue] agrees to the desire of [F.F. Cruz] to use a portion of the parcel of land described under paragraph 1 by [F.F. Cruz] for the latter to use for the construction of their offices to house its personnel to supervise the said Mandaue City Reclamation Project with no rental to be paid by [F.F. Cruz] to the [City of Mandaue]. 5) That the [City of Mandaue] and [F.F. Cruz] have agreed that upon the completion of the Mandaue City Reclamation Project, all improvements introduced by [F.F. Cruz] to the portion of the parcel of land owned by the [City of Mandaue]as described under paragraph 3 hereof existing upon the completion of the said Mandaue City Reclamation Project shall ipso facto belong to the [City of Mandaue] in ownershipas compensation for the use of said parcel of land by [F.F. Cruz] without any rental whatsoever. (emphasis supplied) Pursuant to the MOA, F.F. Cruz proceeded to construct the contemplated housing units and other facilities which included a canteen and a septic tank. Later developments saw the City of Mandaue undertaking the Metro Cebu Development Project II (MCDP II), part of which required the widening of the Plaridel Extension Mandaue Causeway. However, the structures and facilities built by F.F. Cruz subject of the MOA stood in the direct path of the road widening project. Thus, the Department of Public Works and Highways (DPWH) and Samuel B. Darza, MCDP II project director, entered into an Agreement to Demolish, Remove and Reconstruct Improvement dated July 23, 1997 6 with F.F. Cruz whereby the latter would demolish the improvements outside of the boundary of the road widening project and, in return, receive the total amount of PhP 1,084,836.42 in compensation. Accordingly, petitioner Rowena B.Rances (now Rowena RancesSolante), Human Resource Management Officer III, prepared and, with the approval of Samuel B. Darza (Darza), then issued Disbursement Voucher (DV) No. 102-07-88-97 dated July 24, 1997 7 for PhP 1,084,836.42 in favor of F.F. Cruz. In the voucher, Solante certified that the expense covered by it was "necessary, lawful and incurred under my direct supervision." Thereafter, Darza addressed a letter-complaint to the Office of the Ombudsman, Visayas, inviting attention to several irregularities regarding the implementation of MCDP II. The letter was referred to the COA which then issued Assignment Order No. 2000-063 for a team to audit the accounts of MCDP II. Following an audit, the audit team issued Special Audit Office (SAO) Report No. 2000-28, par. 5 of which states: F.F. Cruz and Company, Inc. was paid ₱1,084,836.42 for the cost of the property affected by the widening of Plaridel Extension, Mandaue Causeway. However, under Section 5 of its MOA with Mandaue City, the former was no longer the lawful owner of the properties at the time the payment was made.8 Based on the above findings, the SAO audit team, through Rexy Ramos, issued the adverted ND 2000-002-101-(97)9 disallowing the payment of PhP 1,084,836.42 to F.F. Cruz and 434

naming that company, Darza and Solante liable for the transaction. Therefrom, Solante sought reconsideration, while F.F. Cruz appealed, but the motion for reconsideration and the appeal were jointly denied in Legal and Adjudication Office (LAO) Local Decision No. 2004-040 dated March 5, 2004, which F.F. Cruz in time appealed to COA Central. In the meantime, the adverted letter-complaint of Darza was upgraded as an Ombudsman case, docketed as OMB-V-C-03-0173-C, against Solante, et al., albeit the Ombudsman, by Resolution of June 29, 2006,10 would subsequently dismiss the same for lack of merit. The Ruling of the Commission on Audit In its February 15, 2008 Decision, 11 the COA, as indicated at the outset, affirmed ND 2000002-101-97 on the strength of the following premises: From the above provision of the MOA, it is clear that the improvements introduced by F.F. Cruz x x x would be owned by the City upon completion of the project which under the Contract of reclamation should have been in 1995. However, the project was not completed in 1995 and even in 1997 when MDCP paid for these improvements. The fact that the reclamation project had not yet been completed or turned over to the City of Mandaue by F.F. Cruz in 1997 or two years after it should have been completed, does not negate the right over such improvements by the City x x x. Clearly, the intention of the stipulation is for F.F. Cruz x x x to compensate the government for the use of the land on which the office, pavement, canteen, extension shed, house and septic tank were erected. Thus, to make the government pay for the cost of the demolished improvements will defeat the intention of parties as regards compensation due from the contractor for its use of [the] subject land. Under Article 1315 of the Civil Code, from the moment a contract is perfected, the parties are bound to the fulfillment to what has been expressly stipulated and all the consequences which according to their nature, may be in keeping with good faith, usage and law. Thus, even if the contractual stipulations may turn out to be financially disadvantageous to any party, such will not relieve any or both parties fromtheir contractual obligations. 12 (emphasis supplied) From such decision, Solante filed a Motion for Reconsideration dated June 28, 2010 purportedly with Audit Team Leader, Leila Socorro P. Domantay. This motion was denied by the COA in a Resolution dated November 5, 201213 wherein the commission held: x x x The arguments of Ms. Solante that as long as the Project has not yet been turned over, the ownership of the said improvements would not be acquired yet by the City would put the entire contract at the mercy of F.F. Cruz & Co., Inc., thus, negating the mutuality of contracts principle expressed in Article 1308 ofthe New Civil Code, which states: Art. 1308. The contracts must bindboth contracting parties; its validity or compliance cannot be leftto the will of one of them. On February 15, 2013, Solante received a Notice of Finality of Decision (NFD) 14 stating that the COA Decision dated February 15, 2008 and Resolution dated November 5, 2012 have 435

become final and executory, a copy of the Resolution having been served on the parties on November 9, 2012 by registered mail. Notably, Solante never received a copy of the COA Resolution. She came to get one only on May 8, 2013 after inquiring from the Cebu Central Post Office, which, in a Certification of Deliverydated May 8, 2013, 15 stated that the registered mail containing said copy was in fact not delivered. Hence, the instant petition. The Issue The resolution of the present controversy rests on the determination of a sole issue: who between the City ofMandaue and F.F. Cruz owned during the period material the properties that were demolished. The Court’s Ruling The petition is meritorious. The COA and its audit team obviously misread the relevant stipulations of the MOA in relation to the provisions on project completion and termination of contract of the Mandaue-F.F. Cruz reclamation contract. Essentially, the COA is alleging that the Contract of Reclamation establishes an obligation on the part of F.F. Cruz to finish the project within the allotted period of six (6) years from contract execution in August 1989. Prescinding from this premise, the COA would conclude that after the six (6)-year period, F.F. Cruz is automatically deemed to be in delay, the contract considered as completed, and the ownership of the structures built in accordance with the MOA transferred to the City of Mandaue. COA’s basic position and the arguments holding it together is untenable. On this point, the Civil Code provision on obligations with a period is relevant. Article 1193 thereof provides: Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to bethat which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. (emphasis supplied) A plain reading of the Contract ofReclamation reveals that the six (6)-year period provided for projectcompletion, or, with like effect, termination of the contract was a mere 436

estimateand cannot be considered a period or a "day certain" inthe context of the aforequoted Art. 1193. To be clear, par. 15 of the Contract of Reclamation states: "[T]he project is estimated to be completed in six (6) years." As such, the lapse of six (6) years from the perfection of the contract did not, by itself, make the obligation to finish the reclamation project demandable, such as to put the obligor in a state of actionable delay for its inability to finish. Thus, F.F. Cruz cannot be deemed to be in delay. Parenthetically, the Ombudsman, in a Resolution of June 29, 2006 in OMB-V-C-03-0173-C, espoused a similar view in dismissing the complaint against Solante, thus: A careful reading of the pertinent section of the Contract of Reclamation between F.F. Cruz and Mandaue City, however, would confirm respondents Rances-Solante[’s]and Sungahid’s view that herein respondent Cruz was still the owner of the subject properties at the time these were demolished. Indeed, the Contract specifies that the six (6)-year period was no more than an estimate of the project completion. It was not a fixed period agreed upon. Being so, the mere lapse of six (6) years from the execution of the Contract, did not by itself deem the reclamation project completed, muchless bring about the fulfillment of the condition stipulated in the MOA (on the shift of ownership over the demolished properties). Herein respondent Cruz, and/or his company, at least on this particular regard, can be said to be still the owner of the structures along Plaridel Extension x x x, when these were demolished to give way to road widening. It was nothing but equitable that they get compensated for the damages caused by the demolition. 16 (emphasis supplied) Put a bit differently, the lapse of six (6) years from the perfection of the subject reclamation contract, withoutmore, could not have automatically vested Mandaue City, under the MOA, with ownership of the structures. Moreover, even if we consider the allotted six (6) years within which F.F. Cruz was supposed to completethe reclamation project, the lapse thereof does not automatically mean thatF.F. Cruz was in delay. As may be noted, the City of Mandaue never madea demand for the fulfillment of its obligation under the Contract of Reclamation. Article 1169 of the Civil Code on the interaction of demand and delay and the exceptions to the requirement of demand relevantly states: Article 1169. Those obliged to deliver orto do something incur in delay from the time the obligeejudicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. 437

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the momentone of the parties fulfills his obligation, delay by the other begins. Thus, in J Plus Asia Development Corporation v. Utility Assurance Corporation, 17 the Court has held: In this jurisdiction, the following requisites must be present in order that the debtor may be in default: (1) that the obligation be demandable and already liquidated;(2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. (emphasis supplied) In the instant case, the records are bereft of any document whence to deduce that the City of Mandaue exactedfrom F.F. Cruz the fulfillment of its obligation under the reclamation contract. And to be sure, not one of the exceptions to the requisite demand under Art. 1169 is established, let alone asserted. On the contrary, the then city mayor of Mandaue, no less, absolved F.F. Cruz from incurring under the premises in delay. In his affidavit dated July 9, 2004,18 then Mayor Ouano stated: That although x x x the reclamation wasestimatedto be completed in six years ending in 1995, the said project however, was not fully completed when the demolition of the mentioned improvements of [F.F. Cruz] was made x x x [and in fact] up to now the said Mandaue Reclamation Project has not yet been fully completed and turned over to the City of Mandaue. x x x [S]ince at the time of the demolition the said improvements actually belonged to [F.F. Cruz] and the City of Mandaue has no claim whatsoever on the said payment x x x for the demolished improvements. (emphasis supplied) As it were, the Mandaue-F.F.Cruz MOA states that the structures built by F .F. Cruz on the property of the city will belong to the latter only upon the completion of the project. Clearly, the completion of the project is a suspensive condition that has yet to be fulfilled.1âwphi1 Until the condition arises, ownership of the structures properly pertains to F .F. Cruz. To be clear, the MOA does not state that the structures shall inure in ownership to the City of Mandaue after the lapse of six ( 6) years from the execution of the Contract of Reclamation. What the MOA does provide is that ownership of the structures shall vest upon, or ipso facto belong to, the City of Mandaue when the Contract of Reclamation shall have been completed. Logically, before such time, or until the agreed reclamation project is actually finished, F.F. Cruz owns the structures. The payment of compensation for the demolition thereof is justified. The disallowance of the payment is without factual and legal basis. COA then gravely abused its discretion when it decreed the disallowance. WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed February 15, 2008 Decision, November 5, 2012 Resolution, and Notice of Disallowance No. 2000-002-101 (97) 438

dated November 14, 2001 issued by the Commission on Audit are hereby REVERSED and SET ASIDE. No costs. SO ORDERED.

18, SARGASSO CONSTRUCTION & DEVELOPMENT CORPORATION/PICK & SHOVEL, INC.,/ATLANTIC ERECTORS, INC. (JOINT VENTURE), Petitioner, versus pHILIPEOPLEINE PORTS AUTHORITY, Respondent. G.R. No. 170530 | 2010-07-05 DECISION MENDOZA,

J.:

This is a petition for review on certiorari under Rule 45 which seeks to annul and set aside the August 22, 2005 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 63180 and its November 14, 2005 Resolution[2] denying petitioner's motion for the reconsideration thereof. The questioned CA decision reversed the June 8, 1998 Decision[3] of the Regional Trial Court of Manila, Branch 14, in Civil Case No. 97-83916, which granted petitioner's action for specific performance. The factual and procedural antecedents have been succinctly recited in the subject Court of Appeals decision in this wise:[4] Plaintiff Sargasso Construction and Development Corporation, Pick and Shovel, Inc. and Atlantic Erectors, Inc., a joint venture, was awarded the construction of Pier 2 and the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union, after a public bidding conducted by the defendant PPA. Implementation of the project commenced on August 14, 1990. The port construction was in pursuance of the development of the Northwest Luzon Growth Quadrangle. Adjacent to Pier 2 is an area of P4,280 square meters intended for the reclamation project as part of the overall port development plan. In a letter dated October 1, 1992 of Mr. Melecio J. Go, Executive Director of the consortium, plaintiff offered to undertake the reclamation between the Timber Pier and Pier 2 of the Port of San Fernando, La Union, as an extra work to its existing construction of R.C. Pier 2 and Rock Causeway for a price of P36,294,857.03. Defendant replied thru its Assistant 439

General Manager Teofilo H. Landicho who sent the following letter dated December 18, 1992: "This is to acknowledge receipt of your letter dated 01 October 1992 offering to undertake the reclamation between the Timber Pier and Pier 2, at the Port of San Fernando, La Union as an extra work to your existing contract. "Your proposal to undertake the project at a total cost of THIRTY SIX MILLION TWO HUNDRED NINETY FOUR THOUSAND EIGHT HUNDRED FIFTY SEVEN AND 03/100 PESOS (P36,294,857.03) is not acceptable to PPA. If you can reduce your offer to THIRTY MILLION SEVEN HUNDRED NINETY FOUR THOUSAND TWO HUNDRED THIRTY AND 89/100 (P30,794,230.89) we may consider favorably award of the project in your favor, subject to the approval of higher authority. Please signify your agreement to the reduced amount of P30,794,230.89 by signing in the space provided below. (emphasis in the original) On August 26, 1993, a Notice of Award signed by PPA General Manager Rogelio Dayan was sent to plaintiff for the phase I Reclamation Contract in the amount of P30,794,230.89 and instructing it to "enter into and execute the contract agreement with this Office" and to furnish the documents representing performance security and credit line. Defendant likewise stated [and] made it a condition that "fendering of Pier No. 2 Port of San Fernando, and the Port of Tabaco is completed before the approval of the contract for the reclamation project." Installation of the rubber dock fenders in the said ports was accomplished in the year 1994. PPA Management further set a condition [that] "the acceptance by the contractor that mobilization/demobilization cost shall not be included in the contract and that escalation shall be reckoned upon approval of the Supplemental Agreement." The award of the negotiated contract as additional or supplemental project in favor of plaintiff was intended "to save on the mobilization/demobilization costs and some items as provided for in the original contract." Hence, then General Manager Carlos L. Agustin presented for consideration by the PPA Board of Directors the contract proposal for the reclamation project. At its meeting held on September 9, 1994, the Board decided not to approve the contract proposal, as reflected in the following excerpt of the minutes taken during said board meeting: "After due deliberation, the Board advised Management to bid the project since there is no strong legal basis for Management to award the supplemental contract through negotiation. The Board noted that the Pier 2 Project was basically for the construction of a pier while the supplemental agreement refers to reclamation. Thus there is no basis to compare the 440

terms and conditions of the reclamation project with the original contract (Pier 2 Project) of Sargasso."[5]

It appears that PPA did not formally advise the plaintiff of the Board's action on their contract proposal. As plaintiff learned that the Board was not inclined to favor its Supplemental Agreement, Mr. Go wrote General Manager Agustin requesting that the same be presented again to the Board meeting for approval. However, no reply was received by plaintiff from the defendant. On June 30, 1997, plaintiff filed a complaint for specific performance and damages before the Regional Trial Court of Manila alleging that defendant PPA's unjustified refusal to comply with its undertaking, unnecessarily leading to the delay in the implementation of the award under the August 26, 1993 Notice of Award, has put on hold plaintiff's men and resources earmarked for the project, aside from effectively tying its hands in undertaking other projects for fear that plaintiff's incapacity to undertake work might be spread thinly and it might not be able to function efficiently if the PPA project and other projects should require simultaneous attention. Plaintiff averred that it sought reconsideration of the August 9, 1996 letter of PPA informing it that it did not qualify to bid for the proposed extension of RC Pier No. 2, Port of San Fernando, La Union for not having IAC Registration and Classification and not complying with equipment requirement. In its letter dated September 19, 1996, plaintiff pointed out that the disqualification was clearly unjust and totally without basis considering that individual contractors of the joint venture have undertaken separately bigger projects, and have been such individual contractors for almost 16 years. It thus prayed that judgment be rendered by the court directing the defendant (a) to comply with its undertaking under the Notice of Award dated August 26, 1993; and (b) to pay plaintiff actual damages (P1,000,000.00), exemplary damages (P1,000,000.00), attorney's fees (P300,000.00) and expenses of litigation and costs (P50,000.00). Defendant PPA thru the Office of the Government Corporate Counsel (OGCC) filed its Answer with Compulsory Counterclaim contending that the alleged Notice of Award has already been properly revoked when the Supplemental Agreement which should have implemented the award was denied approval by defendant's Board of Directors. As to plaintiff's pre-disqualification from participating in the bidding for the extension of R.C. Pier No. 2 Project at the Port of San Fernando, La Union, the same is based on factual determination by the defendant that plaintiff lacked IAC Registration and Classification and equipment for the said project as communicated in the August 9, 1996 letter. Defendant disclaimed any liability for whatever damages suffered by the plaintiff when it "jumped the gun" by committing its alleged resources for the reclamation project despite the fact that no Notice to Proceed was issued to plaintiff by the defendant. The cause of action insofar as the Extension of R.C. Pier No. 2 of the Port of San Fernando, La Union, is barred by the statute of limitation since plaintiff filed its request for reconsideration way beyond the seven (7) day441

period allowed under IB 6-5 of the Implementing Rules and Regulations of P.D. 1594. Defendant clarified that the proposed Reclamation Project and Extension of R.C. Pier No. 2 San Fernando, La Union, are separate projects of PPA. The Board of Directors denied approval of the Supplemental Agreement on September 9, 1994 for lack of legal basis to award the supplemental contract through negotiation which was properly communicated to the plaintiff as shown by its letter dated September 19, 1994 seeking reconsideration thereof. As advised by the Board, PPA Management began to make preparations for the public bidding for the proposed reclamation project. In the meantime, defendant decided to pursue the extension of R.C. Pier 2, San Fernando, La Union. xxx It [prayed that the complaint be dismissed]. (Emphasis supplied) After trial, the lower court rendered a decision in favor of the plaintiff, the dispositive portion of which reads: "WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered ordering the defendant to execute a contract in favor of the plaintiff for the reclamation of the area between the Timber Pier and Pier 2 located at San Fernando, La Union for the price of P30,794,230.89 and to pay the costs. The

counterclaim

is

dismissed

for

lack

of

merit.

SO ORDERED.[6] In addressing affirmatively the basic issue of whether there was a perfected contract between the parties for the reclamation project, the trial court ruled that the "higher authority x x adverted to does not necessarily mean the Board of Directors (Board). Under IRR, P.D. 1594 (1)B10.6, approval of award and contracts is vested on the head of the infrastructure department or its duly authorized representative. Under Sec. 9 (iii) of P.D. 857 which has amended P.D. 505 that created the PPA, one of the particular powers and duties of the General Manager and Assistant General Manager is to sign contracts."[7] It went on to say that "in the case of the PPA, the power to enter into contracts is not only vested on the Board of Directors, but also to the manager" citing Section 9 (III) of P.D. No. 857.[8] The trial court added that the tenor of the Notice of Award implied that respondent's general manager had been empowered by its Board of Directors to bind respondent by contract. It noted that whereas the letter-reply contained the phrase "approval of the higher authority," the conspicuous absence of the same in the Notice of Award supported the finding that the general manager had been vested with authority to enter into the contract for and in behalf of respondent. To the trial court, the disapproval by the PPA Board of the supplementary contract for the reclamation on a ground other than the general manager's 442

lack of authority was an explicit recognition that the latter was so authorized to enter into the purported contract. Respondent moved for a reconsideration of the RTC decision but it was denied for lack of merit. Respondent then filed its Notice of Appeal. Subsequently, petitioner moved to dismiss the appeal on the ground that respondent failed to perfect its appeal seasonably. On June 27, 2000, the Court of Appeals issued a Resolution[9] dismissing respondent's appeal for having been filed out time. Respondent's motion for reconsideration of said resolution was also denied.[10] Undaunted, respondent elevated its problem to this Court via a petition for review on certiorari under Rule 45 assailing the denial of its appeal. On July 30, 2004, the Court rendered an en banc decision[11] granting respondent's petition on a liberal interpretation of the rules of procedure, and ordering the CA to conduct further proceedings. On August 22, 2005, the CA rendered the assailed decision reversing the trial court's decision and dismissing petitioner's complaint for specific performance and damages. Thus, the dispositive portion thereof reads: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated June 8, 1998 of the trial court in Civil Case No. 97-83916 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered DISMISSING the complaint for specific performance and damages filed by Plaintiff Sargasso Construction and Development Corporation/Pick & Shovel, Inc./Atlantic Erectors, Inc., (Joint Venture) against the Philippine Ports Authority for lack of merit. In setting aside the trial court's decision, the CA ruled that the law itself should serve as the basis of the general manager's authority to bind respondent corporation and, thus, the trial court erred in merely relying on the wordings of the Notice of Award and the Minutes of the Board meeting in determining the limits of his authority; that the power of the general manager "to sign contracts" is different from the Board's power "to make or enter (into) contracts"; and that, in the execution of contracts, the general manager only exercised a delegated power, in reference to which, evidence was wanting that the PPA Board delegated to its general manager the authority to enter into a supplementary contract for the reclamation project. The CA also found the disapproval of the contract on a ground other than the general manager's lack of authority rather inconsequential because Executive Order 380[12] expressly authorized the governing boards of government-owned or controlled corporations "to enter into negotiated infrastructure contracts involving... not more than fifty million (P50 million)." The CA further noted that the Notice of Award was only one of those documents that comprised the entire contract and, therefore, did not in itself 443

evidence Hence,

the

perfection this

of

a

contract. petition.

The issue to be resolved in this case is whether or not a contract has been perfected between the parties which, in turn, depends on whether or not the general manager of PPA is vested with authority to enter into a contract for and on behalf of PPA. The

petition

fails.

Petitioner contends that the existence of "Notice of Award of Contract and Contractor's Conforme thereto," resulting from its negotiation with respondent, proves that a contract has already been perfected, and that the other documents enumerated under the amended Rules and Regulations[13] implementing P.D. 1594[14] are mere physical representations of the parties' meeting of the minds; that the "Approval of Award by Approving Authority" is only a "supporting document," and not an evidence of perfection of contract, and which merely "facilitates the approval of the contract;"[15] that PPA is bound by the acts of its general manager in issuing the Notice of Award under the doctrine of apparent authority; and that the doctrine of estoppel, being an equitable doctrine, cannot be invoked to perpetuate an injustice against petitioner. At the outset, it must be stated that there are two (2) separate and distinct, though related, projects involving the parties herein, viz: (i) the construction of Pier 2 and the rock causeway for the port of San Fernando, La Union, and (ii) the reclamation of the area between the Timber Pier and Pier 2 of the same port. Petitioner's action for specific performance and damages merely relates to the latter. Every contract has the following essential elements: (i) consent, (ii) object certain and (iii) cause. Consent has been defined as the concurrence of the wills of the contracting parties with respect to the object and cause which shall constitute the contract.[16] In general, contracts undergo three distinct stages, to wit: negotiation, perfection or birth, and consummation. Negotiation[17] begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract, i.e., consent, object and price. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof. The birth or the perfection of the contract, which is the crux of the present controversy, refers to that moment in the life of a contract when there is finally a concurrence of the wills of the contracting parties with respect to the object and the cause of the contract.[18] A government or public contract has been defined as a contract entered into by state officers acting on behalf of the state, and in which the entire people of the state are directly 444

interested. It relates wholly to matter of public concern, and affects private rights only so far as the statute confers such rights when its provisions are carried out by the officer to whom it is confided to perform.[19] A government contract is essentially similar to a private contract contemplated under the Civil Code. The legal requisites of consent of the contracting parties, an object certain which is the subject matter, and cause or consideration of the obligation must likewise concur. Otherwise, there is no government contract to speak of.[20] As correctly found by the CA, the issue on the reclamation of the area between Timber Pier and Pier 2 of the Port of San Fernando involves a government infrastructure project, and it is beyond dispute that the applicable laws, rules and regulations on government contracts or projects apply. On the matter of entering into negotiated contracts by government-owned and controlled corporations, the provisions of existing laws are crystal clear in requiring the governing board's approval thereof. The Court holds that the CA correctly applied the pertinent laws, to wit: Executive Order No. 380... provides for revised levels of authority on approval of government contracts. Section 1 thereof authorizes... GOCCs: 1. To enter into infrastructure contracts awarded through public bidding regardless of the amount involved; 2. To enter into negotiated infrastructure contracts involving not more than one hundred million pesos (P100 million) in the case of the Department of Transportation and Communications and the Department of Public Works and Highways, and not more than fifty million pesos (P50 million) in the case of the other Departments and governments corporations; Provided, That contracts exceeding the said amounts shall only be entered into upon prior authority from the Office of the President; and Provided, Further, That said contracts shall only be awarded in strict compliance with Section 5 of Executive Order No. 164, S. of 1987. xxx The rule on negotiated contracts, as amended on August 12, 2000 (IB 10.6.2) now reads 1. Negotiated contract may be entered into only where any of the following conditions exists and the implementing office/agency/corporation is not capable of undertaking the contract by administration: 445

a. In times of emergencies arising from natural calamities where immediate action is necessary to prevent imminent loss of life and/or property or to restore vital public services, infrastructure and utilities such as... b. Failure to award the contract after competitive public bidding for valid cause or causes c. Where the subject project is adjacent or contiguous to an on-going project and it could be economically prosecuted by the same contractor provided that subject contract has similar or related scope of works and it is within the contracting capacity of the contractor, in which case, direct negotiation may be undertaken with the said contractor... xxx In cases a and b above, bidding may be undertaken through sealed canvass of at least three (3) qualified contractors... Authority to negotiate contract for projects under these exceptional cases shall be subject to prior approval by heads of agencies within their limits of approving authority."[21] (emphasis in the original) Furthermore, the Revised Administrative Code[22] lays down the same requirement, thus: Sec. 51. Who May Execute Contracts. Contracts in behalf of the Republic of the Philippines shall be executed by the President unless authority therefore is expressly vested by law or by him in any other public officer. Contracts in behalf of the political subdivisions and corporate agencies or instrumentalities shall be approved by their respective governing boards or councils and executed by their respective executive heads. Petitioner neither disputes nor admits the application of the foregoing statutory provisions but insists, nonetheless, that the Notice of Award itself already embodies a perfected contract having passed the negotiation stage[23] despite the clear absence thereon of a condition requiring the prior approval of respondent's higher authority. Petitioner's argument is untenable. Contracts to which the government is a party are generally subject to the same laws and regulations which govern the validity and sufficiency of contracts between private individuals.[24] A government contract, however, is perfected[25] only upon approval by a competent authority, where such approval is required.[26] The contracting officer functions as agent of the Philippine government for the purpose of 446

making the contract. There arises then, in that regard, a principal-agent relationship between the Government, on one hand, and the contracting official, on the other. The latter though, in contemplation of law, possesses only actual agency authority. This is to say that his contracting power exists, where it exists at all, only because and by virtue of a law, or by authority of law, creating and conferring it. And it is well settled that he may make only such contracts as he is so authorized to make. Flowing from these basic guiding principles is another stating that the government is bound only to the extent of the power it has actually given its officers-agents. It goes without saying then that, conformably to a fundamental principle in agency, the acts of such agents in entering into agreements or contracts beyond the scope of their actual authority do not bind or obligate the Government. The moment this happens, the principal-agent relationship between the Government and the contracting officer ceases to exist.[27] (emphasis supplied)

It was stressed that ...the contracting official who gives his consent as to the subject matter and the consideration ought to be empowered legally to bind the Government and that his actuations in a particular contractual undertaking on behalf of the government come within the ambit of his authority. On top of that, the approval of the contract by a higher authority is usually required by law or administrative regulation as a requisite for its perfection.[28] Under Article 1881 of the Civil Code, the agent must act within the scope of his authority to bind his principal. So long as the agent has authority, express or implied, the principal is bound by the acts of the agent on his behalf, whether or not the third person dealing with the agent believes that the agent has actual authority.[29] Thus, all signatories in a contract should be clothed with authority to bind the parties they represent. P.D. 857 likewise states that one of the corporate powers of respondent's Board of Directors is to "reclaim... any part of the lands vested in the Authority." It also "exercise[s] all the powers of a corporation under the Corporation Law." On the other hand, the law merely vests the general manager the "general power... to sign contracts" and "to perform such other duties as the Board may assign..." Therefore, unless respondent's Board validly authorizes its general manager, the latter cannot bind respondent PPA to a contract. The Court completely agrees with the CA that the petitioner failed to present competent evidence to prove that the respondent's general manager possessed such actual authority delegated either by the Board of Directors, or by statutory provision. The authority of government officials to represent the government in any contract must proceed from an express provision of law or valid delegation of authority.[30] Without such actual authority being possessed by PPA's general manager, there could be no real consent, much less a perfected contract, to speak of. 447

It is of no moment if the phrase "approval of higher authority" appears nowhere in the Notice of Award. It neither justifies petitioner's presumption that the required approval "had already been granted" nor supports its conclusion that no other condition (than the completion of fendering of Pier 2 as stated in the Notice of Award) ought to be complied with to create a perfected contract.[31] Applicable laws form part of, and are read into, the contract without need for any express reference thereto;[32] more so, to a purported government contract, which is imbued with public interest. Adopting the trial court's ratiocination, petitioner further argues that had it been true that respondent's general manager was without authority to bind respondent by contract, then the former should have disapproved the supplemental contract on that ground.[33] Petitioner also interprets the Board's silence on the matter as an explicit recognition of the latter's authority to enter into a negotiated contract involving the reclamation project. This posture, however, does not conform with the basic provisions of the law to which we always go back. Section 4 of P.D. 1594[34] provides:[35] Section 4. Bidding. Construction projects shall generally be undertaken by contract after competitive public bidding. Projects may be undertaken by administration or force account or by negotiated contract only in exceptional cases where time is of the essence, or where there is lack of qualified bidders or contractors, or where there is a conclusive evidence that greater economy and efficiency would be achieved through this arrangement, and in accordance with provision of laws and acts on the matter, subject to the approval of the Ministry of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million, and of the President of the Philippines, upon the recommendation of the Minister, if the project cost is P1 Million or more. Precisely, the Board of Directors of the respondent did not see fit to approve the contract by negotiation after finding that "the Pier 2 Project was basically for the construction of a pier while the supplemental agreement refers to reclamation. Thus, there is no basis to compare the terms and conditions of the reclamation project with the original contract (Pier 2 Project) of Sargasso." So even granting arguendo that the Board's action or inaction is an "explicit" recognition of the authority of the general manager, the purported contract cannot possibly be the basis of an action for specific performance because the negotiated contract itself basically contravenes stringent legal requirements aimed at protecting the interest of the public. The bottom line here is that the facts do not conform to what the law requires. No wonder petitioner conveniently omitted any attempt at presenting its case within the statutory exceptions, and insisted that respondent's disapproval of the supplemental agreement was "a mere afterthought" "perhaps realizing the infirmity of its excuse" (referring to petitioner's belated pre-disqualification in the construction project). But the 448

Court, at the very outset, has previously clarified that the two projects involved herein are distinct from each other. Hence, petitioner's disqualification in the construction project due to its lack of certain requirements has no significant bearing in this case. Lastly, petitioner's invocation of the doctrine of apparent authority[36] is misplaced. This doctrine, in the realm of government contracts, has been restated to mean that the government is NOT bound by unauthorized acts of its agents, even though within the apparent scope of their authority.[37] Under the law on agency, however, "apparent authority" is defined as the power to affect the legal relations of another person by transactions with third persons arising from the other's manifestations to such third person[38] such that the liability of the principal for the acts and contracts of his agent extends to those which are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred. [39] Apparent authority, or what is sometimes referred to as the "holding out" theory, or doctrine of ostensible agency, imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists. [40] The existence of apparent authority may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties.[41] Easily discernible from the foregoing is that apparent authority is determined only by the acts of the principal and not by the acts of the agent. The principal is, therefore, not responsible where the agent's own conduct and statements have created the apparent authority.[42] In this case, not a single act of respondent, acting through its Board of Directors, was cited as having clothed its general manager with apparent authority to execute the contract with it. With the foregoing disquisition, the Court finds it unnecessary to discuss the other arguments posed by petitioner. WHEREFORE, SO

the

petition

is

DENIED. ORDERED. 449

JOSE Associate

CATRAL

MENDOZA Justice

WE

CONCUR:

ANTONIO Associate Chairperson

T.

ANTONIO Associate

EDUARDO

DIOSDADO Associate

B.

T

NACHURA Justice

M.

ROBERTO Associate A

CARPIO Justice

PERALTA Justice

A.

T

E

S

T

ABAD Justice A

T

I

O

N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

19. PUBLIC ESTATES AUTHORITY and MANUEL R. BERINA, JR., in his capacity as the Acting General Manager of the Public Estates Authority, Petitioners, versus BOLINAO SECURITY AND INVESTIGATION SERVICE, INC., Respondent. G.R. No. 158812 | 2005-10-05 Tagged under keywords

DECISION

CARPIO MORALES, J.:

Before this Court is a Petition for Review of the Court of Appeals Decision[1] dated May 30, 2002 which affirmed that of the Makati Regional Trial Court, Branch 58, dated April 22, 450

1992 declaring null and void the award by the Philippine Estates Authority (PEA) of a bid in favor of Masada Security Agency and declaring Bolinao Security and Investigation Service Inc. as the winning bidder for the April 10, 1991 bidding for security services.

On February 1, 1990, the PEA, a government corporation, through its then Acting General Manager Luis B. Pangilinan, Jr., entered into a Contract for Security Services[2] with Bolinao Security and Investigation Services, Inc. (Bolinao Security), to secure and protect PEA's properties, personnel and premises at Villa Porta Vaga Subdivision, Cavite City. The contract was effective February 1, 1990 until January 31, 1991, extendible at the option of PEA.[3]

In December 1990, PEA published in several newspapers an Invitation to Bid[4] for the services of three hundred seven (307) regular and well-trained guards for its establishments, facilities, and other properties in Metro Manila including those in Cavite City. The Invitation to Bid read:

INVITATION TO BID

Interested bidders are invited to participate in the public bidding for Security Services for the following areas:

(1) 6th and 7th Floor, Legaspi Towers 200, Makati, Metro Manila

(2) Central Business Park (CBP) - I Pasay City

(3) Freedom Islands I and II - Paranñ aque, Metro Manila

(4) Fisherman's Wharf, Paranñ aque, Metro Manila

(5) Aguinaldo Blvd. (Coastal Road or R-I) - Paranñ aque-Las Pinñ as, Metro Manila

(6) Lopez, Bernabe, Madrigal-Relocation Sites - Las Pinñ as

451

(7) Financial Center Area - Pasay City

(8) Villa Porta Vaga (Canñ acao Bay) - Cavite City

Interested bidders may request for copies of the Terms of Reference for this bidding, from the Administrative Department of PEA, beginning on Dec. 17, 1990 up to Dec. 21, 1990 during regular working hours from 9:00 AM-6:00 PM.

All sealed bids must be received by the PEA Prequalification Bids and Awards Committee on or before 10:00 AM of December 27, 1990 at the 7th Floor, Legaspi Towers 200, Paseo de Roxas, Makati, Metro Manila and will be publicly opened and read on the said bidding date at the same address, in the presence of attending bidders or their duly authorized representatives and the general public. A Pre-bid conference will be conducted by the PBAC on Dec. 24, 1990 at 10:00 AM. Attendance to this Pre-bid conference is mandatory.

PEA reserves the right to reject any proposal or waive any defects or formality, impose additional terms and conditions and accept the proposal most advantageous to the Government. (Emphasis supplied)[5]

The Terms of Reference (TOR) for Security Services[6] listed the following documents which an interested party should submit to PEA to qualify to bid:

(a) Certified xerox copy of Current License to Operate;

(b) Certified xerox copy of Articles of Incorporation;

(c) Description of the organization, including its objectives and the names, nationality and experience of key officials;

(d) Certified list of firearms, communication equipment, service vehicles and other equipment with their corresponding licenses to operate said equipment;

452

(e) List of existing clients;

(f) Detailed financial statements (balance sheets and profits and loss statements) as of September 1990 and Income Tax Return duly filed and received by the Bureau of Internal Revenue (BIR);

(g) Certification of up-to-date payments of Social Security Services (SSS) Contributions;

(h) Bank certification of standby credit in the amount of TWO MILLION PESOS (P2,000,000.00);

(i) Certification of deposit from Philippine National Bank (PNB) or any reputable bank equivalent to one (1) monthly salary of three hundred seven (307) guards to be used exclusively for their salaries.(Emphasis and underscoring supplied)[7]

On December 19, 1990, a pre-bid conference was held attended by twenty-one (21) interested security agencies. Following the conference, Bid Bulletin No. 1 dated December 21, 1990 amending, clarifying and/or supplementing the TOR was issued to all prospective bidders.

On the scheduled bidding on December 27, 1990, only six (6) out of the twenty-one (21) interested bidders showed up, namely: Integrity Security and Intelligence Service (Integrity Security); Bolinao Security; Odin Security Agency, Inc.; Masada Security Agency, Inc. (Masada Security); Catalina Security Agency, Inc. and Montillano Security Agency.

For alleged "general non-compliance by bidders with bid qualification," PEA's Prequalification Bids and Awards Committee (PBAC) rejected all the 6 bids and thus scheduled a rebidding for security services contract.

In the meantime, after the contract with Bolinao Security expired on January 31, 1991, it was extended monthly by PEA up to July 29, 1991.[8]

453

The re-bidding was scheduled on April 10, 1991 and all the 21 bidders were again invited to submit their bids. Bid Bulletin No. 2[9] was thereafter issued modifying the TOR originally issued.

On April 3, 1991, a pre-bid conference was held and on April 10, 1991, the bids were opened.

The PBAC's technical working group thereafter issued Bid Evaluation[10] dated June 11, 1991 tabulating the result of the bidding as follows:

BIDDERS

LIQUIDATED

REMARKS

DAMAGES (p/ struct.)

1. Integrity Security

25,000

No SSS Clearance

2. Bolinao Security

20,000

No current license to operate

3. Masada 4. Odin Security 5. Catalina Security 6. Montillano Security eqpt.[11]

6,500 5,500 5,000 5,000

Complying Complying Complying Only application for Permit To Purchase radio

The evaluation noted that all the bidders offered a bid price of P1,499,695.00 per month. PEA thus based the award on the amount of liquidated damages representing the total penalty to be paid by the security agency if it failed to prevent the construction of a shanty by a squatter in the Manila Bay reclamation properties of PEA.

The report, noting that Integrated Security submitted the highest bid in terms of liquidated damages but had no SSS clearance, and Bolinao Security submitted the next highest bid but had no current license to operate, recommended that Masada Security which proffered the third highest bid be considered the winning bidder.[12]

454

Heeding the PBAC's recommendation, PEA awarded the contract to Masada Security effective September 1, 1991 up to April 30, 1993.[13] Bolinao Security whose contract with PEA expired on January 31, 1991 but was, as earlier stated, extended monthly up to July 29, 1991, refused to turn over the PEA properties in Cavite City, however, to Masada Security, prompting PEA to send a demand letter to Bolinao Security to turn over the property to Masada Security.

Bolinao Security insisted to PEA, however, that it should be declared the winning bidder. But PEA explained that the bid of Bolinao Security was rejected because it failed to submit a current license to operate and to award the contract to it despite that would violate Presidential Decree (P.D.) No. 1919.[14]

On September 16, 1991, Bolinao Security filed with the Regional Trial Court of Makati a complaint[15] for annulment of bid award, damages, injunction with special prayer for the issuance of a temporary restraining order against PEA, its Acting General Manager Manuel Berina, Jr., and Masada Security, averring that, among other things, the attempt of Masada Security to take over the Cavite City premises from it based on the result of the bidding was improper, illegal, criminal and violative of the provisions of the Anti-Graft and Corrupt Practices Act.[16]

In its Answer,[17] PEA, denying Bolinao Security's allegations, alleged that the contract for security services for its properties situated in Cavite City with Bolinao Security, as extended, had already been terminated effective September 16, 1991; bidding laws were strictly followed and the bid of Bolinao Security was twice rejected for non-compliance with important requirements of the bidding; Bolinao Security failed to offer the highest liquidated damages; and awarding the contract to Bolinao Security would violate P.D. No. 1919 as well as the "National Accounting and Auditing Manual."

Masada Security, in its Answer with Compulsory Counterclaim,[18] proffered that Bolinao Security had no valid cause of action, hence, not entitled to a writ of preliminary injunction.

By Order of October 14, 1991, the trial court issued a writ of preliminary injunction enjoining the defendants from terminating the contract with Bolinao Security covering PEA's Cavite City property.[19]

455

After trial on the merits, the trial court, by Decision of April 22, 1992, found for Bolinao Security and declared the contract awarded to Masada Security null and void. The decretal text of the decision reads:

"WHEREFORE, premises considered, judgment is rendered in favor of the plaintiff with the following dispositions:

1) The writ of preliminary injunction issued in this case, which enjoins defendants from terminating the existing contract for security services with plaintiff, and from implementing the questioned contract in favor of Masada Security Agency effective September 17, 1991, and from ejecting plaintiff from the Villa Porta Vaga Subdivision, Canacao, Cavite City, is made permanent.

2) The award of the bid in favor of defendant Masada Security Agency is declared null and void and plaintiff Bolinao is declared as the winning bidder during the public bidding held on April 10, 1991.

3) Directing the defendants to jointly and severally pay to the plaintiff the amount of P50,000.00 as nominal damages, P50,000.00 as exemplary damages; attorney's fees; and the costs of suit.

SO ORDERED."[20] (Underscoring supplied)

On appeal, the Court of Appeals affirmed the decision of the trial court by Decision of May 30, 2002.

In affirming the trial court's decision, the appellate court held that disqualifying Bolinao Security for the simple reason that on the day of the bidding its application for renewal of its license was still being processed was "most unfair, arbitrary and has no legal basis" as the period for processing thereof "is a bureaucratic requirement which sh[ould] not work against the interest of [Bolinao Security], absen[t] any badge of fraud or negligence."[21]

456

Even assuming that Bolinao Security's pending application for renewal of license did not serve as proof of a current license to operate, the appellate court held that still PEA was estopped when it opened the second envelope containing the bid.[22]

The appellate court went on to declare that the rule that the doctrine of estoppel does not lie against the government is not without exception, it holding that while the State could not be put in estoppel by the mistakes or errors of its officials or agents, the government must not be allowed to deal dishonorably or capriciously with its citizens;[23] and while the government was not precluded from subsequently raising the issue of lack of qualification on the part of Bolinao Security, the same must be supported by law and equity. [24]

Hence, the present petition for review filed on July 24, 1003 by PEA and its Acting General Manager Manuel R. Berina, Jr.,[25] raising the following issues:

I

WHETHER OR NOT RESPONDENT BOLINAO SECURITY AND INVESTIGATION SERVICE, INC. IS A QUALIFIED BIDDER, DESPITE ITS NON-COMPLIANCE WITH THE BIDDING REQUIREMENTS.

II

WHETHER OR NOT THE LOWER COURTS' RULINGS CONSTITUTE AN UNJUSTIFIED JUDICIAL INTERVENTION OVER PURELY EXECUTIVE MATTERS AND FUNCTIONS.[26]

PEA argues that, inter alia, the lower courts' rulings constituted an unjustified judicial intervention over purely executive matters and functions;[27] where the invitation to bid provides that the government may reject any or all bids or any part thereof or waive any defects contained therein and accept an offer most advantageous to the government, the highest or lowest bidder, as the case may be, cannot claim the award as a matter of right; [28] it should not be considered in estoppel by opening and reading the bids of Bolinao Security since it (PEA) declared, aside from its published reservation, that it reserved the right to reject any bid;[29] and at all events, Bolinao Security failed to submit the most advantageous bid.[30] 457

The petition is meritorious.

The issue in the main is whether the thrashing out of Bolinao Security's bid in favor of Masada Security was justified by PEA in view of the former's lack of "current license to operate" at the time of the opening of the bids on April 10, 1991 and PEA's "right to reject any or all bids" stipulation in the Invitation to Bid.

As priorly stated, the contract for security services between Bolinao Security and PEA took effect on February 1, 1990 until January 31, 1991.[31] As its license to operate was to expire on March 31, 1991, Bolinao Security filed on February 28, 1991 an application for a new license which was granted and issued only on May 16, 1991, after the April 10, 1991 bidding. Evidently, at the time of the bidding, Bolinao Security had no "current license to operate" as required by the TOR.

Bolinao Security argues, however, that since PEA had given it several extensions after its license to operate expired and as its new license was eventually issued on May 16, 1991, such new license should have been given retroactive effect.

At any rate, Bolinao Security argues that while PEA has the right to reject any proposal, it has also the right to waive any defects.

Bolinao Security's position fails.

PEA's granting of extensions to Bolinao Security after its license expired cannot be interpreted as a waiver of the requirement of a current license.

Waiver is defined as the relinquishment of a known right with knowledge of its existence and an intention to relinquish it. Voluntary choice is the essence of waiver.[32] To be valid and effective, a waiver must in the first place be couched in clear and unequivocal terms which leave no doubt as to the intention of a person to give up a right or benefit which legally pertains to him. It may not causally be attributed to a person when the terms thereof do not explicitly and clearly evidence an intent to abandon a right vested in such person. [33] 458

Extension of the effectivity of the security service contract can not be interpreted as an extension of the effectivity of license to operate a security agency. Neither can the new license issued to Bolinao Security be given retroactive effect without running afoul of the rule in public biddings that qualifications of bidders shall be determined at the time of the opening of the bids, and not at any other time. The "National Accounting and Auditing Manual" is explicit on the matter:

SEC. 391. Opening of bids. - Bids shall be opened at the exact hour announced for such opening in the notice or advertisement, and in the presence of all bidders, if possible. Bids for public services or for furnishing supplies, materials, and equipment to the government shall be opened in the presence of a committee to be designated by the head of the office and a representative of the Auditor General who is authorized to secure and identify such papers and samples as will insure the proper safeguard of the interests of the Government.

Before the actual opening of the sealed bids, the committee shall acquaint itself with the conditions imposed by the notice or advertisement upon all prospective bidders, especially those with reference to the personal qualifications of the contractor, if any; the amount and character of deposits to be submitted with the bid, etc. No bid presented after the expiration of the time set for the opening shall be received. Bids shall be in sealed envelopes only. Bids by telegram, telephone, radiogram, or open bids shall not be accepted; they are not valid. A bid opened which does not meet in full the conditions or requirements of the notice or advertisement shall be disqualified and shall not be considered in any award to be made, but notation thereof shall be entered in the abstract of proposals giving the reason or reasons for the disqualification of such bid. An imperfect bid, i.e., a bid which does not comply with all the conditions or requirements in the notice or advertisement, or complies with them partly but not in full may not be perfected after the time set for the opening of the bids has already elapsed, much less after the bids have been opened. Bids which offer other conditions than those specified in the advertisement such as in the quantity, quality or manner of rendering the service, or supplying the materials or supplies being bidded, or the time of performance under the resulting contract, etc., will likewise be ineligible for an award, but the proposal will be noted in the abstract with a memorandum why the said proposal has been disqualified for an award. (Emphasis supplied)

Thus, in Republic v. Capulong,[34] the therein private respondent bidder urged this Court to consider a 1952 Opinion of the Secretary of Justice which declared that the failure of the lowest bidder to secure a license as a transportation operator at the time of the opening of the bids did not affect its bid. In debunking the therein private respondent's appeal, this 459

Court held that the invitation to bid issued by the then Department of Agriculture and Natural Resources contained no requirement that the bidder must be a duly licensed transportation operator at the time of the opening of the bids,[35] in stark contrast to the requirement involved in the instant case.

And in C & C Commercial v. Menor,[36] this Court upheld Nawasa's rejection of the bid to supply asbestos cement pressure proffered by C and C Commercial which did not submit the required tax clearance certificate.

Bolinao Security's argument that PEA was estopped from questioning its qualifications, it asserting that by opening the second/bid envelope, the eligibility and qualification requirements of the bidding were deemed complied with, does not persuade.

Bid Bulletin No. 2[37] expressly provides:

TERMS OF REFERENCE FOR SECURITY SERVICES BID BULLETIN NO. 2

This Bid Bulletin No. 2 is hereby issued for your information and inclusion in the Terms of Reference already issued, as follows:

1. Section A. Bid Price

Delete the entire section and substitute the following:

"Section A. Bid/Tender"

1) Bid Price

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All prices quoted shall not be below the existing minimum rate prescribed by PC-SUSSUAPADPAO.

2) Submission

Bids shall be submitted in two (2) sealed envelopes with the name of the project to be bid and the name of the bidder in capital letters addressed to the PBAC. They shall be marked "Do not open before 2:00 P. M. of 10 April 1991."

The first envelope shall contain the following information/documents:

a) Obligations of Contractor as specified in Section C.[38] b) Bid Security in the proper form and amount.

It shall be opened first to determine the contractor's compliance with the above requirements. Non-compliance with any of the above requirements shall automatically disqualify the bid submitted.

The second envelope shall contain the following information/documents:

a) Bid Price b) Breakdown of Bid Price c) Amount of Liquidated Damages

It shall be opened only if the contractor has complied with the requirements needed in the first envelope. (Emphasis and Footnote supplied)

In Information Technology Foundation of the Philippines v. Commission on Elections,[39] the question of qualification or eligibility of a bidder in a public bidding conducted by the Commission on Elections (COMELEC) to procure election automation machines was in issue. 461

The public bidding conducted by the COMELEC observed a two-envelope/two-stage system. The bidder's first envelope or the Eligibility Envelope was to establish the bidder's eligibility to bid and its qualifications to perform the acts if accepted. The second envelope contained the Bid Envelope itself.

The COMELEC's Request for Proposal (RFP) to procure the election automation machines stated, however, that "the eligibility envelopes of prospective [b]idders shall be opened first to determine their eligibility. In case any of the requirements specified in Clause 20 is missing from the first bid envelope, the BAC shall declare said prospective [b]idder as ineligible to bid. Bid envelopes of ineligible [b]idders shall be immediately returned unopened."[40]

The winning bidder's Bid Envelope was opened by the COMELEC despite its lack of qualification or eligibility. This Court, however, disqualified such winning bidder.

So must Bolinao Security be disqualified.

The basic rule in public bidding that bids should be evaluated on the basis of the required documents submitted before and not after the opening of bids must be strictly observed in order to safeguard a fair, honest and competitive public bidding.[41]

At all events, as PEA argues, assuming arguendo that Bolinao Security was deemed to have complied with the current license requirement, since the Invitation to Bid expressly provided that "PEA reserves the right to reject any proposal or waive any defects or formality, impose additional terms and conditions and accept the proposal most advantageous to the Government," Bolinao Security voluntarily submitted itself to the terms and conditions thereof and acknowledged the said right of the government.

In Bureau Veritas v. Office of the President,[42] this Court through the erudite expatiation of Justice Melencio-Herrera discussed profoundly the legal implications of the "right to reject any or all bids" in an invitation to bid, viz:

xxx 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 462

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."

This 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 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]). xxx The choice of who among the bidders is best qualified to perform this task should be left to the sound discretion of the proper Government authorities in the executive branch since they are in a better position than the Courts to make the determination owing to the experience and knowledge that they have acquired by virtue of their functions. 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 xxx. 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 xxx.

xxx. In the "Invitation to Prequalify and Bid" xxx, 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 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). (Emphasis and underscoring supplied) 463

Similarly, in National Power Corporation v. Philipp Brothers Oceanic, Inc.,[43] this Court declared that where the right to reject is so reserved, the lowest bid or any bid for that matter may be rejected on a mere technicality. And where the government as advertiser, availing itself of that right, makes its choice in rejecting any or all bids, the losing bidder has no cause to complain nor right to dispute that choice unless an unfairness or injustice is shown. Citing Celeste v. Court of Appeals,[44] this Court went on to declare:

Verily, a reservation of the government of its right to reject any bid, generally vests in the authorities a wide discretion as to who is the best and most advantageous bidder. The exercise of such discretion involves inquiry, investigation, comparison, deliberation and decision, which are quasi-judicial functions, and when honestly exercised, may not be reviewed by the court. xxx (Emphasis supplied)

Only recently, this Court in JG Summit Holdings, Inc. v. Court of Appeals[45] held:

It is a settled rule that where the invitation to bid contains a reservation for the Government to reject any or all bids, the lowest or the highest bidder, as the case may be, is not entitled to an award as a matter of right for it does not become a ministerial duty of the Government to make such an award. Thus, it has been held that where the right to reject is so reserved, the lowest bid or any bid for that matter may be rejected on a mere technicality, that all bids may be rejected, even if arbitrarily and unwisely, or under a mistake, and that in the exercise of a sound discretion, the award may be made to another than the lowest bidder. And so, where the Government as advertiser, availing itself of that right, makes its choice in rejecting any or all bids, the losing bidder has no cause to complain nor right to dispute that choice, unless an unfairness or injustice is shown. (Emphasis and underscoring supplied)[46]

Clearly, as spelled out in the foregoing disquisitions, the government is granted broad discretion in choosing who among the bidders can offer the "most advantageous" terms and courts will not interfere therewith or direct the committee on bids to do a particular act or to enjoin such act within its prerogatives, except when in the exercise of its authority, it gravely abuses or exceeds its jurisdiction.[47]

A reading of the decisional rules on reservation of right to reject cautions, however, against injustice, unfairness, arbitrariness, fraudulent acts or grave abuse of discretion.[48] A contrary conclusion would be anathema to the purposes for which public biddings are 464

founded - to give the public the best possible advantages through open competition - as it would give the unscrupulous a plain escape to rig the bidding process.

Thus segueing to the issue of whether PEA's choice of Masada Security over that of Bolinao Security was tainted with injustice, unfairness, arbitrariness or fraud or whether it constituted grave abuse of discretion, this Court finds that Bolinao Security failed to prove the same.

The presumption of regularity of the bidding must thus remain.

As reflected above, competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. It is a mechanism that enables the government agency to avoid or preclude anomalies in the execution of public contracts.[49] Authorities should not thus be permitted to waive any substantial variance between the conditions under which bids are invited and the proposals submitted. If one bidder is relieved from conforming with the conditions which impose some duty upon it or lay the ground for holding it to a strict performance of its contract, that bidder is not contracting in fair competition with those bidders who propose to be bound by all the conditions.[50]

In fine, the PEA did not commit grave abuse of discretion in selecting the bid of Masada Security as the most advantageous to the government.

WHEREFORE, the decision of the Court of Appeals dated May 30, 2002 is REVERSED and SET ASIDE and the complaint of respondent, Bolinao Security and Investigation Service, Inc. is DISMISSED.

SO ORDERED

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20. JAMES MIRASOL, RICHARD SANTIAGO, and LUZON MOTORCYCLISTS FEDERATION, INC., Petitioners vs. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL REGULATORY BOARD, Respondents. G.R. No. 158793 | 2006-06-08 EN BANC DECISION CARPIO, J.: This petition for review on certiorari [1] seeks to reverse the Decision dated 10 March 2003 of the Regional Trial Court, Branch 147, Makati City (RTC) in Civil Case No. 01-034, as well as the RTC's Order dated 16 June 2003 which denied petitioners' Motion for Reconsideration. Petitioners assert that Department of Public Works and Highways' (DPWH) Department Order No. 74 (DO 74), Department Order No. 215 (DO 215), and the Revised Rules and Regulations on Limited Access Facilities of the Toll Regulatory Board (TRB) violate Republic Act No. 2000 (RA 2000) or the Limited Access Highway Act. Petitioners also seek to declare Department Order No. 123 (DO 123) and Administrative Order No. 1 (AO 1) [2] unconstitutional.

Antecedent Facts The facts are not in dispute. As summarized by the Solicitor General, the facts are as follows: 1. On January 10, 2001, petitioners filed before the trial court a Petition for Declaratory Judgment with Application for Temporary Restraining Order and Injunction docketed as Civil Case No. 01-034. The petition sought the declaration of nullity of the following administrative issuances for being inconsistent with the provisions of Republic Act 2000, entitled "Limited Access Highway Act" enacted in 1957: a. DPWH Administrative Order No. 1, Series of 1968; b. DPWH Department Order No. 74, Series of 1993; c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated in 199[8] by the DPWH thru the Toll Regulatory Board (TRB).

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2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on June 25, 1998 Department Order (DO) No. 215 declaring the Manila-Cavite ( Coastal Road ) Toll Expressway as limited access facilities. 3. Accordingly, petitioners filed an Amended Petition on February 8, 2001 wherein petitioners sought the declaration of nullity of the aforesaid administrative issuances. Moreover, petitioners prayed for the issuance of a temporary restraining order and/or preliminary injunction to prevent the enforcement of the total ban on motorcycles along the entire breadth of North and South Luzon Expressways and the Manila-Cavite ( Coastal Road ) Toll Expressway under DO 215. 4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo Guadiz, after due hearing, issued an order granting petitioners' application for preliminary injunction. On July 16, 2001, a writ of preliminary injunction was issued by the trial court, conditioned upon petitioners' filing of cash bond in the amount of P100,000.00, which petitioners subsequently complied with. 5. On July 18, 2001, the DPWH acting thru the TRB, issued Department Order No. 123 allowing motorcycles with engine displacement of 400 cubic centimeters inside limited access facilities (toll ways). 6. Upon the assumption of Honorable Presiding Judge Ma. Cristina Cornejo, both the petitioners and respondents were required to file their respective Memoranda. Petitioners likewise filed [their] Supplemental Memorandum. Thereafter, the case was deemed submitted for decision. 7. Consequently, on March 10, 2003, the trial court issued the assailed decision dismissing the petition but declaring invalid DO 123. Petitioners moved for a reconsideration of the dismissal of their petition; but it was denied by the trial court in its Order dated June 16, 2003. [3] Hence, this petition.

The RTC's Ruling The dispositive portion of the RTC's Decision dated 10 March 2003 reads: WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to declare null and void ab initio DPWH Department Order No. 74, Series of 1993, Administrative Order No. 1, and Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated by the DPWH thru the TRB, the presumed validity thereof not having been overcome; but the 467

petition is granted insofar as DPWH Department Order No. 123 is concerned, declaring the same to be invalid for being violative of the equal protection clause of the Constitution. SO ORDERED. [4] The Issues Petitioners seek a reversal and raise the following issues for resolution: 1. WHETHER THE RTC'S DECISION IS ALREADY BARRED BY RES JUDICATA; 2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS CONTRAVENE RA 2000; AND 3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL. [5] The Ruling of the Court

The petition is partly meritorious.

Whether the RTC's Decision Dismissing Petitioners' Case is Barred by Res Judicata Petitioners rely on the RTC's Order dated 28 June 2001, which granted their prayer for a writ of preliminary injunction. Since respondents did not appeal from that Order, petitioners argue that the Order became "a final judgment" on the issues. Petitioners conclude that the RTC erred when it subsequently dismissed their petition in its Decision dated 10 March 2003. Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June 2001 was not an adjudication on the merits of the case that would trigger res judicata. A preliminary injunction does not serve as a final determination of the issues. It is a provisional remedy, which merely serves to preserve the status quo until the court could hear the merits of the case. [6] Thus, Section 9 of Rule 58 of the 1997 Rules of Civil Procedure requires the issuance of a final injunction to confirm the preliminary injunction should the court during trial determine that the acts complained of deserve to be permanently enjoined. A preliminary injunction is a mere adjunct, an ancillary remedy which exists only as an incident of the main proceeding. [7] Validity of DO 74, DO 215 and the TRB Regulations 468

Petitioners claim that DO 74, [8] DO 215, [9] and the TRB's Rules and Regulations issued under them violate the provisions of RA 2000. They contend that the two issuances unduly expanded the power of the DPWH in Section 4 of RA 2000 to regulate toll ways. Petitioners assert that the DPWH's regulatory authority is limited to acts like redesigning curbings or central dividing sections. They claim that the DPWH is only allowed to re-design the physical structure of toll ways, and not to determine "who or what can be qualified as toll way users." [10] Section 4 of RA 2000 [11] reads: SEC. 4. Design of limited access facility. - The Department of Public Works and Communications is authorized to so design any limited access facility and to so regulate, restrict, or prohibit access as to best serve the traffic for which such facility is intended; and its determination of such design shall be final. In this connection, it is authorized to divide and separate any limited access facility into separate roadways by the construction of raised curbings, central dividing sections, or other physical separations, or by designating such separate roadways by signs, markers, stripes, and the proper lane for such traffic by appropriate signs, markers, stripes and other devices. No person, shall have any right of ingress or egress to, from or across limited access facilities to or from abutting lands, except at such designated points at which access may be permitted, upon such terms and conditions as may be specified from time to time. (Emphasis supplied) On 19 February 1968, Secretary Antonio V. Raquiza of the Department of Public Works and Communications issued AO 1, which, among others, prohibited motorcycles on limited access highways. The pertinent provisions of AO 1 read: SUBJECT:

Revised Rules and Regulations Governing Limited Access Highways

By virtue of the authority granted the Secretary [of] Public Works and Communications under Section 3 of R.A. 2000, otherwise known as the Limited Access Highway Act, the following rules and regulations governing limited access highways are hereby promulgated for the guidance of all concerned: xxxx Section 3 - On limited access highways, it is unlawful for any person or group of persons to: xxxx (h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized); 469

x x x x [12] (Emphasis supplied) On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public Works and Highways issued DO 74: SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Tabang and the South Luzon Expressway from Nichols to Alabang as Limited Access Facilities Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or street especially designed for through traffic, and over, from, or to which owners or occupants of abutting land or other persons have no right or easement or only a limited right or easement of access, light, air or view by reason of the fact that their proper[t]y abuts upon such limited access facility or for any other reason. Such highways or streets may be parkways, from which trucks, buses, and other commerical [sic] vehicles shall be excluded; or they may be free ways open to use by all customary forms of street and highway traffic." Section 3 of the same Act authorizes the Department of Public Works and Communications (now Department of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter, improve, maintain, and provide limited access facilities for public use wherever it is of the opinion that traffic conditions, present or future, will justify such special facilities." Therefore, by virtue of the authority granted above, the Department of Public Works and Highways hereby designates and declares the Balintawak to Tabang Sections of the North Luzon Expressway, and the Nichols to Alabang Sections of the South Luzon Expressways, to be LIMITED ACCESS HIGHWAYS/FACILITIES subject to such rules and regulations that may be imposed by the DPWH thru the Toll Regulatory Board (TRB). In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after consultation with the TRB and in coordination with the Philippine National Police (PNP), to close all illegal openings along the said Limited Access Highways/Facilities. In this connection, the NCR is instructed to organize its own enforcement and security group for the purpose of assuring the continued closure of the right-of-way fences and the implementation of the rules and regulations that may be imposed by the DPWH thru the TRB. This Order shall take effect immediately. [13] On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:

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SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-5 Link Expressway, from Zapote to Noveleta, of the Manila Cavite Toll Expressway as Limited Access Facility. Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or street especially designed for through traffic, and over, from, or to which owners or occupants of abutting land or other persons have no right or easement or only a limited right or easement of access, light, air or view by reason of the fact that their property abuts upon such limited access facility or for any other reason. Such highways or streets may be parkways, from which trucks, buses, and other commercial vehicles shall be excluded; or they may be free ways open to use by all customary forms of street and highway traffic." Section 3 of the same Act authorizes the Department of Public Works and Communications (now Department of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter, improve, maintain, and provide limited access facilities for public use wherever it is of the opinion that traffic conditions, present or future, will justify such special facilities." Therefore, by virtue of the authority granted above, the Department of Public Works and Highways hereby designates and declares the R-1 Expressway, C-5 Link Expressway and the R-1 Extension Expressway Sections of the Manila Cavite Toll Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES subject to such rules and regulations that may be imposed by the DPWH thru the Toll Regulatory Board (TRB). In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after consultation with the TRB and in coordination with the Philippine National Police (PNP), to close all illegal openings along the said Limited Access Highways/Facilities. In this connection, the NCR is instructed to organize its own enforcement and security group for the purpose of assuring the continued closure of the right-of-way fences and the implementation of the rules and regulations that may be imposed by the DPWH thru the TRB. This Order shall take effect immediately. [14] The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to design limited access facilities and to regulate, restrict, or prohibit access as to serve the traffic for which such facilities are intended. According to the RTC, such authority to regulate, restrict, or prohibit logically includes the determination of who and what can and cannot be permitted entry or access into the limited access facilities. Thus, the RTC concluded that AO 1, DO 74, and the Revised Rules and Regulations on Limited Access Facilities, which ban motorcycles' entry or access to the limited access facilities, are not inconsistent with RA 2000.

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RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957. Section 4 of RA 2000 provides that "[t]he Department of Public Works and Communications is authorized to so design any limited access facility and to so regulate, restrict, or prohibit access as to best serve the traffic for which such facility is intended." The RTC construed this authorization to regulate, restrict, or prohibit access to limited access facilities to apply to the Department of Public Works and Highways (DPWH). The RTC's ruling is based on a wrong premise. The RTC assumed that the DPWH derived its authority from its predecessor, the Department of Public Works and Communications, which is expressly authorized to regulate, restrict, or prohibit access to limited access facilities under Section 4 of RA 2000. However, such assumption fails to consider the evolution of the Department of Public Works and Communications. Under Act No. 2711, otherwise known as the Revised Administrative Code, approved on 10 March 1917, there were only seven executive departments, namely: the Department of the Interior, the Department of Finance, the Department of Justice, the Department of Agriculture and Commerce, the Department of Public Works and Communications, the Department of Public Instruction, and the Department of Labor. [15] On 20 June 1964, Republic Act No. 4136 [16] created the Land Transportation Commission under the Department of Public Works and Communications. Later, the Department of Public Works and Communications was restructured into the Department of Public Works, Transportation and Communications. On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau of Public Highways from the Department of Public Works, Transportation and Communications and created it as a department to be known as Department of Public Highways. Under Section 3 of PD 458, the Department of Public Highways is "responsible for developing and implementing programs on the construction and maintenance of roads, bridges and airport runways." With the amendment of the 1973 Philippine Constitution in 1976, resulting in the shift in the form of government, national agencies were renamed from Departments to Ministries. Thus, the Department of Public Works, Transportation and Communications became the Ministry of Public Works, Transportation and Communications.

On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order No. 546 (EO 546), creating a Ministry of Public Works and a Ministry of Transportation and Communications. [17] Under Section 1 of EO 546, the Ministry of Public Works assumed the public works functions of the Ministry of Public Works, Transportation and Communications. The functions of the Ministry of Public Works were the "construction, maintenance and repair of port works, harbor facilities, lighthouses, navigational aids, shore protection works, airport buildings and associated facilities, public buildings and 472

school buildings, monuments and other related structures, as well as undertaking harbor and river dredging works, reclamation of foreshore and swampland areas, water supply, and flood control and drainage works." [18]

On the other hand, the Ministry of Transportation and Communications became the "primary policy, planning, programming, coordinating, implementing, regulating and administrative entity of the executive branch of the government in the promotion, development, and regulation of a dependable and coordinated network of transportation and communication systems." [19] The functions of the Ministry of Transportation and Communications were: a. Coordinate and supervise all activities of the Ministry relative to transportation and communications; b. Formulate and recommend national policies and guidelines for the preparation and implementation of an integrated and comprehensive transportation and communications system at the national, regional and local levels; c. Establish and administer comprehensive and integrated programs for transportation and communication, and for this purpose, may call on any agency, corporation, or organization, whether government or private, whose development programs include transportation and communications as an integral part to participate and assist in the preparation and implementation of such programs; d. Regulate, whenever necessary, activities relative to transportation and communications and prescribe and collect fees in the exercise of such power; e. Assess, review and provide direction to transportation and communications research and development programs of the government in coordination with other institutions concerned; and f. Perform such other functions as may be necessary to carry into effect the provisions of this Executive Order. [20] (Emphasis supplied) On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO 710), which merged the Ministry of Public Works and the Ministry of Public Highways for "greater simplicity and economy in operations." [21] The restructured agency became known as the Ministry of Public Works and Highways. Under Section 1 of EO 710 the functions of the Ministry of Public Works and the Ministry of Public Highways [22] were transferred to the Ministry of Public Works and Highways.

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Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works and Highways became the Department of Public Works and Highways (DPWH) and the former Ministry of Transportation and Communications became the Department of Transportation and Communications (DOTC).

DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5 April 1993 and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised Rules and Regulations on Limited Access Facilities. However, on 23 July 1979, long before these department orders and regulations were issued, the Ministry of Public Works, Transportation and Communications was divided into two agencies - the Ministry of Public Works and the Ministry of Transportation and Communications by virtue of EO 546. The question is, which of these two agencies is now authorized to regulate, restrict, or prohibit access to limited access facilities? [23] Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public works functions of the Ministry of Public Works, Transportation and Communications. On the other hand, among the functions of the Ministry of Transportation and Communications (now Department of Transportation and Communications [DOTC]) were to (1) formulate and recommend national policies and guidelines for the preparation and implementation of an integrated and comprehensive transportation and communications systems at the national, regional, and local levels; and (2) regulate, whenever necessary, activities relative to transportation and communications and prescribe and collect fees in the exercise of such power. Clearly, under EO 546, it is the DOTC, not the DPWH, which has authority to regulate, restrict, or prohibit access to limited access facilities. Even under Executive Order No. 125 (EO 125) [24] and Executive Order No. 125-A (EO 125A), [25] which further reorganized the DOTC, the authority to administer and enforce all laws, rules and regulations relative to transportation is clearly with the DOTC. [26]

Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain expressways as limited access facilities. Under the law, it is the DOTC which is authorized to administer and enforce all laws, rules and regulations in the field of transportation and to regulate related activities. Since the DPWH has no authority to regulate activities relative to transportation, the TRB [27] cannot derive its power from the DPWH to issue regulations governing limited access facilities. The DPWH cannot delegate a power or function which it does not possess in the first place. Since DO 74 and DO 215 are void, it follows that the rules implementing them are likewise void. 474

Whether AO 1 and DO 123 are Unconstitutional DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO 123 reads in part: SUBJECT: Revised Rules and Regulations Governing Limited Access Highways By virtue of the authority granted the Secretary of Public Works and Highways under Section 3 of R.A. 2000, otherwise known as the Limited Access Highway Act, the following revised rules and regulations governing limited access highways are hereby promulgated for the guidance of all concerned: 1. Administrative Order No. 1 dated February 19, 1968, issued by the Secretary of the then Department of Public Works and Communications, is hereby amended by deleting the word "motorcycles" mentioned in Section 3(h) thereof. Therefore, motorcycles are hereby allowed to operate inside the toll roads and limited access highways, subject to the following: a. Motorcycles shall have an engine displacement of at least 400 cubic centimeters (cc) provided that: x x x x [28] (Emphasis supplied) The RTC's Decision dated 10 March 2003 declared DO 123 unconstitutional on the ground that it violates the equal protection clause by allowing only motorcycles with at least 400 cubic centimeters engine displacement to use the toll ways. The RTC reasoned that the creation of a distinction within the class of motorcycles was not based on real differences. We need not pass upon the constitutionality of the classification of motorcycles under DO 123. As previously discussed, the DPWH has no authority to regulate limited access highways since EO 546 has devolved this function to the DOTC. Thus, DO 123 is void for want of authority of the DPWH to promulgate it. On the other hand, the assailed portion of AO 1 states: Section 3. On limited access highways, it is unlawful for any person or group of persons to: xxxx (h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized); xxxx 475

Petitioners assail the DPWH's failure to provide "scientific" and "objective" data on the danger of having motorcycles plying our highways. They attack this exercise of police power as baseless and unwarranted. Petitioners belabor the fact that there are studies that provide proof that motorcycles are safe modes of transport. They also claim that AO 1 introduces an unreasonable classification by singling-out motorcycles from other motorized modes of transport. Finally, petitioners argue that AO 1 violates their right to travel.

Petitioners' arguments do not convince us. We emphasize that the Secretary of the Department of Public Works and Communications issued AO 1 on 19 February 1968.

Section 3 of RA 2000 [29] authorized the issuance of the guidelines. In contrast, DPWH issued DO 74, DO 215 and DO 123 after EO 546 devolved to the DOTC the authority to regulate limited access highways. We now discuss the constitutionality of AO 1. Administrative issuances have the force and effect of law. [30] They benefit from the same presumption of validity and constitutionality enjoyed by statutes. [31] These two precepts place a heavy burden upon any party assailing governmental regulations. The burden of proving unconstitutionality rests on such party. [32] The burden becomes heavier when the police power is at issue.

The use of public highways by motor vehicles is subject to regulation as an exercise of the police power of the state. [33] The police power is far-reaching in scope and is the "most essential, insistent and illimitable" of all government powers. [34] The tendency is to extend rather than to restrict the use of police power. The sole standard in measuring its exercise is reasonableness. [35] What is "reasonable" is not subject to exact definition or scientific formulation. No all-embracing test of reasonableness exists, [36] for its determination rests upon human judgment applied to the facts and circumstances of each particular case. [37] We find that AO 1 does not impose unreasonable restrictions. It merely outlines several precautionary measures, to which toll way users must adhere. These rules were designed to ensure public safety and the uninhibited flow of traffic within limited access facilities. They cover several subjects, from what lanes should be used by a certain vehicle, to maximum vehicle height. The prohibition of certain types of vehicles is but one of these. None of these rules violates reason. The purpose of these rules and the logic behind them are quite 476

evident. A toll way is not an ordinary road. The special purpose for which a toll way is constructed necessitates the imposition of guidelines in the manner of its use and operation. Inevitably, such rules will restrict certain rights. But the mere fact that certain rights are restricted does not invalidate the rules. Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll ways. [38] The regulation affects the right to peaceably assemble. The exercise of police power involves restriction, restriction being implicit in the power itself. Thus, the test of constitutionality of a police power measure is limited to an inquiry on whether the restriction imposed on constitutional rights is reasonable, and not whether it imposes a restriction on those rights. None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The DPWH, through the Solicitor General, maintains that the toll ways were not designed to accommodate motorcycles and that their presence in the toll ways will compromise safety and traffic considerations. The DPWH points out that the same study the petitioners rely on cites that the inability of other drivers to detect motorcycles is the predominant cause of accidents. [39] Arguably, prohibiting the use of motorcycles in toll ways may not be the "best" measure to ensure the safety and comfort of those who ply the toll ways. However, the means by which the government chooses to act is not judged in terms of what is "best," rather, on simply whether the act is reasonable. The validity of a police power measure does not depend upon the absolute assurance that the purpose desired can in fact be probably fully accomplished, or upon the certainty that it will best serve the purpose intended. [40] Reason, not scientific exactitude, is the measure of the validity of the governmental regulation. Arguments based on what is "best" are arguments reserved for the Legislature's discussion. Judicial intervention in such matters will only be warranted if the assailed regulation is patently whimsical. We do not find the situation in this case to be so. Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right to use the limited access facility. They are merely being required, just like the rest of the public, to adhere to the rules on how to use the facility. AO 1 does not infringe upon petitioners' right to travel but merely bars motorcycles, bicycles, tricycles, pedicabs, and any non- motorized vehicles as the mode of traveling along limited access highways. [41] Several cheap, accessible and practical alternative modes of transport are open to petitioners. There is nothing oppressive in being required to take a bus or drive a car instead of one's scooter, bicycle, calesa, or motorcycle upon using a toll way. Petitioners' reliance on the studies they gathered is misplaced. Police power does not rely upon the existence of definitive studies to support its use. Indeed, no requirement exists that the exercise of police power must first be conclusively justified by research. The yardstick has always been simply whether the government's act is reasonable and not 477

oppressive. [42] The use of "reason" in this sense is simply meant to guard against arbitrary and capricious government action. Scientific certainty and conclusiveness, though desirable, may not be demanded in every situation. Otherwise, no government will be able to act in situations demanding the exercise of its residual powers because it will be tied up conducting studies. A police power measure may be assailed upon proof that it unduly violates constitutional limitations like due process and equal protection of the law. [43] Petitioners' attempt to seek redress from the motorcycle ban under the aegis of equal protection must fail. Petitioners' contention that AO 1 unreasonably singles out motorcycles is specious. To begin with, classification by itself is not prohibited. [44] A classification can only be assailed if it is deemed invidious, that is, it is not based on real or substantial differences. As explained by Chief Justice Fernando in Bautista v. Juinio: [45] x x x To assure that the general welfare be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty and property. Those adversely affected may under such circumstances invoked the equal protection clause only if they can show that the governmental act assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not identical is analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding the rest. We find that it is neither warranted nor reasonable for petitioners to say that the only justifiable classification among modes of transport is the motorized against the nonmotorized. Not all motorized vehicles are created equal. A 16-wheeler truck is substantially different from other light vehicles. The first may be denied access to some roads where the latter are free to drive. Old vehicles may be reasonably differentiated from newer models. [46] We find that real and substantial differences exist between a motorcycle and other forms of transport sufficient to justify its classification among those prohibited from plying the toll ways. Amongst all types of motorized transport, it is obvious, even to a child, that a motorcycle is quite different from a car, a bus or a truck. The most obvious and troubling difference would be that a two-wheeled vehicle is less stable and more easily overturned than a four-wheeled vehicle. A classification based on practical convenience and common knowledge is not unconstitutional simply because it may lack purely theoretical or scientific uniformity. 478

Moreover, we take note that the Philippines is home to a host of unique motorized modes of transport ranging from modified hand-carts (kuliglig) to bicycle "sidecars" outfitted with a motor. To follow petitioners' argument to its logical conclusion would open up toll ways to all these contraptions. Both safety and traffic considerations militate against any ruling that would bring about such a nightmare. Petitioners complain that the prohibition on the use of motorcycles in toll ways unduly deprive them of their right to travel. We are not persuaded. A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain destinations, its use, operation, and maintenance require close regulation. Public interest and safety require the imposition of certain restrictions on toll ways that do not apply to ordinary roads. As a special kind of road, it is but reasonable that not all forms of transport could use it. The right to travel does not mean the right to choose any vehicle in traversing a toll way. The right to travel refers to the right to move from one place to another. Petitioners can traverse the toll way any time they choose using private or public four-wheeled vehicles. Petitioners are not denied the right to move from Point A to Point B along the toll way. Petitioners are free to access the toll way, much as the rest of the public can. The mode by which petitioners wish to travel pertains to the manner of using the toll way, a subject that can be validly limited by regulation. Petitioners themselves admit that alternative routes are available to them. Their complaint is that these routes are not the safest and most convenient. Even if their claim is true, it hardly qualifies as an undue curtailment of their freedom of movement and travel. The right to travel does not entitle a person to the best form of transport or to the most convenient route to his destination. The obstructions found in normal streets, which petitioners complain of (i.e., potholes, manholes, construction barriers, etc.), are not suffered by them alone. Finally, petitioners assert that their possession of a driver's license from the Land Transportation Office (LTO) and the fact that their vehicles are registered with that office entitle them to use all kinds of roads in the country. Again, petitioners are mistaken. There exists no absolute right to drive. On the contrary, this privilege, is heavily regulated. Only a qualified group is allowed to drive motor vehicles: those who pass the tests administered by the LTO. A driver's license issued by the LTO merely allows one to drive a particular mode of transport. It is not a license to drive or operate any form of transportation on any type of road. Vehicle registration in the LTO on the other hand merely signifies the roadworthiness of a vehicle. This does not preclude the government from prescribing which roads are accessible to certain vehicles. 479

WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision dated 10 March 2003 of the Regional Trial Court, Branch 147, Makati City and its Order dated 16 June 2003 in Civil Case No. 01-034. We declare VOID Department Order Nos. 74, 215, and 123 of the Department of Public Works and Highways, and the Revised Rules and Regulations on Limited Access Facilities of the Toll Regulatory Board. We declare VALID Administrative Order No. 1 of the Department of Public Works and Communications.

21. TERMINAL FACILITIES AND SERVICES CORPORATION, petitioner, vs. PHILIPPINE PORTS AUTHORITY and PORT MANAGER, and PORT DISTRICT OFFICER OF DAVAO CITY, respondents. G.R. No. 135639 | 2002-02-27 D DE

E

C

I LEON,

S

I JR.,

O

N J.:

Before us are two (2) consolidated petitions for review, one filed by the Terminal Facilities and Services Corporation (TEFASCO) (G.R. No. 135639) and the other by the Philippine Ports Authority (PPA) (G.R. No. 135826), of the Amended Decision[1] dated September 30, 1998 of the former Special Second Division of the Court of Appeals in CA-G.R. CV No. 47318 ordering the PPA to pay TEFASCO: (1) Fifteen Million Eight Hundred Ten Thousand ThirtyTwo Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage dues and Three Million Nine Hundred Sixty-One Thousand Nine Hundred SixtyFour Pesos and Six Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees from 1977 to 1991, which amounts TEFASCO could have earned had not PPA illegally imposed one hundred percent (100%) wharfage and berthing fees, and (2) the sum of Five Hundred Thousand Pesos (P500,000.00) as attorney's fees. No pronouncement was made as to costs of suit. In G.R. No. 135639 TEFASCO assails the declaration of validity of the government share and prays for reinstatement in toto of the decision of the trial court. In G.R. No. 135826 PPA impugns the Amended Decision for awarding the said two (2) amounts for loss of private port usage fees as actual damages, plus attorney's fees. TEFASCO is a domestic corporation organized and existing under the laws of the Philippines with principal place of business at Barrio Ilang, Davao City. It is engaged in the 480

business of providing port and terminal facilities as well as arrastre, stevedoring and other port-related services at its own private port at Barrio Ilang. Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of a specialized terminal complex with port facilities and a provision for port services in Davao City. To ease the acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA welcomed the proposal and organized an inter-agency committee to study the plan. The committee recommended approval thereof and its report stated that TEFASCO Terminal is a specialized terminal complex. The specialized matters intended to be captured are: (a) bananas in consideration of the rate of spoilage; (b) sugar; (c) fertilizers; (d) specialized movement of beer in pallets containerized handling lumber and plywood. 3.2

Limitations

of

the

government

facilities

-

The government port facilities are good for general cargoes only. Both ports are not equipped to handle specialized cargoes like bananas and container cargoes. Besides the present capacity, as well as the planned improvements, cannot cope with the increasing volume of traffic in the area. Participation of the private sector, therefore, involving private financing should be encouraged in the area. 3.3

Project

Viability

-

3.3.1 Technical Aspect - From the port operations point of view, the project is technically feasible. It is within a well-protected harbor and it has a sufficient depth of water for berthing the ships it will service. The lack of back up area can be supplied by the 21-hectare industrial land which will be established out of the hilly land area which is to be scrapped and leveled to be used to fill the area for reclamation. 3.3.2 Economic Aspect - The international port of Sasa and the domestic port of Sta. Ana are general cargo type ports. They are facing serious ship and cargo congestion problems brought about mainly by the faster growth of shipping industry than the development of the ports. They do not possess the special cargo handling facilities which TFSC plans to put up at the proposed terminal. xxx The proposed project expects to get a 31% market slice. It will service domestic and foreign vessels. Main products to be handled initially will be bananas in the export trade and beer in the domestic traffic. Banana exporters in Davao, like Stanfilco and Philippine Packing Corporation have signified their intentions to use the port. Negotiations between TFSC and banana exporters on whether the former or the latter should purchase the mechanical loading equipment have not yet been formed up xxx. 481

Easing the problems at these two ports would result in savings on cost of the operation as cargo storage and on damages and losses. It would also give relief to passengers from timedelay, inconvenience and exposure to hazards in commuting between the pier and ship at anchor. Furthermore, it would redound to better utilization of the government piers, therefore greater revenue from port operations. At the bigger scale, more economic benefits in terms of more employment, greater productivity, increased per capita income in the Davao region, and in light of the limited financial resources of the government for port development the TFSC proposal would be beneficial to the country. On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving TEFASCO's project proposal. PPA resolved to xxx [a]pprove, xxx the project proposal of the Terminal Facilities and Services Corporation, Inc. for the construction of specialized port facilities and provision of port services in Davao City, subject to the terms and conditions set forth in the report of the Technical Committee created by the Board in its meeting of January 30, 1975, and to the usual government rules and regulations. PPA relayed its acceptance of the project terms and conditions to TEFASCO in the letter[2] dated May 7, 1976 of Acting General Manager Mariano Nicanor which affirmed that We are pleased to inform you that the Board of Directors, Philippine Ports Authority, approved the project proposal of the Terminal Facilities and Services Corporation to construct a specialized port facilities and provision of port services in Davao City as follows: 1) Docking Facilities for Ocean Going and Interisland vessels with containerized cargo. 2)

Stevedoring

and

Arrastre

for

3)

above. Warehousing;

4) Container yard and warehouse for containerizing cargoes or breaking up cargoes for containers. 5)

Bulk

6) 7)

handling

and

silos

Bulk Bulk

handling

for

corn,

in

cooperation

handling or

conveyor

with

for system

for

the

NGA.

fertilizer. banana

exports. 482

8) 9)

Bulk

handling Bonded

for

sugar. warehousing.

The approval is subject to the terms and conditions set forth at enclosure. You are hereby authorized to start work immediately taking into account national and local laws and regulations pertaining to the project construction and operation. The enclosure referred to in the letter above-quoted stipulated the "Terms and Conditions of PPA Board Approval of the Project Proposal,"[3] particularly (1) That all fees and/or permits pertinent to the construction and operation of the proposed project shall be paid to and/or secured from the proper authorities. (2) That the plans shall not be altered without the prior approval of the Bureau of Public Works in coordination with the PPA. (3) That [any] damage to public and private property arising from the construction and operation of the project shall be the sole responsibility of the applicant-company. (4) That the Director of Public Works shall be notified five (5) days before the start of the construction works and that the Director of Public Works or his representative shall be authorized to inspect the works and premises while the work is in progress and even after the completion thereof. (5) That the applicant shall construct and complete the structure under the proposed project within eighteen (18) months after the approval of the permit, otherwise the permit shall be null and void. (6) That the facility shall handle general cargoes that are loaded as filler cargoes on bulk/container ships calling at the facility. (7) That the applicant shall build up its banana export traffic to replace the probable loss of its container traffic five (5) years from now because of the plan of PPA to put up a common user type container terminal at the port of Sasa. (8) That all charges payable to the Bureau of Customs will continue to apply upon take over of port operations by the PPA of the Port of Davao from the Bureau of Customs and direct control and regulations of operations of private port facilities in the general area of that port. 483

Under the foregoing terms and conditions, TEFASCO contracted dollar loans from private commercial institutions abroad to construct its specialized terminal complex with port facilities and thereafter poured millions worth of investments in the process of building the port. Long after TEFASCO broke ground with massive infrastructure work, the PPA Board curiously passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking for one, was compelled to submit an application for construction permit. Without the consent of TEFASCO, the application imposed additional significant conditions (1) This Permit to Construct (PTC) will entitle the applicant to operate the facility for a period of fifteen (15) years, without jeopardy to negotiation for a renewal for a period not exceeding ten (10) years. At the expiration of the permit, all improvements shall automatically become the property of the Authority. Thereafter, any interested party, including the applicant, may lease it under new conditions; (2) In the event that the Foreshore Lease Application expires or is disapproved/canceled, this permit shall also be rendered null and void; xxx (7) All other fees and/or permits pertinent to the construction and operation of the proposed project shall be paid to and/or secured from the proper authorities; xxx (9) Unless specifically authorized, no general cargo shall be handled through the facility; (10) All rates and charges to be derived from the use of said facility or facilities shall be approved by the Authority; xxx (12) An application fee in the amount of one-tenth or one percent of the total estimated cost of the proposed improvement/structure shall be paid upon advice; (13) Other requirements of the law shall be complied by the applicant. NOTE: Subject further to the terms and conditions as approved by PPA Board under Resolution No. 7 of 21 April 1976, except that PPA shall take over the role of the Bureau of Public Works and of the Bureau of Customs stipulated in the said approval. TEFASCO played along with this needless exercise as PPA approved the awkward application in a letter stating We are returning herewith your application for Permit to Construct No. 77-19 dated 18 October 1977, duly approved (validation of the original permit to construct approved by the PPA Board under Resolution No. 7 of 21 April 1976), for the construction of your port facilities in Bo. Ilang, Davao City, subject to the conditions stipulated under the approved permit and in accordance with the attached approved set of plans and working drawings. It is understood that this permit is still subject to the terms and conditions under the original permit except that this Authority takes over the role of the Bureau of Public Works and of the Bureau of Customs as stipulated thereon. The series of PPA impositions did not stop there. Two (2) years after the completion of the port facilities and the commencement of TEFASCO's port operations, or on June 10, 1978, PPA again issued to TEFASCO another permit, designated as Special Permit No. CO/CO-1484

067802, under which more onerous conditions were foisted on TEFASCO's port operations. [4] In the purported permit appeared for the first time the contentious provisions for ten percent (10%) government share out of arrastre and stevedoring gross income and one hundred percent (100%) wharfage and berthing charges, thus Pursuant to the provisions of Presidential Decree No. 857, otherwise known as the Revised Charter of the Philippine Ports Authority, and upon due consideration of the formal written application and its enclosures in accordance with PPA Memorandum Order No. 21 dated May 27, 1977, PPA Administrative Order No. 22-77 dated December 9, 1977, and other pertinent policies and guidelines, a Special Permit is hereby granted to TERMINAL FACILITIES AND SERVICES CORPORATION (TEFASCO), with address at Slip 3, Pier 4, North Harbor, Manila to provide its arrastre/stevedoring services at its own private wharf located at Barrio Ilang, Davao City, subject to the following conditions: xxx

xxx

xxx

2. Grantee shall render arrastre/stevedoring services on cargoes of vessels under the agency of Retla Shipping/Transcoastal Shipping, Solid Shipping, Sea Transport and other commercial vessels which cannot be accommodated in government piers at PMU-Davao due to port congestion which shall be determined by the Port Manager/Harbor Master/Port Operations Officer whose decision shall be conclusive; 3. Grantee shall promptly submit its latest certified financial statement and all statistical and other data required by the Authority from time to time; 4. Grantee shall strictly comply with all applicable PPA rules and regulations now in force or to be promulgated hereafter and other pertinent rules and regulations promulgated by other agency of the government and other applicable laws, orders or decrees; 5. Grantee shall remit to the government an amount equivalent to ten (10%) percentum of the handling rates chargeable on similar cargo in government piers/wharves within the jurisdiction of PMU-Davao on or before the 5th working day of every month provided, however, that in case of delay, grantee shall pay a penalty of one (1%) percentum of the accumulated total amount due for every day of delay; provided, further, that said rate shall be reasonably adjusted if and when warranted by the financial conditions of the Grantee; 6. Grantee shall settle with the Authority its back accounts on the 10% government share from the start of its arrastre/stevedoring operation plus 6% legal interest per annum as provided by law; 7. That cargoes and vessels diverted to TEFASCO wharf shall be subject to 100% wharfage and berthing charges respectively; 485

8. Grantee shall hold the Authority free from any liability arising out of the maintenance and operation thereof; 9. Grantee shall not in any manner pose a competition with any port or port facility owned by the government. Rates of charges shall in no case be lower than those prevailing at the Government Port of Davao. xxx

xxx

xxx

This Special Permit is non-transferable and shall remain valid from the date of issuance hereof until December 31, 1978; provided, however, that at any time prior to the expiration thereof, the same may be revoked for violation of any of the conditions herein set forth or for cause at the discretion of the PPA General Manager or his duly authorized representative. Subsequent exactions of PPA included: (a) Admin. Order 09-81, s. 1981,[5] notifying all arrastre and stevedoring operators, whether they do business in government owned port facilities, that special services income be subjected to "government share" equivalent to ten percent (10%) thereof; and, (b) Memo. Circ. 36-82, s. 1982,[6] mandating an assessment of one hundred percent (100%) wharfage dues on commercial and third-party cargoes regardless of extent of use of private port facilities and one hundred percent (100%) berthing charges on every foreign vessel docking at private wharves loading or discharging commercial or third-party cargoes. TEFASCO repeatedly asked PPA for extensions to pay these additional obligations and for reduction in the rates. But the PPA's response was final and non-negotiable statements of arrears and current accounts and threats of business closure in case of failure to pay them.[7] The trial court summed up the documentary evidence on this point xxx [w]hen TEFASCO requested for the structuring of its account of P3.5 million, resulting to a memorandum, issued by PPA General Manager to its internal control, to verify the specific assessment of TEFASCO, coming out in the specific amount of P3,143,425.67 which became a subject of TEFASCO various and series of letters-protest to PPA, for reconsideration of its ultimatum, to enforce TEFASCO's back account, dated June 1, 1983, marked Exh. "32" for defendant, after a series of letters for reconsideration of TEFASCO and reply of PPA, marked Exh. "26" to "31" for the defendants, an ultimatum letter of PPA was issued followed by another series of letters of protest, reconsideration and petition of TEFASCO and reply of PPA, correspondingly marked Exh. "40" - "51" for the defendants, until ultimately, the execution of a memorandum of agreement, marked Exh. "52" for the defendant, dated February 10, 1984. Most alarming was the receipt of defendants communication by TEFASCO, in its letter dated June 1, 1983, a cease and desist order of PPA for TEFASCO, to stop its commercial port operation xxx.[8] 486

On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in government share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos and Seventy-Five Centavos (P3,807,563.75) payable monthly, with default penalized by automatic withdrawal of its commercial private port permit and permit to operate cargo handling services; (b) reduction of government share from ten percent (10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and stevedoring gross income); (c) opening of its pier facilities to all commercial and third-party cargoes and vessels for a period coterminous with its foreshore lease contract with the National Government; and, (d) tenure of five (5) years extendible by five (5) more years for TEFASCO's permit to operate cargo handling in its private port facilities. In return PPA promised to issue the necessary permits for TEFASCO's port activities. TEFASCO complied with the MOA and paid the accrued and current government share.[9] On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in Davao City for refund of government share it had paid and for damages as a result of alleged illegal exaction from its clients of one hundred percent (100%) berthing and wharfage fees. The complaint also sought to nullify the February 10, 1984 MOA and all other PPA issuances modifying the terms and conditions of the April 21, 1976 Resolution No. 7 abovementioned.[10] The RTC, Branch 17, Davao City, in its decision dated July 15, 1992 in Civil Case No. 1921688, ruled for TEFASCO, (a) nullifying the MOA and all PPA issuances imposing government share and one hundred percent (100%) berthing and wharfage fees or otherwise modifying PPA Resolution No. 7, and, (b) awarding Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) for reimbursement of government share and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) for thirty percent (30%) berthing charges and Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) for fifty percent (50%) wharfage fees which TEFASCO could have earned as private port usage fee from 1977 to 1991 had PPA not collected one hundred percent (100%) of these fees; Two Hundred Forty-Eight Thousand Seven Hundred Twenty-Seven Pesos (P248,727.00) for dredging and blasting expenses; One Million Pesos (P1,000,000.00) in damages for blatant violation of PPA Resolution No. 7; and, Five Hundred Thousand Pesos (P500,000.00) for attorneys fees, with twelve percent (12%) interest per annum on the total amount awarded. [11] PPA appealed the decision of the trial court to the Court of Appeals. The appellate court in its original decision recognized the validity of the impositions and reversed in toto the decision of the trial court.[12] TEFASCO moved for reconsideration which the Court of Appeals found partly meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed the RTC decision only in the sense that PPA was directed to pay TEFASCO 487

(1) the amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage fees and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees which TEFASCO could have earned as private port usage fee from 1977 to 1991 had PPA not illegally imposed and collected one hundred percent (100%) of wharfage and berthing fees and (2) Five Hundred Thousand Pesos (P500,000.00) for attorney's fees. The Court of Appeals held that the one hundred percent (100%) berthing and wharfage fees were unenforceable because they had not been approved by the President under Secs. 19 and 20, P.D. No. 857, and discriminatory since much lower rates were charged in other private ports as shown by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were unsatisfied with this disposition hence these petitions. In G.R. No. 135639 TEFASCO prays to reinstate in toto the decision of the trial court. Its grounds are: (a) PPA Resolution No. 7 and the terms and conditions thereunder constitute a contract that PPA could not change at will; (b) the MOA between PPA and TEFASCO indicating the schedule of TEFASCO arrears and reducing the rate of government share is void for absence of consideration; and, (c) government share is neither authorized by PPA Resolution No. 7 nor by any law, and in fact, impairs the obligation of contracts. In G.R. No. 135826 PPA seeks to set aside the award of actual damages for wharfage and berthing fees and for attorney's fees. PPA anchors its arguments on the following: (a) that its collection of one hundred percent (100%) wharfage and berthing fees is authorized by Secs. 6 (b, ix) and 39 (a), P.D. No. 857, under which the imposable rates for such fees are within the sole power and authority of PPA; (b) that absence of evidentiary relevance of PPA issuances effective 1995 to 1997 reducing wharfage, berthing and port usage fees in private ports; (c) that TEFASCO's lack of standing to claim alleged overpayments of wharfage and berthing fees; and, (d) that lack of legal basis for the award of fifty percent (50%) wharfage and thirty percent (30%) berthing fees as actual damages in favor of TEFASCO for the period from 1977 to 1991, and for attorney's fees. In a nutshell, the issues in the two (2) consolidated petitions are centered on: (a) the character of the obligations between TEFASCO and PPA; (b) the validity of the collection by PPA of one hundred percent (100%) wharfage fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from 1977 to 1991; (d) the legality of the imposed government share and the MOA stipulating a schedule of TEFASCO's arrears for and imposing a reduced rate of government share; and, (e) the propriety of the award of attorney's fees and damages. Firstly, it was not a mere privilege that PPA bestowed upon TEFASCO to construct a specialized terminal complex with port facilities and provide port services in Davao City under PPA Resolution No. 7 and the terms and conditions thereof. Rather, the arrangement 488

was envisioned to be mutually beneficial, on one hand, to obtain business opportunities for TEFASCO, and on the other, enhance PPA's services The international port of Sasa and the domestic port of Sta. Ana are general cargo type ports. They are facing serious ship and cargo congestion problems brought about mainly by the faster growth of shipping industry than the development of the ports. They do not possess the special cargo handling facilities which TFSC plans to put up at the proposed terminal.[13] It is true that under P.D. No. 857 (1975) as amended,[14] the construction and operation of ports are subject to licensing regulations of the PPA as public utility.[15] However, the instant case did not arise out of pure beneficence on the part of the government where TEFASCO would be compelled to pay ordinary license and permit fees. TEFASCO accepted and performed definite obligations requiring big investments that made up the valuable consideration of the project. The inter-agency committee report that recommended approval of TEFASCO port construction and operation estimated investments at Sixteen Million Pesos (P16,000,000.00) (1975/1976 price levels) disbursed within a construction period of one year[16] and covered by foreign loans of Two Million Four Hundred ThirtyFour Thousand US Dollars (US$2,434,000.00) with interests of up to Ten Million Nine Hundred Sixty-Five Thousand Four Hundred Sixty-Five Pesos (P10,965,465.00) for the years 1979 to 1985.[17] In 1987 the total investment of TEFASCO in the project was valued at One Hundred Fifty-Six Million Two Hundred Fifty-One Thousand Seven Hundred NinetyEight Pesos (P156,251,798.00).[18] The inter-agency committee report also listed the costly facilities TEFASCO would build, and which in fact it has already built xxx The terminal complex will provide specialized mechanical cargo handling facilities for bananas, sugar, beer, grain and fertilizer, and containerized cargo operations. The marginal wharf could accommodate two ocean-going ships and one inter-island vessel at a time. The essential structures and facilities to be provided are: (1) 400-meter concrete wharf; (2) Back-up area (3.8 hectare reclaimed area plus a 21-hectare inland industrial zone); (3) Two warehouses with total floor area of 5,000 sq. meters; (4) mechanized banana loading equipment; (5) container yard.[19] With such considerable amount of money spent in reliance upon the promises of PPA under Resolution No. 7 and the terms and conditions thereof, the authorization for TEFASCO to build and operate the specialized terminal complex with port facilities assumed the character of a truly binding contract between the grantor and the grantee.[20] It was a twoway advantage for both TEFASCO and PPA, that is, the business opportunities for the former and the decongestion of port traffic in Davao City for the latter, which is also the cause of consideration for the existence of the contract. The cases of Ramos v. Central Bank of the Philippines[21] and Commissioner of Customs v. Auyong Hian[22] are deemed precedents. In Ramos, the Central Bank (CB) committed itself to support the Overseas Bank of Manila (OBM) and avoid its liquidation in exchange for the execution of a voting trust agreement 489

turning over the management of OBM to CB and a mortgage of its properties to CB to cover OBM's overdraft balance. This agreement was reached in CB's capacity as the regulatory agency of banking operations. After OBM accepted and performed in good faith its obligations, we deemed as perfected contract the relation between CB and OBM from which CB could not retreat and in the end prejudice OBM and its depositors and creditors Bearing in mind that the communications, xxx as well as the voting trust agreement xxx had been prepared by the CB, and the well-known rule that ambiguities therein are to be construed against the party that caused them, the record becomes clear that, in consideration of the execution of the voting trust agreement by the petitioner stockholders of OBM, and of the mortgage or assignment of their personal properties to the CB, xxx the CB had agreed to announce its readiness to support the new management "in order to allay the fears of depositors and creditors" xxx and to stave off liquidation "by providing adequate funds for the rehabilitation, normalization and stabilization" of the OBM, in a manner similar to what the CB had previously done with the Republic Bank xxx. While no express terms in the documents refer to the provision of funds by CB for the purpose, the same is necessarily implied, for in no other way could it rehabilitate, normalize and stabilize a distressed bank. xxx The deception practiced by the Central Bank, not only on petitioners but on its own management team, was in violation of Articles 1159 and 1315 of the Civil Code of the Philippines: Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.[23] Auyong Hian involved an importation of old newspapers in four (4) shipments under a "nodollar" arrangement pursuant to a license issued by the Import Control Commission. When the last shipment arrived in Manila, the customs authorities seized the importation on the ground that it was made without the license required by Central Bank Circular No. 45. While the seizure proceedings were pending before the Collector of Customs, the President of the Philippines through its Cabinet canceled the aforesaid license for the reason that it was illegally issued "in that no fixed date of expiration is stipulated." On review, this Court held xxx [W]hile the Cabinet, acting for the President, can pass on the validity of a license issued by the Import Control Commission, that power cannot be arbitrarily exercised. The action must be founded on good ground or reason and must not be capricious or whimsical. This 490

principle

is

so

clear

to

require

further

elaboration.

xxx In fact, if the cancellation were to prevail, the importer would stand to lose the license fee he paid amounting to P12,000.00, plus the value of the shipment amounting to P21,820.00. This is grossly inequitable. Moreover, "it has been held in a great number of cases that a permit or license may not arbitrarily be revoked xxx where, on the faith of it, the owner has incurred material expense." It has also been held that "where the licensee has acted under the license in good faith, and has incurred expense in the execution of it, by making valuable improvements or otherwise, it is regarded in equity as an executed contract and substantially an easement, the revocation of which would be a fraud on the licensee, and therefore the licensor is estopped to revoke it xxx It has also been held that the license cannot be revoked without reimbursing the licensee for his expenditures or otherwise placing him in status quo."[24] For a regulatory permit to be impressed with contractual character we held in Batchelder v. Central Bank[25] that the administrative agency in issuing the permit must have assumed such obligation on itself. The facts certainly bear out the conclusion that PPA passed Resolution No. 7 and the terms and conditions thereof with a view to decongesting port traffic in government ports in Davao City and engaging TEFASCO to infuse its own funds and skills to operate another port therein. As acceptance of these considerations and execution thereof immediately followed, it is too late for PPA to change the rules of engagement with TEFASCO as expressed in the said Resolution and other relevant documents. The terms and conditions binding TEFASCO are only those enumerated or mentioned in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure. With due consideration for the policy that laws of the land are written into every contract,[26] the said documents stand to be the only source of obligations between the parties. That being the case, it was arbitrary, unreasonable and unfair for PPA to add new burdens and uncertainties into their agreement of which TEFASCO had no prior knowledge even in the context of regulation. Lowell v. Archambault[27] is persuasive on this issue. In that case, the defendant was engaged in the business of an undertaker who wanted to erect on his land a stable to be used in connection therewith. He then applied to the board of health for a license to permit him to occupy and use the building when completed for the stabling of eight (8) horses. His application was granted and a license was issued to him permitting the exercise of this privilege. Upon receiving it, he at once had plans prepared and began the erection of a stable on a site from which he had, at a pecuniary loss, removed another building. After the work had begun but before its completion, the board of health acting on a petition of residents in the immediate vicinity rescinded their former vote and canceled the license. The court held 491

xxxUpon application for permission to erect a stable, which, in the absence of a restricting statute, would be a legitimate improvement in the enjoyment of his property, the applicant is entitled to know the full measure of immunity that can be granted to him before making the expenditure of money required to carry out his purpose. A resort to the general laws relating to the subject, or to ordinances or regulations made pursuant to them, should furnish him with the required information. When this has been obtained, he has a right to infer that he can safely act, with the assurance that, so long as he complies with the requirements under which it is proposed to grant the privilege, he has a constitutional claim to protection, until the legislature further restricts or entirely abolishes the right bestowed. A license should not be subjected to the uncertainties that constantly would arise if unauthorized limitations, of which he can have no knowledge, are subsequently and without notice to be read into his license, at the pleasure of the licensing board. Besides, all reasonable police regulations enacted for the preservation of the public health or morality, where a penalty is provided for their violation, while they may limit or prevent the use or enjoyment of property except under certain restrictions, and are constitutional, create statutory misdemeanors, which are not to be extended by implication. xxx. It was not within the power of the board of health, even after a hearing, in the absence of an authority conferred upon them by legislative sanction, to deprive him of the privilege they had unreservedly granted.[28] The record shows that PPA made express representations to TEFASCO that it would authorize and support its port project under clear and categorical terms and conditions of an envisioned contract. TEFASCO complied with its obligation which ultimately resulted to the benefit of PPA. And the PPA accepted the project as completed and authorized TEFASCO to operate the same. Under these circumstances, PPA is estopped from reneging on its commitments and covenants as exclusively contained in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure. As this Court explained in Ramos v. Central Bank of the Philippines [29] xxx[A]n estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. In this respect, the reliance by the promisee is generally evidenced by action or forbearance on his part, and the idea has been expressed that such action or forbearance would reasonably have been expected by the promisor. xxx But even assuming arguendo that TEFASCO relied upon a mere privilege granted by PPA, still the terms and conditions between them as written in the documents approving TEFASCO's project proposal should indubitably remain the same. Under traditional form of property ownership, recipients of privileges or largesses from the government could be said to have no property rights because they possessed no traditionally recognized proprietary interest therein. The cases of Vinco v. Municipality of Hinigaran[30] and Pedro 492

v. Provincial Board of Rizal[31] holding that a license to operate cockpits would be a mere privilege belonged to this vintage. But the right-privilege dichotomy came to an end when courts realized that individuals should not be subjected to the unfettered whims of government officials to withhold privileges previously given them.[32] Indeed to perpetuate such distinction would leave the citizens at the mercy of State functionaries, and worse, threaten the liberties protected by the Bill of Rights. Thus in Kisner v. Public Service Commission[33] wherein the US Public Service Commission reduced the number of vehicles which appellant Kisner was authorized to operate under his certificate of convenience and necessity when no limit was stipulated therein, it was ruled It appears from the record in this case that after the issuance of the initial certificate the appellant took steps to procure vehicles in addition to the one he already owned. He changed his position in reliance upon the original certificate authorizing him to operate an unlimited number of vehicles. xxx For the purpose of due process analysis, a "property interest" includes not only the traditional notions of real and personal property, but also extends to those benefits to which an individual may be deemed to have a legitimate claim of entitlement under existing rules and regulations. xxx The right of the appellant in the case at bar to operate more than one vehicle under the certificate of convenience and necessity, as originally issued, clearly constituted a benefit to the appellant and that benefit may be deemed to be a legitimate claim of entitlement under existing rules and regulations. Even if PPA granted TEFASCO only a license to construct and operate a specialized complex terminal with port facilities, the fact remains that PPA cannot unilaterally impose conditions that find no basis in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure. Secondly, we hold that PPA's imposition of one hundred percent (100%) wharfage fees and berthing charges is void. It is very clear from P.D. No. 857 as amended that wharfage and berthing rates collectible by PPA "upon the coming into operation of this Decree shall be those now provided under Parts 1, 2, 3 and 6 of Title VII of Book II of The Tariff and Customs Code, until such time that the President upon recommendation of the Board may order that the adjusted schedule of dues are in effect."[34] PPA cannot unilaterally peg such rates but must rely on either The Tariff and Customs Code or the quasi-legislative issuances of the President in view of the legislative prerogative of rate-fixing.[35] Accordingly, P.D. No. 441 (1974) amending The Tariff and Customs Code fixed wharfage dues at fixed amounts per specified quantity brought into or involving national ports or at fifty percent (50%) of the rates provided for herein in case the articles imported or exported from or transported within the Philippines are loaded or unloaded offshore, in midstream, or in private wharves where no loading or unloading facilities are owned and maintained by the government. Inasmuch as the TEFASCO port is privately owned and maintained, we rule that the applicable rate for imported or exported articles loaded or unloaded thereat is not one hundred percent (100%) but only fifty percent (50%) of the 493

rates

specified

in

P.D.

No.

441.

As regard berthing charges, this Court has ruled in Commissioner of Customs v. Court of Tax Appeals[36] that "subject vessels, not having berthed at a national port but at the Port of Kiwalan, which was constructed, operated, and continues to be maintained by private respondent xxx are not subject to berthing charges, and petitioner should refund the berthing fees paid by private respondent." The berthing facilities at Port of Kiwalan were constructed, improved, operated and maintained solely by and at the expense of a private corporation, the Iligan Express. On various dates, vessels using the berthing facilities therein were assessed berthing fees by the Collector of Customs which were paid by private respondent under protest. We nullified the collection and ordered their refund The only issue involved in this petition for review is: Whether a vessel engaged in foreign trade, which berths at a privately owned wharf or pier, is liable to the payment of the berthing charge under Section 2901 of the Tariff and Customs Code, which, as amended by Presidential Decree No. 34, reads: Sec. 2901. Definition. - Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulk-head-wharf, river or channel marginal wharf at any national port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of any national port of the Philippines: Provided, however, That in the last instance, the charge shall be fifty (50%) per cent of rates provided for in cases of piers without cargo shed in the succeeding sections. The owner, agent, operator or master of the vessel is liable for this charge. Petitioner Commissioner of Customs contends that the government has the authority to impose and collect berthing fees whether a vessel berths at a private pier or at a national port. On the other hand, private respondent argues that the right of the government to impose berthing fees is limited to national ports only. The governing law classifying ports into national ports and municipal ports is Executive Order No. 72, Series of 1936 (O.G. Vol. 35, No. 6, pp. 65-66). A perusal of said executive order discloses the absence of the port of Kiwalan in the list of national ports mentioned therein. Furthermore, Paragraph 1 of Executive Order No. 72 expressly provides that "the improvement and maintenance of national ports shall be financed by the Commonwealth Government, and their administration and operation shall be under the direct supervision and control of the Insular Collector of Customs." It is undisputed that the port of Kiwalan was constructed and improved and is operated and maintained solely by and at the expense of the Iligan Express Corporation, and not by the National Government of the Republic or any of its agencies or instrumentalities. xxx The port of Kiwalan not being included in the 494

list of national ports appended to Customs Memorandum Circular No. 33-73 nor in Executive Order No. 72, it follows inevitably as a matter of law and legal principle that this Court may not properly consider said port as a national port. To do otherwise would be to legislate on our part and to arrogate unto ourselves powers not conferred on us by the Constitution. xxx Plainly,

therefore,

the

port

of

Kiwalan

is

not

a

national

port.

xxx

Section 2901 of the Tariff and Customs Code prior to its amendment and said section as amended by Presidential Decree No. 34 are hereunder reproduced with the amendments duly highlighted: Sec. 2901. Definition. - Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal wharf at any port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of any port of the Philippines (old TCC). Sec. 2901. Definition. - Berthing charge is the amount assessed a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal wharf AT ANY NATIONAL PORT IN THE PHILIPPINES; for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of ANY NATIONAL port of the Philippines; Provided, HOWEVER, THAT IN THE LAST INSTANCE, THE CHARGE SHALL BE FIFTY (50%) PER CENT OF RATES PROVIDED FOR IN CASES OF PIERS WITHOUT CARGO SHED IN THE SUCCEEDING SECTIONS. (emphasis in the original). It will thus be seen that the word "national" before the word "port" is inserted in the amendment. The change in phraseology by amendment of a provision of law indicates a legislative intent to change the meaning of the provision from that it originally had (Agpalo, supra, p. 76). The insertion of the word "national" before the word "port" is a clear indication of the legislative intent to change the meaning of Section 2901 from what it originally meant, and not a mere surplusage as contended by petitioner, in the sense that the change "merely affirms what customs authorities had been observing long before the law was amended" (p. 18, Petition). It is the duty of this Court to give meaning to the amendment. It is, therefore, our considered opinion that under Section 2901 of The Tariff and Customs Code, as amended by Presidential Decree No. 34, only vessels berthing at national ports are liable for berthing fees. It is to be stressed that there are differences between national ports and municipal ports, namely: (1) the maintenance of municipal ports is borne by the municipality, whereas that of the national ports is shouldered by the national government; (2) municipal ports are created by executive order, while national ports are usually created by legislation; (3) berthing fees are not collected by the government from vessels berthing at municipal ports, while such berthing fees are 495

collected by the government from vessels moored at national ports. The berthing fees imposed upon vessels berthing at national ports are applied by the national government for the maintenance and repair of said ports. The national government does not maintain municipal ports which are solely maintained by the municipalities or private entities which constructed them, as in the case at bar. Thus, no berthing charges may be collected from vessels moored at municipal ports nor may berthing charges be imposed by a municipal council xxx.[37] PPA has not cited - nor have we found - any law creating the TEFASCO Port as a national port or converting it into one. Hence, following case law, we rule that PPA erred in collecting berthing fees from vessels that berthed at the privately funded port of petitioner TEFASCO. It also bears stressing that one hundred percent (100%) wharfage dues and berthing charges are void for failing to comply with Sec. 19, P.D. No. 857[38] as amended, requiring presidential approval of any increase or decrease of such dues. In Philippine Interisland Shipping Association of the Philippines v. CA[39] we ruled that PPA cannot override the statutory rates for dues by lowering rates of pilotage fees and leaving the fees to be paid for pilotage to agreement of parties, and further stated that There is, therefore, no legal basis for PPA's intransigence, after failing to get the new administration of President Aquino to revoke the order by issuing its own order in the form of A.O. NO. 02-88. It is noteworthy that if President Marcos had legislative power under Amendment No. 6 of the 1973 Constitution so did President Aquino under the Provisional (Freedom) Constitution who could, had she thought E.O. No. 1088 to be a mere "political gimmick," have just as easily revoked her predecessor's order. It is tempting to ask if the administrative agency would have shown the same act of defiance of the President's order had there been no change of administration. What this Court said in La Perla Cigar and Cigarette Factory v. Capapas, mutatis mutandis, - may be applied to the cases at bar: Was it within the powers of the then Collector Ang-angco to refuse to collect the duties that must be paid? That is the crucial point of inquiry. We hold that it was not. Precisely, he had to give the above legal provisions, quite explicit in character, force and effect. His obligation was to collect the revenue for the government in accordance with existing legal provisions, executive agreements and executive orders certainly not excluded. He would not be living up to his official designation if he were permitted to act otherwise. He was not named Collector of Customs for nothing... Certainly, if the President himself were called upon to execute the laws faithfully, a Collector of Customs, himself a subordinate executive official, cannot be considered as exempt in any wise from such an obligation of fealty. Similarly, if the President cannot suspend the operation of any law, it would be presumptuous in the extreme for one in the position of 496

then Collector Ang-angco to consider himself as possessed of such a prerogative...[40] Thirdly, PPA argues that the courts a quo wrongly awarded to TEFASCO fifty percent (50%) and thirty percent (30%) of the wharfage dues and berthing charges, respectively, as actual damages representing private port usage fees from 1977 to 1991. It claims that TEFASCO has no cause of action to ask for a portion of these fees since they were collected from "the owner, agent, operator or master of the vessel" for the berthing charge and "the owner or consignee of the article, or the agent of either" for the wharfage dues. We find no merit in this argument. The cause of action of TEFASCO is the injury it suffered as a result of the illegal imposition on its clientele of such dues and charges that should have otherwise gone to it as private port usage fee. TEFASCO is asserting injury to its right to collect valuable consideration for the use of its facilities and wrongdoing on the part of PPA prejudicing such right. This is especially true in the light of PPA's practice of collecting one hundred percent (100%) of the wharfage and berthing dues by cornering the cargoes and vessels, as it were, even before they were landed and berthed at TEFASCO's privately owned port. It is aggravated by the fact that these unlawful rates were collected by PPA long after the port facilities of TEFASCO had been completed and functioning. Considering these pleaded facts, TEFASCO's cause of action has been sufficiently alleged and proven. We quote with approval the following ruling of the Court of Appeals xxx As earlier stated, TEFASCO is only trying to recover income it has to forego because of the excessive collections imposed by PPA. By doing what it was prohibited to do under an existing law, PPA cannot be allowed to enjoy the fruits of its own illegal act. To be sure, TEFASCO suffered real damage as a result of such illegal act requiring indemnification xxx. [41] There is also no basis for PPA's assertion that there was lack of evidence to support the award in favor of TEFASCO of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage dues and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) for thirty percent (30%) berthing charges from 1977 to 1991. According to the appellate court, the determination was based on the "actual summarized list of cargoes and vessels which went through TEFASCO's port, which were under obligation to pay usage fees, multiplied by the applicable tariff rates."[42] The trial court explained in more detail the preponderant evidence for the judgment Another harassment is the issuance of Memorandum Circular No. 36-82, authorizing collection of 100% wharfage fees, instead of only 50% and also 100% berthing fees, instead of only 70% as provided for in PD 441, marked Exh. "LL" for plaintiff, and a copy of Letter of Instruction No. 8001-A, marked Exh. "NN" for plaintiff, in the process, the total collection of PPA for wharfage fees, amounted to P10,582,850.00 and berthing fee, amounted to P6,997,167.00 in the latter case, berthing fee collected was marked Exh. "PP" for plaintiff, 497

otherwise if PPA collected only 70% as provided, it could have collected only P4,898,018.03, equally TEFASCO could have earned the remainder of P2,099,150.90 while in the case of wharfage fee, if PPA collected only 50%, TEFASCO would have earned the other half of P5,291,042.00, 50% by way of rentals. xxx In cases of berthing and wharfage fees prior to the issuance of the injunction order from this court, PPA charges 100% the totality or summary of claims from PPA, from 1977 to 1991, was shown and marked Exhibit KKK and submarkings, showing TEFASCO is supposed to collect, if PPA collects only 50% wharfage, the other 50% goes with TEFASCO in case of berthing 70%, the remainder of 30% could have been collected by TEFASCO.[43] Under Arts. 2199 and 2200 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of or in recompense for loss or injury sustained.[44] They proceed from a sense of natural justice and are designed to repair the wrong done. In Producers Bank of the Philippines v. CA[45] we succinctly explain the kinds of actual damages, thusThere are two kinds of actual or compensatory damages: one is the loss of what a person already possesses, and the other is the failure to receive as a benefit that which would have pertained to him x x x. In the latter instance, the familiar rule is that damages consisting of unrealized profits, frequently referred as "ganacias frustradas" or "lucrum cessans,' are not to be granted on the basis of mere speculation, conjecture, or surmise, but rather by reference to some reasonably definite standard such as market value, established experience, or direct inference from known circumstances xxx. It is not necessary to prove with absolute certainty the amount of ganacias frustradas or lucrum cessans. In Producers Bank of the Philippines we ruled that xxx the benefit to be derived from a contract which one of the parties has absolutely failed to perform is of necessity to some extent, a matter of speculation, but the injured party is not to be denied for this reason alone. He must produce the best evidence of which his case is susceptible and if that evidence warrants the inference that he has been damaged by the loss of profits which he might with reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled to recover.[46] Applying the test aforequoted, we find that TEFASCO has proved with clear and convincing evidence its loss of wharfage and berthing fees. There was basis for the courts a quo in awarding to TEFASCO, as actual damages, the sums equivalent to fifty percent (50%) and thirty percent (30%) of the wharfage dues and berthing charges, respectively. It has not been denied that TEFASCO was forced to reluctantly let go of such fees to avoid the unwise business practice of financially overburdening the users of its port by requiring them to pay beyond one hundred percent (100%) of such dues. It has not also been disproved that this loss of TEFASCO was the direct result of the collection of one hundred percent (100%) wharfage and berthing dues by PPA, an imposition that left nothing more for TEFASCO to 498

charge for the use of its port and terminal facilities. Consequently, there is merit in TEFASCO's claim that had the PPA imposition been limited to the fifty percent (50%) wharfage dues and seventy percent (70%) berthing charges, TEFASCO could have received the remainder as port usage fees since the amounts were disbursed by its clients for that purpose. Significantly, in regard to berthing charges, TEFASCO's cause of action and evidence presented before the trial court as well as its assigned error on appeal on that point were limited to thirty percent (30%) of such charges. Fourthly, we also declare void the imposition by PPA of ten percent (10%), later reduced to six percent (6%), government share out of arrastre and stevedoring gross income of TEFASCO. This exaction was never mentioned in the contract, much less is it a binding prestation, between TEFASCO and PPA. What was clearly stated in the terms and conditions appended to PPA Resolution No. 7 was for TEFASCO to pay and/or secure from the proper authorities "all fees and/or permits pertinent to the construction and operation of the proposed project." The government share demanded and collected from the gross income of TEFASCO from its arrastre and stevedoring activities in TEFASCO's wholly owned port is certainly not a fee or in any event a proper condition in a regulatory permit. Rather it is an onerous "contractual stipulation"[47] which finds no root or basis or reference even in the contract aforementioned. We stress that the cause of the contract between TEFASCO and PPA was, on the part of the former, to engage in the business of operating its privately owned port facilities, and for the latter, to decongest port traffic in Davao City and concomitantly to enhance regional trade. The records of the project acceptance made by PPA indicate that the contract was executed not to earn income for PPA or the government as justification for the subsequent and unfair imposition of government share in the arrastre and stevedoring gross income of TEFASCO. Hence this charge was obviously an after-thought conceived by PPA only after the TEFASCO port had already begun its operations. The sharing scheme only meant that PPA would piggy back unreasonably on the substantial investment and labor of TEFASCO. As the scheme was subsequently stipulated on percentage of gross income, it actually penalized TEFASCO for its hand work and substantial capital expenditures in the TEFASCO port and terminal. Moreover, PPA is bereft of any authority to impose whatever amount it pleases as government share in the gross income of TEFASCO from its arrastre and stevedoring operations. As an elementary principle of law, license taxation must not be "so unreasonable to show a purpose to prohibit a business which is not itself injurious to public health or morals."[48] In the case at bar, the absurd and confiscatory character of government share is convincingly proved by PPA's decision itself to abandon the disadvantageous scheme through Administrative Order No. 06-95 dated 4 December 1995, Liberalized Regulation on Private Ports Construction, Development, and Operation.[49] The PPA issuance scrapped government share in the income of private ports where no government facilities had been installed and in place thereof imposed a one-time privilege 499

fee of P20,000.00 per annum for commercial ports and P10,000.00 yearly for noncommercial ports. In passing, we believe that this impost is more in consonance with the description of government share as consideration for the "supervision inherent in the upgrading and improvement of port operations, of which said services are an integral part."[50] We do not also agree that TEFASCO subsequently acceded to paying the government share in its gross income from its arrastre and stevedoring operations, and in recognizing arrears for such charge. The Memorandum of Agreement (MOA) which it subsequently signed with PPA did not give TEFASCO any benefit so that we cannot conclude that there was indeed a voluntary settlement between them. Rather it could be described aptly as an imposition under actual threats of closure of TEFASCO's port. Verily the MOA was meant to cloak semblance of validity upon that particular charge since there was nothing in the original TEFASCO-PPA contract authorizing the PPA to collect any share in the gross income of TEFASCO in its arrastre and stevedoring operations. The MOA is invalid for want of consideration and consent.[51] As such, it is an invalid novation[52] of the original agreement between TEFASCO and PPA as embodied in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure. Truly, the MOA was a set of stipulations executed under undue pressure on TEFASCO of permanent closure of its port and terminal. As the TEFASCO investment was worth millions of dollars in loans and equities, PPA's posture of prohibiting it from engaging in the bulk of its business presented it with no reasonable freedom of choice but to accept and sign the MOA. Furthermore, the MOA suffers from utter want of consideration since nothing more could have been stipulated in the agreement when every detail of port operation had already been previously spelled out and sanctioned in the original contract. The belated MOA citations of PPA's recognition of TEFASCO's facility as a private port and provision of arrastre and stevedoring and repair services were all part of the agreement from 1976 when the project proposal was approved by the PPA Board. Under these circumstances, it cannot be said that TEFASCO embraced voluntarily the unfair imposition in the MOA that inevitably would cause, as it did, its own bankruptcy. In sum, TEFASCO is entitled to Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) for reimbursement of what PPA illegally collected as "government share" in the gross income of TEFASCO's arrastre and stevedoring operations for 1977 to 1991. Fifthly, we affirm the award of Five Hundred Thousand Pesos (P500,000.00) as attorney's fees. Attorney's fees may be awarded when a party is compelled to litigate or incur expenses to protect his interest by reason of an unjustified act of the other party.[53] In the instant case, attorney's fees were warranted by PPA's unfair exaction of exorbitant wharfage and berthing dues from TEFASCO and threats to close its port. These adverse actions correctly drove the latter to institute the present proceedings to protect its rights and 500

remedy

the

unfair

situation.

However, we set aside the award of Two Hundred Forty-Eight Thousand Seven Hundred Twenty-Seven Pesos (P248,727.00) for dredging and blasting expenses. The trial court justified the award on the ground that this activity was allegedly the responsibility of PPA under Sec. 37 of P.D. No. 857[54] as amended which TEFASCO in good faith undertook. This is not correct. More precisely, the law obliged PPA to fund construction and dredging works only in "public ports vested in the Authority." Clearly the construction of the TEFASCO port was not the responsibility of the PPA and does not fall under Sec. 37 of P.D. No. 857. The dredging and blasting done by TEFASCO augmented the viability of its port, and therefore the same were part and parcel of the contractual obligations it agreed to undertake when it accepted the terms and conditions of the project. It is also erroneous to set legal interest on the damages awarded herein at twelve percent (12%) yearly computed from the filing of the complaint. In Crismina Garments, Inc. v. CA[55], it was held that interest on damages, other than loan or forbearance of money, is six percent (6%) annually computed from determination with reasonable certainty of the amount demanded. Thus, applying that rule in the case at bar, the interest would be six percent (6%) per annum from the date of promulgation of the decision of the trial court in Civil Cases Nos. 19216-88 on July 15, 1992. To recapitulate: PPA is liable to TEFASCO for Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage fees and Three Million Nine Hundred Sixty-One Thousand Nine Hundred SixtyFour Pesos and Six Centavos (P3,961,964.06) for thirty percent (30%) berthing charges from 1977 to 1991 and Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) for reimbursement of the unlawfully collected government share in TEFASCO's gross income from its arrastre and stevedoring operations during the same period. The said principal amounts herein ordered shall earn interest at six percent (6%) annually from July 15, 1992, date of promulgation of the Decision of the Regional Trial Court of Davao in Civil Cases Nos. 19216-88. The PPA shall also pay TEFASCO the amount of Five Hundred Thousand Pesos (P500,000.00) for and as attorney's fees. Henceforth, PPA shall collect only such dues and charges as are duly authorized by the applicable provisions of The Tariff and Customs Code and presidential issuances pursuant to Sec. 19, P.D. No. 857. PPA shall strictly observe only the legally imposable rates. Furthermore, PPA has no authority to charge government share in the gross income of TEFASCO from its arrastre and stevedoring operations within its subject private port in Davao City. TEFASCO's port operations including cargo handling services shall be co-terminous with its foreshore lease contract with the National Government and any extension of the said foreshore lease contract shall similarly lengthen the duration of its port operations. It is 501

clear from the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure that the intention of the parties under their contract is to integrate port operations of TEFASCO so that all services therein, including arrastre and stevedoring operations, shall end at the same time. The subsequent and onerous MOA did not change the tenure of its port operations, there being no clear and convincing showing of TEFASCO's free and voluntary amenability thereto. In no case, however, shall such port operations of TEFASCO exceed fifty (50) years which is the maximum period of foreshore lease contracts with the National Government. WHEREFORE, the Amended Decision of the Court of Appeals dated September 30, 1998 in case CA-G.R. CV No. 47318 is MODIFIED as follows: 1. The Philippine Ports Authority (PPA) is held liable and hereby ordered to pay and reimburse to Terminal Facilities and Services Corporation (TEFASCO) the amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) representing fifty percent (50%) wharfage fees and thirty percent (30%) berthing charges respectively, from 1977 to 1991, and the sum of Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) representing PPA's unlawfully collected "government share" in the gross income of TEFASCO's arrastre and stevedoring operations during the said period; 2. The said principal amounts herein ordered to be paid by PPA to TEFASCO shall earn interest at six percent (6%) per annum from July 15, 1992, date of promulgation of the Decision of the Regional Trial Court, Branch 17 of Davao City in Civil Case No. 19216-88; and 3. The PPA is also ordered to pay TEFASCO the sum of Five Hundred Thousand Pesos (P500,000.00) for and as attorney's fees. Costs

against

the

Philippine

Ports

Authority.

SO ORDERED.

22.

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