EN BANC

[G.R. No. 135385. December 6, 2000]

ISAGANI CRUZ and CESAR EUROPA, petitioners, vs. SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES, SECRETARY OF BUDGET AND MANAGEMENT and CHAIRMAN and COMMISSIONERS OF THE NATIONAL COMMISSION ON INDIGENOUS PEOPLES, respondents.

HON. JUAN M .FLAVIER, HON. PONCIANO BENNAGEN, BAYANI ASCARRAGA, EDTAMI MANSAYANGAN, BASILIO WANDAG, EVELYN DUNUAN, YAOM TUGAS, ALFREMO CARPIANO, LIBERATO A. GABIN, MATERNIDAD M. COLAS, NARCISA M. DALUPINES, BAI KIRAM-CONNIE SATURNO, BAE MLOMO-BEATRIZ T. ABASALA, DATU BALITUNGTUNG-ANTONIO D. LUMANDONG, DATU MANTUMUKAW TEOFISTO SABASALES, DATU EDUAARDO BANDA, DATU JOEL UNAD, DATU RAMON BAYAAN, TIMUAY JOSE ANOY, TIMUAY MACARIO D. SALACAO, TIMUAY EDWIN B. ENDING, DATU SAHAMPONG MALANAW VI, DATU BEN PENDAO CABIGON, BAI NANAPNAY-LIZA SAWAY, BAY INAY DAYA-MELINDA S. REYMUNDO, BAI TINANGHAGA HELINITA T. PANGAN, DATU MAKAPUKAW ADOLINO L. SAWAY, DATU MAUDAYAW-CRISPEN SAWAY, VICKY MAKAY, LOURDES D. AMOS, GILBERT P. HOGGANG, TERESA GASPAR, MANUEL S. ONALAN, MIA GRACE L. GIRON, ROSEMARIE G. PE, BENITO CARINO, JOSEPH JUDE CARANTES, LYNETTE CARANTES-VIVAL, LANGLEY SEGUNDO, SATUR S. BUGNAY, CARLING DOMULOT, ANDRES MENDIOGRIN, LEOPOLDO ABUGAN, VIRGILIO CAYETANO, CONCHITA G. DESCAGA, LEVY ESTEVES, ODETTE G. ESTEVEZ, RODOLFO C. AGUILAR, MAURO VALONES, PEPE H. ATONG, OFELIA T. DAVI, PERFECTO B. GUINOSAO, WALTER N. TIMOL, MANUEL T. SELEN, OSCAR DALUNHAY, RICO O. SULATAN, RAFFY MALINDA, ALFREDO ABILLANOS, JESSIE ANDILAB, MIRLANDO H. MANGKULINTAS, SAMIE SATURNO, ROMEO A. LINDAHAY, ROEL S. MANSANG-CAGAN, PAQUITO S.

LIESES, FILIPE G. SAWAY, HERMINIA S. SAWAY, JULIUS S. SAWAY, LEONARDA SAWAY, JIMMY UGYUB, SALVADOR TIONGSON, VENANCIO APANG, MADION MALID, SUKIM MALID, NENENG MALID, MANGKATADONG AUGUSTO DIANO, JOSEPHINE M. ALBESO, MORENO MALID, MARIO MANGCAL, FELAY DIAMILING, SALOME P. SARZA, FELIPE P. BAGON, SAMMY SALNUNGAN, ANTONIO D. EMBA, NORMA MAPANSAGONOS, ROMEO SALIGA, SR., JERSON P. GERADA, RENATO T. BAGON, JR., SARING MASALONG, SOLEDAD M. GERARDA, ELIZABETH L. MENDI, MORANTE S. TIWAN, DANILO M. MALUDAO, MINORS MARICEL MALID, represented by her father CORNELIO MALID, MARCELINO M. LADRA, represented by her father MONICO D. LADRA, JENNYLYN MALID, represented by her father TONY MALID, ARIEL M. EVANGELISTA, represented by her mother LINAY BALBUENA, EDWARD M. EMUY, SR., SUSAN BOLANIO, OND, PULA BATO B’LAAN TRIBAL FARMER’S ASSOCIATION, INTER-PEOPLE’S EXCHANGE, INC. and GREEN FORUM-WESTERN VISAYAS, intervenors.

COMMISSION ON HUMAN RIGHTS, intervenor.

IKALAHAN INDIGENOUS PEOPLE and HARIBON FOUNDATION FOR THE CONSERVATION OF NATURAL RESOURCES, INC., intervenor.

R E S O L U T I O N

PER CURIAM:

Petitioners Isagani Cruz and Cesar Europa brought this suit for prohibition and mandamus as citizens and taxpayers, assailing the constitutionality of certain provisions of Republic Act No. 8371 (R.A. 8371), otherwise known as the Indigenous Peoples Rights Act of 1997 (IPRA), and its Implementing Rules and Regulations (Implementing Rules).

In its resolution of September 29, 1998, the Court required respondents to comment.[1] In compliance, respondents Chairperson and Commissioners of the National Commission on Indigenous Peoples (NCIP), the government agency created under the IPRA to implement its provisions, filed on October 13, 1998 their Comment to the Petition, in which they defend the constitutionality of the IPRA and pray that the petition be dismissed for lack of merit.

On October 19, 1998, respondents Secretary of the Department of Environment and Natural Resources (DENR) and Secretary of the Department of Budget and

Management (DBM) filed through the Solicitor General a consolidated Comment. The Solicitor General is of the view that the IPRA is partly unconstitutional on the ground that it grants ownership over natural resources to indigenous peoples and prays that the petition be granted in part.

On November 10, 1998, a group of intervenors, composed of Sen. Juan Flavier, one of the authors of the IPRA, Mr. Ponciano Bennagen, a member of the 1986 Constitutional Commission, and the leaders and members of 112 groups of indigenous peoples (Flavier, et. al), filed their Motion for Leave to Intervene. They join the NCIP in defending the constitutionality of IPRA and praying for the dismissal of the petition.

On March 22, 1999, the Commission on Human Rights (CHR) likewise filed a Motion to Intervene and/or to Appear as Amicus Curiae. The CHR asserts that IPRA is an expression of the principle of parens patriae and that the State has the responsibility to protect and guarantee the rights of those who are at a serious disadvantage like indigenous peoples. For this reason it prays that the petition be dismissed.

On March 23, 1999, another group, composed of the Ikalahan Indigenous People and the Haribon Foundation for the Conservation of Natural Resources, Inc. (Haribon, et al.), filed a motion to Intervene with attached Comment-in-Intervention. They agree with the NCIP and Flavier, et al. that IPRA is consistent with the Constitution and pray that the petition for prohibition and mandamus be dismissed.

The motions for intervention of the aforesaid groups and organizations were granted.

Oral arguments were heard on April 13, 1999. Thereafter, the parties and intervenors filed their respective memoranda in which they reiterate the arguments adduced in their earlier pleadings and during the hearing.

Petitioners assail the constitutionality of the following provisions of the IPRA and its Implementing Rules on the ground that they amount to an unlawful deprivation of the State’s ownership over lands of the public domain as well as minerals and other natural resources therein, in violation of the regalian doctrine embodied in Section 2, Article XII of the Constitution:

“(1) Section 3(a) which defines the extent and coverage of ancestral domains, and Section 3(b) which, in turn, defines ancestral lands;

“(2) Section 5, in relation to section 3(a), which provides that ancestral domains including inalienable public lands, bodies of water, mineral and other resources found within ancestral domains are private but community property of the indigenous peoples;

“(3) Section 6 in relation to section 3(a) and 3(b) which defines the composition of ancestral domains and ancestral lands;

“(4) Section 7 which recognizes and enumerates the rights of the indigenous peoples over the ancestral domains;

(5) Section 8 which recognizes and enumerates the rights of the indigenous peoples over the ancestral lands;

“(6) Section 57 which provides for priority rights of the indigenous peoples in the harvesting, extraction, development or exploration of minerals and other natural resources within the areas claimed to be their ancestral domains, and the right to enter into agreements with nonindigenous peoples for the development and utilization of natural resources therein for a period not exceeding 25 years, renewable for not more than 25 years; and

“(7) Section 58 which gives the indigenous peoples the responsibility to maintain, develop, protect and conserve the ancestral domains and portions thereof which are found to be necessary for critical watersheds, mangroves, wildlife sanctuaries, wilderness, protected areas, forest cover or reforestation.”[2]

Petitioners also content that, by providing for an all-encompassing definition of “ancestral domains” and “ancestral lands” which might even include private lands found within said areas, Sections 3(a) and 3(b) violate the rights of private landowners.[3]

In addition, petitioners question the provisions of the IPRA defining the powers and jurisdiction of the NCIP and making customary law applicable to the settlement of disputes involving ancestral domains and ancestral lands on the ground that these provisions violate the due process clause of the Constitution.[4]

These provisions are:

“(1) sections 51 to 53 and 59 which detail the process of delineation and recognition of ancestral domains and which vest on the NCIP the sole authority to delineate ancestral domains and ancestral lands;

“(2) Section 52[i] which provides that upon certification by the NCIP that a particular area is an ancestral domain and upon notification to the following officials, namely, the Secretary of Environment and Natural Resources, Secretary of Interior and Local Governments, Secretary of Justice and Commissioner of the National Development Corporation, the jurisdiction of said officials over said area terminates;

“(3) Section 63 which provides the customary law, traditions and practices of indigenous peoples shall be applied first with respect to property rights, claims of ownership, hereditary succession and settlement of land disputes, and that any doubt or ambiguity in the interpretation thereof shall be resolved in favor of the indigenous peoples;

“(4) Section 65 which states that customary laws and practices shall be used to resolve disputes involving indigenous peoples; and

“(5) Section 66 which vests on the NCIP the jurisdiction over all claims and disputes involving rights of the indigenous peoples.”[5]

Finally, petitioners assail the validity of Rule VII, Part II, Section 1 of the NCIP Administrative Order No. 1, series of 1998, which provides that “the administrative relationship of the NCIP to the Office of the President is characterized as a lateral but autonomous relationship for purposes of policy and program coordination.” They contend that said Rule infringes upon the President’s power of control over executive departments under Section 17, Article VII of the Constitution.[6]

Petitioners pray for the following:

“(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59, 63, 65 and 66 and other related provisions of R.A. 8371 are unconstitutional and invalid;

“(2) The issuance of a writ of prohibition directing the Chairperson and Commissioners of the NCIP to cease and desist from implementing the assailed provisions of R.A. 8371 and its Implementing Rules;

“(3) The issuance of a writ of prohibition directing the Secretary of the Department of Environment and Natural Resources to cease and desist from implementing Department of Environment and Natural Resources Circular No. 2, series of 1998;

“(4) The issuance of a writ of prohibition directing the Secretary of Budget and Management to cease and desist from disbursing public funds for the implementation of the assailed provisions of R.A. 8371; and

“(5) The issuance of a writ of mandamus commanding the Secretary of Environment and Natural Resources to comply with his duty of carrying out the State’s constitutional mandate to control and supervise the exploration, development, utilization and conservation of Philippine natural resources.”[7]

After due deliberation on the petition, the members of the Court voted as follows:

Seven (7) voted to dismiss the petition. Justice Kapunan filed an opinion, which the Chief Justice and Justices Bellosillo, Quisumbing, and Santiago join, sustaining the validity of the challenged provisions of R.A. 8371. Justice Puno also filed a separate opinion sustaining all challenged provisions of the law with the exception of Section 1, Part II, Rule III of NCIP Administrative Order No. 1, series of 1998, the Rules and Regulations Implementing the IPRA, and Section 57 of the IPRA which he contends should be interpreted as dealing with the large-scale exploitation of natural resources and should be read in conjunction with Section 2, Article XII of the 1987 Constitution. On the other hand, Justice Mendoza voted to dismiss the petition solely on the ground that it does not raise a justiciable controversy and petitioners do not have standing to question the constitutionality of R.A. 8371.

Seven (7) other members of the Court voted to grant the petition. Justice Panganiban filed a separate opinion expressing the view that Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of R.A. 8371 are unconstitutional. He reserves judgment on the constitutionality of Sections 58, 59, 65, and 66 of the law, which he believes must await the filing of specific cases by those whose rights may have been violated by the IPRA. Justice Vitug also filed a separate opinion expressing the view that Sections 3(a), 7, and 57 of R.A. 8371 are unconstitutional. Justices Melo, Pardo, Buena, Gonzaga-Reyes, and De Leon join in the separate opinions of Justices Panganiban and Vitug.

As the votes were equally divided (7 to 7) and the necessary majority was not obtained, the case was redeliberated upon. However, after redeliberation, the voting remained the same. Accordingly, pursuant to Rule 56, Section 7 of the Rules of Civil Procedure, the petition is DISMISSED.

Attached hereto and made integral parts thereof are the separate opinions of Justices Puno, Vitug, Kapunan, Mendoza, and Panganiban.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De Leon, Jr., JJ., concur.

Puno, Vitug, Kapunan, Mendoza and Panganiban JJ., see separate opinion

[1] Rollo, p. 114.

[2] Petition, Rollo, pp. 16-23.

[3] Id. at 23-25.

[4] Section 1, Article III of the Constitution states: “No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws.”

[5] Rollo, pp. 25-27.

[6] Id. at 27-28.

[7] Transcript of Stenographic Notes of the hearing held on April 13, 1999, pp. 5-6.

Republic of the Philippines

Supreme Court Manila

EN BANC

THE SECRETARY OF THE G.R. No. 167707

DEPARTMENT OF ENVIRONMENT

AND NATURAL RESOURCES, THE

REGIONAL EXECUTIVE Present: DIRECTOR, DENR-REGION VI, REGIONAL TECHNICAL PUNO, C.J., DIRECTOR FOR LANDS, QUISUMBING, LANDS MANAGEMENT BUREAU, YNARES-SANTIAGO, REGION VI PROVINCIAL CARPIO, ENVIRONMENT AND NATURAL AUSTRIA-MARTINEZ, RESOURCES OFFICER OF KALIBO, CORONA,* AKLAN, REGISTER OF DEEDS, CARPIO MORALES, DIRECTOR OF LAND AZCUNA, REGISTRATION AUTHORITY, TINGA, DEPARTMENT OF TOURISM CHICO-NAZARIO, SECRETARY, DIRECTOR OF VELASCO, JR., PHILIPPINE TOURISM NACHURA,** AUTHORITY, REYES, Petitioners, LEONARDO-DE CASTRO, and BRION, JJ.

- versus - MAYOR JOSE S. YAP, LIBERTAD

TALAPIAN, MILA Y. SUMNDAD, and

ANICETO YAP, in their behalf and Promulgated: in behalf of all those similarly situated,

Respondents. October 8, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DR. ORLANDO SACAY and G.R. No. 173775

WILFREDO GELITO, joined by

THE LANDOWNERS OF

BORACAY SIMILARLY

SITUATED NAMED IN A LIST, ANNEX “A” OF THIS PETITION, Petitioners,

- versus - THE SECRETARY OF THE

DEPARTMENT OF ENVIRONMENT

AND NATURAL RESOURCES, THE

REGIONAL TECHNICAL

DIRECTOR FOR LANDS, LANDS

MANAGEMENT BUREAU, REGION VI, PROVINCIAL

ENVIRONMENT AND NATURAL

RESOURCES OFFICER, KALIBO, AKLAN,

Respondents.

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

REYES, R.T., J.:

AT stake in these consolidated cases is the right of the present

occupants of Boracay Island to secure titles over their occupied lands.

There are two consolidated petitions. The first is G.R. No. 167707, a

petition for review on certiorari of the Decision[1] of the Court of Appeals

(CA) affirming that[2] of the Regional Trial Court (RTC) in Kalibo, Aklan,

which granted the petition for declaratory relief filed by respondents-

claimants Mayor Jose Yap, et al. and ordered the survey of Boracay for

titling purposes. The second is G.R. No. 173775, a petition for prohibition,

mandamus, and nullification of Proclamation No. 1064[3] issued by

President Gloria Macapagal-Arroyo classifying Boracay into reserved forest

and agricultural land.

The Antecedents

G.R. No. 167707

Boracay Island in the Municipality of Malay, Aklan, with its powdery

white sand beaches and warm crystalline waters, is reputedly a premier

Philippine tourist destination. The island is also home to 12,003

inhabitants[4] who live in the bone-shaped island’s three barangays.[5]

On April 14, 1976, the Department of Environment and Natural

Resources (DENR) approved the National Reservation Survey of

Boracay

Island,[6] which identified several lots as being occupied or claimed by

named persons.[7]

On November 10, 1978, then President Ferdinand Marcos issued

Proclamation No. 1801[8] declaring Boracay Island, among other islands,

caves and peninsulas in the Philippines, as tourist zones and marine

reserves under the administration of the Philippine Tourism Authority

(PTA). President Marcos later approved the issuance of PTA Circular 3-

82[9] dated September 3, 1982, to implement Proclamation No. 1801.

Claiming that Proclamation No. 1801 and PTA Circular No 3-82

precluded them from filing an application for judicial confirmation of

imperfect title or survey of land for titling purposes, respondents-claimants

Mayor Jose S. Yap, Jr., Libertad Talapian, Mila Y. Sumndad, and

Aniceto Yap filed a petition for declaratory relief with the RTC in Kalibo,

Aklan.

In their petition, respondents-claimants alleged that Proclamation No.

1801 and PTA Circular No. 3-82 raised doubts on their right to secure titles

over their occupied lands. They declared that they themselves, or through

their predecessors-in-interest, had been in open, continuous, exclusive,

and notorious possession and occupation in Boracay since June 12, 1945,

or earlier since time immemorial. They declared their lands for tax

purposes and paid realty taxes on them.[10]

Respondents-claimants posited that Proclamation No. 1801 and its

implementing Circular did not place Boracay beyond the commerce of

man. Since the Island was classified as a tourist zone, it was susceptible

of private ownership. Under Section 48(b) of Commonwealth Act (CA) No.

141, otherwise known as the Public Land Act, they had the right to have the

lots registered in their names through judicial confirmation of imperfect

titles.

The Republic, through the Office of the Solicitor General (OSG),

opposed the petition for declaratory relief. The OSG countered

that Boracay Island was an unclassified land of the public domain. It

formed part of the mass of lands classified as “public forest,” which was not

available for disposition pursuant to Section 3(a) of Presidential Decree

(PD) No. 705 or the Revised Forestry Code,[11] as amended.

The OSG maintained that respondents-claimants’ reliance on PD No.

1801 and PTA Circular No. 3-82 was misplaced. Their right to judicial

confirmation of title was governed by CA No. 141 and PD No.

705. Since Boracay Island had not been classified as alienable and

disposable, whatever possession they had cannot ripen into ownership.

During pre-trial, respondents-claimants and the OSG stipulated on

the following facts: (1) respondents-claimants were presently in

possession of parcels of land in Boracay Island; (2) these parcels of land

were planted with coconut trees and other natural growing trees; (3) the

coconut trees had heights of more or less twenty (20) meters and were

planted more or less fifty (50) years ago; and (4) respondents-claimants

declared the land they were occupying for tax purposes.[12]

The parties also agreed that the principal issue for resolution was

purely legal: whether Proclamation No. 1801 posed any legal hindrance or

impediment to the titling of the lands in Boracay. They decided to forego

with the trial and to submit the case for resolution upon submission of their

respective memoranda.[13]

The RTC took judicial notice[14] that certain parcels of land

in Boracay Island, more particularly Lots 1 and 30, Plan PSU-5344, were

covered by Original Certificate of Title No. 19502 (RO 2222) in the name of

the Heirs of Ciriaco S. Tirol. These lots were involved in Civil Case Nos.

5222 and 5262 filed before

the RTC of Kalibo, Aklan.[15] The titles were issued on

August 7, 1933.[16]

RTC and CA Dispositions

On July 14, 1999, the RTC rendered a decision in favor of

respondents-claimants, with a fallo reading:

WHEREFORE, in view of the foregoing, the Court declares that

Proclamation No. 1801 and PTA Circular No. 3-82 pose no legal obstacle to the petitioners and those similarly situated to acquire title to their lands in Boracay, in accordance with the applicable laws and in the manner prescribed therein; and to have their lands surveyed and approved by respondent Regional Technical Director of Lands as the approved survey does not in itself constitute a title to the land.

SO ORDERED.[17]

The RTC upheld respondents-claimants’ right to have their occupied

lands titled in their name. It ruled that neither Proclamation No. 1801

nor PTA Circular No. 3-82 mentioned that lands in Boracay were

inalienable or could not be the subject of disposition.[18] The Circular itself

recognized private ownership of lands.[19] The trial court cited Sections

87[20] and 53[21] of the Public Land Act as basis for acknowledging private

ownership of lands in Boracay and that only those forested areas in public

lands were declared as part of the forest reserve.[22]

The OSG moved for reconsideration but its motion was

denied.[23] The Republic then appealed to the CA.

On December 9, 2004, the appellate court affirmed in

toto the RTC decision, disposing as follows:

WHEREFORE, in view of the foregoing premises, judgment is

hereby rendered by us DENYING the appeal filed in this case and AFFIRMING the decision of the lower court.[24]

The CA held that respondents-claimants could not be prejudiced by a

declaration that the lands they occupied since time immemorial were part of

a forest reserve.

Again, the OSG sought reconsideration but it was similarly

denied.[25] Hence, the present petition under Rule 45.

G.R. No. 173775

On May 22, 2006, during the pendency of G.R. No.

167707, President Gloria Macapagal-Arroyo issued Proclamation No.

1064[26] classifying Boracay Island into four hundred (400) hectares of

reserved forest land (protection purposes) and six hundred twenty-eight

and 96/100 (628.96) hectares of agricultural land (alienable and

disposable). The Proclamation likewise provided for a fifteen-meter buffer

zone on each side of the centerline of roads and trails, reserved for right-of-

way and which shall form part of the area reserved for forest land

protection purposes.

On August 10, 2006, petitioners-claimants Dr. Orlando

Sacay,[27] Wilfredo Gelito,[28] and other landowners[29] in Boracay filed with

this Court an original petition for prohibition, mandamus, and nullification of

Proclamation No. 1064.[30] They allege that the Proclamation infringed on

their “prior vested rights” over portions of Boracay. They have been in

continued possession of their respective lots in Boracay since time

immemorial. They have also invested billions of pesos in developing their

lands and building internationally renowned first class resorts on their

lots.[31]

Petitioners-claimants contended that there is no need for a

proclamation reclassifying Boracay into agricultural land. Being classified

as neither mineral nor timber land, the island isdeemed agricultural

pursuant to the Philippine Bill of 1902 and Act No. 926, known as the first

Public Land Act.[32] Thus, their possession in the concept of owner for the

required period entitled them to judicial confirmation of imperfect title.

Opposing the petition, the OSG argued that petitioners-claimants do

not have a vested right over their occupied portions in the island. Boracay

is an unclassified public forest land pursuant to Section 3(a) of PD No.

705. Being public forest, the claimed portions of the island are inalienable

and cannot be the subject of judicial confirmation of imperfect title. It is

only the executive department, not the courts, which has authority to

reclassify lands of the public domain into alienable and disposable

lands. There is a need for a positive government act in order to release the

lots for disposition.

On November 21, 2006, this Court ordered the consolidation of the

two petitions as they principally involve the same issues on the land

classification of Boracay Island.[33]

Issues

G.R. No. 167707

The OSG raises the lone issue of whether Proclamation No. 1801

and PTA Circular No. 3-82 pose any legal obstacle for respondents, and all

those similarly situated, to acquire title to their occupied lands

in Boracay Island.[34]

G.R. No. 173775

Petitioners-claimants hoist five (5) issues, namely:

I.

AT THE TIME OF THE ESTABLISHED POSSESSION OF PETITIONERS IN CONCEPT OF OWNER OVER THEIR RESPECTIVE AREAS IN BORACAY, SINCE TIME IMMEMORIAL OR AT THE LATEST SINCE 30 YRS. PRIOR TO THE FILING OF THE PETITION FOR DECLARATORY RELIEF ON NOV. 19, 1997, WERE THE AREAS OCCUPIED BY THEM PUBLIC AGRICULTURAL LANDS AS DEFINED BYLAWS THEN ON JUDICIAL CONFIRMATION OF IMPERFECT TITLES OR PUBLIC FOREST AS DEFINED BY SEC. 3a, PD 705?

II. HAVE PETITIONERS OCCUPANTS ACQUIRED PRIOR VESTED RIGHT OF PRIVATE OWNERSHIP OVER THEIR OCCUPIED PORTIONS OF BORACAY LAND, DESPITE THE FACT THAT THEY HAVE NOT APPLIED YET FOR JUDICIAL CONFIRMATION OF IMPERFECT TITLE?

III. IS THE EXECUTIVE DECLARATION OF THEIR AREAS AS ALIENABLE AND DISPOSABLE UNDER SEC 6, CA 141 [AN] INDISPENSABLE PRE-REQUISITE FOR PETITIONERS TO OBTAIN TITLE UNDER THE TORRENS SYSTEM?

IV. IS THE ISSUANCE OF PROCLAMATION 1064 ON MAY 22, 2006, VIOLATIVE OF THE PRIOR VESTED RIGHTS TO PRIVATE OWNERSHIP OF PETITIONERS OVER THEIR LANDS IN BORACAY, PROTECTED BY THE DUE PROCESS CLAUSE OF THE CONSTITUTION OR IS PROCLAMATION 1064 CONTRARY TO SEC. 8, CA 141, OR SEC. 4(a) OF RA 6657.

V.

CAN RESPONDENTS BE COMPELLED BY MANDAMUS TO ALLOW THE SURVEY AND TO APPROVE THE SURVEY PLANS FOR PURPOSES OF THE APPLICATION FOR TITLING OF THE LANDS OF PETITIONERS IN BORACAY?[35] (Underscoring supplied)

In capsule, the main issue is whether private claimants (respondents-

claimants in G.R. No. 167707 and petitioners-claimants in G.R. No.

173775) have a right to secure titles over their occupied portions in

Boracay. The twin petitions pertain to their right, if any, to judicial

confirmation of imperfect title under CA No. 141, as amended. They do not

involve their right to secure title under other pertinent laws.

Our Ruling

Regalian Doctrine and power of the executive

to reclassify lands of the public domain

Private claimants rely on three (3) laws and executive acts in their bid

for judicial confirmation of imperfect title, namely: (a) Philippine Bill of

1902[36] in relation to Act No. 926, later amended and/or superseded by Act

No. 2874 and CA No. 141;[37] (b) Proclamation No. 1801[38] issued by then

President Marcos; and (c) Proclamation No. 1064[39] issued by President

Gloria Macapagal-Arroyo. We shall proceed to determine their rights to

apply for judicial confirmation of imperfect title under these laws and

executive acts.

But first, a peek at the Regalian principle and the power of the

executive to reclassify lands of the public domain.

The 1935 Constitution classified lands of the public domain into

agricultural, forest or timber.[40] Meanwhile, the 1973 Constitution provided

the following divisions: agricultural, industrial or commercial, residential,

resettlement, mineral, timber or forest and grazing lands, and such other

classes as may be provided by law,[41] giving the government great leeway

for classification.[42] Then the 1987 Constitution reverted to the 1935

Constitution classification with one addition: national parks.[43] Of

these, only agricultural lands may be alienated.[44] Prior to Proclamation

No. 1064 of May 22, 2006, Boracay Island had never been expressly and

administratively classified under any of these grand divisions. Boracay was

an unclassified land of the public domain.

The Regalian Doctrine dictates that all lands of the public domain

belong to the State, that the State is the source of any asserted right to

ownership of land and charged with the conservation of such

patrimony.[45] The doctrine has been consistently adopted under the 1935,

1973, and 1987 Constitutions.[46]

All lands not otherwise appearing to be clearly within private

ownership are presumed to belong to the State.[47] Thus, all lands that

have not been acquired from the government, either by purchase or by

grant, belong to the State as part of the inalienable public

domain.[48] Necessarily, it is up to the State to determine if lands of the

public domain will be disposed of for private ownership. The government,

as the agent of the state, is possessed of the plenary power as the persona

in law to determine who shall be the favored recipients of public lands, as

well as under what terms they may be granted such privilege, not excluding

the placing of obstacles in the way of their exercise of what otherwise

would be ordinary acts of ownership.[49]

Our present land law traces its roots to the Regalian Doctrine. Upon

the Spanish conquest of the Philippines, ownership of all lands, territories

and possessions in the Philippines passed to the Spanish Crown.[50] The

Regalian doctrine was first introduced in the Philippines through the Laws

of the Indies and the Royal Cedulas, which laid the foundation that “all

lands that were not acquired from the Government, either by purchase or

by grant, belong to the public domain.”[51]

The Laws of the Indies was followed by the Ley Hipotecaria or

the Mortgage Law of 1893. The Spanish Mortgage Law provided for the

systematic registration of titles and deeds as well as possessory claims.[52]

The Royal Decree of 1894 or the Maura Law[53] partly amended the

Spanish Mortgage Law and the Laws of the Indies. It established

possessory information as the method of legalizing possession of vacant

Crown land, under certain conditions which were set forth in said

decree.[54] Under Section 393 of the Maura Law, an informacion

posesoria or possessory information title,[55] when duly inscribed in the

Registry of Property, is converted into a title of ownership only after the

lapse of twenty (20) years of uninterrupted possession which must be

actual, public, and adverse,[56] from the date of its inscription.[57] However,

possessory information title had to be perfected one year after the

promulgation of the Maura Law, or until April 17, 1895. Otherwise, the

lands would revert to the State.[58]

In sum, private ownership of land under the Spanish regime could

only be founded on royal concessions which took various forms,

namely: (1) titulo real or royal grant; (2) concesion especial or special

grant; (3) composicion con el estado or adjustment title; (4) titulo de

compra or title by purchase; and (5) informacion posesoria or possessory

information title.[59]

The first law governing the disposition of public lands in

the Philippines under American rule was embodied in the Philippine Bill

of 1902.[60] By this law, lands of the public domain in the Philippine Islands

were classified into three (3) grand divisions, to wit: agricultural, mineral,

and timber or forest lands.[61] The act provided for, among others, the

disposal of mineral lands by means of absolute grant (freehold system) and

by lease (leasehold system).[62] It also provided the definition by exclusion

of “agricultural public lands.”[63] Interpreting the meaning of “agricultural

lands” under the Philippine Bill of 1902, the Court declared in Mapa v.

Insular Government:[64]

x x x 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. x x x[65] (Emphasis Ours)

On February 1, 1903, the Philippine Legislature passed Act No. 496,

otherwise known as the Land Registration Act. The act established a

system of registration by which recorded title becomes absolute,

indefeasible, and imprescriptible. This is known as the Torrens system.[66]

Concurrently, on October 7, 1903, the Philippine Commission passed

Act No. 926, which was the first Public Land Act. The Act introduced the

homestead system and made provisions for judicial and administrative

confirmation of imperfect titles and for the sale or lease of public lands. It

permitted corporations regardless of the nationality of persons owning the

controlling stock to lease or purchase lands of the public domain.[67] Under

the Act, open, continuous, exclusive, and notorious possession and

occupation of agricultural lands for the next ten (10) years precedingJuly

26, 1904 was sufficient for judicial confirmation of imperfect title.[68]

On November 29, 1919, Act No. 926 was superseded by Act

No. 2874, otherwise known as the second Public Land Act. This new, more

comprehensive law limited the exploitation of agricultural lands to Filipinos

and Americans and citizens of other countries which gave Filipinos the

same privileges. For judicial confirmation of title, possession and

occupation en concepto dueño since time immemorial, or since July 26,

1894, was required.[69]

After the passage of the 1935 Constitution, CA No. 141 amended Act

No. 2874 on December 1, 1936. To this day, CA No. 141, as

amended, remains as the existing general law governing the classification

and disposition of lands of the public domain other than timber and mineral

lands,[70] and privately owned lands which reverted to the State.[71]

Section 48(b) of CA No. 141 retained the requirement under Act No.

2874 of possession and occupation of lands of the public domain since

time immemorial or since July 26, 1894. However, this provision was

superseded by Republic Act (RA) No. 1942,[72] which provided for a simple

thirty-year prescriptive period for judicial confirmation of imperfect title. The

provision was last amended by PD No. 1073,[73] which now provides for

possession and occupation of the land applied for since June 12, 1945, or

earlier.[74]

The issuance of PD No. 892[75] on February 16, 1976 discontinued

the use of Spanish titles as evidence in land registration

proceedings.[76] Under the decree, all holders of Spanish titles or grants

should apply for registration of their lands under Act No. 496 within six (6)

months from the effectivity of the decree on February 16, 1976. Thereafter,

the recording of all unregistered lands[77] shall be governed by Section 194

of the Revised Administrative Code, as amended by Act No. 3344.

On June 11, 1978, Act No. 496 was amended and updated by PD

No. 1529, known as the Property Registration Decree. It was enacted to

codify the various laws relative to registration of property.[78] It governs

registration of lands under the Torrens system as well as unregistered

lands, including chattel mortgages.[79]

A positive act declaring land as alienable and disposable is

required. In keeping with the presumption of State ownership, the Court

has time and again emphasized that there must be apositive act of the

government, such as an official proclamation,[80] declassifying inalienable

public land into disposable land for agricultural or other purposes.[81] In

fact, Section 8 of CA No. 141 limits alienable or disposable lands only to

those lands which have been “officially delimited and classified.”[82]

The burden of proof in overcoming the presumption of State

ownership of the lands of the public domain is on the person applying for

registration (or claiming ownership), who must prove that the land subject

of the application is alienable or disposable.[83] To overcome this

presumption, incontrovertible evidence must be established that the land

subject of the application (or claim) is alienable or disposable.[84] There

must still be a positive act declaring land of the public domain as alienable

and disposable. To prove that the land subject of an application for

registration is alienable, the applicant must establish the existence of a

positive act of the government such as a presidential proclamation or an

executive order; an administrative action; investigation reports of Bureau of

Lands investigators; and a legislative act or a statute.[85] The applicant may

also secure a certification from the government that the land claimed to

have been possessed for the required number of years is alienable and

disposable.[86]

In the case at bar, no such proclamation, executive order,

administrative action, report, statute, or certification was presented to the

Court. The records are bereft of evidence showing that, prior to 2006, the

portions of Boracay occupied by private claimants were subject of a

government proclamation that the land is alienable and disposable. Absent

such well-nigh incontrovertible evidence, the Court cannot accept the

submission that lands occupied by private claimants were already open to

disposition before 2006. Matters of land classification or reclassification

cannot be assumed. They call for proof.[87]

Ankron and De Aldecoa did not make the whole of Boracay

Island, or portions of it, agricultural lands. Private claimants posit that

Boracay was already an agricultural land pursuant to the old cases Ankron

v. Government of the Philippine Islands (1919)[88] and De Aldecoa v. The

Insular Government (1909).[89] These cases were decided under the

provisions of the Philippine Bill of 1902 and Act No. 926. There is a

statement in these old cases that “in the absence of evidence to the

contrary, that in each case the lands are agricultural lands until the contrary

is shown.”[90]

Private claimants’ reliance on Ankron and De Aldecoa is

misplaced. These cases did not have the effect of converting the whole

of Boracay Island or portions of it into agricultural lands. It should be

stressed that the Philippine Bill of 1902 and Act No. 926 merely provided

the manner through which land registration courts would classify lands of

the public domain. Whether the land would be classified as timber,

mineral, or agricultural depended on proof presented in each case.

Ankron and De Aldecoa were decided at a time when the President of

the Philippines had no power to classify lands of the public domain into

mineral, timber, and agricultural. At that time, the courts were free to make

corresponding classifications in justiciable cases, or were vested with

implicit power to do so, depending upon the preponderance of the

evidence.[91] This was the Court’s ruling in Heirs of the Late Spouses

Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v.

Republic,[92] in which it stated, through Justice Adolfo Azcuna, viz.:

x x x Petitioners furthermore insist that a particular land need not

be formally released by an act of the Executive before it can be deemed open to private ownership, citing the cases of Ramos v. Director of Landsand Ankron v. Government of the Philippine Islands.

x x x x

Petitioner’s reliance upon Ramos v. Director of Lands and Ankron

v. Government is misplaced. These cases were decided under the Philippine Bill of 1902 and the first Public Land Act No. 926 enacted by the Philippine Commission on October 7, 1926, under which there was no legal provision vesting in the Chief Executive or President of the Philippines the power to classify lands of the public domain into mineral, timber and agricultural so that the courts then were free to make corresponding classifications in justiciable cases, or were vested with implicit power to do so, depending upon the preponderance of the evidence.[93]

To aid the courts in resolving land registration cases under Act No.

926, it was then necessary to devise a presumption on land

classification. Thus evolved the dictum in Ankron that “the courts have a

right to presume, in the absence of evidence to the contrary, that in each

case the lands are agricultural lands until the contrary is shown.”[94]

But We cannot unduly expand the presumption in Ankron and De

Aldecoa to an argument that all lands of the public domain had been

automatically reclassified as disposable and alienable agricultural

lands. By no stretch of imagination did the presumption convert all lands of

the public domain into agricultural lands.

If We accept the position of private claimants, the Philippine Bill of

1902 and Act No. 926 would have automatically made all lands in

the Philippines, except those already classified as timber or mineral land,

alienable and disposable lands. That would take these lands out of State

ownership and worse, would be utterly inconsistent with and totally

repugnant to the long-entrenched Regalian doctrine.

The presumption in Ankron and De Aldecoa attaches only to land

registration cases brought under the provisions of Act No. 926, or more

specifically those cases dealing with judicial and administrative

confirmation of imperfect titles. The presumption applies to an applicant for

judicial or administrative conformation of imperfect title under Act No.

926. It certainly cannot apply to landowners, such as private claimants or

their predecessors-in-interest, who failed to avail themselves of the benefits

of Act No. 926. As to them, their land remained unclassified and, by virtue

of the Regalian doctrine, continued to be owned by the State.

In any case, the assumption in Ankron and De Aldecoa was not

absolute. Land classification was, in the end, dependent on proof. If there

was proof that the land was better suited for non-agricultural uses, the

courts could adjudge it as a mineral or timber land despite the

presumption. In Ankron, this Court stated:

In the case of Jocson vs. Director of Forestry (supra), the Attorney-

General admitted in effect that whether the particular land in question belongs to one class or another is a question of fact. The mere fact that a tract of land has trees upon it or has mineral within it is not of itself sufficient to declare that one is forestry land and the other, mineral land. There must be some proof of the extent and present or future value of the forestry and of the minerals. While, as we have just said, many definitions have been given for “agriculture,” “forestry,” and “mineral” lands, and that in each case it is a question of fact, we think it is safe to say that in order to be forestry or mineral land the proof must show that it is more valuable for the forestry or the mineral which it contains than it is for agricultural purposes. (Sec. 7, Act No. 1148.) It is not sufficient to show that there exists some trees upon the land or that it bears some mineral. Land may be classified as forestry or mineral today, and, by reason of the exhaustion of the timber or mineral, be classified as agricultural land tomorrow. And vice-versa, by reason of the rapid growth of timber or the discovery of valuable minerals, lands classified as agricultural today may be differently classified tomorrow. Each case must be decided upon the proof in that particular case, having regard for its present or future value for one or the other

purposes. We believe, however, considering the fact that it is a matter of public knowledge that a majority of the lands in the Philippine Islands are agricultural lands that the courts have a right to presume, in the absence of evidence to the contrary, that in each case the lands are agricultural lands until the contrary is shown. Whatever the land involved in a particular land registration case is forestry or mineral land must, therefore, be a matter of proof. Its superior value for one purpose or the other is a question of fact to be settled by the proof in each particular case. The fact that the land is a manglar [mangrove swamp] is not sufficient for the courts to decide whether it is agricultural, forestry, or mineral land. It may perchance belong to one or the other of said classes of land. The Government, in the first instance, under the provisions of Act No. 1148, may, by reservation, decide for itself what portions of public land shall be considered forestry land, unless private interests have intervened before such reservation is made. In the latter case, whether the land is agricultural, forestry, or mineral, is a question of proof. Until private interests have intervened, the Government, by virtue of the terms of said Act (No. 1148), may decide for itself what portions of the “public domain” shall be set aside and reserved as forestry or mineral land. (Ramos vs. Director of Lands, 39 Phil. 175; Jocson vs. Director of Forestry, supra)[95] (Emphasis ours)

Since 1919, courts were no longer free to determine the classification

of lands from the facts of each case, except those that have already

became private lands.[96] Act No. 2874, promulgated in 1919 and

reproduced in Section 6 of CA No. 141, gave the Executive Department,

through the President, the exclusive prerogative to classify or reclassify

public lands into alienable or disposable, mineral or forest.96-a Since then,

courts no longer had the authority, whether express or implied, to

determine the classification of lands of the public domain.[97]

Here, private claimants, unlike the Heirs of Ciriaco Tirol who were

issued their title in 1933,[98] did not present a justiciable case for

determination by the land registration court of the property’s land

classification. Simply put, there was no opportunity for the courts then to

resolve if the land the Boracay occupants are now claiming were

agricultural lands. When Act No. 926 was supplanted by Act No. 2874 in

1919, without an application for judicial confirmation having been filed by

private claimants or their predecessors-in-interest, the courts were no

longer authorized to determine the property’s land classification. Hence,

private claimants cannot bank on Act No. 926.

We note that the RTC decision[99] in G.R. No. 167707

mentioned Krivenko v. Register of Deeds of Manila,[100] which was decided

in 1947 when CA No. 141, vesting the Executive with the sole power to

classify lands of the public domain was already in effect. Krivenko cited

the old cases Mapa v. Insular Government,[101] De Aldecoa v. The Insular

Government,[102] andAnkron v. Government of the Philippine Islands.[103]

Krivenko, however, is not controlling here because it involved a totally

different issue. The pertinent issue in Krivenko was whether residential lots

were included in the general classification of agricultural lands; and if so,

whether an alien could acquire a residential lot. This Court ruled that as an

alien, Krivenko was prohibited by the 1935 Constitution[104] from acquiring

agricultural land, which included residential lots. Here, the issue is whether

unclassified lands of the public domain are automatically deemed

agricultural.

Notably, the definition of “agricultural public lands” mentioned

in Krivenko relied on the old cases decided prior to the enactment of Act

No. 2874, including Ankron and De Aldecoa.[105] As We have already

stated, those cases cannot apply here, since they were decided when the

Executive did not have the authority to classify lands as agricultural, timber,

or mineral.

Private claimants’ continued possession under Act No. 926 does

not create a presumption that the land is alienable. Private claimants

also contend that their continued possession of portions

of Boracay Island for the requisite period of ten (10) years under Act No.

926[106] ipso facto converted the island into private ownership. Hence, they

may apply for a title in their name.

A similar argument was squarely rejected by the Court in Collado v.

Court of Appeals.[107] Collado, citing the separate opinion of now Chief

Justice Reynato S. Puno in Cruz v. Secretary of Environment and Natural

Resources,107-a ruled:

“Act No. 926, the first Public Land Act, was passed in

pursuance of the provisions of the Philippine Bill of 1902. The law governed the disposition of lands of the public domain. It prescribed rules and regulations for the homesteading, selling and leasing of portions of the public domain of the Philippine Islands, and prescribed the terms and conditions to enable persons to perfect their titles to public lands in the Islands. It also provided for the “issuance of patents to certain native settlers upon public lands,” for the establishment of town sites and sale of lots therein, for the completion of imperfect titles, and for the cancellation or confirmation of Spanish concessions and grants in the Islands.” In short, the Public Land Act operated on the assumption that title to public lands in the Philippine Islands remained in the government; and that the government’s title to public land sprung from the Treaty of Paris and other subsequent treaties between Spain and the United States. The term “public land” referred to all lands of the public domain whose title still remained in the government and are thrown open to private appropriation and settlement, and excluded the patrimonial property of the government and the friar lands.”

Thus, it is plain error for petitioners to argue that under the Philippine Bill of 1902 and Public Land Act No. 926, mere possession by private individuals of lands creates the legal presumption that the lands are alienable and disposable.[108] (Emphasis Ours)

Except for lands already covered by existing titles, Boracay was

an unclassified land of the public domain prior to Proclamation No.

1064. Such unclassified lands are considered public forest under PD

No. 705. The DENR[109] and the National Mapping and Resource

Information Authority[110] certify that Boracay Island is an unclassified land

of the public domain.

PD No. 705 issued by President Marcos categorized all unclassified

lands of the public domain as public forest. Section 3(a) of PD No. 705

defines a public forest as “a mass of lands of the public domain which has

not been the subject of the present system of classification for the

determination of which lands are needed for forest purpose and which are

not.” Applying PD No. 705, all unclassified lands, including those

in Boracay Island, are ipso facto considered public forests. PD No. 705,

however, respects titles already existing prior to its effectivity.

The Court notes that the classification of Boracay as a forest land

under PD No. 705 may seem to be out of touch with the present realities in

the island. Boracay, no doubt, has been partly stripped of its forest cover

to pave the way for commercial developments. As a premier tourist

destination for local and foreign tourists, Boracay appears more of a

commercial island resort, rather than a forest land.

Nevertheless, that the occupants of Boracay have built multi-million

peso beach resorts on the island;[111] that the island has already been

stripped of its forest cover; or that the implementation of Proclamation No.

1064 will destroy the island’s tourism industry, do not negate its character

as public forest.

Forests, in the context of both the Public Land Act and the

Constitution[112] classifying lands of the public domain into “agricultural,

forest or timber, mineral lands, and national parks,”do not necessarily refer

to large tracts of wooded land or expanses covered by dense growths of

trees and underbrushes.[113] The discussion in Heirs of Amunategui v.

Director of Forestry[114]is particularly instructive:

A forested area classified as forest land of the public domain does

not lose such classification simply because loggers or settlers may have stripped it of its forest cover. Parcels of land classified as forest land may actually be covered with grass or planted to crops by kaingin cultivators or other farmers. “Forest lands” do not have to be on mountains or in out of the way places. Swampy areas covered by mangrove trees, nipa palms, and other trees growing in brackish or sea water may also be classified as forest land. The classification is descriptive of its legal nature or status and does not have to be descriptive of what the land actually looks like. Unless and until the land classified as “forest” is released in an official proclamation to that effect so that it may form part of the disposable agricultural lands of the public domain, the rules on confirmation of imperfect title do not apply.[115] (Emphasis supplied)

There is a big difference between “forest” as defined in a dictionary

and “forest or timber land” as a classification of lands of the public domain

as appearing in our statutes. One is descriptive of what appears on the

land while the other is a legal status, a classification for legal

purposes.[116] At any rate, the Court is tasked to determine the legal status

of Boracay Island, and not look into its physical layout. Hence, even if its

forest cover has been replaced by beach resorts, restaurants and other

commercial establishments, it has not been automatically converted from

public forest to alienable agricultural land.

Private claimants cannot rely on Proclamation No. 1801 as basis

for judicial confirmation of imperfect title. The proclamation did not

convert Boracay into an agricultural land. However, private claimants

argue that Proclamation No. 1801 issued by then President Marcos in 1978

entitles them to judicial confirmation of imperfect title. The Proclamation

classified Boracay, among other islands, as a tourist zone. Private

claimants assert that, as a tourist spot, the island is susceptible of private

ownership.

Proclamation No. 1801 or PTA Circular No. 3-82 did not convert the

whole of Boracay into an agricultural land. There is nothing in the law or

the Circular which made Boracay Island an agricultural land. The reference

in Circular No. 3-82 to “private lands”[117] and “areas declared as alienable

and disposable”[118] does not by itself classify the entire island as

agricultural. Notably, Circular No. 3-82 makes reference not only to private

lands and areas but also to public forested lands. Rule VIII, Section 3

provides:

No trees in forested private lands may be cut without prior authority

from the PTA. All forested areas in public lands are declared forest reserves. (Emphasis supplied)

Clearly, the reference in the Circular to both private and public lands

merely recognizes that the island can be classified by the Executive

department pursuant to its powers under CA No. 141. In fact, Section 5 of

the Circular recognizes the then Bureau of Forest Development’s authority

to declare areas in the island as alienable and disposable when it provides:

Subsistence farming, in areas declared as alienable and disposable by the Bureau of Forest Development.

Therefore, Proclamation No. 1801 cannot be deemed the positive act

needed to classify Boracay Island as alienable and disposable land. If

President Marcos intended to classify the island as alienable and

disposable or forest, or both, he would have identified the specific limits of

each, as President Arroyo did in Proclamation No. 1064. This was not

done in Proclamation No. 1801.

The Whereas clauses of Proclamation No. 1801 also explain the

rationale behind the declaration of Boracay Island, together with other

islands, caves and peninsulas in the Philippines, as a tourist zone and

marine reserve to be administered by the PTA – to ensure the concentrated

efforts of the public and private sectors in the development of the areas’

tourism potential with due regard for ecological balance in the marine

environment. Simply put, the proclamation is aimed at administering the

islands for tourism and ecological purposes. It does not address the

areas’ alienability.[119]

More importantly, Proclamation No. 1801 covers not only Boracay

Island, but sixty-four (64) other islands, coves, and peninsulas in the

Philippines, such as Fortune and Verde Islands in Batangas, Port Galera in

Oriental Mindoro, Panglao and Balicasag Islands in Bohol, Coron Island,

Puerto Princesa and surrounding areas in Palawan, Camiguin Island in

Cagayan de Oro, and Misamis Oriental, to name a few. If the designation

of Boracay Island as tourist zone makes it alienable and disposable by

virtue of Proclamation No. 1801, all the other areas mentioned would

likewise be declared wide open for private disposition. That could not have

been, and is clearly beyond, the intent of the proclamation.

It was Proclamation No. 1064 of 2006 which positively declared

part of Boracay as alienable and opened the same to private

ownership. Sections 6 and 7 of CA No. 141[120] provide that it is only the

President, upon the recommendation of the proper department head, who

has the authority to classify the lands of the public domain into alienable or

disposable, timber and mineral lands.[121]

In issuing Proclamation No. 1064, President Gloria Macapagal-Arroyo

merely exercised the authority granted to her to classify lands of the public

domain, presumably subject to existing vested rights. Classification of

public lands is the exclusive prerogative of the Executive Department,

through the Office of the President. Courts have no authority to do

so.[122] Absent such classification, the land remains unclassified until

released and rendered open to disposition.[123]

Proclamation No. 1064 classifies Boracay into 400 hectares of

reserved forest land and 628.96 hectares of agricultural land. The

Proclamation likewise provides for a 15-meter buffer zone on each side of

the center line of roads and trails, which are reserved for right of way and

which shall form part of the area reserved for forest land protection

purposes.

Contrary to private claimants’ argument, there was nothing invalid or

irregular, much less unconstitutional, about the classification

of Boracay Island made by the President through Proclamation No.

1064. It was within her authority to make such classification, subject to

existing vested rights.

Proclamation No. 1064 does not violate the Comprehensive

Agrarian Reform Law. Private claimants further assert that Proclamation

No. 1064 violates the provision of the Comprehensive Agrarian Reform

Law (CARL) or RA No. 6657 barring conversion of public forests into

agricultural lands. They claim that since Boracay is a public forest under

PD No. 705, President Arroyo can no longer convert it into an agricultural

land without running afoul of Section 4(a) of RA No. 6657, thus:

SEC. 4. Scope. – The Comprehensive Agrarian Reform Law of

1988 shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain suitable for agriculture.

More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program:

(a) All alienable and disposable lands of the public domain

devoted to or suitable for agriculture. No reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain.

That Boracay Island was classified as a public forest under PD No.

705 did not bar the Executive from later converting it into agricultural

land. Boracay Island still remained an unclassified land of the public

domain despite PD No. 705.

In Heirs of the Late Spouses Pedro S. Palanca and Soterranea

Rafols v. Republic,[124] the Court stated that unclassified lands are public

forests.

While it is true that the land classification map does not

categorically state that the islands are public forests, the fact that they were unclassified lands leads to the same result. In the absence of the classification as mineral or timber land, the land remains unclassified land until released and rendered open to disposition.[125] (Emphasis supplied)

Moreover, the prohibition under the CARL applies only to a

“reclassification” of land. If the land had never been previously classified,

as in the case of Boracay, there can be no prohibited reclassification under

the agrarian law. We agree with the opinion of the Department of

Justice[126] on this point:

Indeed, the key word to the correct application of the prohibition in

Section 4(a) is the word “reclassification.” Where there has been no previous classification of public forest [referring, we repeat, to the mass of the public domain which has not been the subject of the present system of classification for purposes of determining which are needed for forest purposes and which are not] into permanent forest or forest reserves or

some other forest uses under the Revised Forestry Code, there can be no “reclassification of forest lands” to speak of within the meaning of Section 4(a).

Thus, obviously, the prohibition in Section 4(a) of the CARL against

the reclassification of forest lands to agricultural lands without a prior law delimiting the limits of the public domain, does not, and cannot, apply to those lands of the public domain, denominated as “public forest” under the Revised Forestry Code, which have not been previously determined, or classified, as needed for forest purposes in accordance with the provisions of the Revised Forestry Code.[127]

Private claimants are not entitled to apply for judicial

confirmation of imperfect title under CA No. 141. Neither do they have

vested rights over the occupied lands under the said law. There are

two requisites for judicial confirmation of imperfect or incomplete title under

CA No. 141, namely: (1) open, continuous, exclusive, and notorious

possession and occupation of the subject land by himself or through his

predecessors-in-interest under a bona fide claim of ownership since time

immemorial or from June 12, 1945; and (2) the classification of the land as

alienable and disposable land of the public domain.[128]

As discussed, the Philippine Bill of 1902, Act No. 926, and

Proclamation No. 1801 did not convert portions of Boracay Island into an

agricultural land. The island remained an unclassified land of the public

domain and, applying the Regalian doctrine, is considered State property.

Private claimants’ bid for judicial confirmation of imperfect title, relying

on the Philippine Bill of 1902, Act No. 926, and Proclamation No. 1801,

must fail because of the absence of the second element of alienable and

disposable land. Their entitlement to a government grant under our

present Public Land Act presupposes that the land possessed and applied

for is already alienable and disposable. This is clear from the wording of

the law itself.[129] Where the land is not alienable and disposable,

possession of the land, no matter how long, cannot confer ownership or

possessory rights.[130]

Neither may private claimants apply for judicial confirmation of

imperfect title under Proclamation No. 1064, with respect to those lands

which were classified as agricultural lands. Private claimants failed to

prove the first element of open, continuous, exclusive, and notorious

possession of their lands in Boracay since June 12, 1945.

We cannot sustain the CA and RTC conclusion in the petition for

declaratory relief that private claimants complied with the requisite period of

possession.

The tax declarations in the name of private claimants are insufficient

to prove the first element of possession. We note that the earliest of the

tax declarations in the name of private claimants were issued in

1993. Being of recent dates, the tax declarations are not sufficient to

convince this Court that the period of possession and occupation

commenced on June 12, 1945.

Private claimants insist that they have a vested right in Boracay,

having been in possession of the island for a long time. They have

invested millions of pesos in developing the island into a tourist spot. They

say their continued possession and investments give them a vested right

which cannot be unilaterally rescinded by Proclamation No. 1064.

The continued possession and considerable investment of private

claimants do not automatically give them a vested right in Boracay. Nor do

these give them a right to apply for a title to the land they are presently

occupying. This Court is constitutionally bound to decide cases based on

the evidence presented and the laws applicable. As the law and

jurisprudence stand, private claimants are ineligible to apply for a judicial

confirmation of title over their occupied portions in Boracay even with their

continued possession and considerable investment in the island.

One Last Note

The Court is aware that millions of pesos have been invested for the

development of Boracay Island, making it a by-word in the local and

international tourism industry. The Court also notes that for a number of

years, thousands of people have called the island their home. While the

Court commiserates with private claimants’ plight, We are bound to apply

the law strictly and judiciously. This is the law and it should prevail. Ito

ang batas at ito ang dapat umiral.

All is not lost, however, for private claimants. While they may not be

eligible to apply for judicial confirmation of imperfect title under Section

48(b) of CA No. 141, as amended, this does not denote their automatic

ouster from the residential, commercial, and other areas they possess now

classified as agricultural. Neither will this mean the loss of their substantial

investments on their occupied alienable lands. Lack of title does not

necessarily mean lack of right to possess.

For one thing, those with lawful possession may claim good faith as

builders of improvements. They can take steps to preserve or protect their

possession. For another, they may look into other modes of applying for

original registration of title, such as by homestead[131] or sales

patent,[132] subject to the conditions imposed by law.

More realistically, Congress may enact a law to entitle private

claimants to acquire title to their occupied lots or to exempt them from

certain requirements under the present land laws. There is one such

bill[133] now pending in the House of Representatives. Whether that bill or a

similar bill will become a law is for Congress to decide.

In issuing Proclamation No. 1064, the government has taken the step

necessary to open up the island to private ownership. This gesture may

not be sufficient to appease some sectors which view the classification of

the island partially into a forest reserve as absurd. That the island is no

longer overrun by trees, however, does not becloud the vision to protect its

remaining forest cover and to strike a healthy balance between progress

and ecology. Ecological conservation is as important as economic

progress.

To be sure, forest lands are fundamental to our nation’s

survival. Their promotion and protection are not just fancy rhetoric for

politicians and activists. These are needs that become more urgent as

destruction of our environment gets prevalent and difficult to control. As

aptly observed by Justice Conrado Sanchez in 1968 in Director of Forestry

v. Munoz:[134]

The view this Court takes of the cases at bar is but in adherence to

public policy that should be followed with respect to forest lands. Many have written much, and many more have spoken, and quite often, about the pressing need for forest preservation, conservation, protection, development and reforestation. Not without justification. For, forests constitute a vital segment of any country's natural resources. It is of common knowledge by now that absence of the necessary green cover on our lands produces a number of adverse or ill effects of serious proportions. Without the trees, watersheds dry up; rivers and lakes which they supply are emptied of their contents. The fish disappear. Denuded areas become dust bowls. As waterfalls cease to function, so will hydroelectric plants. With the rains, the fertile topsoil is washed away; geological erosion results. With erosion come the dreaded floods that wreak havoc and destruction to property – crops, livestock, houses, and highways – not to mention precious human lives. Indeed, the foregoing observations should be written down in a lumberman’s decalogue.[135]

WHEREFORE, judgment is rendered as follows:

1. The petition for certiorari in G.R. No. 167707 is GRANTED and the

Court of Appeals Decision in CA-G.R. CV No.

71118 REVERSED AND SET ASIDE.

2. The petition for certiorari in G.R. No. 173775 is DISMISSED for

lack of merit.

SO ORDERED. RUBEN T. REYES

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chief Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice

ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

(On official leave) RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

ADOLFO S. AZCUNA DANTE O. TINGA

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO PRESBITERO J. VELASCO, JR. Associate Justice Associate Justice

(No part) ANTONIO EDUARDO B. NACHURA TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

ARTURO D. BRION

Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify 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.

REYNATO S. PUNO

Chief Justice

* On official leave per Special Order No. 520 dated September 19, 2008.

** No part. Justice Nachura participated in the present case as Solicitor General.

[1] Rollo (G.R. No. 167707), pp. 37-43. CA-G.R. CV No. 71118, promulgated on December 9,

2004. Penned by Associate Justice Isaias P. Dicdican, with Associate Justices Sesinando E. Villon and Ramon M. Bato, Jr., concurring. [2]

Id. at 47-54; Annex “C.” Spl. Civil Case No. 5403. Penned by Judge Niovady M. Marin, RTC, Kalibo, Branch 5. [3]

Rollo (G.R. No. 173775), pp. 101-114. Annex “F.” Classifying Boracay Island Situated in the Municipality of Malay, Province of Aklan Into Forestland (Protection Purposes) and Into Agricultural Land (Alienable and Disposable) Pursuant to Presidential Decreee No. 705 (Revised Forestry Reform Code of the Philippines). Issued on May 22, 2006. [4]

As of the year 2000. http://www.nscb.gov.ph/ru6/boracay.htm. [5]

Manoc-Manoc, Balabag, and Yapak. http://www.nscb.gov.ph/ru6/boracay.htm.

[6] Under Survey Plan No. NR-06-000001.

[7] Rollo (G.R. No. 167707), p. 49.

[8] Id. at 21-23; Annex “B.” Declaring Certain Islands, Coves, and Peninsulas in the Philippines as Tourist

Zones and Marine Reserves Under the Administration and Control of the Philippine Tourism Authority. [9]

Id. at 24-27. Rules and Regulations Governing Activities at Boracay Island Tourist Zone. [10]

Records, pp. 13-32; Annexes “A” to “A-18.” [11]

Issued on May 19, 1975. [12]

Records, p. 148. [13]

Id. [14]

RULES OF COURT, Rule 129, Sec. 2. [15]

Records, p. 148. [16]

Id. at 177, 178. [17]

Rollo (G.R. No. 167707), p. 54. [18]

Id. at 51. [19]

Id.; PTA Circular No. 3-82, Rule VIII, Sec. 1(3) states: No trees in forested private lands may be cut without prior authority from the PTA. All forested areas in public lands are declared forest reserves.

[20] Sec. 87. If all the lands included in the proclamation of the President are not registered under the

Land Registration Act, the Solicitor-General, if requested to do so by the Secretary of Agriculture and Natural Resources, shall proceed in accordance with the provisions of section fifty-three of this Act. [21]

Sec. 53. It shall be lawful for the Director of Lands, whenever in the opinion of the President the public interests shall require it, to cause to be filed in the proper Court of First Instance, through the Solicitor General or the officer acting in his stead, a petition against the holder, claimant, possessor, or occupant of any land who shall not have voluntarily come in under the provisions of this chapter or of the Land Registration Act, stating in substance that the title of such holder, claimant, possessor, or occupant is open to discussion; or that the boundaries of any such land which has not been brought into court as aforesaid are open to question; or that it is advisable that the title to such land be settled and adjudicated, and praying that the title to any such land or the boundaries thereof or the right to occupancy thereof be settled and adjudicated. The judicial proceedings under this section shall be in accordance with the laws on adjudication of title in cadastral proceedings. [22]

Rollo (G.R. No. 167707), p. 51. [23]

Id. at 211-121. [24]

Id. at 42. [25]

Id. at 45-46. [26]

Supra note 3. [27]

Owner of Waling-Waling Beach Resort and Chairman of the Board of Boracay Foundation, Inc. [28]

Owner of Willy’s Beach Resort. [29]

Rollo (G.R. No. 173775), p. 20; Annex “A.” [30]

Petitioners in G.R. No. 173775 claim that they are also petitioners in the declaratory case filed in November 1997 before the RTC in Kalibo, Aklan, docketed as Sp. Civil Case No. 5403 and now before this Court as G.R. No. 167707. [31]

Rollo (G.R No. 173775), pp. 4-5. [32]

Id. at 4. [33]

Id. at 143. [34]

Rollo (G.R. No. 167707), p. 26. [35]

Rollo (G.R. No. 173775), pp. 280-281. [36]

An Act Temporarily to Provide for the Administration of the Affairs of Civil Government in the Philippine Islands, and for Other Purposes. Issued on July 1, 1902. [37]

An Act to Amend and Compile the Laws Relative to Lands of the Public Domain. Approved on December 1, 1936. [38]

See note 8. [39]

See note 3. [40]

CONSTITUTION (1935), Art. XIII, Sec. 1. [41]

CONSTITUTION (1973), Art. XIV, Sec. 10. [42]

Bernas, S.J., The Intent of the 1986 Constitution Writers, 1995 ed., p. 830. [43]

CONSTITUTION (1987), Art. XII, Sec. 3.

[44] Id.

[45] Zarate v. Director of Lands, G.R. No. 131501, July 14, 2004, 434 SCRA 322; Reyes v. Court of

Appeals, 356 Phil. 606, 624 (1998). [46]

Chavez v. Public Estates Authority, G.R. No. 133250, July 9, 2002, 384 SCRA 152. [47]

Zarate v. Director of Lands, supra; Collado v. Court of Appeals, G.R. No. 107764, October 4, 2002, 390 SCRA 343; Director of Lands v. Intermediate Appellate Court, G.R. No. 73246, March 2, 1993, 219 SCRA 339. [48]

Republic v. Estonilo, G.R. No. 157306, November 25, 2005, 476 SCRA 265; Zarate v. Director of Lands, supra. [49]

De los Reyes v. Ramolete, G.R. No. L-47331, June 21, 1983, 122 SCRA 652, citing Gonzaga v. Court of Appeals, G.R. No. L-27455, June 28, 1973, 51 SCRA 381. [50]

Collado v. Court of Appeals, supra, citing Chavez v. Public Estates Authority, supra. [51]

Id., citing separate opinion of then Justice Reynato S. Puno in Cruz v. Secretary of Environment and Natural Resources, G.R. No. 135385, December 6, 2000, 347 SCRA 128, and Chavez v. Public Estates Authority, supra note 46. [52]

Collado v. Court of Appeals, supra note 47. [53]

Effective February 13, 1894. [54]

De Aldecoa v. The Insular Government, 13 Phil. 159 (1909). [55]

A valid title based upon adverse possession or a valid title based upon prescription. Noblejas, A.H. and Noblejas, E.H., Registration of Land Titles and Deeds, 1986 ed., p. 39, citing Cruz v. De Leon, 21 Phil. 199 (1912). [56]

Ten (10) years, according to Archbishop of Manila v. Arnedo, 30 Phil. 593 (1915). [57]

Noblejas, A.H. and Noblejas, E.H., Registration of Land Titles and Deeds, supra at 8. [58]

Id. at 9; Director of Forest Administration v. Fernandez, G.R. Nos. 36827, 56622 & 70076, December 10, 1990, 192 SCRA 121, 137. [59]

Id. at 5-11. [60]

See note 36. [61]

Director of Forestry v. Villareal, G.R. No. L-32266, February 27, 1989, 170 SCRA 598, 601. [62]

Noblejas, A.H. and Noblejas, E.H., Registration of Land Titles and Deeds, supra note 55, at 347. [63]

The provisions relevant to the definition are: Sec. 13. That the Government of the Philippine Islands, subject to the provisions of this Act and except as herein provided, shall classify according to its agricultural character and productiveness, and shall immediately make rules and regulations for the lease, sale, or other disposition of the public lands other than timber or mineral lands, but such rules and regulations shall not go into effect or have the force of law until they have received the approval of the President, and when approved by the President they shall be submitted by him to Congress at the beginning of the next ensuing session thereof and unless disapproved or amended by Congress at said session they shall at the close of such period have the force and effect of law in the Philippine Islands: Provided, That a single homestead entry shall not exceed sixteen hectares in extent. Sec. 14. That the Government of the Philippine Islands is hereby authorized and empowered to enact rules and regulations and to prescribe terms and conditions to enable persons to perfect their title to public lands in said Islands, who, prior to the transfer of sovereignty from Spain to the United States, had fulfilled all or some of the conditions required by the Spanish laws and royal decrees of the Kingdom of Spain for the acquisition of legal title thereto, yet failed to secure conveyance of title; and the Philippine Commission is authorized to issue patents, without compensation, to any native of said Islands, conveying title to any tract of land not more than sixteen hectares in extent, which were public lands and had been actually occupied by such native or his ancestors prior to and on the thirteenth of August, eighteen hundred and ninety-eight. Sec. 15. That the Government of the Philippine Islands is hereby authorized and empowered, on such terms as it may prescribe, by general legislation, to provide for the granting or sale and conveyance to actual occupants and settlers and other citizens of said Islands such parts and portions of the public domain, other than timber and mineral lands, of the United States in said Islands as it may deem wise, not exceeding sixteen hectares to any one person and for the sale and conveyance of not more than one thousand and twenty-four

hectares to any corporation or association of persons: Provided, That the grant or sale of such lands, whether the purchase price be paid at once or in partial payments, shall be conditioned upon actual and continued occupancy, improvement, and cultivation of the premises sold for a period of not less than five years, during which time the purchaser or grantee can not alienate or encumber said land or the title thereto; but such restriction shall not apply to transfers of rights and title of inheritance under the laws for the distribution of the estates of decedents.

[64] 10 Phil. 175 (1908).

[65] Id. at 182.

[66] Collado v. Court of Appeals, supra note 47.

[67] Noblejas, A.H. and Noblejas, E.H., Registration of Land Titles and Deeds, supra note 55.

[68] Sec. 54, par. 6.

[69] Sec. 45(b); Public Estates Authority v. Court of Appeals, G.R. No. 112172, November 20, 2000, 345

SCRA 96; Director of Lands v. Buyco, G.R. No. 91189, November 27, 1992, 216 SCRA 78. [70]

Collado v. Court of Appeals, supra note 47, see separate opinion of Justice Puno in Cruz v. Secretary of Environment and Natural Resources, supra note 51, and Chavez v. Public Estates Authority, supra note 46. [71]

Sec. 2. [72]

An Act to Amend Subsection (b) of Section Forty-Eight of Commonwealth Act Numbered One Hundred Forty-One, Otherwise Known as the Public Land Act. Approved on June 22, 1957. [73]

Extending the Period of Filing Applications for Administrative Legislation (Free Patent) and Judicial Confirmation of Imperfect and Incomplete Titles to Alienable and Disposable Lands in the Public Domain Under Chapter VII and Chapter VIII of Commonwealth Act No. 141, As Amended, For Eleven (11) Years Commencing January 1, 1977. Approved on January 25, 1977. [74]

Republic v. Doldol, G.R. No. 132963, September 10, 1998, 295 SCRA 359. [75]

Discontinuance of the Spanish Mortgage System of Registration and of the Use of Spanish Titles as Evidence in Land Registration Proceedings (Issued – February 16, 1976). [76]

Director of Forest Administration v. Fernandez, supra note 58, citing Director of Lands v. Rivas, G.R. No. L-61539, February 14, 1986, 141 SCRA 329. [77]

Lands which were not recorded under the Maura Law and were not yet covered by Torrens titles. [78]

Presidential Decree No. 1529, Preamble; Director of Lands v. Intermediate Appellate Court, supra note 47. [79]

Peña, N. and Peña, Jr., N., Registration of Land Titles and Deeds, 1988 ed., p. 9. [80]

Republic v. Court of Appeals, G.R. No. 48227, August 21, 1991, 201 SCRA 1; Director of Lands v. Court of Appeals, G.R. No. 83609, October 26, 1989, 178 SCRA 708. [81]

Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic, G.R. No. 151312, August 30, 2006, 500 SCRA 209; Director of Lands v. Intermediate Appellate Court, supra note 47, citing Director of Lands v. Aquino, G.R. No. 31688,December 17, 1990, 192 SCRA 296. [82]

Chavez v. Public Estates Authority, supra note 46. [83]

Republic v. Lao, G.R. No. 150413, July 1, 2003; 405 SCRA 291; Director of Lands v. Intermediate Appellate Court, supra note 47, citing Director of Lands v. Aquino, supra. [84]

Republic v. Lao, supra; Pagkatipunan v. Court of Appeals, 429 Phil. 377, 389-390 (2002). [85]

Republic of the Philippines v. Muñoz, G.R. No. 151910, October 15, 2007. [86]

Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic, supra; Gutierrez Hermanos v. Court of Appeals, G.R. Nos. 54472-77, September 28, 1989, 178 SCRA 37. [87]

Republic v. Naguiat, G.R. No. 134209, January 24, 2006, 479 SCRA 585. [88]

40 Phil. 10 (1919). [89]

Supra note 54. [90]

Ankron v. Government of the Philippine Islands, supra at 16. [91]

Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic, supra note 81. [92]

Id. at 76. [93]

Id. at 219-223. [94]

Ankron v. Government of the Philippine Islands, supra note 88, at 16. [95]

Id. at 15-16.

[96] Act No. 2874, Sec. 8; Republic v. Court of Appeals, G.R. No. 155450, August 6, 2008; Republic v.

Court of Appeals, G.R. No. 127245, January 30, 2001. 96-a

Bureau of Forestry v. Court of Appeals, G.R. No. L-37995, August 31, 1987, 153 SCRA 351, 357. [97]

Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic, supra note 81. [98]

The records do not show the manner in which title was issued to the Heirs of Ciriaco Tirol. [99]

Records, p. 179. [100]

79 Phil. 461 (1947). [101]

Supra note 64. [102]

Supra note 54. [103]

Supra note 88. [104]

Art. XIII, Sec. 1. [105]

Krivenko v. Register of Deeds of Manila, supra note 100, at 468-469. [106]

Act No. 926, Sec. 54, par. 6 states: SEC. 54. The following described persons or their legal successors in right, occupying lands in the Philippines, or claiming to own any such land or interest therein but whose titles to such land have not been perfected may apply to the Court of Land Registration of the Philippine Islands for confirmation of their claims and the issuance of a certificate of title therefor to wit –

x x x x (6) All persons who by themselves or their predecessors in interest have been in the open, continuous exclusive, and notorious possession and occupation of agricultural public lands, as defined by said Act of Congress of July first, nineteen hundred and two, under a bona fide claim of ownership except as against the Government, for a period of ten years next preceding the taking effect of this act, except when prevented by war, or force majeure, shall be conclusively presumed to have performed all the conditions essential to a Government grant and to have received the same, and shall be entitled to a certificate of title to such land under the provisions of this chapter.

[107] Supra note 47.

107-a G.R. No. 135385, December 6, 2000, 347 SCRA 128.

[108] Collado v. Court of Appeals, id. at 356.

[109] Records, p. 101; Annex “A.”

[110] Id. at 106; Exhibit “1-a.”

[111] Rollo (G.R. No. 173775), p. 5.

[112] CONSTITUTION (1987), Art. XII, Sec. 3; CONSTITUTION (1973), Art. XIV, Sec. 10, as amended;

and CONSTITUTION (1935), Art. XIII, Sec. 1. [113]

Republic v. Naguiat, supra note 87. [114]

G.R. No. L-27873, November 29, 1983, 126 SCRA 69. [115]

Heirs of Amunategui v. Director of Forestry, id. at 75. [116]

Republic v. Court of Appeals, G.R. No. L-56948, September 30, 1987, 154 SCRA 476, 482-483. [117]

Sec. 3 provides: Establishment of or low-density human settlements in private lands, or subdivisions, if any, subject to prior approval by the Ministry of Human Settlements, PTA and local building officials; Provided, that no structures shall be constructed within 30 meters from the shorelines.

[118] Sec. 5 states:

Subsistence farming, in areas declared as alienable and disposable by the Bureau of Forest Development.

[119] Pars. 3-4.

[120] SEC. 6. The President, upon recommendation of the Secretary of Agriculture and Commerce (now

the Secretary of the Department of Environment and Natural Resources), shall from time to time classify lands of the public domain into –

(a) Alienable or disposable, (b) Timber, and (c) Mineral lands,

And may at any time and in a like manner transfer such lands from one class to another, for the purposes of their administration and disposition.

SEC. 7. For the purposes of administration and disposition of alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture and Commerce (now the Secretary of the Department of Environment and Natural Resources), shall from time to time declare what lands are open to disposition or concession under this Act. [121]

Director of Lands v. Intermediate Appellate Court, supra note 47; Manalo v. Intermediate Appellate Court, G.R. No. 64753, April 26, 1989, 172 SCRA 795. [122]

Republic v. Register of Deeds of Quezon, G.R. No. 73974, May 31, 1995, 244 SCRA 537; Director of Lands v. Intermediate Appellate Court, supra note 47. [123]

Director of Lands v. Intermediate Appellate Court, supra note 47, citing Yngson v. Secretary of Agriculture and Natural Resources, G.R. No. L-36847, July 20, 1983, 123 SCRA 441; Republic v. Court of Appeals, G.R. No. L-45202, September 11, 1980, 99 SCRA 742. [124]

Supra note 81. [125]

Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic, id. at 222-223. [126]

Reconsideration of DOJ Opinion No. 169, s. 1993, on the DOJ affirmative stand on whether the prohibition against the reclassification of forest lands applies to “unclassified public forest.” [127]

Rollo (G.R. No. 173775), p. 139. [128]

Del Rosario-Igtiben v. Republic, G.R. No. 158449, October 22, 2004, 441 SCRA 188; Republic v. Lao, supra note 83. [129]

Public Land Act, Sec. 48(b). [130]

Public Estates Authority v. Court of Appeals, supra note 69. [131]

Commonwealth Act No. 141, Chapter IV. [132]

Id., Chapter V. [133]

House Bill No. 1109. Declaring Certain Parcels of the Public Domain Within Boracay Island, Malay, Aklan as Agricultural Land Open to Disposition. [134]

G.R. No. L-24796, June 28, 1968, 23 SCRA 1183, cited in Lepanto Consolidated Mining Company v. Dumyung, G.R. Nos. L-31666-68, April 30, 1979, 89 SCRA 532. [135]

Director of Forestry v. Muñoz, id. at 1214.

FIRST DIVISION

[G.R. No. 150413. July 1, 2003]

REPUBLIC OF THE PHILIPPINES, petitioner, vs. ALEXANDRA LAO, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review assails the decision[1] of the Court of Appeals in CA-G.R. CV No. 56230, which affirmed the judgment[2] of the Regional Trial Court of Tagaytay City, Branch 18, in Land Registration Case No. TG-719.

On September 4, 1995, respondent Alexandra Lao filed with the Regional Trial Court of Tagaytay City, Branch 18, an application for the registration of title over a parcel of land designated as Lot No. 3951, Cad. 452-D, Silang Cadastre, Plan Ap-04-007770, consisting of nine thousand three hundred forty nine (9,349) square meters under Presidential Decree No. 1529, otherwise known as the Property Registration Decree. Respondent alleged that she acquired the land by purchase from the siblings Raymundo Noguera and Ma. Victoria A. Valenzuela, who inherited it from Generosa Medina. The latter, in turn, inherited the land from her father, Jose Medina, who acquired the same from Edilberto Perido by transfer.

In the alternative, respondent prayed that the land be awarded to her under the provisions of Commonwealth Act No. 141, as amended, also known as the Public Land Act, based on her and her predecessor’s open, public, actual, continuous, exclusive, notorious and adverse possession and occupancy under bona fide claim of ownership for more than thirty (30) years.

At the hearing in the lower court, respondent presented the following witnesses: Candido Amoroso, who testified on the ownership of the land by Edilberto Perido in 1932; Vicente Laudato, who testified on respondent’s purchase of the property from Raymundo and Ma. Victoria; and Fina Victoria So-Liwanag, who assisted respondent in her application for registration. Respondent likewise presented in evidence the Deed of Absolute Sale[3] dated April 19, 1994 executed by Raymundo and Victoria in her favor, the survey plan and technical description of the property, and the tax declarations in the name of respondent as well as her predecessors-in-interest.

On June 28, 1996, the trial court made the following findings, to wit:

x x x the applicant acquired the subject parcel of land by purchase from Raymundo

Noguera and Ma. Victoria A. Valenzuela in 1994, and that applicant and her

predecessors-in-interest have been in continuous, uninterrupted, open, public, adverse

and in the concept of an owner possession of the subject parcel of land for more than

thirty (30) years now; and that the same parcel was declared for taxation purposes;

that the realty taxes due thereon have been duly paid; that the land involved in this

case is not covered by any land patent. Likewise, this Court could well-discern from

the survey plan covering the same property, as well as technical description and other

documents presented, that the land sought to be registered is agricultural and not

within any forest zone or public domain; and that tacking her predecessors-in-

interest’s possession to hers, applicant appears to be in continuous and public

possession thereof for more than thirty (30) years.[4]

The dispositive portion of the decision reads:

WHEREFORE, this Court hereby approves this application for registration and thus

places under the operation of Act 141, Act 496 and/or P.D. 1529, otherwise known as

Property Registration Law, the land described in Plan Ap-04-007770 and containing

an area of nine thousand three hundred forty-nine (9,349) square meters as supported

by its technical description now forming part of the record of this case, in addition to

other proofs adduced in the name of ALEXANDRA A. LAO, of legal age, married to

NELSON O. LAO, Filipino citizen, with residence at 1648 Yakal Street, Sta. Cruz,

Manila.

Once this Decision becomes final and executory, the corresponding decree of

registration shall forthwith issue.

SO ORDERED.[5]

Petitioner Republic of the Philippines, represented by the Office of the Solicitor General, appealed to the Court of Appeals which was docketed as CA-G.R. CV No. 56230. On October 15, 2001, the appellate court affirmed the judgment of the trial court.[6] Hence, this petition for review raising the following errors:

THERE IS NO SUFFICIENT EVIDENCE TO WARRANT THE ORIGINAL

REGISTRATION OF TITLE OF SUBJECT PROPERTY IN THE NAME OF

RESPONDENT.[7]

A. RESPONDENT FAILED TO COMPLY WITH THE LEGALLY REQUIRED PERIOD AND ACTS OF POSSESSION.[8]

B. THE TAX DECLARATIONS PRESENTED BY RESPONDENT DO NOT CORROBORATE HER CLAIM OF THE LEGALLY REQUIRED PERIOD OF POSSESSION.[9]

C. RESPONDENT FAILED TO PRESENT A CERTIFICATION FROM THE APPROPRIATE GOVERNMENT AGENCY THAT THE LAND SUBJECT OF HER

APPLICATION FOR REGISTRATION IS ALIENABLE AND DISPOSABLE LAND OF THE PUBLIC DOMAIN.[10]

In sum, the issues presented before us are (a) whether or not respondent was able to prove, by the quantum of evidence mandated by law, that she met the required period of open, exclusive, continuous and notorious possession, in the concept of an owner, of the subject parcel of land; and (b) whether or not respondent was able to show that the land subject of her application was disposable and alienable land of the public domain.

Section 14 (1) of Presidential Decree No. 1529 states:

Who may apply. – The following persons may file in the proper Court of First Instance

an application for registration of title to land, whether personally or through their duly

authorized representatives:

(1) Those who by themselves or through their predecessor-in-interest have been in

open, continuous, exclusive and notorious possession and occupation of alienable and

disposable lands of the public domain under a bona fide claim of ownership since

June 12, 1945, or earlier.

On the other hand, Section 48 (b) of Commonwealth Act No. 141, as amended by Section 4 of Presidential Decree No. 1073, provides:

The provisions of Section 48(b) and Section 48(c), Chapter VIII, of the Public Land

Act are hereby amended in the sense that these provisions shall apply only to alienable

and disposable lands of the public domain which have been in open, continuous,

exclusive and notorious possession and occupation by the applicant himself or thru his

predecessor-in-interest, under a bona fide claim of acquisition of ownership, since

June 12, 1945.

Thus, before one can register his title over a parcel of land, the applicant must show that (a) he, by himself or through his predecessors-in-interest, has been in open, continuous, exclusive and notorious possession and occupation of the subject land under a bona fide claim of ownership since June 12, 1945 or earlier; and (b) the land subject of the application is alienable and disposable land of the public domain.

Respondent submits that Section 48 (b) of CA 141 was amended by Republic Act No. 6940, which reduced the required period of possession to thirty years immediately prior to the filing of the application. Said law became effective on April 15, 1990. However, petitioner maintains that the required period of possession remained the same. RA 6940 explicitly states that its provisions amended sections 44, 45 and 47 of CA 141. Nothing in RA 6940 amends Section 48 (b). In other words, the requisites for judicial confirmation of imperfect or incomplete title set forth therein remains the same, namely, (1) possession of the subject land from June 12, 1945, and (2) the

classification of the land as alienable and disposable land of the public domain. In Public Estates Authority v. Court of Appeals,[11] we held that:

Under the public land act, judicial confirmation of imperfect title required

possession en concepto de dueño since time immemorial, or since July 26, 1894.

Under C.A. No. 141, this requirement was retained. However, on June 22, 1957,

Republic Act No. 1942 was enacted amending C.A. No. 141. This later enactment

required adverse possession for a period of only thirty (30) years. On January 25,

1977, the President enacted P.D. No. 1073, further amending C.A. No. 141, extending

the period for filing applications for judicial confirmation of imperfect or incomplete

titles to December 31, 1987. Under this decree, “the provisions of Section 48 (b) and

Section 48 (c), Chapter VIII, of the Public Land Act are hereby amended in the sense

that these provisions shall apply only to alienable and disposable land of the public

domain which have been in open, continuous, exclusive and notorious possession and

occupation by the applicant himself or thru his predecessors-in-interest under a bona

fide claim of acquisition of ownership, since June 12, 1945.

The aforequoted ruling was reiterated in Republic v. Court of Appeals,[12] thus:

This Court has held in Republic vs. Doldol [295 SCRA 359, (1998)] that, originally,

“Section 48(b) of C.A. No. 141 provided for possession and occupation of lands of the

public domain since July 26, 1894. This was superseded by R.A. No. 1942 which

provided for a simple thirty-year prescriptive period of occupation by an applicant for

judicial confirmation of imperfect title. The same, however, has already been

amended by Presidential Decree No. 1073, approved on January 25, 1977.” As

amended Section 48 (b) now reads:

(b) Those who by themselves or through their predecessors-in-interest have been

in open, continuous, exclusive and notorious possession and occupation of agricultural

lands of the public domain, under a bona fide claim of acquisition or ownership, since

June 12, 1945, or earlier, immediately preceding the filing of the application for

confirmation of title, except when prevented by wars or force majeure. Those shall be

conclusively presumed to have performed all the conditions essential to a Government

grant and shall be entitled to a certificate of title under the provisions of this chapter.

Petitioner argues that respondent failed to prove by incontrovertible evidence that she had been in open, continuous, exclusive and notorious possession and occupation of the subject land, in the concept of an owner, since June 12, 1945 or earlier. According to petitioner, respondent’s witnesses did not state the exact period when respondent’s predecessors-in-interest started occupying the subject land. They only made sweeping statements to the effect that respondent had been in possession of the property for more than thirty years. Hence, it can not be conclusively determined whether respondent and her predecessors-in-interest have truly been in possession of

the property since June 12, 1945 or earlier. Furthermore, respondent failed to show how the property was transferred from Generosa Medina to Raymundo Noguera and Ma. Victoria A. Valenzuela. No extrajudicial settlement of property was established. Consequently, respondent can not tack her possession with those of Generosa Medina and her predecessors-in-interest.

There is merit in the petition.

Candido Amoroso, respondent’s first witness, testified that he first knew of the property in 1932 and that it was owned by a certain Edilberto Perido. However, no evidence was presented to support his claim. Respondent submitted the tax declarations in the name of her predecessors-in-interest, including that of Edilberto. However, the earliest of these documents pertained to the year 1948 only, three years short of the required period. Respondent’s other witness, Vicente Laudato, claimed that he had known about the property since he was ten years old, which was in 1945, and that Edilberto Perido owned the property. On cross-examination, however, he testified that he based his information on Edilberto’s ownership of the land on the fact that the latter used to greet him and his family whenever he passed by their house. Vicente later on admitted that he did not know with certainty whether Edilberto was indeed the owner and possessor of the property.[13]

Finally, respondent failed to present the extrajudicial settlement or other document evidencing the transfer of the land from Generosa Medina to Raymundo Noguera and Ma. Victoria A. Valenzuela. She likewise did not show the relationship between these parties. She only presented the deed of sale between her and the latter, where it was stated that Raymundo and Ma. Victoria inherited the property from Generosa. Hence, respondent can not tack her possession with those of Generosa and her predecessors-in-interest. At most, respondent’s possession can only be reckoned from the time that Raymundo and Ma. Victoria claimed possession of the property.

Respondent having thus failed to show by incontrovertible evidence that her possession of the land commenced on June 12, 1945 or earlier, she failed to meet the first requisite under the pertinent provisions of PD 1529 and CA 141.

Petitioner further submits that respondent failed to show that the land subject of her application is classified as alienable and disposable land of the public domain. Under the Regalian doctrine which is embodied in our Constitution,[14] all lands of the public domain belong to the State, which is the source of any asserted right to ownership of land.[15] All lands not appearing to be clearly within private ownership are presumed to belong to the State.[16] Unless public land is shown to have been reclassified or alienated to a private person by the State, it remains part of the inalienable public domain.[17] To overcome this presumption, incontrovertible evidence must be established that the land subject of the application is alienable or disposable.[18]

In De Ocampo v. Arlos,[19] it was held that:

x x x a title may be judicially confirmed under Section 48 of the Public Land Act only

if it pertains to alienable lands of the public domain. Unless such assets are

reclassified and considered disposable and alienable, occupation thereof in the

concept of owner, no matter how long, cannot ripen into ownership and be registered

as a title. Verily, Presidential Decree No. 1073 clarified Section 48 (b) of the Public

Land Act by specifically declaring that the latter applied only to alienable and

disposable lands of the public domain.

In the case at bar, no certification from the appropriate government agency or official proclamation reclassifying the land as alienable and disposable was presented by respondent. Respondent merely submitted the survey map and technical descriptions of the land, which contained no information regarding the classification of the property. These documents are not sufficient to overcome the presumption that the land sought to be registered forms part of the public domain.

Respondent argues that she was not required to present any certification stating that the land is open for disposition because no opposition to her application was ever made by the appropriate government agencies. She claims that in the absence of any proof to the contrary, lands of the public domain are agricultural in nature and thus susceptible to private ownership.

As an applicant for registration of a parcel of land, respondent had the initial obligation to show that the property involved is agricultural. Being the interested party, it was incumbent upon her to prove that the land being registered is indeed alienable or disposable. She cannot rely on the mere presumption that it was agricultural and, therefore, alienable part of the public domain.[20] Thus, in Director of Lands v. Funtilar,[21] we held:

It was rather sweeping for the appellate court to rule that after an applicant files his

application for registration, the burden shifts totally to the government to prove that

the land forms part of the unclassified forest zone. The ruling inHeirs of Amunategui

v. Director of Forestry (126 SCRA 69) governs applications for confirmation of

imperfect title. The applicant shoulders the burden of overcoming the presumption

that the land sought to be registered forms part of the public domain.

Moreover, the absence of opposition from the government agencies is of no moment because the State cannot be estopped by the omission, mistake or error of its officials or agents.[22]

It bears stressing at this point that declassification of forest land and its conversion into alienable or disposable land for agricultural or other purposes requires an express and positive act from the government.[23] It cannot be presumed; but must be established by convincing proof.[24]

WHEREFORE, in view of the foregoing, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 56230 is REVERSED and SET ASIDE. The application for original registration of title over Lot No. 3951, Cad. 452-D, Silang Cadastre, Plan Ap-04-007770, which was docketed as Land Registration Case No. TG-719 before the Regional Trial Court of Tagaytay City, Branch 18, is DENIED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

[1] Rollo, pp. 27-33.

[2] RTC Records, pp. 68-69.

[3] Id., at 5.

[4] RTC Records, pp. 68-69.

[5] Id., at 69.

[6] Rollo, p. 33.

[7] Id., at 14.

[8] Id.

[9] Id., at 21.

[10] Id.

[11] G.R. No. 112172, 20 November 2000, 345 SCRA 96.

[12] G.R. No. 116372, 18 January 2001, 349 SCRA 451.

[13] TSN, April 19, 1996, p. 10.

[14] Section 2, Article XII of the 1987 Constitution: 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. xxx.

[15] Seville v. National Development Company, G.R. No. 129401, 2 February 2001, 351 SCRA 112, 120.

[16] Bracewell v. Court of Appeals, 380 Phil. 156 (2000).

[17] Menguito v. Republic, G.R. No. 134308, 14 December 2000, 348 SCRA 128, 139.

[18] Pagkatipunan, et al. v. Court of Appeals, et al., G.R. No. 129682, 21 March 2002.

[19] G.R. No. 135527, 19 October 2000, 343 SCRA 716.

[20] Director of Lands v. Court of Appeals, G.R. No. 50260, 29 July 1992, 211 SCRA 868, 876.

[21] G.R. No. L-68533, 23 May 1986, 142 SCRA 57.

[22] Director of Lands v. Court of Appeals, 214 Phil. 606, 610.

[23] Republic v. Court of Appeals, G.R. No. 48327, 21 August 1991, 201 SCRA 1, 9.

[24] Pagkatipunan, et al. v. Court of Appeals, et al., supra.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. 127882 January 27, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., represented by its Chairman F'LONG MIGUEL M. LUMAYONG, WIGBERTO E. TAÑADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR., F'LONG AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE, SIMEON H. DOLOJO, IMELDA M. GANDON, LENY B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A. LABUAYAN, LOMINGGES D. LAWAY, BENITA P. TACUAYAN, minors JOLY L. BUGOY, represented by his father UNDERO D. BUGOY, ROGER M. DADING, represented by his father ANTONIO L. DADING, ROMY M. LAGARO, represented by his father TOTING A. LAGARO, MIKENY JONG B. LUMAYONG, represented by his father MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by his mother EDITHA T. MIGUEL, ALDEMAR L. SAL, represented by his father DANNY M. SAL, DAISY RECARSE, represented by her mother LYDIA S. SANTOS, EDWARD M. EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL, ALDEN S. TUSAN, AMPARO S. YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR, JR., represented by their father VIRGILIO CULAR, PAUL ANTONIO P. VILLAMOR, represented by his parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA GININA R. TALJA, represented by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN, represented by her father ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III, represented by his mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, represented by his father MANUEL E. NARVADEZ, JR., ROSERIO MARALAG LINGATING, represented by her father RIO OLIMPIO A. LINGATING, MARIO JOSE B. TALJA, DAVID E. DE VERA, MARIA MILAGROS L. SAN JOSE, SR., SUSAN O. BOLANIO, OND, LOLITA G. DEMONTEVERDE, BENJIE L. NEQUINTO,1 ROSE LILIA S. ROMANO, ROBERTO S. VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by his father ELPIDIO V. PERIA,2 GREEN FORUM PHILIPPINES, GREEN FORUM WESTERN VISAYAS, (GF-WV), ENVIRONMETAL LEGAL ASSISTANCE CENTER (ELAC), PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN),3 KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and RURAL DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PART`NERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA), WOMEN'S LEGAL BUREAU (WLB), CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI), UPLAND DEVELOPMENT INSTITUTE (UDI), KINAIYAHAN FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP PANLIGAL (SALIGAN), LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC. (LRC), petitioners, vs. VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), HORACIO RAMOS, DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES, EXECUTIVE SECRETARY, and WMC (PHILIPPINES), INC.4 respondents.

D E C I S I O N

CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of Republic Act No. 7942,5otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR) Administrative Order 96-40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a corporation organized under Philippine laws.

On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 2796 authorizing the DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts or agreements involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, which, upon appropriate recommendation of the Secretary, the President may execute with the foreign proponent. In entering into such proposals, the President shall consider the real contributions to the economic growth and general welfare of the country that will be realized, as well as the development and use of local scientific and technical resources that will be promoted by the proposed contract or agreement. Until Congress shall determine otherwise, large-scale mining, for purpose of this Section, shall mean those proposals for contracts or agreements for mineral resources exploration, development, and utilization involving a committed capital investment in a single mining unit project of at least Fifty Million Dollars in United States Currency (US $50,000,000.00).7

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to "govern the exploration, development, utilization and processing of all mineral resources."8 R.A. No. 7942 defines the modes of mineral agreements for mining operations,9 outlines the procedure for their filing and approval,10 assignment/transfer11and withdrawal,12 and fixes their terms.13 Similar provisions govern financial or technical assistance agreements.14

The law prescribes the qualifications of contractors15 and grants them certain rights, including timber,16 water17and easement18 rights, and the right to possess explosives.19 Surface owners, occupants, or concessionaires are forbidden from preventing holders of mining rights from entering private lands and concession areas.20 A procedure for the settlement of conflicts is likewise provided for.21

The Act restricts the conditions for exploration,22 quarry23 and other24 permits. It regulates the transport, sale and processing of minerals,25 and promotes the development of mining communities, science and mining technology,26 and safety and environmental protection.27

The government's share in the agreements is spelled out and allocated,28 taxes and fees are imposed,29incentives granted.30 Aside from penalizing certain acts,31 the law likewise specifies grounds for the cancellation, revocation and termination of agreements and permits.32

On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and Manila Times, two newspapers of general circulation, R.A. No. 7942 took effect.33 Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the President entered into an FTAA with WMCP covering 99,387 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato.34

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing Rules and Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s. 1996 which was adopted on December 20, 1996.

On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No. 96-40,35 giving the DENR fifteen days from receipt36 to act thereon. The DENR, however, has yet to respond or act on petitioners' letter.37

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining order. They allege that at the time of the filing of the petition, 100 FTAA applications had already been filed, covering an area of 8.4 million hectares,38 64 of which applications are by fully foreign-owned corporations covering a total of 5.8 million hectares, and at least one by a fully foreign-owned mining company over offshore areas.39

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:

I

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows fully foreign owned corporations to explore, develop, utilize and exploit mineral resources in a manner contrary to Section 2, paragraph 4, Article XII of the Constitution;

II

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows the taking of private property without the determination of public use and for just compensation;

III

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it violates Sec. 1, Art. III of the Constitution;

IV

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows enjoyment by foreign citizens as well as fully foreign owned corporations of the nation's marine wealth contrary to Section 2, paragraph 2 of Article XII of the Constitution;

V

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows priority to foreign and fully foreign owned corporations in the exploration, development and utilization of mineral resources contrary to Article XII of the Constitution;

VI

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows the inequitable sharing of wealth contrary to Sections [sic] 1, paragraph 1, and Section 2, paragraph 4[,] [Article XII] of the Constitution;

VII

x x x in recommending approval of and implementing the Financial and Technical Assistance Agreement between the President of the Republic of the Philippines and Western Mining Corporation Philippines Inc. because the same is illegal and unconstitutional.40

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or Technical Assistance Agreements;

(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null and void;

(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act contained in DENR Administrative Order No. 96-40 and all other similar administrative issuances as unconstitutional and null and void; and

(d) Cancelling the Financial and Technical Assistance Agreement issued to Western Mining Philippines, Inc. as unconstitutional, illegal and null and void.41

Impleaded as public respondents are Ruben Torres, the then Executive Secretary, Victor O. Ramos, the then DENR Secretary, and Horacio Ramos, Director of the Mines and Geosciences Bureau of the DENR. Also impleaded is private respondent WMCP, which entered into the assailed FTAA with the Philippine Government. WMCP is owned by WMC Resources International Pty., Ltd. (WMC), "a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly listed major Australian mining and exploration company."42 By WMCP's information, "it is a 100% owned subsidiary of WMC LIMITED."43

Respondents, aside from meeting petitioners' contentions, argue that the requisites for judicial inquiry have not been met and that the petition does not comply with the criteria for prohibition and mandamus. Additionally, respondent WMCP argues that there has been a violation of the rule on hierarchy of courts.

After petitioners filed their reply, this Court granted due course to the petition. The parties have since filed their respective memoranda.

WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on January 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc. (Sagittarius), a corporation organized under Philippine laws.44 WMCP was subsequently renamed "Tampakan Mineral Resources Corporation."45 WMCP claims that at least 60% of the equity of Sagittarius is owned by Filipinos and/or Filipino-owned corporations while about 40% is owned by Indophil Resources NL, an Australian company.46 It further claims that by such sale and transfer of shares, "WMCP has ceased to be connected in any way with WMC."47

By virtue of such sale and transfer, the DENR Secretary, by Order of December 18, 2001,48 approved the transfer and registration of the subject FTAA from WMCP to Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co. (Lepanto) to the Office of the President which upheld it by Decision of July 23, 2002.49 Its motion for reconsideration having been denied by the Office of the President by Resolution of November 12, 2002,50 Lepanto filed a petition for review51 before the Court of Appeals. Incidentally, two other petitions for review related to the

approval of the transfer and registration of the FTAA to Sagittarius were recently resolved by this Court.52

It bears stressing that this case has not been rendered moot either by the transfer and registration of the FTAA to a Filipino-owned corporation or by the non-issuance of a temporary restraining order or a preliminary injunction to stay the above-said July 23, 2002 decision of the Office of the President.53 The validity of the transfer remains in dispute and awaits final judicial determination. This assumes, of course, that such transfer cures the FTAA's alleged unconstitutionality, on which question judgment is reserved.

WMCP also points out that the original claimowners of the major mineralized areas included in the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and Southcot Mining Corporation, are all Filipino-owned corporations,54 each of which was a holder of an approved Mineral Production Sharing Agreement awarded in 1994, albeit their respective mineral claims were subsumed in the WMCP FTAA;55 and that these three companies are the same companies that consolidated their interests in Sagittarius to whom WMC sold its 100% equity in WMCP.56 WMCP concludes that in the event that the FTAA is invalidated, the MPSAs of the three corporations would be revived and the mineral claims would revert to their original claimants.57

These circumstances, while informative, are hardly significant in the resolution of this case, it involving the validity of the FTAA, not the possible consequences of its invalidation.

Of the above-enumerated seven grounds cited by petitioners, as will be shown later, only the first and the last need be delved into; in the latter, the discussion shall dwell only insofar as it questions the effectivity of E. O. No. 279 by virtue of which order the questioned FTAA was forged.

I

Before going into the substantive issues, the procedural questions posed by respondents shall first be tackled.

REQUISITES FOR JUDICIAL REVIEW

When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the following requisites are present:

(1) The existence of an actual and appropriate case;

(2) A personal and substantial interest of the party raising the constitutional question;

(3) The exercise of judicial review is pleaded at the earliest opportunity; and

(4) The constitutional question is the lis mota of the case. 58

Respondents claim that the first three requisites are not present.

Section 1, Article VIII of the Constitution states that "(j)udicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable." The power of judicial review, therefore, is limited to the determination of actual cases and controversies.59

An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination, not conjectural or anticipatory,60 lest the decision of the court would amount to an advisory opinion.61 The power does not extend to hypothetical questions62 since any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.63

"Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged,64alleging more than a generalized grievance.65 The gist of the question of standing is whether a party alleges "such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions."66Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no standing.67

Petitioners traverse a wide range of sectors. Among them are La Bugal B'laan Tribal Association, Inc., a farmers and indigenous people's cooperative organized under Philippine laws representing a community actually affected by the mining activities of WMCP, members of said cooperative,68 as well as other residents of areas also affected by the mining activities of WMCP.69 These petitioners have standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial injury. They claim that they would suffer "irremediable displacement"70 as a result of the implementation of the FTAA allowing WMCP to conduct mining activities in their area of residence. They thus meet the appropriate case requirement as they assert an interest adverse to that of respondents who, on the other hand, insist on the FTAA's validity.

In view of the alleged impending injury, petitioners also have standing to assail the validity of E.O. No. 279, by authority of which the FTAA was executed.

Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue either or both contracting parties to annul it.71 In other words, they contend that petitioners are not real parties in interest in an action for the annulment of contract.

Public respondents' contention fails. The present action is not merely one for annulment of contract but for prohibition and mandamus. Petitioners allege that public respondents acted without or in excess of jurisdiction in implementing the FTAA, which they submit is unconstitutional. As the case involves constitutional questions, this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal standing. As held in Kilosbayan v. Morato:72

x x x. "It is important to note . . . that standing because of its constitutional and public policy underpinnings, is very different from questions relating to whether a particular plaintiff is the real party in interest or has capacity to sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper role of the judiciary in certain areas.["] (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985])

Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence, the question in standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions." (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962].)

As earlier stated, petitioners meet this requirement.

The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40 likewise fulfills the requisites of justiciability. Although these laws were not in force when the subject FTAA was entered into, the question as to their validity is ripe for adjudication.

The WMCP FTAA provides:

14.3 Future Legislation

Any term and condition more favourable to Financial &Technical Assistance Agreement contractors resulting from repeal or amendment of any existing law or regulation or from the enactment of a law, regulation or administrative order shall be considered a part of this Agreement.

It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more favorable to WMCP, hence, these laws, to the extent that they are favorable to WMCP, govern the FTAA.

In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing agreements.

SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. – x x x That the provisions of Chapter XIV on government share in mineral production-sharing agreement and of Chapter XVI on incentives of this Act shall immediately govern and apply to a mining lessee or contractor unless the mining lessee or contractor indicates his intention to the secretary, in writing, not to avail of said provisions x x x Provided, finally, That such leases, production-sharing agreements, financial or technical assistance agreements shall comply with the applicable provisions of this Act and its implementing rules and regulations.

As there is no suggestion that WMCP has indicated its intention not to avail of the provisions of Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply to the WMCP FTAA.

Misconstruing the application of the third requisite for judicial review – that the exercise of the review is pleaded at the earliest opportunity – WMCP points out that the petition was filed only almost two years after the execution of the FTAA, hence, not raised at the earliest opportunity.

The third requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later.73 A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same.

PROPRIETY OF PROHIBITION AND MANDAMUS

Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule 65 read:

SEC. 2. Petition for prohibition. – When the proceedings of any tribunal, corporation, board, or person, whether exercising functions judicial or ministerial, are without or in excess of its or his jurisdiction, or with grave abuse of discretion, 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 defendant to desist from further proceeding in the action or matter specified therein.

Prohibition is a preventive remedy.74 It seeks a judgment ordering the defendant to desist from continuing with the commission of an act perceived to be illegal.75

The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself may be fait accompli, its implementation is not. Public respondents, in behalf of the Government, have obligations to fulfill under said contract. Petitioners seek to prevent them from fulfilling such obligations on the theory that the contract is unconstitutional and, therefore, void.

The propriety of a petition for prohibition being upheld, discussion of the propriety of the mandamus aspect of the petition is rendered unnecessary.

HIERARCHY OF COURTS

The contention that the filing of this petition violated the rule on hierarchy of courts does not likewise lie. The rule has been explained thus:

Between two courts of concurrent original jurisdiction, it is the lower court that should initially pass upon the issues of a case. That way, as a particular case goes through the hierarchy of courts, it is shorn of all but the important legal issues or those of first impression, which are the proper subject of attention of the appellate court. This is a procedural rule borne of experience and adopted to improve the administration of justice.

This Court has consistently enjoined litigants to respect the hierarchy of courts. Although this Court has concurrent jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give a party unrestricted freedom of choice of court forum. The resort to this Court's primary jurisdiction to issue said writs shall be allowed only where the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify such invocation. We held in People v. Cuaresma that:

A becoming regard for 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 Court's original jurisdiction to issue these writs should be allowed only where there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket x x x.76 [Emphasis supplied.]

The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this Court in the first instance.

In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the requirements of an actual case or legal standing when paramount public interest is involved.77 When the issues raised are of paramount importance to the public, this Court may brush aside technicalities of procedure.78

II

Petitioners contend that E.O. No. 279 did not take effect because its supposed date of effectivity came after President Aquino had already lost her legislative powers under the Provisional Constitution.

And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates Section 2, Article XII of the Constitution because, among other reasons:

(1) It allows foreign-owned companies to extend more than mere financial or technical assistance to the State in the exploitation, development, and utilization of minerals, petroleum, and other mineral oils, and even permits foreign owned companies to "operate and manage mining activities."

(2) It allows foreign-owned companies to extend both technical and financial assistance, instead of "either technical or financial assistance."

To appreciate the import of these issues, a visit to the history of the pertinent constitutional provision, the concepts contained therein, and the laws enacted pursuant thereto, is in order.

Section 2, Article XII reads in full:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

THE SPANISH REGIME AND THE REGALIAN DOCTRINE

The first sentence of Section 2 embodies the Regalian doctrine or jura regalia. Introduced by Spain into these Islands, this feudal concept is based on the State's power of dominium, which is the capacity of the State to own or acquire property.79

In its broad sense, the term "jura regalia" refers to royal rights, or those rights which the King has by virtue of his prerogatives. In Spanish law, it refers to a right which the sovereign has over anything in which a subject has a right of property or propriedad. These were rights enjoyed during feudal times by the king as the sovereign.

The theory of the feudal system was that title to all lands was originally held by the King, and while the use of lands was granted out to others who were permitted to hold them under certain conditions, the King theoretically retained the title. By fiction of law, the King was regarded as the original proprietor of all lands, and the true and only source of title, and from him all lands were held. The theory of jura regalia was therefore nothing more than a natural fruit of conquest.80

The Philippines having passed to Spain by virtue of discovery and conquest,81 earlier Spanish decrees declared that "all lands were held from the Crown."82

The Regalian doctrine extends not only to land but also to "all natural wealth that may be found in the bowels of the earth."83 Spain, in particular, recognized the unique value of natural resources, viewing them, especially minerals, as an abundant source of revenue to finance its wars against other nations.84 Mining laws during the Spanish regime reflected this perspective.85

THE AMERICAN OCCUPATION AND THE CONCESSION REGIME

By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago known as the Philippine Islands" to the United States. The Philippines was hence governed by means of organic acts that were in the nature of charters serving as a Constitution of the occupied territory from 1900 to 1935.86 Among the principal organic acts of the Philippines was the Act of Congress of July 1, 1902, more commonly known as the Philippine Bill of 1902, through which the United States Congress assumed the administration of the Philippine Islands.87 Section 20 of said Bill reserved the disposition of mineral lands of the public domain from sale. Section 21 thereof allowed the free and open exploration, occupation and purchase of mineral deposits not only to citizens of the Philippine Islands but to those of the United States as well:

Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands, both surveyed and unsurveyed, are hereby declared to be free and open to exploration, occupation and purchase, and the land in which they are found, to occupation and purchase, by citizens of the United States or of said Islands: Provided, That when on any lands in said Islands entered and occupied as agricultural lands under the provisions of this Act, but not patented, mineral deposits have been found, the working of such mineral deposits is forbidden until the person, association, or corporation who or which has entered and is occupying such lands shall have paid to the Government of said Islands such additional sum or sums as will make the total amount paid for the mineral claim or claims in which said deposits are located equal to the amount charged by the Government for the same as mineral claims.

Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant patents to private mineral lands.88 A person who acquired ownership over a parcel of private mineral land pursuant to the laws then prevailing could exclude other persons, even the State, from exploiting minerals within his property.89Thus, earlier jurisprudence90 held that:

A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of the statutes of the United States, has the effect of a grant by the United States of the present and exclusive possession of the lands located, and this exclusive right of possession and enjoyment continues during the entire life of the location. x x x.

x x x.

The discovery of minerals in the ground by one who has a valid mineral location perfects his claim and his location not only against third persons, but also against the Government. x x x. [Italics in the original.]

The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the Regalian theory, mineral rights are not included in a grant of land by the state; under the American doctrine, mineral rights are included in a grant of land by the government.91

Section 21 also made possible the concession (frequently styled "permit", license" or "lease")92 system.93 This was the traditional regime imposed by the colonial administrators for the exploitation of natural resources in the extractive sector (petroleum, hard minerals, timber, etc.).94

Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area.95 Thus, the concession amounts to complete control by the concessionaire over the country's natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction.96 In consideration for the right to exploit a natural resource, the concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds.97

Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual framework of the concession.98 For instance, Act No. 2932,99 approved on August 31, 1920, which provided for the exploration, location, and lease of lands containing petroleum and other mineral oils and gas in the Philippines, and Act No. 2719,100 approved on May 14, 1917, which provided for the leasing and development of coal lands in the Philippines, both utilized the concession system.101

THE 1935 CONSTITUTION AND THE NATIONALIZATION OF NATURAL RESOURCES

By the Act of United States Congress of March 24, 1934, popularly known as the Tydings-McDuffie Law, the People of the Philippine Islands were authorized to adopt a constitution.102 On July 30, 1934, the Constitutional Convention met for the purpose of drafting a constitution, and the Constitution subsequently drafted was approved by the Convention on February 8, 1935.103 The Constitution was submitted to the President of the United States on March 18, 1935.104 On March 23, 1935, the President of the United States certified that the Constitution conformed substantially with the provisions of the Act of Congress approved on March 24, 1934.105 On May 14, 1935, the Constitution was ratified by the Filipino people.106

The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines, including mineral lands and minerals, to be property belonging to the State.107 As adopted in a republican system, the medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested in the State.108

Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935 Constitution provided:

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, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant.

The nationalization and conservation of the natural resources of the country was one of the fixed and dominating objectives of the 1935 Constitutional Convention.109 One delegate relates:

There was an overwhelming sentiment in the Convention in favor of the principle of state ownership of natural resources and the adoption of the Regalian doctrine. State ownership of natural resources was seen as a necessary starting point to secure recognition of the state's power to control their disposition, exploitation, development, or utilization. The delegates of the Constitutional Convention very well knew that the concept of State ownership of land and natural resources was introduced by the Spaniards, however, they were not certain whether it was continued and applied by the Americans. To remove all doubts, the Convention approved the provision in the Constitution affirming the Regalian doctrine.

The adoption of the principle of state ownership of the natural resources and of the Regalian doctrine was considered to be a necessary starting point for the plan of nationalizing and conserving the natural resources of the country. For with the establishment of the principle of state ownership of the natural resources, it would not be hard to secure the recognition of the power of the State to control their disposition, exploitation, development or utilization.110

The nationalization of the natural resources was intended (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension to the country of foreign control through peaceful economic penetration; and (3) to avoid making the Philippines a source of international conflicts with the consequent danger to its internal security and independence.111

The same Section 1, Article XIII also adopted the concession system, expressly permitting the State to grant licenses, concessions, or leases for the exploitation, development, or utilization of any of the natural resources. Grants, however, were limited to Filipinos or entities at least 60% of the capital of which is owned by Filipinos.lawph!l.ne+

The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November 1946, the Parity Amendment, which came in the form of an "Ordinance Appended to the Constitution," was ratified in a plebiscite.112 The Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural resources to citizens of the United States and business enterprises owned or controlled, directly or indirectly, by citizens of the United States:113

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred

and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act No. 1355.114

THE PETROLEUM ACT OF 1949 AND THE CONCESSION SYSTEM

In the meantime, Republic Act No. 387,115 also known as the Petroleum Act of 1949, was approved on June 18, 1949.

The Petroleum Act of 1949 employed the concession system for the exploitation of the nation's petroleum resources. Among the kinds of concessions it sanctioned were exploration and exploitation concessions, which respectively granted to the concessionaire the exclusive right to explore for116 or develop117 petroleum within specified areas.

Concessions may be granted only to duly qualified persons118 who have sufficient finances, organization, resources, technical competence, and skills necessary to conduct the operations to be undertaken.119

Nevertheless, the Government reserved the right to undertake such work itself.120 This proceeded from the theory that all natural deposits or occurrences of petroleum or natural gas in public and/or private lands in the Philippines belong to the State.121 Exploration and exploitation concessions did not confer upon the concessionaire ownership over the petroleum lands and petroleum deposits.122 However, they did grant concessionaires the right to explore, develop, exploit, and utilize them for the period and under the conditions determined by the law.123

Concessions were granted at the complete risk of the concessionaire; the Government did not guarantee the existence of petroleum or undertake, in any case, title warranty.124

Concessionaires were required to submit information as maybe required by the Secretary of Agriculture and Natural Resources, including reports of geological and geophysical examinations, as well as production reports.125 Exploration126 and exploitation127 concessionaires were also required to submit work programs.lavvphi 1.net

Exploitation concessionaires, in particular, were obliged to pay an annual exploitation tax,128 the object of which is to induce the concessionaire to actually produce petroleum, and not simply to sit on the concession without developing or exploiting it.129 These concessionaires were also bound to pay the Government royalty, which was not less than 12½% of the petroleum produced and saved, less that consumed in the operations of the concessionaire.130 Under Article 66, R.A. No. 387, the exploitation tax may be credited against the royalties so that if the concessionaire shall be actually producing enough oil, it would not actually be paying the exploitation tax.131

Failure to pay the annual exploitation tax for two consecutive years,132 or the royalty due to the Government within one year from the date it becomes due,133 constituted grounds for the

cancellation of the concession. In case of delay in the payment of the taxes or royalty imposed by the law or by the concession, a surcharge of 1% per month is exacted until the same are paid.134

As a rule, title rights to all equipment and structures that the concessionaire placed on the land belong to the exploration or exploitation concessionaire.135 Upon termination of such concession, the concessionaire had a right to remove the same.136

The Secretary of Agriculture and Natural Resources was tasked with carrying out the provisions of the law, through the Director of Mines, who acted under the Secretary's immediate supervision and control.137 The Act granted the Secretary the authority to inspect any operation of the concessionaire and to examine all the books and accounts pertaining to operations or conditions related to payment of taxes and royalties.138

The same law authorized the Secretary to create an Administration Unit and a Technical Board.139 The Administration Unit was charged, inter alia, with the enforcement of the provisions of the law.140 The Technical Board had, among other functions, the duty to check on the performance of concessionaires and to determine whether the obligations imposed by the Act and its implementing regulations were being complied with.141

Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development, analyzed the benefits and drawbacks of the concession system insofar as it applied to the petroleum industry:

Advantages of Concession. Whether it emphasizes income tax or royalty, the most positive aspect of the concession system is that the State's financial involvement is virtually risk free and administration is simple and comparatively low in cost. Furthermore, if there is a competitive allocation of the resource leading to substantial bonuses and/or greater royalty coupled with a relatively high level of taxation, revenue accruing to the State under the concession system may compare favorably with other financial arrangements.

Disadvantages of Concession. There are, however, major negative aspects to this system. Because the Government's role in the traditional concession is passive, it is at a distinct disadvantage in managing and developing policy for the nation's petroleum resource. This is true for several reasons. First, even though most concession agreements contain covenants requiring diligence in operations and production, this establishes only an indirect and passive control of the host country in resource development. Second, and more importantly, the fact that the host country does not directly participate in resource management decisions inhibits its ability to train and employ its nationals in petroleum development. This factor could delay or prevent the country from effectively engaging in the development of its resources. Lastly, a direct role in management is usually necessary in order to obtain a knowledge of the international petroleum industry which is important to an appreciation of the host country's resources in relation to those of other countries.142

Other liabilities of the system have also been noted:

x x x there are functional implications which give the concessionaire great economic power arising from its exclusive equity holding. This includes, first, appropriation of the returns of the undertaking, subject to a modest royalty; second, exclusive management of the project; third, control of production of the natural resource, such as volume of production, expansion, research and development; and fourth, exclusive responsibility for downstream operations, like processing, marketing, and distribution. In short, even if nominally, the state is the sovereign and owner of the natural resource being exploited, it has been shorn of all elements of control over such natural resource because of the exclusive nature of the contractual regime of the concession. The concession system, investing as it does ownership of natural resources, constitutes a consistent

inconsistency with the principle embodied in our Constitution that natural resources belong to the state and shall not be alienated, not to mention the fact that the concession was the bedrock of the colonial system in the exploitation of natural resources.143

Eventually, the concession system failed for reasons explained by Dimagiba:

Notwithstanding the good intentions of the Petroleum Act of 1949, the concession system could not have properly spurred sustained oil exploration activities in the country, since it assumed that such a capital-intensive, high risk venture could be successfully undertaken by a single individual or a small company. In effect, concessionaires' funds were easily exhausted. Moreover, since the concession system practically closed its doors to interested foreign investors, local capital was stretched to the limits. The old system also failed to consider the highly sophisticated technology and expertise required, which would be available only to multinational companies.144

A shift to a new regime for the development of natural resources thus seemed imminent.

PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND THE SERVICE CONTRACT SYSTEM

The promulgation on December 31, 1972 of Presidential Decree No. 87,145 otherwise known as The Oil Exploration and Development Act of 1972 signaled such a transformation. P.D. No. 87 permitted the government to explore for and produce indigenous petroleum through "service contracts."146

"Service contracts" is a term that assumes varying meanings to different people, and it has carried many names in different countries, like "work contracts" in Indonesia, "concession agreements" in Africa, "production-sharing agreements" in the Middle East, and "participation agreements" in Latin America.147 A functional definition of "service contracts" in the Philippines is provided as follows:

A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum, mineral, energy, land and other natural resources by which a government or its agency, or a private person granted a right or privilege by the government authorizes the other party (service contractor) to engage or participate in the exercise of such right or the enjoyment of the privilege, in that the latter provides financial or technical resources, undertakes the exploitation or production of a given resource, or directly manages the productive enterprise, operations of the exploration and exploitation of the resources or the disposition of marketing or resources.148

In a service contract under P.D. No. 87, service and technology are furnished by the service contractor for which it shall be entitled to the stipulated service fee.149 The contractor must be technically competent and financially capable to undertake the operations required in the contract.150

Financing is supposed to be provided by the Government to which all petroleum produced belongs.151 In case the Government is unable to finance petroleum exploration operations, the contractor may furnish services, technology and financing, and the proceeds of sale of the petroleum produced under the contract shall be the source of funds for payment of the service fee and the operating expenses due the contractor.152 The contractor shall undertake, manage and execute petroleum operations, subject to the government overseeing the management of the operations.153 The contractor provides all necessary services and technology and the requisite financing, performs the exploration work obligations, and assumes all exploration risks such that if no petroleum is produced, it will not be entitled to reimbursement.154 Once petroleum in commercial quantity is discovered, the contractor shall operate the field on behalf of the government.155

P.D. No. 87 prescribed minimum terms and conditions for every service contract.156 It also granted the contractor certain privileges, including exemption from taxes and payment of tariff duties,157 and permitted the repatriation of capital and retention of profits abroad.158

Ostensibly, the service contract system had certain advantages over the concession regime.159 It has been opined, though, that, in the Philippines, our concept of a service contract, at least in the petroleum industry, was basically a concession regime with a production-sharing element.160

On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new Constitution.161Article XIV on the National Economy and Patrimony contained provisions similar to the 1935 Constitution with regard to Filipino participation in the nation's natural resources. Section 8, Article XIV thereof provides:

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 twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant.

While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment of natural resources, it also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts with any person or entity for the exploration or utilization of natural resources.

Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of the natural resources of the Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum of which is owned by such citizens. The Batasang Pambansa, in the national interest, may allow such citizens, corporations or associations to enter into service contracts for financial, technical, management, or other forms of assistance with any person or entity for the exploration, or utilization of any of the natural resources. Existing valid and binding service contracts for financial, technical, management, or other forms of assistance are hereby recognized as such. [Emphasis supplied.]

The concept of service contracts, according to one delegate, was borrowed from the methods followed by India, Pakistan and especially Indonesia in the exploration of petroleum and mineral oils.162 The provision allowing such contracts, according to another, was intended to "enhance the proper development of our natural resources since Filipino citizens lack the needed capital and technical know-how which are essential in the proper exploration, development and exploitation of the natural resources of the country."163

The original idea was to authorize the government, not private entities, to enter into service contracts with foreign entities.164 As finally approved, however, a citizen or private entity could be allowed by the National Assembly to enter into such service contract.165 The prior approval of the National Assembly was deemed sufficient to protect the national interest.166 Notably, none of the laws allowing service contracts were passed by the Batasang Pambansa. Indeed, all of them were enacted by presidential decree.

On March 13, 1973, shortly after the ratification of the new Constitution, the President promulgated Presidential Decree No. 151.167 The law allowed Filipino citizens or entities which have acquired

lands of the public domain or which own, hold or control such lands to enter into service contracts for financial, technical, management or other forms of assistance with any foreign persons or entity for the exploration, development, exploitation or utilization of said lands.168

Presidential Decree No. 463,169 also known as The Mineral Resources Development Decree of 1974, was enacted on May 17, 1974. Section 44 of the decree, as amended, provided that a lessee of a mining claim may enter into a service contract with a qualified domestic or foreign contractor for the exploration, development and exploitation of his claims and the processing and marketing of the product thereof.

Presidential Decree No. 704170 (The Fisheries Decree of 1975), approved on May 16, 1975, allowed Filipinos engaged in commercial fishing to enter into contracts for financial, technical or other forms of assistance with any foreign person, corporation or entity for the production, storage, marketing and processing of fish and fishery/aquatic products.171

Presidential Decree No. 705172 (The Revised Forestry Code of the Philippines), approved on May 19, 1975, allowed "forest products licensees, lessees, or permitees to enter into service contracts for financial, technical, management, or other forms of assistance . . . with any foreign person or entity for the exploration, development, exploitation or utilization of the forest resources."173

Yet another law allowing service contracts, this time for geothermal resources, was Presidential Decree No. 1442,174 which was signed into law on June 11, 1978. Section 1 thereof authorized the Government to enter into service contracts for the exploration, exploitation and development of geothermal resources with a foreign contractor who must be technically and financially capable of undertaking the operations required in the service contract.

Thus, virtually the entire range of the country's natural resources –from petroleum and minerals to geothermal energy, from public lands and forest resources to fishery products – was well covered by apparent legal authority to engage in the direct participation or involvement of foreign persons or corporations (otherwise disqualified) in the exploration and utilization of natural resources through service contracts.175

THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS

After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power under a revolutionary government. On March 25, 1986, President Aquino issued Proclamation No. 3,176 promulgating the Provisional Constitution, more popularly referred to as the Freedom Constitution. By authority of the same Proclamation, the President created a Constitutional Commission (CONCOM) to draft a new constitution, which took effect on the date of its ratification on February 2, 1987.177

The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: "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."

Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same provision, prohibits the alienation of natural resources, except agricultural lands.

The third sentence of the same paragraph is new: "The exploration, development and utilization of natural resources shall be under the full control and supervision of the State." The constitutional policy of the State's "full control and supervision" over natural resources proceeds from the concept

of jura regalia, as well as the recognition of the importance of the country's natural resources, not only for national economic development, but also for its security and national defense.178 Under this provision, the State assumes "a more dynamic role" in the exploration, development and utilization of natural resources.179

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural resources. By such omission, the utilization of inalienable lands of public domain through "license, concession or lease" is no longer allowed under the 1987 Constitution.180

Having omitted the provision on the concession system, Section 2 proceeded to introduce "unfamiliar language":181

The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.

Consonant with the State's "full supervision and control" over natural resources, Section 2 offers the State two "options."182 One, the State may directly undertake these activities itself; or two, it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or entities at least 60% of whose capital is owned by such citizens.

A third option is found in the third paragraph of the same section:

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

While the second and third options are limited only to Filipino citizens or, in the case of the former, to corporations or associations at least 60% of the capital of which is owned by Filipinos, a fourth allows the participation of foreign-owned corporations. The fourth and fifth paragraphs of Section 2 provide:

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

Although Section 2 sanctions the participation of foreign-owned corporations in the exploration, development, and utilization of natural resources, it imposes certain limitations or conditions to agreements with such corporations.

First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements, and only with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter into a service contract with a "foreign person or entity."

Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The term "large-scale usually refers to very capital-intensive activities."183

Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the intent being to limit service contracts to those areas where Filipino capital may not be sufficient.184

Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and conditions provided by law.

Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real contributions to economic growth and general welfare of the country.

Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of local scientific and technical resources.

Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance agreement entered into within thirty days from its execution.

Finally, the scope of the agreements. While the 1973 Constitution referred to "service contracts for financial, technical, management, or other forms of assistance" the 1987 Constitution provides for "agreements. . . involving either financial or technical assistance." It bears noting that the phrases "service contracts" and "management or other forms of assistance" in the earlier constitution have been omitted.

By virtue of her legislative powers under the Provisional Constitution,185 President Aquino, on July 10, 1987, signed into law E.O. No. 211 prescribing the interim procedures in the processing and approval of applications for the exploration, development and utilization of minerals. The omission in the 1987 Constitution of the term "service contracts" notwithstanding, the said E.O. still referred to them in Section 2 thereof:

Sec. 2. Applications for the exploration, development and utilization of mineral resources, including renewal applications and applications for approval of operating agreements and mining service contracts, shall be accepted and processed and may be approved x x x. [Emphasis supplied.]

The same law provided in its Section 3 that the "processing, evaluation and approval of all mining applications . . . operating agreements and service contracts . . . shall be governed by Presidential Decree No. 463, as amended, other existing mining laws, and their implementing rules and regulations. . . ."

As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by authority of which the subject WMCP FTAA was executed on March 30, 1995.

On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof declares that the Act "shall govern the exploration, development, utilization, and processing of all mineral resources." Such declaration notwithstanding, R.A. No. 7942 does not actually cover all the modes through which the State may undertake the exploration, development, and utilization of natural resources.

The State, being the owner of the natural resources, is accorded the primary power and responsibility in the exploration, development and utilization thereof. As such, it may undertake these activities through four modes:

The State may directly undertake such activities.

(2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or qualified corporations.

(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens.

(4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils, the President may enter into agreements with foreign-owned corporations involving technical or financial assistance.186

Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and surveys,187and a passing mention of government-owned or controlled corporations,188 R.A. No. 7942 does not specify how the State should go about the first mode. The third mode, on the other hand, is governed by Republic Act No. 7076189 (the People's Small-Scale Mining Act of 1991) and other pertinent laws.190 R.A. No. 7942 primarily concerns itself with the second and fourth modes.

Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A. No. 7942 as "mineral agreements."191 The Government participates the least in a mineral production sharing agreement (MPSA). In an MPSA, the Government grants the contractor192 the exclusive right to conduct mining operations within a contract area193 and shares in the gross output.194 The MPSA contractor provides the financing, technology, management and personnel necessary for the agreement's implementation.195 The total government share in an MPSA is the excise tax on mineral products under Republic Act No. 7729,196 amending Section 151(a) of the National Internal Revenue Code, as amended.197

In a co-production agreement (CA),198 the Government provides inputs to the mining operations other than the mineral resource,199 while in a joint venture agreement (JVA), where the Government enjoys the greatest participation, the Government and the JVA contractor organize a company with both parties having equity shares.200 Aside from earnings in equity, the Government in a JVA is also entitled to a share in the gross output.201 The Government may enter into a CA202 or JVA203 with one or more contractors. The Government's share in a CA or JVA is set out in Section 81 of the law:

The share of the Government in co-production and joint venture agreements shall be negotiated by the Government and the contractor taking into consideration the: (a) capital investment of the project, (b) the risks involved, (c) contribution of the project to the economy, and (d) other factors that will provide for a fair and equitable sharing between the Government and the contractor. The Government shall also be entitled to compensations for its other contributions which shall be agreed upon by the parties, and shall consist, among other things, the contractor's income tax, excise tax, special allowance, withholding tax due from the contractor's foreign stockholders arising from dividend or interest payments to the said foreign stockholders, in case of a foreign national and all such other taxes, duties and fees as provided for under existing laws.

All mineral agreements grant the respective contractors the exclusive right to conduct mining operations and to extract all mineral resources found in the contract area.204 A "qualified person" may enter into any of the mineral agreements with the Government.205 A "qualified person" is

any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources development and duly registered in accordance with law at least sixty per centum (60%) of the capital of which is owned by citizens of the Philippines x x x.206

The fourth mode involves "financial or technical assistance agreements." An FTAA is defined as "a contract involving financial or technical assistance for large-scale exploration, development, and utilization of natural resources."207 Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of natural resources in the Philippines may enter into such agreement directly with the Government through the DENR.208 For the purpose of granting an FTAA, a legally organized foreign-owned corporation (any corporation, partnership, association, or cooperative duly registered in accordance with law in which less than 50% of the capital is owned by Filipino citizens)209 is deemed a "qualified person."210

Other than the difference in contractors' qualifications, the principal distinction between mineral agreements and FTAAs is the maximum contract area to which a qualified person may hold or be granted.211 "Large-scale" under R.A. No. 7942 is determined by the size of the contract area, as opposed to the amount invested (US $50,000,000.00), which was the standard under E.O. 279.

Like a CA or a JVA, an FTAA is subject to negotiation.212 The Government's contributions, in the form of taxes, in an FTAA is identical to its contributions in the two mineral agreements, save that in an FTAA:

The collection of Government share in financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development expenditures, inclusive.213

III

Having examined the history of the constitutional provision and statutes enacted pursuant thereto, a consideration of the substantive issues presented by the petition is now in order.

THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279

Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was executed, did not come into effect.

E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days before the opening of Congress on July 27, 1987.214 Section 8 of the E.O. states that the same "shall take effect immediately." This provision, according to petitioners, runs counter to Section 1 of E.O. No. 200,215 which provides:

SECTION 1. Laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided.216[Emphasis supplied.]

On that premise, petitioners contend that E.O. No. 279 could have only taken effect fifteen days after its publication at which time Congress had already convened and the President's power to legislate had ceased.

Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in Miners Association of the Philippines v. Factoran, supra. This is of course incorrect for the issue in Miners Association was not the validity of E.O. No. 279 but that of DAO Nos. 57 and 82 which were issued pursuant thereto.

Nevertheless, petitioners' contentions have no merit.

It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other than – even before – the 15-day period after its publication. Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O. No. 200. Indeed, this is the very essence of the phrase "unless it is otherwise provided" in Section 1 thereof. Section 1, E.O. No. 200, therefore, applies only when a statute does not provide for its own date of effectivity.

What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Tañada v. Tuvera,217 is the publication of the law for without such notice and publication, there would be no basis for the application of the maxim "ignorantia legis n[eminem] excusat." It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one.

While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its invalidation since the Constitution, being "the fundamental, paramount and supreme law of the nation," is deemed written in the law.218 Hence, the due process clause,219 which, so Tañada held, mandates the publication of statutes, is read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No. 200 which provides for publication "either in the Official Gazette or in a newspaper of general circulation in the Philippines," finds suppletory application. It is significant to note that E.O. No. 279 was actually published in the Official Gazette220 on August 3, 1987.

From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Tañada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately upon its publication in the Official Gazette on August 3, 1987.

That such effectivity took place after the convening of the first Congress is irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she was still validly exercising legislative powers under the Provisional Constitution.221 Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states:

Sec. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened.

The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it did not prevent the effectivity of laws she had previously enacted.

There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute.

THE CONSTITUTIONALITY OF THE WMCP FTAA

Petitioners submit that, in accordance with the text of Section 2, Article XII of the Constitution, FTAAs should be limited to "technical or financial assistance" only. They observe, however, that, contrary to the language of the Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to extend more than mere financial or technical assistance to the State, for it permits WMCP to manage and operate every aspect of the mining activity. 222

Petitioners' submission is well-taken. It is a cardinal rule in the interpretation of constitutions that the instrument must be so construed as to give effect to the intention of the people who adopted it.223 This intention is to be sought in the constitution itself, and the apparent meaning of the words is to be taken as expressing it, except in cases where that assumption would lead to absurdity, ambiguity, or contradiction.224 What the Constitution says according to the text of the provision, therefore, compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say.225 Accordingly, following the literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration, development, and utilization of petroleum, minerals and mineral oils should be limited to "technical" or "financial" assistance only.

WMCP nevertheless submits that the word "technical" in the fourth paragraph of Section 2 of E.O. No. 279 encompasses a "broad number of possible services," perhaps, "scientific and/or technological in basis."226 It thus posits that it may also well include "the area of management or operations . . . so long as such assistance requires specialized knowledge or skills, and are related to the exploration, development and utilization of mineral resources."227

This Court is not persuaded. As priorly pointed out, the phrase "management or other forms of assistance" in the 1973 Constitution was deleted in the 1987 Constitution, which allows only "technical or financial assistance." Casus omisus pro omisso habendus est. A person, object or thing omitted from an enumeration must be held to have been omitted intentionally.228 As will be shown later, the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate.

Respondents insist that "agreements involving technical or financial assistance" is just another term for service contracts. They contend that the proceedings of the CONCOM indicate "that although the terminology 'service contract' was avoided [by the Constitution], the concept it represented was not." They add that "[t]he concept is embodied in the phrase 'agreements involving financial or technical assistance.'"229 And point out how members of the CONCOM referred to these agreements as "service contracts." For instance:

SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the President? That is the only difference, is it not?

MR. VILLEGAS. That is right.

SR. TAN. So those are the safeguards[?]

MR. VILLEGAS. Yes. There was no law at all governing service contracts before.

SR. TAN. Thank you, Madam President.230 [Emphasis supplied.]

WMCP also cites the following statements of Commissioners Gascon, Garcia, Nolledo and Tadeo who alluded to service contracts as they explained their respective votes in the approval of the draft Article:

MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons: One, the provision on service contracts. I felt that if we would constitutionalize any provision on

service contracts, this should always be with the concurrence of Congress and not guided only by a general law to be promulgated by Congress. x x x.231 [Emphasis supplied.]

x x x.

MR. GARCIA. Thank you.

I vote no. x x x.

Service contracts are given constitutional legitimization in Section 3, even when they have been proven to be inimical to the interests of the nation, providing as they do the legal loophole for the exploitation of our natural resources for the benefit of foreign interests. They constitute a serious negation of Filipino control on the use and disposition of the nation's natural resources, especially with regard to those which are nonrenewable.232 [Emphasis supplied.]

x x x

MR. NOLLEDO. While there are objectionable provisions in the Article on National Economy and Patrimony, going over said provisions meticulously, setting aside prejudice and personalities will reveal that the article contains a balanced set of provisions. I hope the forthcoming Congress will implement such provisions taking into account that Filipinos should have real control over our economy and patrimony, and if foreign equity is permitted, the same must be subordinated to the imperative demands of the national interest.

x x x.

It is also my understanding that service contracts involving foreign corporations or entities are resorted to only when no Filipino enterprise or Filipino-controlled enterprise could possibly undertake the exploration or exploitation of our natural resources and that compensation under such contracts cannot and should not equal what should pertain to ownership of capital. In other words, the service contract should not be an instrument to circumvent the basic provision, that the exploration and exploitation of natural resources should be truly for the benefit of Filipinos.

Thank you, and I vote yes.233 [Emphasis supplied.]

x x x.

MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.

Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang salitang "imperyalismo." Ang ibig sabihin nito ay ang sistema ng lipunang pinaghaharian ng iilang monopolyong kapitalista at ang salitang "imperyalismo" ay buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa pamamagitan ng salitang "based on," naroroon na ang free trade sapagkat tayo ay mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring produkto. Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang 60-40 equity sa natural resources. Habang naghihirap ang sambayanang Pilipino, ginagalugad naman ng mga dayuhan ang ating likas na yaman. Kailan man ang Article on National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng

bansa ay dalawa lamang: ang pagpapatupad ng tunay na reporma sa lupa at ang national industrialization. Ito ang tinatawag naming pagsikat ng araw sa Silangan. Ngunit ang mga landlords and big businessmen at ang mga komprador ay nagsasabi na ang free trade na ito, ang kahulugan para sa amin, ay ipinipilit sa ating sambayanan na ang araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang araw sa Kanluran. I vote no.234 [Emphasis supplied.]

This Court is likewise not persuaded.

As earlier noted, the phrase "service contracts" has been deleted in the 1987 Constitution's Article on National Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under the 1973 Constitution, it could have simply adopted the old terminology ("service contracts") instead of employing new and unfamiliar terms ("agreements . . . involving either technical or financial assistance"). Such a difference between the language of a provision in a revised constitution and that of a similar provision in the preceding constitution is viewed as indicative of a difference in purpose.235 If, as respondents suggest, the concept of "technical or financial assistance" agreements is identical to that of "service contracts," the CONCOM would not have bothered to fit the same dog with a new collar. To uphold respondents' theory would reduce the first to a mere euphemism for the second and render the change in phraseology meaningless.

An examination of the reason behind the change confirms that technical or financial assistance agreements are not synonymous to service contracts.

[T]he Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in light of the history of the times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that purpose.236

As the following question of Commissioner Quesada and Commissioner Villegas' answer shows the drafters intended to do away with service contracts which were used to circumvent the capitalization (60%-40%) requirement:

MS. QUESADA. The 1973 Constitution used the words "service contracts." In this particular Section 3, is there a safeguard against the possible control of foreign interests if the Filipinos go into coproduction with them?

MR. VILLEGAS. Yes. In fact, the deletion of the phrase "service contracts" was our first attempt to avoid some of the abuses in the past regime in the use of service contracts to go around the 60-40 arrangement. The safeguard that has been introduced – and this, of course can be refined – is found in Section 3, lines 25 to 30, where Congress will have to concur with the President on any agreement entered into between a foreign-owned corporation and the government involving technical or financial assistance for large-scale exploration, development and utilization of natural resources.237 [Emphasis supplied.]

In a subsequent discussion, Commissioner Villegas allayed the fears of Commissioner Quesada regarding the participation of foreign interests in Philippine natural resources, which was supposed to be restricted to Filipinos.

MS. QUESADA. Another point of clarification is the phrase "and utilization of natural resources shall be under the full control and supervision of the State." In the 1973 Constitution, this was limited to citizens of the Philippines; but it was removed and substituted by "shall be under the full control and supervision of the State." Was the concept changed so that these particular resources would be limited to citizens of the Philippines? Or would these resources only be under the full control and supervision of the State; meaning, noncitizens would have access to these natural resources? Is that the understanding?

MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence, it states:

Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-sharing agreements with Filipino citizens.

So we are still limiting it only to Filipino citizens.

x x x.

MS. QUESADA. Going back to Section 3, the section suggests that:

The exploration, development, and utilization of natural resources… may be directly undertaken by the State, or it may enter into co-production, joint venture or production-sharing agreement with . . . corporations or associations at least sixty per cent of whose voting stock or controlling interest is owned by such citizens.

Lines 25 to 30, on the other hand, suggest that in the large-scale exploration, development and utilization of natural resources, the President with the concurrence of Congress may enter into agreements with foreign-owned corporations even for technical or financial assistance.

I wonder if this part of Section 3 contradicts the second part. I am raising this point for fear that foreign investors will use their enormous capital resources to facilitate the actual exploitation or exploration, development and effective disposition of our natural resources to the detriment of Filipino investors. I am not saying that we should not consider borrowing money from foreign sources. What I refer to is that foreign interest should be allowed to participate only to the extent that they lend us money and give us technical assistance with the appropriate government permit. In this way, we can insure the enjoyment of our natural resources by our own people.

MR. VILLEGAS. Actually, the second provision about the President does not permit foreign investors to participate. It is only technical or financial assistance – they do not own anything – but on conditions that have to be determined by law with the concurrence of Congress. So, it is very restrictive.

If the Commissioner will remember, this removes the possibility for service contracts which we said yesterday were avenues used in the previous regime to go around the 60-40 requirement.238 [Emphasis supplied.]

The present Chief Justice, then a member of the CONCOM, also referred to this limitation in scope in proposing an amendment to the 60-40 requirement:

MR. DAVIDE. May I be allowed to explain the proposal?

MR. MAAMBONG. Subject to the three-minute rule, Madam President.

MR. DAVIDE. It will not take three minutes.

The Commission had just approved the Preamble. In the Preamble we clearly stated that the Filipino people are sovereign and that one of the objectives for the creation or establishment of a government is to conserve and develop the national patrimony. The implication is that the national patrimony or our natural resources are exclusively reserved for the Filipino people. No alien must be allowed to enjoy, exploit and develop our natural resources. As a matter of fact, that principle proceeds from the fact that our natural resources are gifts from God to the Filipino people and it would be a breach of that special blessing from God if we will allow aliens to exploit our natural resources.

I voted in favor of the Jamir proposal because it is not really exploitation that we granted to the alien corporations but only for them to render financial or technical assistance. It is not for them to enjoy our natural resources. Madam President, our natural resources are depleting; our population is increasing by leaps and bounds. Fifty years from now, if we will allow these aliens to exploit our natural resources, there will be no more natural resources for the next generations of Filipinos. It may last long if we will begin now. Since 1935 the aliens have been allowed to enjoy to a certain extent the exploitation of our natural resources, and we became victims of foreign dominance and control. The aliens are interested in coming to the Philippines because they would like to enjoy the bounty of nature exclusively intended for Filipinos by God.

And so I appeal to all, for the sake of the future generations, that if we have to pray in the Preamble "to preserve and develop the national patrimony for the sovereign Filipino people and for the generations to come," we must at this time decide once and for all that our natural resources must be reserved only to Filipino citizens.

Thank you.239 [Emphasis supplied.]

The opinion of another member of the CONCOM is persuasive240 and leaves no doubt as to the intention of the framers to eliminate service contracts altogether. He writes:

Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological undertakings for which the President may enter into contracts with foreign-owned corporations, and enunciates strict conditions that should govern such contracts. x x x.

This provision balances the need for foreign capital and technology with the need to maintain the national sovereignty. It recognizes the fact that as long as Filipinos can formulate their own terms in their own territory, there is no danger of relinquishing sovereignty to foreign interests.

Are service contracts allowed under the new Constitution? No. Under the new Constitution, foreign investors (fully alien-owned) can NOT participate in Filipino enterprises except to provide: (1) Technical Assistance for highly technical enterprises; and (2) Financial Assistance for large-scale enterprises.

The intent of this provision, as well as other provisions on foreign investments, is to prevent the practice (prevalent in the Marcos government) of skirting the 60/40 equation using the cover of service contracts.241 [Emphasis supplied.]

Furthermore, it appears that Proposed Resolution No. 496,242 which was the draft Article on National Economy and Patrimony, adopted the concept of "agreements . . . involving either technical or financial assistance" contained in the "Draft of the 1986 U.P. Law Constitution Project" (U.P. Law draft) which was taken into consideration during the deliberation of the CONCOM.243 The former, as well as Article XII, as adopted, employed the same terminology, as the comparative table below shows:

DRAFT OF THE UP LAW CONSTITUTION PROJECT

PROPOSED RESOLUTION NO. 496 OF THE

CONSTITUTIONAL COMMISSION

ARTICLE XII OF THE 1987 CONSTITUTION

Sec. 1. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, flora and fauna and other natural resources of the Philippines 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. Such activities may be directly undertaken by the state, or it may enter into co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty per cent of whose voting stock or controlling interest is owned by such citizens for a period of not more than twenty-five years, renewable for not more than twenty-five years and under such terms and conditions as may be provided by law. In case as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power,

Sec. 3. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests, 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. Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-sharing agreements with Filipino citizens or corporations or associations at least sixty per cent of whose voting stock or controlling interest is owned by such citizens. Such agreements shall be for a period of twenty-five years, renewable for not more than twenty-five years, and under such term and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries or industrial uses other than the

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In case of water rights for irrigation, water supply, fisheries, or industrial uses other than the

beneficial use may be the measure and limit of the grant.

The National Assembly may by law allow small scale utilization of natural resources by Filipino citizens.

The National Assembly, may, by two-thirds vote of all its members by special law provide the terms and conditions under which a foreign-owned corporation may enter into agreements with the government involving either technical or financial assistance for large-scale exploration, development, or utilization of natural resources. [Emphasis supplied.]

development for water power, beneficial use may be the measure and limit of the grant.

The Congress may by law allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming in rivers, lakes, bays, and lagoons.

The President with the concurrence of Congress, by special law, shall provide the terms and conditions under which a foreign-owned corporation may enter into agreements with the government involving either technical or financial assistance for large-scale exploration, development, and utilization of natural resources. [Emphasis supplied.]

development of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. [Emphasis supplied.]

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase "technical or financial assistance."

In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor Pacifico A. Agabin, who was a member of the working group that prepared the U.P. Law draft, criticized service contracts for they "lodge exclusive management and control of the enterprise to the service contractor, which is reminiscent of the old concession regime. Thus, notwithstanding the provision of the Constitution that natural resources belong to the State, and that these shall not be alienated, the service contract system renders nugatory the constitutional provisions cited."244He elaborates:

Looking at the Philippine model, we can discern the following vestiges of the concession regime, thus:

1. Bidding of a selected area, or leasing the choice of the area to the interested party and then negotiating the terms and conditions of the contract; (Sec. 5, P.D. 87)

2. Management of the enterprise vested on the contractor, including operation of the field if petroleum is discovered; (Sec. 8, P.D. 87)

3. Control of production and other matters such as expansion and development; (Sec. 8)

4. Responsibility for downstream operations – marketing, distribution, and processing may be with the contractor (Sec. 8);

5. Ownership of equipment, machinery, fixed assets, and other properties remain with contractor (Sec. 12, P.D. 87);

6. Repatriation of capital and retention of profits abroad guaranteed to the contractor (Sec. 13, P.D. 87); and

7. While title to the petroleum discovered may nominally be in the name of the government, the contractor has almost unfettered control over its disposition and sale, and even the domestic requirements of the country is relegated to a pro rata basis (Sec. 8).

In short, our version of the service contract is just a rehash of the old concession regime x x x. Some people have pulled an old rabbit out of a magician's hat, and foisted it upon us as a new and different animal.

The service contract as we know it here is antithetical to the principle of sovereignty over our natural resources restated in the same article of the [1973] Constitution containing the provision for service contracts. If the service contractor happens to be a foreign corporation, the contract would also run counter to the constitutional provision on nationalization or Filipinization, of the exploitation of our natural resources.245 [Emphasis supplied. Underscoring in the original.]

Professor Merlin M. Magallona, also a member of the working group, was harsher in his reproach of the system:

x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the [1973] Charter, but the essence of nationalism was reduced to hollow rhetoric. The 1973 Charter still provided that the exploitation or development of the country's natural resources be limited to Filipino citizens or corporations owned or controlled by them. However, the martial-law Constitution allowed them, once

these resources are in their name, to enter into service contracts with foreign investors for financial, technical, management, or other forms of assistance. Since foreign investors have the capital resources, the actual exploitation and development, as well as the effective disposition, of the country's natural resources, would be under their direction, and control, relegating the Filipino investors to the role of second-rate partners in joint ventures.

Through the instrumentality of the service contract, the 1973 Constitution had legitimized at the highest level of state policy that which was prohibited under the 1973 Constitution, namely: the exploitation of the country's natural resources by foreign nationals. The drastic impact of [this] constitutional change becomes more pronounced when it is considered that the active party to any service contract may be a corporation wholly owned by foreign interests. In such a case, the citizenship requirement is completely set aside, permitting foreign corporations to obtain actual possession, control, and [enjoyment] of the country's natural resources.246 [Emphasis supplied.]

Accordingly, Professor Agabin recommends that:

Recognizing the service contract for what it is, we have to expunge it from the Constitution and reaffirm ownership over our natural resources. That is the only way we can exercise effective control over our natural resources.

This should not mean complete isolation of the country's natural resources from foreign investment. Other contract forms which are less derogatory to our sovereignty and control over natural resources – like technical assistance agreements, financial assistance [agreements], co-production agreements, joint ventures, production-sharing – could still be utilized and adopted without violating constitutional provisions. In other words, we can adopt contract forms which recognize and assert our sovereignty and ownership over natural resources, and where the foreign entity is just a pure contractor instead of the beneficial owner of our economic resources.247 [Emphasis supplied.]

Still another member of the working group, Professor Eduardo Labitag, proposed that:

2. Service contracts as practiced under the 1973 Constitution should be discouraged, instead the government may be allowed, subject to authorization by special law passed by an extraordinary majority to enter into either technical or financial assistance. This is justified by the fact that as presently worded in the 1973 Constitution, a service contract gives full control over the contract area to the service contractor, for him to work, manage and dispose of the proceeds or production. It was a subterfuge to get around the nationality requirement of the constitution.248 [Emphasis supplied.]

In the annotations on the proposed Article on National Economy and Patrimony, the U.P. Law draft summarized the rationale therefor, thus:

5. The last paragraph is a modification of the service contract provision found in Section 9, Article XIV of the 1973 Constitution as amended. This 1973 provision shattered the framework of nationalism in our fundamental law (see Magallona, "Nationalism and its Subversion in the Constitution"). Through the service contract, the 1973 Constitution had legitimized that which was prohibited under the 1935 constitution—the exploitation of the country's natural resources by foreign nationals. Through the service contract, acts prohibited by the Anti-Dummy Law were recognized as legitimate arrangements. Service contracts lodge exclusive management and control of the enterprise to the service contractor, not unlike the old concession regime where the concessionaire had complete control over the country's natural resources, having been given exclusive and plenary rights to exploit a particular resource and, in effect, having been assured of ownership of that resource at the point of extraction (see Agabin, "Service Contracts: Old Wine in New Bottles"). Service contracts, hence, are antithetical to the principle of sovereignty over our natural resources,

as well as the constitutional provision on nationalization or Filipinization of the exploitation of our natural resources.

Under the proposed provision, only technical assistance or financial assistance agreements may be entered into, and only for large-scale activities. These are contract forms which recognize and assert our sovereignty and ownership over natural resources since the foreign entity is just a pure contractor and not a beneficial owner of our economic resources. The proposal recognizes the need for capital and technology to develop our natural resources without sacrificing our sovereignty and control over such resources by the safeguard of a special law which requires two-thirds vote of all the members of the Legislature. This will ensure that such agreements will be debated upon exhaustively and thoroughly in the National Assembly to avert prejudice to the nation.249 [Emphasis supplied.]

The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial ownership of the country's natural resources to foreign owned corporations. While, in theory, the State owns these natural resources – and Filipino citizens, their beneficiaries – service contracts actually vested foreigners with the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos, became the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the constitutional ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader perspective, with Philippine sovereignty.

The proponents nevertheless acknowledged the need for capital and technical know-how in the large-scale exploitation, development and utilization of natural resources – the second paragraph of the proposed draft itself being an admission of such scarcity. Hence, they recommended a compromise to reconcile the nationalistic provisions dating back to the 1935 Constitution, which reserved all natural resources exclusively to Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate in these resources through service contracts. Such a compromise called for the adoption of a new system in the exploration, development, and utilization of natural resources in the form of technical agreements or financial agreements which, necessarily, are distinct concepts from service contracts.

The replacement of "service contracts" with "agreements… involving either technical or financial assistance," as well as the deletion of the phrase "management or other forms of assistance," assumes greater significance when note is taken that the U.P. Law draft proposed other equally crucial changes that were obviously heeded by the CONCOM. These include the abrogation of the concession system and the adoption of new "options" for the State in the exploration, development, and utilization of natural resources. The proponents deemed these changes to be more consistent with the State's ownership of, and its "full control and supervision" (a phrase also employed by the framers) over, such resources. The Project explained:

3. In line with the State ownership of natural resources, the State should take a more active role in the exploration, development, and utilization of natural resources, than the present practice of granting licenses, concessions, or leases – hence the provision that said activities shall be under the full control and supervision of the State. There are three major schemes by which the State could undertake these activities: first, directly by itself; second, by virtue of co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty per cent (60%) of the voting stock or controlling interests of which are owned by such citizens; or third, with a foreign-owned corporation, in cases of large-scale exploration, development, or utilization of natural resources through agreements involving either technical or financial assistance only. x x x.

At present, under the licensing concession or lease schemes, the government benefits from such benefits only through fees, charges, ad valorem taxes and income taxes of the exploiters of our

natural resources. Such benefits are very minimal compared with the enormous profits reaped by theses licensees, grantees, concessionaires. Moreover, some of them disregard the conservation of natural resources and do not protect the environment from degradation. The proposed role of the State will enable it to a greater share in the profits – it can also actively husband its natural resources and engage in developmental programs that will be beneficial to them.

4. Aside from the three major schemes for the exploration, development, and utilization of our natural resources, the State may, by law, allow Filipino citizens to explore, develop, utilize natural resources in small-scale. This is in recognition of the plight of marginal fishermen, forest dwellers, gold panners, and others similarly situated who exploit our natural resources for their daily sustenance and survival.250

Professor Agabin, in particular, after taking pains to illustrate the similarities between the two systems, concluded that the service contract regime was but a "rehash" of the concession system. "Old wine in new bottles," as he put it. The rejection of the service contract regime, therefore, is in consonance with the abolition of the concession system.

In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed changes, there is no doubt that the framers considered and shared the intent of the U.P. Law proponents in employing the phrase "agreements . . . involving either technical or financial assistance."

While certain commissioners may have mentioned the term "service contracts" during the CONCOM deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973 Constitution. As noted earlier, "service contracts" is a term that assumes different meanings to different people.251 The commissioners may have been using the term loosely, and not in its technical and legal sense, to refer, in general, to agreements concerning natural resources entered into by the Government with foreign corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution provision allowing service contracts.

It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in response to Sr. Tan's question, Commissioner Villegas commented that, other than congressional notification, the only difference between "future" and "past" "service contracts" is the requirement of a general law as there were no laws previously authorizing the same.252 However, such remark is far outweighed by his more categorical statement in his exchange with Commissioner Quesada that the draft article "does not permit foreign investors to participate" in the nation's natural resources – which was exactly what service contracts did – except to provide "technical or financial assistance."253

In the case of the other commissioners, Commissioner Nolledo himself clarified in his work that the present charter prohibits service contracts.254 Commissioner Gascon was not totally averse to foreign participation, but favored stricter restrictions in the form of majority congressional concurrence.255 On the other hand, Commissioners Garcia and Tadeo may have veered to the extreme side of the spectrum and their objections may be interpreted as votes against any foreign participation in our natural resources whatsoever.

WMCP cites Opinion No. 75, s. 1987,256 and Opinion No. 175, s. 1990257 of the Secretary of Justice, expressing the view that a financial or technical assistance agreement "is no different in concept" from the service contract allowed under the 1973 Constitution. This Court is not, however, bound by this interpretation. When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally determine what the law means.258

In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned corporations is an exception to the rule that participation in the nation's natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos. As Commissioner Villegas emphasized, the provision is "very restrictive."259 Commissioner Nolledo also remarked that "entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation and, therefore, being an exception, it should be subject, whenever possible, to stringent rules."260Indeed, exceptions should be strictly but reasonably construed; they extend only so far as their language fairly warrants and all doubts should be resolved in favor of the general provision rather than the exception.261

With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service contracts. Although the statute employs the phrase "financial and technical agreements" in accordance with the 1987 Constitution, it actually treats these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law.

Section 33, which is found under Chapter VI (Financial or Technical Assistance Agreement) of R.A. No. 7942 states:

SEC. 33. Eligibility.—Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of mineral resources in the Philippines may enter into a financial or technical assistance agreement directly with the Government through the Department. [Emphasis supplied.]

"Exploration," as defined by R.A. No. 7942,

means the searching or prospecting for mineral resources by geological, geochemical or geophysical surveys, remote sensing, test pitting, trending, drilling, shaft sinking, tunneling or any other means for the purpose of determining the existence, extent, quantity and quality thereof and the feasibility of mining them for profit.262

A legally organized foreign-owned corporation may be granted an exploration permit,263 which vests it with the right to conduct exploration for all minerals in specified areas,264 i.e., to enter, occupy and explore the same.265Eventually, the foreign-owned corporation, as such permittee, may apply for a financial and technical assistance agreement.266

"Development" is the work undertaken to explore and prepare an ore body or a mineral deposit for mining, including the construction of necessary infrastructure and related facilities.267

"Utilization" "means the extraction or disposition of minerals."268 A stipulation that the proponent shall dispose of the minerals and byproducts produced at the highest price and more advantageous terms and conditions as provided for under the implementing rules and regulations is required to be incorporated in every FTAA.269

A foreign-owned/-controlled corporation may likewise be granted a mineral processing permit.270 "Mineral processing" is the milling, beneficiation or upgrading of ores or minerals and rocks or by similar means to convert the same into marketable products.271

An FTAA contractor makes a warranty that the mining operations shall be conducted in accordance with the provisions of R.A. No. 7942 and its implementing rules272 and for work programs and minimum expenditures and commitments.273 And it obliges itself to furnish the Government records of geologic, accounting, and other relevant data for its mining operation.274

"Mining operation," as the law defines it, means mining activities involving exploration, feasibility, development, utilization, and processing.275

The underlying assumption in all these provisions is that the foreign contractor manages the mineral resources, just like the foreign contractor in a service contract.

Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA and JV).276 Parenthetically, Sections 72 to 75 use the term "contractor," without distinguishing between FTAA and mineral agreement contractors. And so does "holders of mining rights" in Section 76. A foreign contractor may even convert its FTAA into a mineral agreement if the economic viability of the contract area is found to be inadequate to justify large-scale mining operations,277provided that it reduces its equity in the corporation, partnership, association or cooperative to forty percent (40%).278

Finally, under the Act, an FTAA contractor warrants that it "has or has access to all the financing, managerial, and technical expertise. . . ."279 This suggests that an FTAA contractor is bound to provide some management assistance – a form of assistance that has been eliminated and, therefore, proscribed by the present Charter.

By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nation's mineral resources to these contractors, leaving the State with nothing but bare title thereto.

Moreover, the same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained 60%-40% capitalization requirement for corporations or associations engaged in the exploitation, development and utilization of Philippine natural resources.

In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the Constitution:

(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:

Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical assistance agreement or mineral processing permit.

(2) Section 23,280 which specifies the rights and obligations of an exploration permittee, insofar as said section applies to a financial or technical assistance agreement,

(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance agreement;

(4) Section 35,281 which enumerates the terms and conditions for every financial or technical assistance agreement;

(5) Section 39,282 which allows the contractor in a financial and technical assistance agreement to convert the same into a mineral production-sharing agreement;

(6) Section 56,283 which authorizes the issuance of a mineral processing permit to a contractor in a financial and technical assistance agreement;

The following provisions of the same Act are likewise void as they are dependent on the foregoing provisions and cannot stand on their own:

(1) Section 3 (g),284 which defines the term "contractor," insofar as it applies to a financial or technical assistance agreement.

Section 34,285 which prescribes the maximum contract area in a financial or technical assistance agreements;

Section 36,286 which allows negotiations for financial or technical assistance agreements;

Section 37,287 which prescribes the procedure for filing and evaluation of financial or technical assistance agreement proposals;

Section 38,288 which limits the term of financial or technical assistance agreements;

Section 40,289 which allows the assignment or transfer of financial or technical assistance agreements;

Section 41,290 which allows the withdrawal of the contractor in an FTAA;

The second and third paragraphs of Section 81,291 which provide for the Government's share in a financial and technical assistance agreement; and

Section 90,292 which provides for incentives to contractors in FTAAs insofar as it applies to said contractors;

When the parts of the statute are so mutually dependent and connected as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, and that if all could not be carried into effect, the legislature would not pass the residue independently, then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected, must fall with them.293

There can be little doubt that the WMCP FTAA itself is a service contract.

Section 1.3 of the WMCP FTAA grants WMCP "the exclusive right to explore, exploit, utilise[,] process and dispose of all Minerals products and by-products thereof that may be produced from the Contract Area."294 The FTAA also imbues WMCP with the following rights:

(b) to extract and carry away any Mineral samples from the Contract area for the purpose of conducting tests and studies in respect thereof;

(c) to determine the mining and treatment processes to be utilised during the Development/Operating Period and the project facilities to be constructed during the Development and Construction Period;

(d) have the right of possession of the Contract Area, with full right of ingress and egress and the right to occupy the same, subject to the provisions of Presidential Decree No. 512 (if applicable) and not be prevented from entry into private ands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therein;

x x x

(f) to construct roadways, mining, drainage, power generation and transmission facilities and all other types of works on the Contract Area;

(g) to erect, install or place any type of improvements, supplies, machinery and other equipment relating to the Mining Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all parts thereof;

(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third Parties, easement rights and the use of timber, sand, clay, stone, water and other natural resources in the Contract Area without cost for the purposes of the Mining Operations;

x x x

(i) have the right to mortgage, charge or encumber all or part of its interest and obligations under this Agreement, the plant, equipment and infrastructure and the Minerals produced from the Mining Operations;

x x x. 295

All materials, equipment, plant and other installations erected or placed on the Contract Area remain the property of WMCP, which has the right to deal with and remove such items within twelve months from the termination of the FTAA.296

Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing, technology, management and personnel necessary for the Mining Operations." The mining company binds itself to "perform all Mining Operations . . . providing all necessary services, technology and financing in connection therewith,"297 and to "furnish all materials, labour, equipment and other installations that may be required for carrying on all Mining Operations."298> WMCP may make expansions, improvements and replacements of the mining facilities and may add such new facilities as it considers necessary for the mining operations.299

These contractual stipulations, taken together, grant WMCP beneficial ownership over natural resources that properly belong to the State and are intended for the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress. Consequently, the contract from which they spring must be struck down.

In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the Promotion and Protection of Investments between the Philippine and Australian Governments, which was signed in Manila on January 25, 1995 and which entered into force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies to investments whenever made and thus the fact that [WMCP's] FTAA was entered into prior to the entry into force of the treaty does not preclude the Philippine Government from protecting [WMCP's] investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides that "Each Party shall encourage and promote investments in its area by investors of the other Party and shall [admit] such investments in accordance with its Constitution, Laws, regulations and investment policies" and in Article 3 (2), it states that "Each Party shall ensure that investments are accorded fair and equitable treatment." The latter stipulation indicates that it was intended to impose an obligation upon a Party to afford fair and equitable treatment to the

investments of the other Party and that a failure to provide such treatment by or under the laws of the Party may constitute a breach of the treaty. Simply stated, the Philippines could not, under said treaty, rely upon the inadequacies of its own laws to deprive an Australian investor (like [WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without likewise nullifying the service contracts entered into before the enactment of RA 7942 such as those mentioned in PD 87 or EO 279.

This becomes more significant in the light of the fact that [WMCP's] FTAA was executed not by a mere Filipino citizen, but by the Philippine Government itself, through its President no less, which, in entering into said treaty is assumed to be aware of the existing Philippine laws on service contracts over the exploration, development and utilization of natural resources. The execution of the FTAA by the Philippine Government assures the Australian Government that the FTAA is in accordance with existing Philippine laws.300 [Emphasis and italics by private respondents.]

The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn, would amount to a violation of Section 3, Article II of the Constitution adopting the generally accepted principles of international law as part of the law of the land. One of these generally accepted principles is pacta sunt servanda, which requires the performance in good faith of treaty obligations.

Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that "the Philippines could not . . . deprive an Australian investor (like [WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without likewise nullifying the service contracts entered into before the enactment of RA 7942 . . .," the annulment of the FTAA would not constitute a breach of the treaty invoked. For this decision herein invalidating the subject FTAA forms part of the legal system of the Philippines.301 The equal protection clause302 guarantees that such decision shall apply to all contracts belonging to the same class, hence, upholding rather than violating, the "fair and equitable treatment" stipulation in said treaty.

One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section 2, Article XII of the Constitution, the President may enter into agreements involving "either technical or financial assistance" only. The agreement in question, however, is a technical and financial assistance agreement.

Petitioners' contention does not lie. To adhere to the literal language of the Constitution would lead to absurd consequences.303 As WMCP correctly put it:

x x x such a theory of petitioners would compel the government (through the President) to enter into contract with two (2) foreign-owned corporations, one for financial assistance agreement and with the other, for technical assistance over one and the same mining area or land; or to execute two (2) contracts with only one foreign-owned corporation which has the capability to provide both financial and technical assistance, one for financial assistance and another for technical assistance, over the same mining area. Such an absurd result is definitely not sanctioned under the canons of constitutional construction.304 [Underscoring in the original.]

Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of "either/or." A constitution is not to be interpreted as demanding the impossible or the impracticable; and unreasonable or absurd consequences, if possible, should be avoided.305 Courts are not to give words a meaning that would lead to absurd or unreasonable consequences and a literal interpretation is to be rejected if it would be unjust or lead to absurd results.306 That is a strong argument against its adoption.307 Accordingly, petitioners' interpretation must be rejected.

The foregoing discussion has rendered unnecessary the resolution of the other issues raised by the petition.

WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void:

(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),

(b) Section 23,

(c) Section 33 to 41,

(d) Section 56,

(e) The second and third paragraphs of Section 81, and

(f) Section 90.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s. 1996 which are not in conformity with this Decision, and

(3) The Financial and Technical Assistance Agreement between the Government of the Republic of the Philippines and WMC Philippines, Inc.

SO ORDERED.

Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga. JJ., concur. Vitug, J., see Separate Opinion. Panganiban, J., see Separate Opinion. Ynares-Santiago, Sandoval-Gutierrez and Austria-Martinez, JJ., joins J., Panganiban's separate opinion. Azcuna, no part, one of the parties was a client.

Footnotes

1 Appears as "Nequito" in the caption of the Petition but "Nequinto" in the body. (Rollo, p. 12.)

2 As appears in the body of the Petition. (Id., at 13.) The caption of the petition does not include Louel A. Peria as one of the petitioners but the name of his father Elpidio V. Peria appears therein.

3 Appears as "Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN)" in the caption of the Petition by "Philippine Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN)" in the body. (Id., at 14.)

4 Erroneously designated in the Petition as "Western Mining Philippines Corporation." (Id., at 212.) Subsequently, WMC (Philippines), Inc. was renamed "Tampakan Mineral Resources Corporation." (Id., at 778.)

5 An Act Instituting A New System of Mineral Resources Exploration, Development, Utilization and Conservation.

6 Authorizing the Secretary of Environment and Natural Resources to Negotiate and Conclude Joint Venture, Co-Production, or Production-Sharing Agreements for the Exploration, Development and Utilization of Mineral Resources, and Prescribing the Guidelines for such Agreements and those Agreements involving Technical or Financial Assistance by Foreign-Owned Corporations for Large-Scale Exploration, Development and Utilization of Minerals.

7 Exec. Order No. 279 (1987), sec. 4.

8 Rep. Act No. 7942 (1995), sec. 15.

9 Id., sec. 26 (a)-(c).

10 Id., sec. 29.

11 Id., sec. 30.

12 Id., sec. 31.

13 Id., sec. 32.

14 Id., ch. VI.

15 Id., secs. 27 and 33 in relation to sec. 3 (aq).

16 Id., sec. 72.

17 Id., sec. 73.

18 Id., sec. 75.

19 Id., sec. 74.

20 Id., sec. 76.

21 Id., ch. XIII.

22 Id., secs. 20-22.

23 Id., secs. 43, 45.

24 Id., secs. 46-49, 51-52.

25 Id., ch. IX.

26 Id., ch. X.

27 Id., ch. XI.

28 Id., ch. XIV.

29 Id., ch. XV.

30 Id., ch. XVI.

31 Id., ch. XIX.

32 Id., ch. XVII.

33 Section 116, R.A. No. 7942 provides that the Act "shall take effect thirty (30) days following its complete publication in two (2) newspapers of general circulation in the Philippines."

34 WMCP FTAA, sec. 4.1.

35 Rollo, p. 22.

36 Ibid.

37 Ibid.

38 Ibid. The number has since risen to 129 applications when the petitioners filed their Reply. (Rollo, p. 363.)

39 Id., at 22.

40 Id., at 23-24.

41 Id., at 52-53. Emphasis and underscoring supplied.

42 WMCP FTAA, p. 2.

43 Rollo, p. 220.

44 Id., at 754.

45 Vide Note 4.

46 Rollo, p. 754.

47 Id., at 755.

48 Id., at 761-763.

49 Id., at 764-776.

50 Id., at 782-786.

51 Docketed as C.A.-G. R. No. 74161.

52 G.R. No. 153885, entitled Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd., et al., decided September 24, 2003 and G.R. No. 156214, entitled Lepanto Mining Company v. WMC Resources International Pty. Ltd., WMC (Philippines), Inc., Southcot Mining Corporation, Tampakan Mining Corporation and Sagittarius Mines, Inc., decided September 23, 2003.

53 Section 12, Rule 43 of the Rules of Court, invoked by private respondent, states, " The appeal shall not stay the award, judgment, final order or resolution sought to be reviewed unless the Court of Appeals shall direct otherwise upon such terms as it may deem just."

54 WMCP's Reply (dated May 6, 2003) to Petitioners' Comment (to the Manifestation and Supplemental Manifestation), p. 3.

55 Ibid.

56 Ibid.

57 WMCP's Reply (dated May 6, 2003) to Petitioners' Comment (to the Manifestation and Supplemental Manifestation), p. 4.

58 Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994); National Economic Protectionism Association v. Ongpin, 171 SCRA 657 (1989); Dumlao v. COMELEC, 95 SCRA 392 (1980).

59 Dumlao v. COMELEC, supra.

60 Board of Optometry v. Colet, 260 SCRA 88 (1996).

61 Dumlao v. COMELEC, supra.

62 Subic Bay Metropolitan Authority v. Commission on Elections, 262 SCRA 492 (1996).

63 Angara v. Electoral Commission, 63 Phil. 139 (1936).

64 Integrated Bar of the Philippines v. Zamora, 338 SCRA 81, 100 (2000); Dumlao v. COMELEC, supra; People v. Vera, 65 Phil. 56 (1937).

65 Dumlao v. COMELEC, supra.

66 Integrated Bar of the Philippines v. Zamora, supra.

67 Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila¸ 21 SCRA 449 (1967).

68 Petitioners Roberto P. Amloy, Raqim L. Dabie, Simeon H. Dolojo, Imelda Gandon, Leny B. Gusanan, Marcelo L. Gusanan, Quintol A. Labuayan, Lomingges Laway, and Benita P. Tacuayan.

69 Petitioners F'long Agutin M. Dabie, Mario L. Mangcal, Alden S. Tusan, Sr. Susuan O. Bolanio, OND, Lolita G. Demonteverde, Benjie L. Nequinto, Rose Lilia S. Romano and Amparo S. Yap.

70 Rollo, p. 6.

71 Id. at 337, citing Malabanan v. Gaw Ching, 181 SCRA 84 (1990).

72 246 SCRA 540 (1995).

73 People v. Vera, supra.

74 Militante v. Court of Appeals, 330 SCRA 318 (2000).

75 Ibid.

76 Cruz v. Secretary of Environment and Natural Resources, 347 SCRA 128 (2000), Kapunan, J., Separate Opinion. [Emphasis supplied.]

77 Joya v. Presidential Commission on Good Government, 225 SCRA 568 (1993).

78 Integrated Bar of the Philippines v. Zamora, supra.

79 J. Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary 1009 (1996).

80 Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion.

81 Id., Puno, J., Separate Opinion, and Panganiban, J., Separate Opinion.

82 Cariño v. Insular Government, 212 US 449, 53 L.Ed. 595 (1909). For instance, Law 14, Title 12, Book 4 of the Recopilacion de Leyes de las Indias proclaimed:

We having acquired full sovereignty over the Indies, and all lands, territories, and possessions not heretofore ceded away by our royal predecessors, or by us, or in our name, still pertaining to the royal crown and patrimony, it is our will that all lands which are held without proper and true deeds of grant be restored to us according as they belong to us, in order that after reserving before all what to us or to our viceroys, audiencias, and governors may seem necessary for public squares, ways, pastures, and commons in those places which are peopled, taking into consideration not only their present condition, but also their future and their probable increase, and after distributing to the natives what may be necessary for tillage and pasturage, confirming them in what they now have and giving them more if necessary, all the

rest of said lands may remain free and unencumbered for us to dispose of as we may wish.

83 Republic v. Court of Appeals, 160 SCRA 228 (1988). It has been noted, however, that "the prohibition in the [1935] Constitution against alienation by the state of mineral lands and minerals is not properly a part of the Regalian doctrine but a separate national policy designed to conserve our mineral resources and prevent the state from being deprived of such minerals as are essential to national defense." (A. Noblejas, Philippine Law on Natural Resources 126-127 [1959 ed.], citing V. Francisco, The New Mining Law.)

84 Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion, citing A. Noblejas, Philippine Law on Natural Resources 6 (1961). Noblejas continues:

Thus, they asserted their right of ownership over mines and minerals or precious metals, golds, and silver as distinct from the right of ownership of the land in which the minerals were found. Thus, when on a piece of land mining was more valuable than agriculture, the sovereign retained ownership of mines although the land has been alienated to private ownership. Gradually, the right to the ownership of minerals was extended to base metals. If the sovereign did not exploit the minerals, they grant or sell it as a right separate from the land. (Id., at 6.)

85 In the unpublished case of Lawrence v. Garduño (L-10942, quoted in V. Francisco, Philippine Law on Natural Resources 14-15 [1956]), this Court observed:

The principle underlying Spanish legislation on mines is that these are subject to the eminent domain of the state. The Spanish law of July 7, 1867, amended by the law of March 4, 1868, in article 2 says: "The ownership of the substances enumerated in the preceding article (among them those of inflammable nature), belong[s] to the state, and they cannot be disposed of without the government authority."

The first Spanish mining law promulgated for these Islands (Decree of Superior Civil Government of January 28, 1864), in its Article I, says: "The supreme ownership of mines throughout the kingdom belong[s] to the crown and to the king. They shall not be exploited except by persons who obtained special grant from this superior government and by those who may secure it thereafter, subject to this regulation."

Article 2 of the royal decree on ownership of mines in the Philippine Islands, dated May 14, 1867, which was the law in force at the time of the cession of these Islands to the Government of the United States, says: "The ownership of the substances enumerated in the preceding article (among them those of inflammable nature) belongs to the state, and they cannot be disposed of without an authorization issued by the Superior Civil Governor."

Furthermore, all those laws contained provisions regulating the manner of prospecting, locating and exploring mines in private property by persons other than the owner of the land as well as the granting of concessions, which goes to show that private ownership of the land did not include, without express grant, the mines that might be found therein.

Analogous provisions are found in the Civil Code of Spain determining the ownership of mines. In its Article 339 (Article 420, New Civil Code) enumerating properties of

public ownership, the mines are included, until specially granted to private individuals. In its article 350 (Art. 437, New Civil Code) declaring that the proprietor of any parcel of land is the owner of its surface and of everything under it, an exception is made as far as mining laws are concerned. Then in speaking of minerals, the Code in its articles 426 and 427 (Art. 519, New Civil Code) provides rules governing the digging of pits by third persons on private-owned lands for the purpose of prospecting for minerals.

86 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 261 SCRA 528 (1996).

87 Ibid.

88 Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion.

89 Ibid.

90 McDaniel v. Apacible and Cuisia, 42 Phil. 749 (1922).

91 Noblejas, supra, at 5.

92 V. M. A. Dimagiba, Service Contract Concepts in Energy, 57 Phil. L. J. 307, 313 (1982).

93 P. A. Agabin, Service Contracts: Old Wine in New Bottles?, in II Draft Proposal of the 1986 U.P. Law Constitution Project 3.

94 Id., at 2-3.

95 Id., at 3.

96 Ibid.

97 Ibid.

98 Ibid.

99 An Act to Provide for the Exploration, Location and Lease of Lands Containing Petroleum and other Mineral Oils and Gas in the Philippine Islands.

100 An Act to Provide for the Leasing and Development of Coal Lands in the Philippine Islands.

101 Agabin, supra, at 3.

102 People v. Linsangan, 62 Phil. 646 (1935).

103 Ibid.

104 Ibid.

105 Ibid.

106 Ibid.

107 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

108 Bernas, S.J., supra, at 1009-1010, citing Lee Hong Hok v. David, 48 SCRA 372 (1972).

109 II J. Aruego, The Framing of the Philippine Constitution 592 (1949).

110 Id., at 600-601.

111 Id., at 604. Delegate Aruego expounds:

At the time of the framing of the Philippine Constitution, Filipino capital had been known to be rather shy. Filipinos hesitated as a general rule to invest a considerable sum of their capital for the development, exploitation, and utilization of the natural resources of the country. They had not as yet been so used to corporate enterprises as the peoples of the West. This general apathy, the delegates knew, would mean the retardation of the development of the natural resources, unless foreign capital would be encouraged to come in and help in that development. They knew that the nationalization of the natural resources would certainly not encourage the investment of foreign capital into them. But there was a general feeling in the Convention that it was better to have such development retarded or even postponed altogether until such time when the Filipinos would be ready and willing to undertake it rather than permit the natural resources to be placed under the ownership or control of foreigners in order that they might be immediately developed, with the Filipinos of the future serving not as owners but at most as tenants or workers under foreign masters. By all means, the delegates believed, the natural resources should be conserved for Filipino posterity.

The nationalization of natural resources was also intended as an instrument of national defense. The Convention felt that to permit foreigner to own or control the natural resources would be to weaken the national defense. It would be making possible the gradual extension of foreign influence into our politics, thereby increasing the possibility of foreign control. x x x.

Not only these. The nationalization of the natural resources, it was believed, would prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence. For unless the natural resources were nationalized, with the nationals of foreign countries having the opportunity to own or control them, conflicts of interest among them might arise inviting danger to the safety and independence of the nation. (Id., at 605-606.)

112 Palting v. San Jose Petroleum Inc., 18 SCRA 924 (1966); Republic v. Quasha, 46 SCRA 160 (1972).

113 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

114 Article VI thereof provided:

1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources of potential energy, and other natural resources of either Party, and the operation of public utilities, shall, if open to any person, be open to citizens of the other Party and to all forms of business enterprise owned or controlled directly or indirectly, by citizens of such other Party in the same manner as to and under the same conditions imposed upon citizens or corporations or associations owned or controlled by citizens of the Party granting the right.

2. The rights provided for in Paragraph 1 may be exercised x x x in the case of citizens of the United States, with respect to natural resources in the public domain in the Philippines, only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled by citizens of the United States x x x.

3. The United States of America reserves the rights of the several States of the United States to limit the extent to which citizens or corporations or associations owned or controlled by citizens of the Philippines may engage in the activities specified in this Article. The Republic of the Philippines reserves the power to deny any of the rights specified in this Article to citizens of the United States who are citizens of States, or to corporations or associations at least 60% of whose capital stock or capital is owned or controlled by citizens of States, which deny like rights to citizens of the Philippines, or to corporations or associations which ore owned or controlled by citizens of the Philippines x x x.

115 An Act to Promote the Exploration, Development, Exploitation, and Utilization of the Petroleum Resources of the Philippines; to Encourage the Conservation of such Petroleum Resources; to Authorize the Secretary of Agriculture and Natural Resources to Create an Administration Unit and a Technical Board in the Bureau of Mines; to Appropriate Funds therefor; and for other purposes.

116 Rep. Act No. 387 (1949), as amended, art. 10 (b).

117 Id., art. 10 (c).

118 Id., art. 5.

119 Id., art. 31. The same provision recognized the rights of American citizens under the Parity Amendment:

During the effectivity and subject to the provisions of the ordinance appended to the Constitution of the Philippines, citizens of the United States and all forms of business enterprises owned and controlled, directly or indirectly, by citizens of the United States shall enjoy the same rights and obligations under the provisions of this Act in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

120 Id., art. 10.

121 Id., art. 3.

122 Id., art. 9.

123 Ibid.

124 Rep. Act No. 387 (1949), as amended, art. 8.

125 Id., art. 25.

126 Id., art. 47.

127 Id., art. 60.

128 Id., art. 64. Article 49, R.A. No. 387 originally imposed an annual exploration tax on exploration concessionaires but this provision was repealed by Section 1, R.A. No. 4304.

129 Francisco, supra, at 103.

130 Rep. Act No. 387 (1949), as amended, art. 65.

131 Francisco, supra, at 103.

132 Rep. Act No. 387 (1949), as amended, art. 90 (b) 3.

133 Id., art. 90 (b) 4.

134 Id., art. 93-A.

135 Id., art. 93.

136 Ibid.

137 Rep. Act No. 387 (1949), as amended, art. 94.

138 Id., art. 106.

139 Id., art. 95.

140 Ibid.

141 Rep. Act No. 387 (1949), as amended, art. 95 (e).

142 Dimagiba, supra, at 315, citing Fabrikant, Oil Discovery and Technical Change in Southeast Asia, Legal Aspects of Production Sharing Contracts in the Indonesian Petroleum Industry, 101-102, sections 13C.24 and 13C.25 (1972).

143 Agabin, supra, at 4.

144 Dimagiba, supra, at 318.

145 Amending Presidential Decree No. 8 issued on October 2, 1972, and Promulgating an Amended Act to Promote the Discovery and Production of Indigenous Petroleum and Appropriate Funds Therefor.

146 Pres. Decree No. 87 (1972), sec. 4.

147 Agabin, supra, at 6.

148 M. Magallona, Service Contracts in Philippine Natural Resources, 9 World Bull. 1, 4 (1993).

149 Pres. Decree No. 87 (1972), sec. 6.

150 Id., sec. 4.

151 Id., sec. 6.

152 Id., sec. 7.

153 Id., sec. 8.

154 Ibid.

155 Ibid.

156 Pres. Decree No. 87 (1972), sec. 9.

157 Id., sec. 12.

158 Id., sec. 13.

159 Dimagiba draws the following comparison between the service contract scheme and the concession system:

In both the concession system and the service contract scheme, work and financial obligations are required of the developer. Under Republic Act No. 387 and Presidential Decree No. 87, the concessionaire and the service contractors are extracted certain taxes in favor of the government. In both arrangements, the explorationist/developer is given incentives in the form of tax exemptions in the importation or disposition of machinery, equipment, materials and spare parts needed in petroleum operations.

The concessionaire and the service contractor are required to keep in their files valuable data and information and may be required to submit need technological or accounting reports to the Government. Duly authorized representatives of the Government could, under the law, inspect or audit the books of accounts of the contract holder.

In both systems, signature, discovery or production bonuses may be given by the developer to the host Government.

The concession system, however, differs considerably from the service contract system in important areas of the operations. In the concession system, the Government merely receives fixed royalty which is a certain percentage of the crude oil produced or other units of measure, regardless of whether the concession holder makes profits or not. This is not so in the service contract system. A certain percentage of the gross production is set aside for recoverable expenditures by the contractor. Of the net proceeds the parties are entitled percentages of share that will accrue to each of them.

In the royalty system, the concessionaire may be discouraged to produce more for the reason that since the royalty paid to the host country is closely linked to the volume of production, the greater the produce, the more amount or royalty would be allocated to the Government. This is not so in the production sharing system. The share of the Government depends largely on the net proceeds of production after reimbursing the service contractor of its recoverable expenses.

As a general rule, the Government plays a passive role in the concession system, more particularly, interested in receiving royalties from the concessionaire. In the production-sharing arrangement, the Government plays a more active role in the management and monitoring of oil operations and requires the service contractor entertain obligations designed to bring more economic and technological benefits to the host country. (Dimagiba, supra, at 330-331.)

160 Agabin, supra, at 6.

161 The antecedents leading to the Proclamation are narrated in Javellana v. Executive Secretary, 50 SCRA 55 (1973):

On March 16, 1967, Congress of the Philippines passed Resolution No. 2, which was amended by Resolution No. 4, of said body, adopted on June 17, 1969, calling a convention to propose amendments to the Constitution of the Philippines. Said Resolution No. 2, as amended, was implemented by Republic Act No. 6132 approved on August 24, 1970, pursuant to the provisions of which the election of delegates to said convention was held on November 10, 1970, and the 1971 Convention began to perform its functions on June 1, 1971. While the Convention was in session on September 21, 1972, the President issued Proclamation No. 1081 placing the entire Philippines under Martial Law. On November 29, 1972, the President of the Philippines issued Presidential Decree No. 73, submitting to the Filipino people for ratification or rejection the Constitution of the Republic of the Philippines proposed by the 1971 Constitutional Convention, and appropriating funds therefor, as well as setting the plebiscite for such ratification on January 15, 1973.

On January 17, 1973, the President issued Proclamation No. 1102 certifying and proclaiming that the Constitution proposed by the 1971 Constitutional Convention "has been ratified by an overwhelming majority of all the votes cast by the members of all the Barangays (Citizens Assemblies) throughout the Philippines, and has thereby come into effect."

162 Bernas, S.J., supra, at 1016, Note 28, citing Session of November 25, 1972.

163 Agabin, supra, at 1, quoting Sanvictores, The Economic Provisions in the 1973 Constitution, in Espiritu, 1979 Philconsa Reader on Constitutional and Policy Issues 449.

164 Bernas, S.J., supra, at 1016, Note 28, citing Session of November 25, 1972.

165 Ibid.

166 Ibid.

167 Allowing Citizens of the Philippines or Corporations or Associations at least Sixty Per Centum of the Capital of which is Owned by such Citizens to Enter into Service Contracts with Foreign Persons, Corporations for the Exploration, Development, Exploitation or Utilization of Lands of the Public Domain, Amending for the purpose certain provisions of Commonwealth Act No. 141.

168 Pres. Decree No. 151 (1973), sec. 1.

169 Providing for A Modernized System of Administration and Disposition of Mineral Lands and to Promote and Encourage the Development and Exploitation thereof.

170 Revising and Consolidating All Laws and Decrees Affecting Fishing and Fisheries.

171 Pres. Decree No. 704 (1975), sec. 21.

172 Revising Presidential Decree No. 389, otherwise known as The Forestry Reform Code of the Philippines.

173 Pres. Decree No. 705 (1975), sec. 62.

174 An Act to Promote the Exploration and Development of Geothermal Resources.

175 Magallona, supra, at 6.

176 Declaring a National Policy to Implement the Reforms Mandated by the People, Protecting their Basic Rights, Adopting a Provisional Constitution, and Providing for an Orderly Transition to a Government under a New Constitution.

177 Const., art. XVIII, sec. 27; De Leon v. Esguerra, 153 SCRA 602 (1987).

178 Miners Association of the Philippines, Inc. v. Factoran, Jr., 240 SCRA 100 (1995).

179 Ibid.

180 Ibid.

181 J. Bernas, S.J., The Intent of the 1986 Constitution Writers 812 (1995).

182 Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.

183 III Records of the Constitutional Commission 255.

184 Id., at 355-356.

185 Const. (1986), art. II, sec. 1.

186 Cruz v. Secretary of Environment and Natural Resources, supra, Puno, J., Separate Opinion.

187 Rep. Act No. 7942 (1995), sec. 9.

188 SEC. 82. Allocation of Government Share.—The Government share as referred to in the preceding sections shall be shared and allocated in accordance with Sections 290 and 292 of Republic Act No. 7160 otherwise known as the Local Government Code of 1991. In case the development and utilization of mineral resources is undertaken by a government-owned or -controlled corporation, the sharing and allocation shall be in accordance with Sections 291 and 292 of the said Code.

189 An Act Creating A People's Small-Scale Mining Program and for other purposes.

190 Rep. Act No. 7942 (1995), sec. 42.

191 Id., secs. 3 (ab) and 26.

192 "Contractor" means a qualified person acting alone or in consortium who is a party to a mineral agreement or to a financial or technical assistance agreement. (Id., sec. 3[g].)

193 "Contract area" means land or body water delineated for purposes of exploration, development, or utilization of the minerals found therein. (Id., sec. 3[f].)

194 "Gross output" means the actual market value of minerals or mineral products from its mining area as defined in the National Internal Revenue Code (Id., sec. 3[v]).

195 Id., sec. 26 (a).

196 An Act Reducing Excise Tax Rates on Metallic and Non-Metallic Minerals and Quarry Resources, amending for the purpose Section 151 (a) of the National Internal Revenue Code, as amended.

197 Rep. Act No. 7942 (1995), sec. (80).

198 Id., Sec. 26 (b).

199 "Mineral resource" means any concentration of minerals/rocks with potential economic value. (Id., sec. 3[ad].)

200 Id., sec. 26 (c).

201 Ibid.

202 Id., sec. 3 (h).

203 Id., sec. 3 (x).

204 Id., sec. 26, last par.

205 Id., sec. 27.

206 Id., sec. 3 (aq).

207 Id., sec. 3 (r).

208 Id., sec. 33.

209 Id., sec. 3 (t).

210 Id., sec. 3 (aq).

211 The maximum areas in cases of mineral agreements are prescribed in Section 28 as follows:

SEC. 28. Maximum Areas for Mineral Agreement. – The maximum area that a qualified person may hold at any time under a mineral agreement shall be:

(a) Onshore, in any one province –

(1) For individuals, ten (10) blocks; and

(2) For partnerships, cooperatives, associations, or corporations, one hundred (100) blocks.

(b) Onshore, in the entire Philippines –

(1) For individuals, twenty (20) blocks; and

(2) For partnerships, cooperatives, associations, or corporations, two hundred (200) blocks.

(c) Offshore, in the entire Philippines –

(1) For individuals, fifty (50) blocks;

(2) For partnerships, cooperatives, associations, or corporations, five hundred (500) blocks; and

(3) For the exclusive economic area, a larger area to be determined by the Secretary.

The maximum areas mentioned above that a contractor may hold under a mineral agreement shall not include mining/quarry areas under operating agreements between the contractor and a claimowner/lessee/permittee/licensee entered into under Presidential Decree No. 463.

On the other hand, Section 34, which governs the maximum area for FTAAs provides:

SEC. 34. Maximum Contract Area. – The maximum contract area that may be granted per qualified person, subject to relinquishment shall be:

(a) 1,000 meridional blocks onshore;

(b) 4,000 meridional blocks offshore; or

(c) Combinations of (a) and (b) provided that it shall not exceed the maximum limits for onshore and offshore areas.

212 Id., sec. 33.

213 Id., sec. 81.

214 Kapatiran v. Tan, 163 SCRA 371 (1988).

215 Providing for the Publication of Laws either in the Official Gazette or in a Newspaper of General Circulation in the Philippines as a Requirement for their Effectivity.

216 Section 1, E.O. No. 200 was subsequently incorporated in the Administrative Code of 1987 (Executive Order No. 292 as Section 18, Chapter 5 (Operation and Effect of Laws), Book 1 (Sovereignty and General Administration).

217 136 SCRA 27 (1985).

218 Manila Prince Hotel v. Government Service Insurance System, 267 SCRA 408 (1997).

219 Const., art. 3, sec. 1.

220 83 O.G. (Suppl.) 3528-115 to 3528-117 (August 1987).

221 Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.

222 Petitioners note in their Memorandum that the FTAA:

x x x guarantees that wholly foreign owned [WMCP] entered into the FTAA in order to facilitate "the large scale exploration, development and commercial exploitation of mineral deposits that may be found to exist within the Contract area." [Section 1.1] As a contractor it also has the "exclusive right to explore, exploit, utilize, process and dispose of all mineral products and by-products thereof that may be derived or produced from the Contract Area." [Section 1.3] Thus, it is divided into an "exploration and feasibility phase" [Section 3.2 (a)] and a "construction, development and production phase." [Section 3. 2 (b).]

Thus, it is this wholly foreign owned corporation that, among other things:

(a) operates within a prescribed contract area [Section 4],

(b) opts to apply for a Mining Production Sharing Agreement [Section 4.2],

(c) relinquishes control over portions thereof at their own choice [Section 4.6],

(d) submits work programs, incurs expenditures, and makes reports during the exploration period [Section 5],

(e) submits a Declaration of Mining Feasibility [Sections 5.4 and 5.5],

(f) during the development period, determines the timetable, submits work programs, provides the reports and determines and executes expansions, modifications, improvements and replacements of new mining facilities within the area [Section 6],

(g) complies with the conditions for environmental protection and industrial safety, posts the necessary bonds and makes representations and warranties to the government [Section 10.5].

The contract subsists for an initial term of twenty-five (25) years from the date of its effectivity [Section 3.1] and renewable for a further period of twenty-five years under the same terms and conditions upon application by private respondent [Section 3.3]. (Rollo, pp. 458-459.)

223 H. C. Black, Handbook on the Construction and Interpretation of the Laws § 8.

224 Ibid.

225 J. M. Tuason & Co., Inc. v. Land Tenure Association, 31 SCRA 413 (1970).

226 Rollo, p. 580.

227 Ibid. Emphasis supplied.

228 People v. Manantan, 115 Phil. 657 (1962); Commission on Audit of the Province of Cebu v. Province of Cebu, 371 SCRA 196 (2001).

229 Rollo, p. 569.

230 III Record of the Constitutional Commission 351-352.

231 V Record of the Constitutional Commission 844.

232 Id., at 841.

233 Id., at 842.

234 Id. at 844.

235 Vide Cherey v. Long Beach, 282 NY 382, 26 NE 2d 945, 127 ALR 1210 (1940), cited in 16 Am Jur 2d Constitutional Law §79.

236 Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 325 (1991).

237 III Record of the Constitutional Commission 278.

238 Id., at 316-317.

239 III Record of the Constitutional Commission 358-359.

240 Vera v. Avelino, 77 Phil. 192 (1946).

241 J. Nolledo, The New Constitution of the Philippines Annotated 924-926 (1990).

242 Resolution to Incorporate in the New Constitution an Article on National Economy and Patrimony.

243 The Chair of the Committee on National Economy and Patrimony, alluded to it in the discussion on the capitalization requirement:

MR. VILLEGAS. We just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is "60 percent of voting stock." (III Record of the Constitutional Commission 255.)

Likewise, in explaining the reasons for the deletion of the term "exploitation":

MR. VILLEGAS. Madam President, following the recommendation in the UP draft, we omitted "exploitation" first of all because it is believed to be subsumed under "development" and secondly because it has a derogatory connotation. (Id., at 358.)

244 Id., at 12.

245 Id., at 15-16.

246 M. Magallona, Nationalism and Its Subversion in the Constitution 5, in II Draft Proposal of the 1986 U.P. Law Constitution Project.

247 Agabin, supra, at 16.

248 E. Labitag, Philippine Natural Resources: Some Problems and Perspectives 17 in II Draft Proposal of the 1986 U.P. Law Constitution Project.

249 I Draft Proposal of the 1986 U.P. Law Constitution Project 11-13.

250 Id., at 9-11. Professor Labitag also suggests that:

x x x. The concession regime of natural resources disposition should be discontinued. Instead the State shall enter into such arrangements and agreements like co-production, joint ventures, etc. as shall bring about effective control and a larger share in the proceeds, harvest or production. (Labitag, supra, at 17.)

251 Vide Note 147.

252 Vide Note 230. The question was posed before the Jamir amendment and subsequent proposals introducing other limitations.

Comm. Villegas' response that there was no requirement in the 1973 Constitution for a law to govern service contracts and that, in fact, there were then no such laws is inaccurate. The 1973 Charter required similar legislative approval, although it did not specify the form it should take: "The Batasang Pambansa, in the national interest, may allow such citizens… to enter into service contracts…." As previously noted, however, laws authorizing service contracts were actually enacted by presidential decree.

253 Vide Note 238.

254 Vide Note 241.

255 Vide Note 231.

256 Dated July 28, 1987.

257 Dated October 3, 1990.

258 Peralta v. Civil Service Commission, 212 SCRA 425 (1992).

259 Vide Note 238.

260 III Record of the Constitutional Commission 354.

261 Salaysay v. Castro, 98 Phil. 364 (1956).

262 Rep. Act No. 7942 (1995), sec. 3 (q).

263 Id., sec. 3 (aq).

264 Id., sec. 20.

265 Id., sec. 23, first par.

266 Id., sec. 23, last par.

267 Id., sec. 3 (j).

268 Id., sec. 3 (az).

269 Id., sec. 35 (m).

270 Id., secs. 3 (aq) and 56.

271 Id., sec. 3 (y).

272 Id., sec. 35 (g).

273 Id., sec. 35 (h).

274 Id., sec. 35 (l).

275 Id., sec. 3 (af).

276 SEC. 72. Timber Rights.—Any provision of the law to the contrary notwithstanding, a contractor may be granted a right to cut trees or timber within his mining area as may be necessary for his mining operations subject to forestry laws, rules and regulations: Provided, That if the land covered by the mining area is already covered by exiting timber concessions, the volume of timber needed and the manner of cutting and removal thereof shall be determined by the mines regional director, upon consultation with the contractor, the timber concessionaire/permittee and the Forest Management Bureau of the Department: Provided, further, That in case of disagreement between the contractor and the timber concessionaire, the matter shall be submitted to the Secretary whose decision shall be final. The contractor shall perform reforestation work within his mining area in accordance with forestry laws, rules and regulations. [Emphasis supplied.]

SEC. 73. Water Rights.—A contractor shall have water rights for mining operations upon approval of application with the appropriate government agency in accordance with existing water laws, rules and regulations promulgated thereunder: Provided, That water rights already granted or vested through long use, recognized and acknowledged by local customs, laws and decisions of courts shall not thereby be impaired: Provided, further, That the Government reserves the right to regulate water rights and the reasonable and equitable distribution of water supply so as to prevent the monopoly of the use thereof. [Emphasis supplied.]

SEC. 74. Right to Possess Explosives.—A contractor/exploration permittee shall have the right to possess and use explosives within his contract/permit area as may be necessary for his mining operations upon approval of an application with the appropriate government agency in accordance with existing laws, rules and regulations promulgated thereunder: Provided, That the Government reserves the right to regulate and control the explosive accessories to ensure safe mining operations. [Emphasis supplied.]

SEC. 75. Easement Rights.—When mining areas are so situated that for purposes of more convenient mining operations it is necessary to build, construct or install on the mining areas or lands owned, occupied or leased by other persons, such infrastructure as roads, railroads, mills, waste dump sites, tailings ponds, warehouses, staging or storage areas and port facilities, tramways, runways, airports, electric transmission, telephone or telegraph lines, dams and their normal flood and catchment areas, sites for water wells, ditches, canals, new river beds, pipelines, flumes, cuts, shafts, tunnels, or mills, the contractor, upon payment of just compensation, shall be entitled to enter and occupy said mining areas or lands. [Emphasis supplied.]

SEC. 76. Entry into Private Lands and Concession Areas.—Subject to prior notification, holders of mining rights shall not be prevented from entry into private lands and concession areas by surface owners, occupants, or concessionaires when conducting mining operations therein: Provided, That any damage done to the

property of the surface owner, occupant, or concessionaire as a consequence of such operations shall be properly compensated as may be bee provided for in the implementing rules and regulations: Provided, further, That to guarantee such compensation, the person authorized to conduct mining operation shall, prior thereto, post a bond with the regional director based on the type of properties, the prevailing prices in and around the area where the mining operations are to be conducted, with surety or sureties satisfactory to the regional director. [Emphasis supplied.]

277 Id., sec. 39, first par.

278 Id., sec. 39, second par.

279 Id., sec. 35 (e).

280 SEC. 23. Rights and Obligations of the Permittee.—x x x.

The permittee may apply for a mineral production sharing agreement, joint venture agreement, co-production agreement or financial or technical assistance agreement over the permit area, which application shall be granted if the permittee meets the necessary qualifications and the terms and conditions of any such agreement: Provided, That the exploration period covered by the exploration period of the mineral agreement or financial or technical assistance agreement.

281 SEC. 35. Terms and Conditions. — The following terms, conditions, and warranties shall be incorporated in the financial or technical assistance agreement, to wit:

(a) A firm commitment in the form of a sworn statement, of an amount corresponding to the expenditure obligation that will be invested in the contract area: Provided, That such amount shall be subject to changes as may be provided for in the rules and regulations of this Act;

(b) A financial guarantee bond shall be posted in favor of the Government in an amount equivalent to the expenditure obligation of the applicant for any year;

(c) Submission of proof of technical competence, such as, but not limited to, its track record in mineral resource exploration, development, and utilization; details of technology to be employed in the proposed operation; and details of technical personnel to undertake the operation;

(d) Representations and warranties that the applicant has all the qualifications and none of the disqualifications for entering into the agreement;

(e) Representations and warranties that the contractor has or has access to all the financing, managerial and technical expertise and, if circumstances demand, the technology required to promptly and effectively carry out the objectives of the agreement with the understanding to timely deploy these resources under its supervision pursuant to the periodic work programs and related budgets, when proper, providing an exploration period up to two (2) years, extendible for another two (2) years but subject to annual review by the Secretary in accordance with the implementing rules and regulations of this Act, and further, subject to the relinquishment obligations;

(f) Representations and warranties that, except for paymets for dispositions for its equity, foreign investments in local enterprises which are qualified for repatriation, and local supplier's credits and such other generally accepted and permissible financial schemes for raising funds for valid business purposes, the conractor shall not raise any form of financing from domestic sources of funds, whether in Philippine or foreign currency, for conducting its mining operations for and in the contract area;

(g) The mining operations shall be conducted in accordance with the provisions of this Act and its implementing rules and regulations;

(h) Work programs and minimum expenditures commitments;

(i) Preferential use of local goods and services to the maximum extent practicable;

(j) A stipulation that the contractors are obligated to give preference to Filipinos in all types of mining employment for which they are qualified and that technology shall be transferred to the same;

(k) Requiring the proponent to effectively use appropriate anti-pollution technology and facilities to protect the environment and to restore or rehabilitate mined out areas and other areas affected by mine tailings and other forms of pollution or destruction;

(l) The contractors shall furnish the Government records of geologic, accounting, and other relevant data for its mining operations, and that book of accounts and records shall be open for inspection by the government;

(m) Requiring the proponent to dispose of the minerals and byproducts produced under a financial or technical assistance agreement at the highest price and more advantageous terms and conditions as provided for under the rules and regulations of this Act;

(n) Provide for consultation and arbitration with respect to the interpretation and implementation of the terms and conditions of the agreements; and

(o) Such other terms and conditions consistent with the Constitution and with this Act as the Secretary may deem to be for the best interest of the State and the welfare of the Filipino people.

282 SEC. 39. Option to Convert into a Mineral Agreement. — The contractor has the option to convert the financial or technical assistance agreement to a mineral agreement at any time during the term of the agreement, if the economic viability of the contract area is found to be inadequate to justify large-scale mining operations, after proper notice to the Secretary as provided for under the implementing rules and regulations; Provided, That the mineral agreement shall only be for the remaining period of the original agreement.

In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the corporation, partnership, association, or cooperative. Upon compliance with this requirement by the contractor, the Secretary shall approve the conversion and execute the mineral production-sharing agreement.

283 SEC. 56. Eligibility of Foreign-owned/-controlled Corporation.—A foreign owned/ -controlled corporation may be granted a mineral processing permit.

284 SEC. 3. Definition of Terms. – As used in and for purposes of this Act, the following terms, whether in singular or plural, shall mean:

x x x

(g) "Contractor" means a qualified person acting alone or in consortium who is a party to a mineral agreement or to a financial or technical assistance agreement.

285 SEC. 34. Maximum Contract Area. — The maximum contract area that may be granted per qualified person, subject to relinquishment shall be:

(a) 1,000 meridional blocks onshore;

(b) 4,000 meridional blocks offshore; or

(c) Combinations of (a) and (b) provided that it shall not exceed the maximum limits for onshore and offshore areas.

286 SEC. 36. Negotiations. — A financial or technical assistance agreement shall be negotiated by the Department and executed and approved by the President. The President shall notify Congress of all financial or technical assistance agreements within thirty (30) days from execution and approval thereof.

287 SEC. 37. Filing and Evaluation of Financial or Technical Assistance Agreement Proposals. — All financial or technical assistance agreement proposals shall be filed with the Bureau after payment of the required processing fees. If the proposal is found to be sufficient and meritorious in form and substance after evaluation, it shall be recorded with the appropriate government agency to give the proponent the prior right to the area covered by such proposal: Provided, That existing mineral agreements, financial or technical assistance agreements and other mining rights are not impaired or prejudiced thereby. The Secretary shall recommend its approval to the President.

288 SEC. 38. Term of Financial or Technical Assistance Agreement. — A financial or technical assistance agreement shall have a term not exceeding twenty-five (25) years to start from the execution thereof, renewable for not more than twenty-five (25) years under such terms and conditions as may be provided by law.

289 SEC. 40. Assignment/Transfer. — A financial or technical assistance agreement may be assigned or transferred, in whole or in part, to a qualified person subject to the prior approval of the President: Provided, That the President shall notify Congress of every financial or technical assistance agreement assigned or converted in accordance with this provision within thirty (30) days from the date of the approval thereof.

290 SEC. 41. Withdrawal from Financial or Technical Assistance Agreement. — The contractor shall manifest in writing to the Secretary his intention to withdraw from the agreement, if in his judgment the mining project is no longer economically feasible, even after he has exerted reasonable diligence to remedy the cause or the situation. The

Secretary may accept the withdrawal: Provided, That the contractor has complied or satisfied all his financial, fiscal or legal obligations.

291 SEC. 81. Government Share in Other Mineral Agreements.—x x x.

The Government share in financial or technical assistance agreement shall consist of, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from the contractor's foreign stockholders arising from dividend or interest payments to the said foreign stockholder in case of a foreign national and all such other taxes, duties and fees as provided for under existing laws.

The collection of Government share in financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development expenditures, inclusive.

292 SEC. 90. Incentives.—The contractors in mineral agreements, and financial or technical assistance agreements shall be entitled to the applicable fiscal and non-fiscal incentives as provided for under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987: Provided, That holders of exploration permits may register with the Board of Investments and be entitled to the fiscal incentives granted under the said Code for the duration of the permits or extensions thereof: Provided, further, That mining activities shall always be included in the investment priorities plan.

293 Lidasan v. Commission on Elections, 21 SCRA 496 (1967).

294 Vide also WMCP FTAA, sec. 10.2 (a).

295 WMCP, sec. 10.2.

296 Id., sec. 11.

297 Id., sec. 10.1(a).

298 Id., sec. 10.1(c).

299 Id., sec. 6.4.

300 Rollo, pp. 563-564.

301 Civil Code, art. 8.

302 Const., art III, sec. 1.

303 Vide Note 223.

304 Rollo, p. 243.

305 Civil Liberties Union v. Executive Secretary, supra.

306 Automotive Parts & Equipment Company, Inc. v. Lingad, 30 SCRA 248 (1969).

307 Ibid.

EN BANC

[G.R. No. L-17768. September 1, 1922. ]

VICENTE SOTTO, Petitioner, v. FILEMON SOTTO, Respondent.

Jose P. Fausto for Petitioner.

The respondent in his own behalf.

SYLLABUS

1. LAND REGISTRATION; FINAL DECREE, REOPENING OF. — The final "decree of confirmation and registration" cannot be reopened except for the

reasons and in the manner stated in section 38 of the Land Registration Act.

2. ID.; ID.; APPLICABILITY OF SECTION 513 OF THE CODE OF CIVIL PROCEDURE. — The final "decree of confirmation and registration" provided

for in the Land Registration Act is not a judgment within the meaning of section 513 of the Code of Civil Procedure and that section is not applicable to

decisions covered or confirmed by such final decrees.

3. ID., ID., ID. — The remedy provided for in section 513 of the Code of Civil Procedure may, in land registration matters, be applied to judgments not

confirmed by final decrees.

D E C I S I O N

OSTRAND, J. :

This is a petition under section 513 of the Code of Civil Procedure to reopen the land registration proceedings in regard to lot No. 7510 of the Cadaster of Cebu. The petitioner alleges that he is the owner of said lot No. 7510; that in or about the year 1907 he absented himself from the city of Cebu, leaving the respondent in charge of the lot; that on or about the 16th of April, 1921, the petitioner, upon visiting the office of the clerk of the Court of First Instance of Cebu, discovered that the respondent had fraudulently obtained the registration

of said lot in his own name and that a certificate of title for said lot had been issued to said respondent on January 24, 1920; that the petitioner, due to his long absence from Cebu, was unable to appear in court in the land registration proceedings and to defend his rights; and that this action is his only remedy to recover the property in question. He therefore asks that the decision of the Court of First Instance in regard to said lot No. 7510 be annulled and that a new trial be had. The case is now before us upon demurrer by the respondent to the petition on the ground that it does not state facts sufficient to constitute a cause of action. The respondent maintains that section 513 of the Code of Civil Procedure is not applicable to decisions in land registration proceedings which are covered by a final decree and this is the only question of importance raised by the demurrer. A brief statement of the history of the legislation relating to the question at issue may be of some aid in its determination. The original Land Registration Act (No. 496) which established the Torrens system of registration in these Islands, went into effect on January 1, 1903. It created a court of land registration and its section 14 provided for an appeal from the court to the Court of First Instance. Section 38 of the Act reads:jgc:chanrobles.com.ph "If the court after hearing finds that the applicant has title as stated in his application, and proper for registration, a decree of confirmation and registration shall be entered. Every decree of registration shall bind the land, and quiet title thereto, subject only to the exceptions stated in the following section. It shall be conclusive upon and against all persons, including the Insular Government and all the branches thereof, whether mentioned by name in the application, notice, or citation, or included in the general description ’To all whom it may concern.’ Such decree shall not be opened by reason of the absence, infancy, or other disability of any person affected thereby, nor by any proceeding in any court for reversing judgments or decrees; subject, however, to the right of any person deprived of land or of any estate or interest therein by decree of registration obtained by fraud to file in the Court of Land Registration a petition for review within one year after entry of the decree, provided no innocent purchaser for value has acquired an interest. If there is any such purchaser, the decree of registration shall not be opened, but shall remain in full force and effect forever, subject only to the right of appeal herein provided. But any person aggrieved by such decree in any case may pursue his remedy by action for damages against the applicant or any other person for fraud in procuring the decree. Whenever the phrase ’innocent purchaser for value’ or an equivalent phrase occurs in this Act, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value."cralaw virtua1aw library On April 5, 1904, Act No. 1108 was enacted which, by its section 4, amended section 14 of the original act so as to read as follows:jgc:chanrobles.com.ph

"SEC. 14. Every order, decision, and decree, or judgment of a Court of First Instance might be reviewed, and for that purpose sections one hundred and forty-one, one hundred and forty-two, one hundred and forty-three, four hundred and ninety-six, four hundred and ninety-seven (except that portion thereof relating to assessors), four hundred and ninety-nine, five hundred, five hundred and one, five hundred and two, five hundred and three, five hundred and four, five hundred and six, five hundred and seven, five hundred and eight, five hundred and nine, five hundred and eleven, five hundred and twelve, five hundred and thirteen, five hundred and fourteen, five hundred and fifteen, five hundred and sixteen, and five hundred and seventeen of Act Numbered One hundred and ninety, entitled ’An Act providing a Code of Procedure in civil actions and special proceedings in the Philippine Islands,’ are made applicable to all the proceedings of the Court of Land Registration and to a review thereof by the Supreme Court, except as otherwise provided in this section: Provided, however, That no certificates of title shall be issued by the Court of Land Registration until after the expiration of the period for perfecting a bill of exceptions for filing: And provided further, That the Court of Land Registration may grant a new trial in any case that has not passed to the Supreme Court, in the manner and under the circumstances provided in sections one hundred and forty-five, one hundred and forty-six, and one hundred and forty-seven of Act Numbered One hundred and ninety: And provided also, That the certificates of judgment to be issued by the Supreme Court, in cases passing to it from the Court of Land Registration, shall be certified to the clerk of the last-named court as well as the copies of the opinion of the Supreme Court: And provided also, That in the bill of exceptions to be printed no testimony or exhibits shall be printed except such limited portions thereof as are necessary to enable the Supreme Court to understand the points of law reserved. The original testimony and exhibits shall be transmitted to the Supreme Court. . . ."cralaw virtua1aw library Section 513 of the Code of Civil Procedure to which reference is made in the foregoing section, reads:jgc:chanrobles.com.ph "When a judgment is rendered by a Court of First Instance upon default, and a party thereto is unjustly deprived of a hearing by fraud, accident, mistake, or excusable negligence, and the Court of First Instance which rendered the judgment has finally adjourned so that no adequate remedy exist in that court, the party so deprived of a hearing may present his petition to the Supreme Court within sixty days after he first learns of the rendition of such judgment, and not thereafter, setting forth the facts and praying to have such judgment set aside. The court shall summarily on notice to both parties hear such petition, upon oral or written testimony as it shall direct, and the judgment shall be set aside and a trial upon the merits granted, upon such terms as may be just, if the facts set forth in the complaint are found to be true, otherwise the complaint shall be dismissed with costs.

"If a trial on the merits is granted, the order shall forthwith be certified to the Court of First Instance. Pending such petition, any judge of the Supreme Court for cause shown, may order a suspension of further proceedings to enforce the judgment complained of, upon taking sufficient security from the petitioner for all costs and damages that may be awarded against him in case the petition is dismissed."cralaw virtua1aw library From the time of the passage of Act No. 1108 until the filing of the petition in the recent case of Caballes v. Director of Lands (41 Phil., 357) the final decrees in land registration cases were always regarded as indefeasible and it apparently did not occur to the members of the legal profession that the provisions of section 513, supra, could be applied to such decrees or to the others or decisions upon which they were based. Aside from the dictum in the Caballes case, this court has consistently held that final decrees in land registration cases could not be reopened except under the circumstances, and in the manner, mentioned in section 38 of the Land Registration Act. (Grey Alba v. De la Cruz, 17 Phil., 49; City of Manila v. Lack, 19 Phil., 324; Cuyugan and Lim Tuico v. Sy Quia, 24 Phil., 567; Broce v. Apurado, 26 Phil., 581; Roxas v. Enriquez, 29 Phil., 31; De Jesus v. City of Manila, 29 Phi., 73; Manila Railroad Co. v. Rodriguez, 29 Phil., 336; Legarda and Prieto v. Saleeby, 31 Phil., 590; Mariano Velasco & Co. v. Gochuico & Co., 33 Phil., 363; Roman Catholic Archbishop of Manila v. Sunico and Catli, 36 Phil., 279; Blas v. De la Cruz and Melendres, 37 Phil., 1, and Government of the Philippine Islands v. Abural, 39 Phil., 996.) The dominant principle of the Torrens system of land registration is that the titles registered thereunder are indefeasible or as nearly so as it is possible to make them. (Niblack’s Analysis of the Torrens System, paragraph 5, 161, and 166; Sheldon on Land Registration, pp. 40 and 41; Dumas’ Registering Title to Land, p. 31; Hogg on the Australian Torrens System, pp. 775 et seq.) This principle is recognized to the fullest extent in our Land Registration Act and gives the Act its principal value. (See Land Registration Act, sections 38 and 39.) An examination of Act No. 1108 shows that it merely provides for the amendment of sections 6, 12, 13, 14, 17, 19, 24, 36 and 114 of the original Land Registration Act. Sections 14 and 19 relate to matters of procedure; all the other sections mentioned deal with administrative matters. Nowhere in Act No. 1108 is there any direct indication of any intention to alter the character of the Land Registration proceedings or to impair the strength of the registered titles. The purpose of the amendment of section 14 of the land Registration Act was clearly to make the Court of Land Registration coordinate with the Courts of First Instance and to make its judgments appealable to the Supreme Court instead of to the Courts of First Instance. In carrying out this purpose the Legislature, by reference to certain sections of the Code of Civil Procedure,

incorporated into the Land Registration Act the then existing provisions for bills of exceptions and appeals from the Courts of First Instance to the Supreme Court and made certain original actions in the Supreme Court applicable to land registration matters. This was all that was done and very evidently all it was intended to do. As Act No. 1108 only amended certain sections of the Land Registration Act and did not purport to amend the Act as a whole, or to introduce any new principle therein, the amended sections should be read in connection with the other sections of the Act as if all had been enacted in the same statute, and, as far as possible, effect should be given to them all in furtherance of the general design of the Act. Sutherland on Statutory Construction, 2d ed., says in paragraph 368:jgc:chanrobles.com.ph "The practical inquiry is usually what a particular provision, clause, or word means. To answer it one must proceed as he would with any other composition — construe it with reference to the leading idea or purpose of the whole and not in parts or sections and is animated by one general purpose and intent. Consequently each part or section should be construed in connection with every other part or section and so as to produce a harmonious whole. It is not proper to confine the attention to the one section to be construed.’It is always an unsafe way of construing a statute or contract to divide it by a process of etymological dissection, into separate words, and then apply to each, thus separated from its context, some particular definition given by lexicographers, and then reconstruct the instrument upon the basis of these definitions. An instrument must always be construed as a whole, and the particular meaning to be attached to any word or phrase is usually to be ascertained from the context, the nature of the subject treated of and the purpose or intention of the parties who executed the contract, or of the body which enacted or framed the statute or constitution.’ (International Trust Co. v. Am. L. & I. Co., 62 Minn., 501.) Another court says: ’Statutes must receive a reasonable construction, reference being had to their controlling purpose, to all their provisions, force and effect being given not narrowly to isolated and disjointed clauses, but to their plain spirit, broadly taking all their provisions together in one rational view. Neither grammatical construction nor the letter of the statute nor its rhetorical framework should be permitted to defeat its clear and definite purpose to be gathered from the whole act, comparing part with part. . . . A statute must receive such reasonable construction as will, if possible, make all its parts harmonize with each other, and render them consistent with its scope and object.’ (Adams v. Yazoo & Miss. Val. R. R. Co., 75 Miss., 275.)" Applying the principles stated, we do not think it impossible to so harmonize the various sections of the Land Registration Act as to carry out its general intent. It must be conceded that section 14, as amended, is repugnant to several other sections of the Land Registration Act, if we hold that the final "decree of

confirmation and registration" provided for in section 38 of the Act is a "judgment" within the meaning of section 513 of the Code of Civil Procedure. But we do not think it necessary to so hold. The Land Registration Act itself distinguishes between a judgment and the final decree. In section 36 of the Act the decision rendered by the court is styled "a judgment." The final "decree of confirmation and registration" is separate and distinct from the judgment and cannot be entered until at least thirty days after such judgment has been rendered. The contents of this final decree is thus prescribed by section 40 of the Act:jgc:chanrobles.com.ph "Every decree of registration shall bear the day of the year, hour, and minute of its entry, and shall be signed by the clerk. It shall state whether the owner is married or unmarried, and the name of the husband or wife. If the owner is under disability, it shall state the nature of the disability, and if a minor, shall state his age. It shall contain a description of the land as finally determined by the court, and shall set forth the estate of the owner, and also, in such manner as to show their relative priority, all particular estates, mortgages, easements, liens, attachments, and other incumbrances, including rights of husband or wife, if any, to which the land or owner’s estate is subject, and may contain any other matter properly to be determined in pursuance of this Act. The decree shall be stated in a convenient form for transcription upon the certificates of title hereinafter mentioned."cralaw virtua1aw library As provided in the last sentence of the section quoted, the decree is transcribed literally upon the certificate of title. Section 38 of the Act provides that it "shall not be opened by reason of the absence, infancy, or other disability of any person affected thereby, nor by any proceeding in any court for reversing judgments or decrees."cralaw virtua1aw library It can readily be seen that such a decree possesses very special characteristics and that it differs not only in form but also in character from the ordinary judgment. Its features of finality and indefeasibility constitute the cornerstone of the Land Registration Act; if we eliminate them we may still have a land registration system but it will not be a Torrens system. To hold that the Legislature by a mere reference in Act No. 1108 to section 513 of the Code of Civil Procedure intended to include such final decrees in the term "judgment" as employed in that section would therefore be equivalent to holding that it proposed in this casual manner to abolish the Torrens system in these Islands, a system which had given general satisfaction, and to substitute therefor a mongrel system with all the disadvantages of Torrens registration but without its principal advantages. Such an interpretation of the law would be in conflict with the view of the effect of final decrees expressed in all decisions of this court upon the subject from the

time of the enactment of Act No. 1108 until the present time, with the sole exception of the aforementioned dictum in the case of Caballes v. Director of Lands, supra. It would lay a final land registration decree open to successive attacks by persons claiming to have been deprived of their interest in the decreed land by default and would throw the title back into the realm of oral evidence, which, in land disputes in this country, has always been found notoriously unreliable. Moreover, an examination of the Land Registration Act shows clearly that its prime object is to give the greatest possible protection to the bona fide holders of the certificates of title provided for in the Act. If a final decree of confirmation and registration should be reopened and cancelled, it is, of course, obvious that all certificates of title issued under the decree would fail whether the holders were guilty of bad faith or not; as far as the validity of his title might be concerned, the bona fide holder of a transfer certificate — an innocent third party — would be exactly in the same position as the holder in bad faith of the first certificate issued under a decree, i. e., neither would have any legal title whatever. A bona fide holder of a title recorded in the old, or Mortgage Law, register would enjoy the very important benefits of article 34 of the Mortgage Law. In other words, the old register would offer greater advantages and afford much better protection to bona fide third parties than would the Torrens register if we were to accept the interpretation placed upon the law by the petitioner. It requires no argument to show that such an interpretation would defeat the principal object of the Land Registration Act and render a certificate of title an instrument of very slight value. It is hardly conceivable that the legislators intended to create such a state of affairs. Another circumstance also plainly indicates that in enacting Act No. 1108 it was not the purpose to make such drastic changes in the law. The theory of the American adaptation of the Torrens systems is that every transfer of title and every memorandum upon the certificate of title is a judicial act and that the register of deeds merely acts in a ministerial capacity as an officer of the court. A transfer certificate of title is both in form and in substance merely a variation of the final decree in the case; it runs in the name of the judge of the court, contains the same data as the final decree and transfers and confirms the title just as effectively. If, therefore, we regard the final decree as a judgment within the meaning of section 513 the Code of Civil Procedure, we must also so regard a transfer certificate of title. Now, if this is so, what can then be the purpose of maintaining the assurance fund? If both final decrees and transfer certificates of title can be regarded as judgments and reopened or cancelled by a proceeding under section 513, how can there ever be any demand upon the assurance fund? Indeed, the fact that in passing Act No. 1108 the Legislature left the provisions for the assurance fund intact and did not reduce the amount of the

premium to be paid into said fund by an applicant for registration, shows sufficiently that it did not intend to introduce a new proceeding in substitution of the action against the assurance fund. We cannot assume or believe that the collection of the assurance premium or fee is only a scheme on the part of the Government to obtain money under false pretenses. If we, on the other hand, hold that in land registration matters section 513 of the Code of Civil Procedure applies only to those judgments which are not covered by final decrees of confirmation (of which the Caballes case offers a good example) all difficulties in reconciling the amended section 14 of the Land Registration Act with its other section 14 of the Land Registration Act with its other sections disappear and the registration system established by the Act will remain intact. In view of the fact that it obviously was not the intention of the Legislature to introduce any racial changes in the system itself, this seems to be only rational construction which can be placed upon the law. Such an interpretation can in reality impose no material hardship upon the aggrieved party; he still has his right of action for damages against the person who has unjustly deprived him of his land and if the title has not been transferred to a third party, an attachment may be levied upon the land. Recourse may also be had to the assurance fund in proper cases. Furthermore, we have already held in the case of Cabanos v. Register of Deeds of Laguna and Obianana (40 Phil., 620), that in certain cases a suit in equity may be maintained to compel the conveyance of registered land to the true owner. A person who, through no fault of his own, has been deprived of his land through registration proceedings is thus offered all the remedies which he, in justice and equity, ought to have; to go farther and allow his claims to prevail against the rights of a bona fide purchaser for value from the holder of a registered title is neither justice nor common sense and is, as we have seen, subversive of the object of the Land Registration Act. This, as far as we can see, would be the inevitable and logical consequence of adopting the doctrine that final land registration decrees may be reopened; it is inconceivable that a certificate of title can stand when the decree upon which it is based fails. It has been suggested by some of the opponents of the views set forth that as under the final decree in a land registration case the petitioner acquires a legal title, a purchaser from him in good faith also acquires a good title and cannot be disturbed through proceedings under section 513, and that such proceedings can, therefore, only reach the original holder of the title and his mala fides transferees. This view is in itself a recognition of the that the sweeping language of the section in question is not, to its full extent, applicable to land registration cases; the only difference between this theory and ours is that the line of the inapplicably of the section is drawn at a different point. Instead of being placed at the issuance of the final decree, thus making the section applicable only to judgments not covered by such decrees, the line of demarcation is drawn at the

point where the land passes into the hands of an innocent purchaser for value. While this interpretation of the law has an appearance of reasonableness and, at first sight, may seem harmless, its adoption would in reality be only slightly less disastrous than the holding that section 513 is applicable to all land registration matters. The fact that the question of good or bad faith on the part of a purchaser would often have to be determined by oral evidence, would introduce an element of uncertainty which would impair the value of Torrens titles out of all proportion to the benefits to be derived from the application of the remedy prescribed by section 513 in the manner suggested. There might be few successful attacks on such titles, but from a practical point of view the possibility of attacks and of litigation in regard to which the Statute of Limitations does not apply, would necessarily have a deterrent effect on possible investors in lands covered by such titles. And, as we have seen, there is not now, and never has been, any real necessity for such an application of the remedy in land registration cases; the field is sufficiently covered by other remedies, equally effective and much less harmful to the public interests. It is, therefore, not at all a question of sanctioning or encouraging fraud by curtailing the remedies against it. For the reasons stated, we hold that the so called "decree of confirmation and registration" provided for in the Land Registration Act is not a judgment within the meaning of section 513 of the Code of Civil Procedure, and that such a decree cannot be reopened except for the reasons and in the manner stated in section 38 of the Land Registration Act. The demurrer must, accordingly, be sustained and it being evident that the petition suffers from defects not curable by an amendment, an order absolute will be entered dismissing the same with costs. So ordered. Johnson, Avanceña, Villamor, and Romualdez, JJ., concur.

Separate Opinions ARAULLO, C.J., concurring:chanrob1es virtual 1aw library I concur in the foregoing decision, and have to state, in addition, that, as the declaration made by this court in the case of Caballes v. Director of Lands (41 Phil., 357) with regard to the application of section 513 of the Code of Civil Procedure to cadastral or land registration proceedings has reference only to the case where final judgment by default has been rendered, and not to that where the final decree has already been entered and the respective certificate of title issued, as in the instant case, such a declaration cannot serve as a ground to support the pretension of the petitioner, nor is it in conflict with the finding and ruling contained in this decision.

STREET, J., with whom concur MALCOLM, and JOHNS, JJ., dissenting:chanrob1es virtual 1aw library The complaint in this case, considered as a petition for relief under section 513 of the Code of Civil Procedure, is apparently defective in more than one respect; and if the court had been content to sustain the demurrer because of the insufficiency of the complaint to make out a cause for relief, the undersigned would not have been called upon to record this dissent. Instead of pursuing this course, the court holds that said section 513 is not applicable in land registration proceedings. In so holding, the court flatly refuses to give effect to so much of section 4 of Act No. 1108 of the Philippine Commission as makes section 513 of our Code of Civil Procedure applicable in land registration cases. The reason suggested for this in substance is that said section is opposed to the spirit and purpose of the Land Registration Act. Our reply to this is the same legislative body that introduced the Torrens system in these Islands was not lacking in power to modify the system so introduced; and it is an unusual and in our opinion unjustified exercise of judicial power to override the legislative will as expressed in the amendatory Act. It is idle to invoke in such case as this the familiar rules of interpretation and construction. These rules were devised for the purpose of enabling the courts to discover the legislative intent when such intent is not readily discernible, and above all rules of statutory interpretation stands the fundamental principle that where the intention of the legislative body is clearly revealed no interpretation or construction is admissible which contradicts that intention. In dealing with a decision believed to be so entirely untenable as this, the temptation to multiply words is great, but we commend ourselves with a few observations on a single aspect of the case, which has reference to the manner in which section 513 of the Code of Civil Procedure would operate in land registration cases if allowed to have effect. In the first place it will be noted that section 513 contemplates and assumes the existence of a valid judgment, which means — in relation to land registration proceedings — that there has been a conclusive adjudication of title and that the decree has become final in the sense that the Court of First Instance has lost the power to change the same and that the time for appeal to the Supreme Court has passed, with the result that, but for the remedy now given in section 513, all right of the party adversely affected by the decree has been totally destroyed. In other words the person in whose name the property has been registered has acquired an indefeasible legal title, subject only to be divested in a subsequent proceeding under section 513. This being true, it must follow that any bona fide purchaser of the property who acquires the same from the person in whose name the same is registered, before any proceeding is instituted under section 513, acquires a good title and

cannot be disturbed, regardless of what the situation may be as between the petitioner, supposedly the original true owner, and the person who procured the property to be registered in his own name. Section 38 of the Land Registration Act, which permits the decree to be opened within one year in the Court of Land Registration upon the petition of one who has been deprived of an interest in the land by fraud, expressly saves the interest of any innocent purchaser for value; and in obedience to recognized principles of jurisprudence the same reservation of the rights of the innocent purchaser must be understood to exist in connection with the remedy given be section 513. It is rudimentary in English and American jurisprudence that a person who has acquired the legal title to property by transfer for value and without notice of any defect in the title will not be deprived thereof at the instance of any person having an equitable right only, even though it be prior in point of time. In this connection it should be borne in mind that the remedy granted in section 513 involves the exercise of the equity powers of the court; and the equitable right of a person against whom a default judgment has been taken in a land registration proceeding, under the decree set aside does not rest upon as high a plane as does the right of an innocent purchaser from the person in whose name the title has been registered. It should be observed that section 513 of the Code of Civil Procedure was originally conceived and reduced to form with especial reference to ordinary civil litigation, such as is chiefly dealt with in the Code of Civil Procedure; and some rational adjustment is necessary when we come to apply that section in land registration cases. It results that the "new trial upon the merits" which may be granted in a proper case under section 513 must of necessity fail of effect as against any innocent purchaser for value claiming by transfer of the Torrens title under the person to whom the certificates was issued. But as between an owner who has lost the legal title under the conditions defined in section 513 and the individual who has been unjustly enriched by the decree of the Land Registration Court in his favor, there is really no reason why the remedy conferred in said section should not be allowed to operate with full effect. In the end, supposing the petition to be sustained and that the property still remains in the name of the respondent, he should be compelled to transfer it to the petitioner. The decision of the court lays great emphasis upon the hardships which might be expected to result to innocent purchasers of registered land, if section 513 should be given effect in land registration proceedings, but what has been said shows that this fear is not well founded. It is needless to say that in the case before us the land in question appears to be still in the position of the person who procured registration and against whom the petition brought. The view of the land registration system entertained by the majority seems entirely to ignore section 70 of the Land Registration Act, and especially the concluding portion which declares that nothing in said Act shall in any way be construed to change or affect any rights or liabilities created by law and

applicable to registered land, except as otherwise expressly provided in said Act or in the amendments thereof. This is really a basal idea in the system, and when an amendatory statute has expressly created a liability with reference to registered land, as was inferentially done when the remedy expressed in section 513 of the Code of Civil Procedure was made applicable to land registration cases, said liability should undoubtedly be respected by all the courts called upon to maintain the law. It is to be regretted that our land registration system should have become an object of superstitious reverence to such a degree as to inhibit the court from giving effect to a plain mandate of the statutory law. No system worth preserving was ever destroyed, or even impaired, by the creation of a remedy against fraud or for the relief of those who have lost their property without fault.

FIRST DIVISION

[G.R. No. 8936. October 2, 1915. ]

CONSUELO LEGARDA, with her husband MAURO PRIETO, Plaintiffs-Appellants, v. N. M. SALEEBY, Defendant-Appellee.

Singson, Ledesma & Lim for Appellants.

D. R. Williams for Appellee.

SYLLABUS

1. REGISTRATION OF LAND; REGISTRATION OF SAME LAND IN THE NAMES OF TWO DIFFERENT PERSONS. — L obtained a decree of registration of a parcel of land

on the 25th of October, 1906. S, on the 25th of March, 1912, obtained a certificate of registration for his land which joined the land theretofore registered by L. The certificate of title issued to S included a narrow strip of the land theretofore registered in the name

of L. On the 13th of December, 1912, L presented a petition in the Court of Land Registration for the adjustment and correction of the error committed in the certificate issued to S, which included said narrow strip of land. Held: That in a case where two certificates of title include or cover the same land, the earlier in date must prevail as between the original parties, whether the land comprised in the latter certificate be wholly or only in part comprised in the earlier certificate. In successive registrations

where more than one certificate is issued in respect of a particular interest in land, the person holding under the prior certificate is entitled to the land as against the person

who obtained the second certificate. The decree of registration is conclusive upon and against all persons.

2. ID.; PURPOSE OF THE TORRENS SYSTEM. — The real purpose of the torrens

system of land registration is to quiet title to land; to put a stop forever to any question of the legality of the title, except claims which were noted, at the time of registrations in the certificate, or which may arise subsequent thereto. That being the purpose of the law, it would seem that once the title was registered, the owner might rest secure, without the necessity of waiting in the portals of the court, or sitting in the "mirador de su casa," to avoid the possibility of losing his land. The proceeding for the registration of land under

the torrens system is a judicial proceeding, but it involves more in its consequences than does an ordinary action.

3. ID; ID.; EFFECT OF REGISTRATION AND CERTIFICATE OF TITLE. — The

registration under the torrens system and the issuance of a certificate of title do not give

the owner any better title than he had. He does not obtain title by virtue of the certificate. He secures his certificate by virtue of the fact that he has a fee simple title. If he obtains

a certificate of title, by mistake, to more land than he really and in fact owns, the certificate should be corrected. If he does not already have a perfect title, he can not secure his certificate. Having a fee simple title, and presenting sufficient proof of that fact, he is entitled to a certificate of registration. The certificate of registration simply

accumulates, in one document, a precise and correct statement of the exact status of the fee simple title, which the owner, in fact, has. The certificate, once issued, is the

evidence of the title which the owner has. The certificate should not be altered, changed, modified, enlarged or diminished, except to correct errors, in some direct

proceedings permitted by law. The title represented by the certificate can not be changed, altered, modified, enlarged or diminished in a collateral proceeding.

D E C I S I O N

JOHNSON, J. : From the record the following facts appear:chanrob1es virtual 1aw library First. That the plaintiffs and the defendant occupy, as owners, adjoining lots in the district of Ermita in the city of Manila. Second. That there exists and has existed for a number of years a stone wall between the said lots. Said wall is located on the lot of the plaintiffs. Third. That the plaintiffs, on the 2d day of March, 1906, presented a petition in the Court of Land Registration for the registration of their lot. After a consideration of said petition the court, on the 25th day of October, 1906, decreed that the title of the plaintiffs should be registered and issued to them the original certificate provided for under the torrens system. Said registration and certificate included the wall. Fourth. Later the predecessor of the defendant presented a petition in the Court of Land Registration for the registration of the lot now occupied by him. On the 25th day of March, 1912, the court decreed the registration of said title and issued the original certificate provided for under the torrens system. The description of the lot given in the petition of the defendant also included said wall. Fifth. Several months later (the 13th day of December, 1912) the plaintiffs discovered that the wall which had been included in the certificate granted to them had also been included in the certificate granted to the defendant. They immediately presented a petition in the Court of Land Registration for an adjustment and correction of the error committed by including said wall in the registered title of each of said parties. The lower court however, without notice to the defendant, denied said petition upon the theory

that, during the pendency of the petition for the registration of the defendant’s land, they failed to make any objection to the registration of said lot, including the wall, in the name of the defendant. Sixth. That the land occupied by the wall is registered in the name of each of the owners of the adjoining lots. The wall is not a joint wall. Under these facts, who is the owner of the wall and the land occupied by it? The decision of the lower court is based upon the theory that the action for the registration of the lot of the defendant was a judicial proceeding and that the judgment or decree was binding upon all parties who did not appear and oppose it. In other words, by reason of the fact that the plaintiffs had not opposed the registration of that part of the lot on which the wall was situate they had lost it, even though it had been theretofore registered in their name. Granting that theory to be the correct one, and granting even that the wall and the land occupied by it, in fact, belonged to the defendant and his predecessors, then the same theory should be applied to the defendant himself. Applying that theory to him, he had already lost whatever right he had therein, by permitting the plaintiffs to have the same registered in their name, more than six years before. Having thus lost his right, may he be permitted to regain it by simply including it in a petition for registration? The plaintiffs having secured the registration of their lot, including the wall, were they obliged to constantly be on the alert and to watch all the proceedings in the land court to see that some one else was not having all, or a portion of the same, registered? If that question is to be answered in the affirmative, then the whole scheme and purpose of the torrens system of land registration must fail. The real purpose of that system is to quiet title to land; to put a stop forever to any question of the legality of the title, except claims which were noted at the time of registration, in the certificate, or which may arise subsequent thereto. That being the purpose of the law, it would seem that once a title is registered the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting in the "mirador de su casa," to avoid the possibility of losing his land. Of course, it can not be denied that the proceeding for the registration of land under the torrens system is judicial (Escueta v. Director of Lands, 16 Phil. Rep., 482). It is clothed with all the forms of an action and the result is final and binding upon all the world. It is an action in rem. (Escueta v. Director of Lands (supra); Grey Alba v. De la Cruz, 17 Phil. Rep., 49; Roxas v. Enriquez, 29 Phil. Rep., 31; Tyler v. Judges, 175 Mass., 71; American Land Co. v. Zeiss, 219 U. S., 47.) While the proceeding is judicial, it involves more in its consequences than does an ordinary action. All the world are parties, including the government. After the registration is complete and final and there exists no fraud, there are no innocent third parties who may claim an interest The rights of all the world are foreclosed by the decree of registration. The government itself assumes the burden of giving notice to all parties. To permit persons who are parties in the registration proceeding (and they are all the world) to again litigate the same questions, and to again cast doubt upon the validity of the registered title, would destroy the very purpose and intent of the law. The

registration, under the torrens system, does not give the owner any better title than he had. If he does not already have a perfect title, he can not have it registered. Fee simple titles only may be registered. The certificate of registration accumulates in one document a precise and correct statement of the exact status of the fee held by its owner. The certificate, in the absence of fraud, is the evidence of title and shows exactly the real interest of its owner. The title once registered, with very few exceptions, should not thereafter be impugned, altered, changed, modified, enlarged, or diminished, except in some direct proceeding permitted by law. Otherwise all security in registered titles would be lost. A registered title can not be altered, modified, enlarged, or diminished in a collateral proceeding and not even by a direct proceeding, after the lapse of the period prescribed by law. For the difficulty involved in the present case the Act (No. 496) providing for the registration of titles under the torrens system affords us no remedy. There is no provision in said Act giving the parties relief under conditions like the present. There is nothing in the Act which indicates who should be the owner of land which has been registered in the name of two different persons. The rule, we think, is well settled that the decree ordering the registration of a particular parcel of land is a bar to future litigation over the same between the same parties. In view of the fact that all the world are parties, it must follow that future litigation over the title is forever barred; there can be no Persons who are not parties to the action. This, we think, is the rule, except as to rights which are noted in the certificate or which arise subsequently, and with certain other exceptions which need not be discussed at present. A title once registered can not be defeated, even by an adverse, open, and notorious possession. Registered title under the torrens system can not be defeated by prescription (section 46, Act No. 496). The title, once registered, is notice to the world. All persons must take notice. No one can plead ignorance of the registration. The question, who is the owner of land registered in the name of two different persons, has been presented to the courts in other jurisdictions. In some jurisdictions, where the "torrens" system has been adopted, the difficulty has been settled by express statutory provision. In others it has been settled by the courts. Hogg, in his excellent discussion of the "Australian Torrens System," at page 823, says: "The general rule is that in the case of two certificates of title, purporting to include the same land, the earlier in date prevails, whether the land comprised in the latter certificate be wholly, or only in part, comprised in the earlier certificate. (Oelkers v. Merry, 2 Q. S. C. R., 193; Miller v. Davy, 7 N. Z. R., 155; Lloyd v. May-field, 7 A. L. T. (V.) 48; Stevens v. Williams, 12 V. L. R., 152; Register of Titles v. Esperance Land Co., 1 W. A. R., 118.)" Hogg adds however that, "if it can be clearly ascertained by the ordinary rules of construction relating to written documents, that the inclusion of the land in the certificate of title of prior date is a mistake, the mistake may be rectified by holding the latter of the two certificates of title to be conclusive." (See Hogg on the "Australian Torrens System," supra, and cases cited. See also the excellent work of Niblack in his "Analysis of the Torrens System," page 99.) Niblack, in discussing the general question, said: "Where two certificates purport to include the same land the earlier in date prevails . . . In successive

registrations, where more than one certificate is issued in respect of a particular estate or interest in land, the person claiming under the prior certificate is entitled to the estate or interest; and that person is deemed to hold under the prior certificate who is the holder of, or whose claim is derived directly or indirectly from the person who was the holder of the earliest certificate issued in respect thereof. While the acts in this country do not expressly cover the case of the issue of two certificates for the same land, they provide that a registered owner shall hold the title, and the effect of this undoubtedly is that where two certificates purport to include the same registered land, the holder of the earlier one continues to hold the title" (p. 237). Section 38 of Act No. 496, provides that; "It (the decree of registration) shall be conclusive upon and against all persons, including the Insular Government and all the branches thereof, whether mentioned by name in the application, notice, or citation, or included in the general description ’To all whom it may concern.’ Such decree shall not be opened by reason of the absence, infancy, or other disability of any person affected thereby, nor by any proceeding in any court for reversing judgments or decrees; subject, however, to the right of any person deprived of land or of any estate or interest therein by decree of registration obtained by fraud to file in the Court of Land Registration a petition for review within one year after entry of the decree (of registration), provided no innocent purchaser for value has acquired an interest."cralaw virtua1aw library It will be noted, from said section, that the "decree of registration" shall not be opened, for any reason, in any court, except for fraud, and not even for fraud, after the lapse of one year. If then the decree of registration can not be opened for any reason, except for fraud, in a direct proceeding for that purpose, may such decree be opened or set aside in a collateral proceeding by including a portion of the land in a subsequent certificate or decree of registration? We do not believe the law contemplated that a person could be deprived of his registered title in that way. We have in this jurisdiction a general statutory provision which governs the right of the ownership of land when the same is registered in the ordinary registry in the name of two different persons. Article 1473 of the Civil Code provides, among other things, that when one piece of real property has been sold to two different persons it shall belong to the person acquiring it, who first inscribes it in the registry. This rule, of course, presupposes that each of the vendees or purchasers has acquired title to the land. The real ownership in such a case depends upon priority of registration. While we do not now decide that the general provisions of the Civil Code are applicable to the Land Registration Act, even though we see no objection thereto, yet we think, in the absence of other express provisions, they should have a persuasive influence in adopting a rule for governing the effect of a double registration under said Act. Adopting the rule which we believe to be more in consonance with the purposes and the real intent of the torrens system, we are of the opinion and so decree that in case land has been registered under the Land Registration Act in the name of two different persons, the earlier in date shall prevail. In reaching the above conclusion, we have not overlooked the forceful argument of the

appellee. He says, among other things; "When Prieto Et. Al. were served with notice of the application of Teus (the predecessor of the defendant) they became defendants in a proceeding wherein he, Teus, was seeking to foreclose their right, and that of others, to the parcel of land described in his application. Through their failure to appear and contest his right thereto, and the subsequent entry of a default judgment against them, they became irrevocably bound by the decree adjudicating such land to Teus. They had their day in court and cannot set up their own omission as ground for impugning the validity of a judgment duly entered by a court of competent jurisdiction. To decide otherwise would be to hold that lands with torrens titles are above the law and beyond the jurisdiction of the courts."cralaw virtua1aw library As was said above, the primary and fundamental purpose of the torrens system is to quiet title. If the holder of a certificate cannot rest secure in his registered title then the purpose of the law is defeated. If those dealing with registered land cannot rely upon the certificate, then nothing has been gained by the registration and the expense incurred thereby has been in vain. If the holder may lose a strip of his registered land by the method adopted in the present case, he may lose it all. Suppose within the six years which elapsed after the plaintiff had secured their title they had mortgaged or sold their right, what would be the position or right of the mortgagee or vendee? That mistakes are bound to occur cannot be denied, and sometimes the damage done thereby is irreparable. It is the duty of the courts to adjust the rights of the parties under such circumstances so as to minimize such damages, taking into consideration all of the conditions and the diligence of the respective parties to avoid them. In the present case, the appellee was first negligent (granting that he was the real owner, and if he was not the real owner he can not complain) in not opposing the registration in the name of the appellants. He was a party-defendant in an action for the registration of the lot in question, in the name of the appellants, in 1906. "Through his failure to appear and to oppose such registration, and the subsequent entry of a default judgment against him, he became irrevocably bound by the decree adjudicating such land to the appellants. He had his day in court and should not be permitted to setup his own omissions as the ground for impugning the validity of a judgment duly entered by a court of competent jurisdiction." Granting that he was the owner of the land upon which the wall is located, his failure to Oppose the registration of the same in the name of the appellants, in the absence of fraud, forever closes his mouth against impugning the validity of that judgment. There is no more reason why the doctrine invoked by the appellee should be applied to the appellants than to him. We have decided, in case of double registration under the Land Registration Act. that the owner of the earliest certificate is the owner of the land. That is the rule between original parties. May this rule be applied to successive vendees of the owners of such certificates? Suppose that one or the other of the parties, before the error is discovered, transfers his original certificate to an "innocent purchaser. "The general rule is that the vendee of land has no greater right, title, or interest than his vendor; that he acquires the right which his vendor had, only. Under that rule the vendee of the earlier certificate would be the owner as against the vendee of the owner of the later certificate.

We find statutory provisions which, upon first reading, seem to cast some doubt upon the rule that the vendee acquires the interest of the vendor only. Sections 38, 55, and 112 of Act No. 496 indicate that the vendee may acquire rights and be protected against defenses which the vendor would not. Said sections speak of available rights in favor of third parties which are cut off by virtue of the sale of the land to an "innocent purchaser." That is to say, persons who had had a right or interest in land wrongfully included in an original certificate would be unable to enforce such rights against an "innocent purchaser," by virtue of the provisions of said sections. In the present case Teus had his land, including the wall, registered in his name. He subsequently sold the same to the appellee. Is the appellee an "innocent purchaser," as that phrase is used in said sections? May those who have been deprived of their land by reason of a mistake in the original certificate in favor of Teus be deprived of their right to the same, by virtue of the sale by him to the appellee? Suppose the appellants had sold their lot, including the wall, to an "innocent purchaser," would such purchaser be included in the phrase "innocent purchaser," as the same is used in said sections? Under these examples there would be two innocent purchasers of the same land, if said sections are to be applied. Which of the two innocent purchasers, if they are both to be regarded as innocent purchasers, should be protected under the provisions of said sections? These questions indicate the difficulty with which we are met in giving meaning and effect to the phrase "innocent purchaser," in said sections. May the purchaser of land which has been included in a "second original certificate" ever be regarded as an "innocent purchaser," as against the rights or interest of the owner of the first original certificate, his heirs, assigns, or vendee? The first original certificate is recorded in the public registry. It is never issued until it is recorded. The record is notice to all the world. All persons are charged with the knowledge of what it contains. All persons dealing with the land so recorded, or any portion of it, must be charged with notice of whatever it contains. The purchaser is charged with notice of every fact shown by the record and is presumed to know every fact which the record discloses. This rule is so well established that it is scarcely necessary to cite authorities in its support (Northwestern National Bank v. Freeman, 171 U. S., 620, 629; Delvinon Real Estate, sections 710, 710 [a]). When a conveyance has been properly recorded such record is constructive notice of its contents and all interests, legal and equitable, included therein. (Grandin v. Anderson, 15 Ohio State, 286, 289; Orvis v. Newell, 17 Conn., 97; Buchanan v. International Bank, 78 Ill., 500; Youngs v. Wilson, 27 N. Y., 351; McCabe v. Grey, 20 Cal., 509; Montefiore v. Browne, 7 House of Lords Cases, 341.) Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the title. Such presumption is irrebutable. He is charged with notice of every fact shown by the record and is presumed to know every fact which an examination of the record would have disclosed. This presumption cannot be overcome by proof of innocence or good faith. Otherwise the very purpose and object of the law requiring a record would be destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the record contains anymore than one may be

permitted to show that he was ignorant of the provisions of the law. The rule that all persons must take notice of the facts which the public record contains is a rule of law. The rule must be absolute. Any variation would lead to endless confusion and useless litigation. While there is no statutory provision in force here requiring that original deeds of conveyance of real property be recorded, yet there is a rule requiring mortgages to be recorded. (Arts. 1875 and 606 of the Civil Code.) The record of a mortgage is indispensable to its validity. (Art. 1875.) In the face of that statute would the courts allow a mortgage to be valid which had not been recorded, upon the plea of ignorance of the statutory provision, when third parties were interested? May a purchaser of land, subsequent to the recorded mortgage, plead ignorance of its existence, and by reason of such ignorance have the land released from such lien? Could a purchaser of land, after the recorded mortgage, be relieved from the mortgage lien by the plea that he was a bona fide purchaser? May there be a bona fide purchaser of said land, bona fide in the sense that he had no knowledge of the existence of the mortgage? We believe the rule that all persons must take notice of what the public record contains is just as obligatory upon all persons as the rule that all men must know the law; that no one can plead ignorance of the law. The fact that all men know the law is contrary to the presumption. The conduct of men, at times, shows clearly that they do not know the law. The rule, however, is mandatory and obligatory, notwithstanding. It would be just as logical to allow the plea of ignorance of the law affecting a contract as to allow the defense of ignorance of the existence and contents of a public record. In view, therefore, of the foregoing rules of law, may the purchaser of land from the owner of the second original certificate be an "innocent purchaser," when a part or all of such land had theretofore been registered in the name of another, not the vendor? We are of the opinion that said sections 38, 55, and 112 should not be applied to such purchasers. We do not believe that the Phrase "innocent purchasers should be applied to such a purchaser. He cannot be regarded as an "innocent purchaser" because of the facts contained in the record of the first original certificate. The rule should not be applied to the purchaser of a parcel of land the vendor of which is not the owner of the original certificate, or his successors. He, in no sense, can be an "innocent purchaser" of the portion of the land included in another earlier original certificate. The rule of notice of what the record contains precludes the idea of innocence. By reason of the prior registry there cannot be an innocent purchaser of land included in a prior original certificate and in a name other than that of the vendor, or his successors. In order to minimize the difficulties we think this is the safer rule to establish. We believe the phrase "innocent purchaser," used in said sections, should be limited only to cases where unregistered land has been wrongfully included in a certificate under the torrens system. When land is once brought under the torrens system, the record of the original certificate and all subsequent transfers thereof is notice to all the world. That being the rule, could Teus even be regarded as the holder in good faith of that part of the land included in his certificate which had theretofore been included in the original certificate of the appellants? We think not. Suppose, for example, that Teus had never had his lot registered under the torrens system. Suppose he had sold his lot to the appellee and

had included in his deed of transfer the very strip of land now in question. Could his vendee be regarded as an "innocent purchaser" of said strip? Would his vendee be an "innocent purchaser" of said strip? Certainly not. The record of the original certificate of the appellants precludes the possibility. Has the appellee gained any right by reason of the registration of the strip of land in the name of his vendor? Applying the rule of notice resulting from the record of the title of the appellants, the question must be answered in the negative. We are of the opinion that these rules are more in harmony with the purpose of Act No. 496 than the rule contended for by the appellee. We believe that the purchaser from the owner of the later certificate, and his successors. should be required to resort to his vendor for damages, in case of a mistake like the present, rather than to molest the holder of the first certificate who has been guilty of no negligence. The holder of the first original certificate and his successors should be permitted to rest secure in their title, against one who had acquired rights in conflict therewith and who had full and complete knowledge of their rights. The purchaser of land included in the second original certificate, by reason of the facts contained in the public record and the knowledge with which he is charged and by reason of his negligence, should suffer the loss, if any, resulting from such purchase, rather than he who has obtained the first certificate and who was innocent of any act of negligence. The foregoing decision does not solve, nor pretend to solve, all the difficulties resulting from double registration under the torrens system and the subsequent transfer of the land. Neither do we now attempt to decide the effect of the former registration in the ordinary registry upon the registration under the torrens system. We are inclined to the view, without deciding it, that the record under the torrens system must, by the very nature and purposes of that system, supersede all other registries. If that view is correct then it will be sufficient, in dealing with land registered and recorded under the torrens system, to examine that record alone. Once land is registered and recorded under the torrens system, that record alone can be examined for the purpose of ascertaining the real status of the title to the land. It would seem to be a just and equitable rule, when two persons have acquired equal rights in the same thing, to hold that the one who acquired it first and who has complied with all the requirements of the law should be protected. In view of our conclusions, above stated, the judgment of the lower court should be and is hereby revoked. The record is hereby returned to the court now having and exercising the jurisdiction heretofore exercised by the land court, with direction to make such orders and decrees in the premises as may correct the error heretofore made in including the land in question in the second original certificate issued in favor of the predecessor of the appellee, as well as in all other duplicate certificates issued. Without any finding as to costs, it is so ordered. Arellano, C.J. Torres and Araullo, JJ., concur.

Separate Opinions

CARSON J., with whom concurs TRENT, J., dissenting:chanrob1es virtual 1aw library I dissent. In cases of double or overlapping registration, I am inclined to agree with the reasoning and authority on which it is held in the majority opinion (first) that the original holder of the prior certificate is entitled to the land as against the original holder of the later certificate, where there has been no transfer of title by either party to an innocent purchaser; both, as is shown in the majority opinion, being at fault in permitting the double registration to take place; (second) that an innocent purchaser claiming under the prior certificate is entitled to the land as against the original holder of the later certificate, and also as against innocent purchasers from the holder of the later certificate; the innocent purchaser being in no wise at fault in connection with the issuance of the later certificate. But I am of opinion that neither the authorities cited, nor the reasoning of the majority opinion sustains the proposition that the original holder of the prior certificate is entitled to the land as against an innocent purchaser from the holder of the later certificate. As to the text-book authorities cited in the majority opinion, it is sufficient to say that the rules laid down by both Hogg and Niblack are mere general rules, admittedly subject to exception, and of course of no binding force or authority where the reasoning upon which these rules are based is inapplicable to the facts developed in a particular case. In its last analysis the general rule laid down in the majority opinion rests upon the proposition set forth in the last page of the opinion wherein it is said that "it would seem to be a just and equitable rule, when two persons have acquired equal rights in the same thing, to hold that the one who acquired it first and who has complied with all the requirements of the law should be protected." The rule, as applied to the matter in hand, may be stated as follows: It would seem to be a just and equitable rule when two persons have acquired separate and independent registered titles to the same land, under the Land Registration Act, to hold that the one who first acquired registered title and who has complied with all the requirements of the law in that regard should be protected, in the absence of any express statutory provision to the contrary. Thus stated I have no quarrel with the doctrine as a statement of the general rule to be applied in cases of double or overlapping registration under the Land Registration Act; for it is true as stated in the majority opinion that in the adjudication and registration of titles by the Courts of Land Registration "mistakes are bound to occur, and sometimes the damage done thereby is irreparable;" and that in the absence of statutory provisions covering such cases, "it is the duty of the courts to adjust the rights of the parties, under such circumstances, so as to minimize such damages, taking into consideration all of the conditions, and the diligence of the respective parties to avoid them."cralaw virtua1aw library

But like most such general rules, it has its exceptions and should not be applied in a case wherein the reasons on which it is based do not exist, or in cases wherein still more forceful reasons demand the application of a contrary rule. The general rule relied upon in the majority opinion is a mere application of a well settled equity rule that: "Where conflicting equities are otherwise equal in merit, that which first accrued will be given the preference." But it is universally laid down by all the courts which have had occasion to apply this equity rule that "it should be the last test resorted to," and that "it never prevails when any other equitable ground for preference exists." (See 19 Cent. Dig., tit. Equity, par. 181; and many cases cited in 16 Cyc., 139. note 57.) It follows that the general rules, that in cases of double or overlapping registration the earlier certificate should be protected, ought not to prevail so as to, deprive an innocent purchaser under the later certificate of his title in any case wherein the fraud or negligence of the holder of the earlier certificate contributed to the issuance of the later certificate. Hence the holder of the earlier certificate of title should not be heard to invoke the" just and equitable rule" as laid down in the majority opinion, in order to have his own title protected and the title of an innocent holder of a later certificate cancelled or annulled, in any case wherein it appears that the holder of the later certificate was wholly without fault, while the holder of the earlier certificate was wholly or largely to blame for the issuance of the later certificate, in that he might have prevented its issuance by merely entering his appearance in court in response to lawful summons personally served upon him in the course of the proceedings for the issuance of the second certificate, and pleading his superior rights under the earlier certificate, instead of keeping silent and by his silence permitting a default judgment to be entered against him adjudicating title in favor of the second applicant. The majority opinion clearly recognizes the soundness of the principles I am contending for by the reasoning (with which I am inclined to agree) whereby it undertakes to demonstrate that as between the original holders of the double or overlapping registration the general rule should prevail, because both such original parties must be held to have been at fault and, their equities being equal, preference should be given to the earlier title. The majority opinion further recognizes the soundness of my contention by the reasoning whereby it undertakes to sustain the application of the general rule in favor of the original holder of the earlier certificate against purchasers from the original holder of the later certificate, by an attempt to demonstrate that such purchasers can in no event be held to be innocent purchasers: because, as it is said, negligence may and should always be imputed to such a purchaser, so that in no event can he claim to be without fault when it appears that the lands purchased by him from the holder of a duly registered certificate of title are included within the bounds of the lands described in a certificate of title of an earlier date. At considerable length the majority opinion (in reliance upon the general rule laid down under the various systems of land registration, other than those based on the torrens

system) insists that a purchaser of land duly registered in the Land Registration Court, is charged with notice of the contents of each and every one of the thousands and tens of thousands of certificates of registry on file in the land registry office, so that negligence may be imputed to him if he does not ascertain that all or any part of the land purchased by him is included within the boundary lines of anyone of the thousands or tens of thousands of tracts of land whose original registry bears an earlier date than the date of the original registry of the land purchased by him. It is contended that he cannot claim to be without fault should he buy such land because, as it is said, it was possible for him to discover that the land purchased by him had been made the subject of double or overlapping registration by a comparison of the description and boundary lines of the thousands of tracts and parcels of land to be found in the land registry office. But such a ruling goes far to defeat one of the principal objects sought to be attained by the introduction and adoption of the so called torrens system for the registration of land. The avowed intent of that system of land registration is to relieve the purchaser of registered lands from the necessity of looking farther than the certificate of title of the vendor in order that he may rest secure as to the validity of the title to the lands conveyed to him. And yet it is said in the majority opinion that he is charged with notice of the contents of every other certificate of title in the office of the registrar so that his failure to acquaint himself with its contents may be imputed to him as negligence. If the rule announced in the majority opinion is to prevail, the new system of land registration, instead of making transfers of real estate simple, expenditious and secure, and instead of avoiding the necessity for expensive and ofttimes uncertain searches of the land records and registries, in order to ascertain the true condition of the title before purchase, will, in many instances, add to the labor, expense and uncertainty of any attempt by a purchaser to satisfy himself as to the validity of the title to lands purchased by him. As I have said before, one of the principal objects, if not the principal object, of the torrens system of land registration upon which our Land Registration Act is avowedly modelled is to facilitate the transfer of real estate. To that end the Legislature undertakes to relieve prospective purchasers and all others dealing in registered lands from the necessity of looking farther than the certificate of title to such lands furnished by the Court of Land Registration, and I cannot, therefore, give my consent to a ruling which charges a purchaser or mortgagee of registered lands with notice of the contents of every other certificate of title in the land registry, so that negligence and fault may be imputed to him should he be exposed to loss or damages as a result of the lack of such knowledge. Suppose a prospective purchaser of lands registered under the Land Registration Act desires to avoid the imputation of negligence in the event that, unknown to him, such lands have been made the subject of double or overlapping registration, what course should he pursue? What measures should he adopt in order to search out the information with notice of which he is charged? There are no indexes to guide him nor is

there anything in the record or the certificate of title of the land he proposes to buy which necessarily or even with reasonable probability will furnish him a clue as to the fact of the existence of such double or overlapping registration. Indeed the only course open to him, if he desires to assure himself against the possibility of double or overlapping registration, would seem to be a careful laborious and extensive comparison of the registered boundary lines contained in the certificate of title of the tract of land he proposes to buy with those contained in all the earlier certificates of title to be found in the land registry. Assuredly it was never the intention of the author of the new Land Registration Act to impose such a burden on a purchaser of duly registered real estate, under penalty that a lack of the knowledge which might thus be acquired maybe imputed to him by this court as negligence in ruling upon the respective equities of the holders of lands which have been the subject of double or overlapping registration. On the other hand, I think that negligence and fault may fairly be imputed to a holder of a registered certificate of title who stood supinely by and let a default judgment be entered against him, adjudicating all or any part of his registered lands to another applicant, if it appears that he was served with notice or had actual notice of the pendency of the proceedings in the Court of Land Registration wherein such default judgment was entered. The owner of land who enjoys the benefits secured to him by its registry in the Court of Land Registration may reasonably be required to appear and defend his title when he has actual notice that proceedings are pending in that court wherein another applicant, claiming the land as his own, is seeking to secure its registry in his name. All that is necessary for him to do is to enter his appearance in those proceedings, invite the court’s attention to the certificate of title registered in his name, and thus, at the cost of the applicant, avoid all the damage and inconvenience flowing from the double or overlapping registration of the land in question. There is nothing in the new system of land registration which seems to render it either expedient or necessary to relieve a holder of a registered title of the duty of appearing and defending that title, when he has actual notice that it is being attacked in a court of competent jurisdiction, and if, as a result of his neglect or failure so to do, his lands become subject to double or overlapping registration, he should not be permitted to subject an innocent purchaser, holding under the later certificate to all the loss and damage resulting from the double or overlapping registration, while he goes scot free and holds the land under a manifest misapplication of the equitable rule that "where conflicting equities are otherwise equal in merit, that which first accrued will be given the preference." It is only where both or neither of the parties are at fault that the rule is properly applicable as between opposing claimants under an earlier and a later certificate of registry to the same land. Of course all that is said in the briefs of counsel and the majority opinion as to the right of the holder of a certificate to rest secure in his registered title so that those dealing with registered lands can confidently rely upon registry certificates thereto is equally forceful by way of argument in favor of the holder of one or the other certificate in case of double or overlapping registration. The problem is to determine which of the

certificate holders is entitled to the land. The decision of that question in favor of either one must necessarily have the effect of destroying the value of the registered title of the other and to that extent shaking the public confidence in the value of the whole system for the registration of lands. But, in the language of the majority opinion, "that mistakes are bound to occur cannot be denied and sometimes the damage done thereby is irreparable. It is the duty of the courts to adjust the rights of the parties under such circumstances so as to minimize the damages, taking into consideration all the conditions and the diligence of the respective parties to avoid them."cralaw virtua1aw library It will be observed that I limit the exception to the general equitable rule, as laid down in the majority opinion, to cases wherein the holder of the earlier certificate of title has actual notice of the pendency of the proceedings in the course of which the later certificate of title was issued, or to cases in which he has received personal notice of the pendency of those proceedings. Unless he has actual notice of the pendency of such proceedings I readily agree with the reasoning of the majority opinion so far as it holds that negligence, culpable negligence, should not be imputed to him for failure to appear and defend his title so as to defeat his right to the benefit of the equitable rule. It is true that the order of publication in such cases having been duly complied with, all the world is charged with notice thereof, but it does not necessarily follow that, in the absence of actual notice, culpable negligence in permitting a default judgment to be entered against him may be imputed to the holder of the earlier certificate so as to defeat his right to the land under the equitable rule favoring the earlier certificate. Such a holding would have the effect (to quote the language of the majority opinion) of requiring the holder of a certificate of title to wait indefinitely "in the portals of the court" and to sit in the "mirador de su casa" in order to avoid the possibility of losing his lands; and I agree with the writer of the majority opinion that to do so would place an unreasonable burden on the holders of such certificate, which was not contemplated by the authors of the Land Registration Act. But no unreasonable burden is placed upon the holder of a registered title by a rule which imputes culpable negligence to him when he sits supinely by and lets a judgment in default be entered against him adjudicating title to his lands in favor of another applicant, despite the fact that he has actual knowledge of the pendency of the proceedings in which such judgment is entered and despite the fact that he has been personally served with summons to appear and default his title. "Taking into consideration all of the conditions and the diligence of the respective parties," it seems to me that there is no "equality in merit" between the conflicting equities set up by an innocent purchaser who acquires title to the land under a registered certificate, and the holder of an earlier certificate who permitted a default judgment to be entered against him, despite actual notice of the pendency of the proceedings in the course of which the later certificate was issued. I am convinced, furthermore, that aside from the superior equities of the innocent purchaser in cases such as that now under discussion, there are strong reasons of convenience and public policy which militate in favor of the recognition of his title rather than that of the holder of the earlier title.

One ruling exposes all persons purchasing or dealing in registered lands to unknown, unspecified and uncertain dangers, to guard against which all such persons will be put to additional cost, annoyance and labor on every occasion when any transaction is had with regard to such lands; while the other ruling tends to eliminate consequences so directly adverse to the purpose and object for which the land registration law was enacted, and imposes no burden upon any holder of a certificate of registered lands other than that of defending his title on those rare, definite and specific occasions wherein he has actual notice that his title is being challenged in a Court of Land Registration, a proceeding in which the cost and expense is reduced to the minimum by the conclusive character of his certificate of title in support of his claim of ownership. Furthermore, judgment against the innocent purchaser and in favor of the holder of the earlier certificate in a case such as that under consideration must inevitably tend to increase the danger of double or overlapping registrations by encouraging holders of registered titles, negligently or fraudulently and collusively, to permit default judgments to be entered against them adjudicating title to all or a part of their registered lands in favor of other applicants, despite actual notice of the pendency of judicial proceedings had for that purpose, and this, without adding in any appreciable degree to the security of their titles, and merely to save them the very slight trouble or inconvenience incident to an entry of appearance in the court in which their own titles were secured, and inviting attention to the fact that their right, title and ownership in the lands in question has already been conclusively adjudicated. The cases wherein there is a practical possibility of double or overlapping registration without actual notice to the holder of the earlier certificate must in the very nature of things be so rare as to be practically negligible. Double or overlapping registration almost invariably occurs in relation to lands held by adjoining occupants or claimants. It is difficult to conceive of a case wherein double registration can take place, in the absence of fraud, without personal service of notice of the pendency of the proceedings upon the holder of the earlier certificate, the statute requiring such notice to be served upon the owner or occupant of all lands adjoining those for which application for registration is made; and the cases wherein an adjoining land owner can, even by the use of fraud, conduct proceedings for the registration of his land to a successful conclusion without actual notice to the adjoining property owners must be rare indeed. In the case at bar the defendant purchased the land in question from the original holder of a certificate of title issued by the Court of Land Registration, relying upon the records of the Court of Land Registration with reference thereto and with no knowledge that any part of the land thus purchased was included in an earlier certificate of title issued to plaintiff. The plaintiff, the holder of the earlier certificate of title, negligently permitted a default judgment to be entered against him in the Court of Land Registration, adjudicating part of the lands included in his own certificate of title in favor of another applicant, from whom the defendant in this action acquired title, and this despite the fact that he was an adjoining land owner, had actual notice of the pendency of the proceedings and was personally served with summons to appear and defend his rights in the premises. It seems to me that there can be no reason for doubt as to the

respective merits of the equities of the parties, and further that the judgment of the majority in favor of the plaintiff will inevitably tend to increase the number of cases wherein registered land owners in the future will fail to appear and defend their titles when challenged in other proceedings in the Courts of Land Registration, thereby enormously increasing the possibility and probability of loss and damage to innocent third parties and dealers in registered lands generally, arising out of erroneous, double or overlapping registration of lands by the Courts of Land Registration.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-16257 January 31, 1963

CAPITOL SUBDIVISION, INC., plaintiff-appellant, vs. PROVINCE OF NEGROS OCCIDENTAL, defendant-appellee.

San Juan, Africa & Benedicto for plaintiff-appellant. Eduardo P. Arboleda and Jesus S. Rodriguez for defendant-appellee.

CONCEPCION, J.:

Plaintiff, Capitol Subdivision, Inc., seeks to recover from defendant, the Province of Negros Occidental, the possession of Lot 378 of the cadastral survey of Bacolod, Negros Occidental, and a reasonable compensation for the use and occupation of said lot by the defendant from November 8, 1935, in addition to attorney's fees and costs. On June 28, 1951, the Court of First Instance of Negros Occidental rendered judgment for the plaintiff. On appeal taken by the defendant, this judgment was, however, set aside by the Supreme Court (see G.R. No. L-6204, decided on July 31, 1956), which, likewise, ordered the case remanded to the lower court "for further trial", after which another decision was rendered by said court of first instance dismissing plaintiff's complaint and ordering plaintiff to execute a deed conveying Lot 378 to the defendant. The case is, once again, before us, this time on appeal by the plaintiff, the subject matter of litigation being worth more than P200,000, exclusive of interest and costs.

The main facts are not in dispute. Said Lot 378 is part of Hacienda Mandalagan, consisting of Lots 378, 405, 407, 410, 1205, 1452 and 1641 of the aforementioned cadastral survey, with an aggregate area of over 502 hectares, originally registered in the name of Agustin Amenabar and Pilar Amenabar. Lot 378 has an area of 22,783 sq. meters, more or less, and was covered by Original Certificate of Title No. 1776 (Exhibit 4), issued on August 25, 1916, in the name of the Amenabars. On November 30, 1920, the latter sold the aforementioned hacienda to Jose Benares (also referred to in some documents as Jose Benares Montelibano) for the sum of P300,000, payable installments, as set forth in the deed of sale, Exhibit 21. On February 8, 1924, said Original Certificate of Title No. 1776 was cancelled and Jose Benares obtained, in lieu thereof, Transfer Certificate of Title No. 6295 in his name. Meanwhile, or on March 12, 1921, the Hacienda, including Lot 378, had been mortgaged by Jose Benares to the Bacolod-Murcia Milling Co. for the sum of P27,991.74 (Exhibit Y-2). On December 6, 1926, Jose Benares again mortgaged the Hacienda, including said Lot 378, on the Philippine National Bank, subject to the first mortgage held by the Bacolod-Murcia Milling Co. (Exhibit Y-1). These transactions were duly recorded in the office of the

Register of Deeds of Negros Occidental and annotated on the corresponding certificate of title, including said Transfer Certificate of Title No. 6295, covering Lot 378.

The mortgage in favor of the Bank was subsequently foreclosed, in pursuance of a decision of the Court of First Instance of Negros Occidental dated September 29, 1931 (Exhibit U-1), and the Bank acquired the Hacienda, including Lot 378, as purchaser at the foreclosure sale. Accordingly, said Transfer Certificate of Title No. 6295 was cancelled and, in its stead, transfer Certificate of Title No. 17166 0151 — which, owing to its subsequent loss, had to be reconstituted as Transfer Certificate of Title No. RT-1371 — in the name of the Bank, was issued on March 14, 1934 (Exhibit P). Soon, later, or on November 8, 1935, the Bank agreed to sell the Hacienda to Carlos P. Benares, son of Jose Banares, for the sum of P400,000, payable in annual installments, subject to the condition that, until full payment thereof, title would remain in the Bank (Exhibit R). Thereafter, Carlos P. Benares transferred his rights, under this contract with the Bank, to plaintiff herein, which completed the payment of the installments due to the Bank in 1949. Hence, on September 29, 1949, the Bank executed the corresponding deed of absolute sale to the plaintiff (Exhibit Q) and Transfer Certificate of Title No. 1798, covering 378 was issued, in lieu of Transfer Certificate of Title No. 17166 (or reconstituted Transfer Certificate of Title RT-1371), in plaintiff's name (Exhibit O).

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

At this juncture, it should be noted that, despite the acquisition of the Hacienda in 1934 by the Bank, the latter did not take possession of the property for Jose Benares claimed to be entitled to retain it under an alleged right of lease. For this reason, the deed of promise to sell, executed by the Bank in favor of Carlos P. Benares, contained a caveat emptor stipulation. When, upon the execution of the deed of absolute sale (Exhibit Q) by the Bank, on September 29, 1949, plaintiff took steps to take possession the Hacienda, it was discovered that Lot 378 was the land occupied by the Provincial Hospital of Negros Occidental. Immediately, thereafter, or on October 4, 1949, plaintiff made representations with the proper officials to clarify the status of said occupation and, not being satisfied with the explanations given by said officials, it brought the present action on June 10, 1950.

In its answer dated June 24, 1950, defendant maintained that it had acquired Lot 378 in the year; 1924-1925, through expropriation proceedings; that immediately after the commencement of said proceedings in 1924, it took possession of said lot and began the construction thereon of the provincial hospital, which was completed in 1926; that since then it had occupied said lot publicly, adversely, notoriously and continuously as owner thereof; that, "for some reason or other and for cause beyond comprehension of the defendant title thereto was never transferred in the name of said defendant"; that said lot had been placed in defendant's name for assessment purposes under Tax Declaration No. 16269 (dated December 31, 1937); and that plaintiff had acted in bad

faith in purchasing said lot from the Bank in 1935, for plaintiff knew then that the provincial hospital was where it is up to the present, and did not declare said lot in its name for assessment purposes until 1950, aside from the fact that Alfredo Montelibano, the controlling stockholder, president and general manager of plaintiff corporation, was the first City Mayor of Bacolod which contributed to the support, operation and maintenance of said hospital. In an amended answer, dated November 8, 1950, defendant alleged, also, that the aforementioned expropriation case was "amicably settled as between the parties herein, in the sense that the ... Province of Negros Occidental would pay ... and did in fact pay to Jose Benares the assessed value of Lot 378 ... and whatever consideration pertaining to said lot in excess of its assessed value which was paid by the Province would be donated and was in fact donated by said ... Jose Benares in favor of the Province purposely for hospital site".

The main question for determination in this case is whether or not defendant herein had acquired Lot 378 in the aforementioned expropriation proceedings. This decision appealed from in effect decided this question in the affirmative and declared that plaintiff merely holds it in trust for the defendant, in view of which it ordered the former to convey said lot to the latter. This conclusion is predicated, substantially, upon the following premises, namely that case No. 3041 of the Court of First Instance of Negros Occidental for the expropriation of the hospital site of said province, was actually commenced on January 26, 1924; that, among the lands sought to be expropriated in said case was Lot 377 of the aforementioned cadastral survey, belonging to one Anacleta Agsam, who sold it, on July 10, 1926, to the defendant (Exhibit BB), in whose favor the corresponding transfer certificate of title (Exhibit BB-2) was issued on July 12, 1926; that, according the testimony of Jose Benares, the expropriation of Lot 378 was settled amicably upon payment to him of the sum of P12,000; and that defendant's failure to secure the corresponding transfer certificate of title to Lot 378 was due to "the mistaken notion or belief that said lot forms part of Lot No. 405-B" in the plan (Exhibit X.).

The testimony of Jose Benares does not deserve, however, full faith and credence, because:

1. Jose Benares appears to be strongly biased and prejudiced against the plaintiff and its president, for the former believes that the latter had "manipulated" to exclude him from plaintiff corporation, and there have been four (4) litigations between Jose Benares and plaintiff, all of which have been finally decided against the former;

2. The testimony of Jose Benares is extremely contradictory. Thus: (a) he testified to having been paid P12,000 by the Government, although, at the rate of P1,000 a hectare at which, he would have us believe, he agreed to sell Lot 378; he should have received less than P3,000 for its 22,783 sq. meters; (b) he claimed to have received said sum of P12,000.00 "in the year 1924 or 1925", about "2 or 3 days" after the Government had taken possession of the land, and

to have sent the money next day to Pilar Amenabar, but the latter acknowledged to have received the said sum of P12,000 on November 7, 1928;

3. Said testimony was contradicted by that of defendant's witness Jose Marco, former deputy clerk of court of Negros Occidental, for: (a) Jose Benares asserted that there was a written compromise agreement between him and the Government, whereas Marco averred that agreement was merely oral; and (b) Marco stated that Benares had agreed to accept, as compensation for Lot 378, the assessed value thereof, which was P430, and to donate to the Government the difference between this sum and the true value of the property, but Benares affirmed that he was first offered P300 per hectare, which he rejected, and that he later demanded P1,000 a hectare, which the Government agreed to pay, although, subsequently, he said that Rafael Alunan and Mariano Yulo had prevailed upon him to accept P1,000 per hectare;

4. Jose Benares was, also, contradicted by defendant's witness Ildefonso Coscolluela, the provincial treasurer of Negros Occidental at the time of the expropriation, who positively assured the Court that the expropriation case "was not yet terminated" and that "negotiations were still pending" for the acquisition of Lot 378 by the Government when he retired from the service in 1934.

Upon the other hand, several circumstances strongly indicate that no compromise agreement for the acquisition of the land by the Government had been reached and that the expropriation had not been consummated. For instance:

1. The only entries in the docket relative to the expropriation case refer to its filing and the publication in the newspaper of the corresponding notices (Exhibit 1);.

2. The registration of the deed of sale of Lot 377 by Anacleta Agsam to the Government, followed by the cancellation of the certificate of title in her name and the issuance, in lieu thereof, of another title in the name of the Province, when contrasted with the absence of a similar deed of assignment and of a transfer certificate title in favor of the Province as regards Lot 378, strongly suggest that no such assignment or agreement with respect to Lot 378 had been made or reached;.

3. The property was mortgaged to the Bacolod-Murcia Milling Co. since March 12, 1921, and this mortgage, duly registered and annotated, inter alia, on Transfer Certificate of Title No. 1776, in the name of Jose Benares, was not cancelled until September 28, 1935. Moreover, Lot 378 could not have been expropriated without the intervention of the Milling Co. Yet, the latter was not made a party in the expropriation proceedings;

4. On December 26, 1926, Jose Benares constituted second mortgage in favor of the Bank, which would not have accepted the mortgage had Lot 378 not belonged then to the mortgagor. Neither could said lot have been expropriated

subsequently thereto without the Bank's knowledge and participation. What is more, in the deed executed by the Bank, on November 8, 1935 (Exhibit R), promising to sell the Hacienda Mandalagan to Carlos Benares, it was explicitly stated that portions of Lots 405, 407 and 410, forming part of said Hacienda and designated as Lots 405-A, 407-A; 407-B and 410-A, had been expropriated by the Provincial Government of Negros Occidental, thus indicating, by necessary implication, that Lot 378 had not been expropriated.

The decision appealed from says:

... It is evident that there were no further proceedings in connection with the expropriation case and the chances are that the case was dismissed. The Court had to examine carefully and minutely every single piece of evidence adduced by both parties in order to arrive at the correct solution of the mystery. The Court believes that the failure of the government to secure the corresponding transfer of title to Lot 378 lies in the mistaken notion or belief that said lot forms a part of Lot 405-B. This conclusion was arrived at after examining closely the plan, Exhibit X. The plan shows that while all the subdivided lots were properly identified by lot numbers, that particular portion at the lower corner of the plan encircled with red pencil, marked Exhibit X-1, is not labelled with the corresponding lot number and that portion is precisely lot No. 378, now in question, where the hospital building was constructed. This plan was prepared for the government on May 12, 1927 by public land surveyor, Mr. Formento, embracing lots covering over 22 hectares for the Capitol and hospital sites. The fact that this particular portion was not labelled with the corresponding lot number might have misled the authorities to believe that it formed a part of lot 405-B, which adjoins it, although separated by the creek. This lack of reasonable explanation why the government failed to secure the corresponding certificate of title to lot 378, when there is sufficient proof that Jose Benares was paid and he executed the deed of sale in favor of the government.

Although said decision appears to have been prepared with the conscientiousness and moral courage that account for the well earned reputation and prestige of the Philippine judiciary, we find ourselves unable to concur in the foregoing view. To begin with, there is no evidence, and defendant has not even tried to prove, that the expropriation case had ever been dismissed insofar as Lot 378 is concerned. Hence, the lower court merely speculated about the "chances that the (expropriation) case was dismissed." By the way, the contrary was intimated by defendant's witness, Ildefonso Coscolluela, for he testified that the expropriation case was still pending in 1934, when he ceased to be the provincial treasurer, and the record before us suggests that since the Province took possession of the land in 1924 or 1925 and completed the construction of the hospital in 1926, there were no further proceedings in said case..

With respect to the plan, Exhibit X, there is, likewise, no evidence whatsoever that the authorities had been "misled ... to believe" that the portion at the lower corner of said plan — which was enclosed, during the trial, within a circle in red pencil, and marked as

Exhibit X-1 — formed part of Lot 405-B, which had been expropriated by the Province of Negros Occidental. In fact, said portion, Exhibit X-1, is not part of the land covered by the plan Exhibit X. A close examination of the latter shows that the boundaries of said portion are not delimited on the plan. More important still, on the right hand side of Exhibit X, the following appears in bold letters: "Subdivision & Consolidation PLAN of Lots Nos. 400, 401, 403,405, 406, 407 and 410 Bacolod Cadastre as surveyed for the Provincial Government of Bacolod, Negros Occidental (Capitol site)". The absence of Lot 378 from said enumeration and the explicit statement in Exhibit X to the effect that it refers to the "Capitol Site", negates the possibility of its being mistaken by any body, much less by government engineers, as including the hospital site, and, hence, said Lot 378. Lastly, the very evidence for the defendant herein, specially the assessor's field sheets and declarations of real property for tax purposes (Exhibits 9, 10, 11, 12 and 13) show that the Government had always regarded Lot 378, not Lot 405, as part of the Provincial Hospital Site. In any event, said possibility of mistake, if any, which would be remote, cannot suffice to warrant — in the face of documentary evidence to the contrary — the conclusion that Lot 378 has already been acquired by the Government.

How about the P12,000 received by Jose Benares from the Government and applied by him to the payment of his debt to Pilar Amenabar? Said amount could not possibly be the price of Lot 378, for, at the rate of P1,000 a hectare allegedly agreed therefor, its price could not have exceeded P3,000.00. In this connection, it should be noted that, aside from the expropriation proceedings for the hospital site, another expropriation case for the Capitol site, affecting another property of Jose Benares, appears to have been instituted in the Court of First Instance of Negros Occidental. Jose Benares may have mistaken the payment for his land included in the Capitol site, as one intended for Lot 378, which was affected by the hospital site. And this possibility may amount to a probability when we consider that he erroneously believed that there had been only one expropriation case, instead of two cases, against him, and that Lot 378, was not included in the mortgage constituted by him in favor of the Philippine National Bank. Evidently, he did not have, at least, an accurate recollection of the events or transactions affecting his properties, and, hence, his testimony may not be relied upon.

Thus, the evidence on record is far from sufficient to establish the alleged acquisition by the defendant of Lot 378, which must be held, therefore, to be the exclusive property of plaintiff herein.

The lower court entertained no doubts about the veracity of the testimony of plaintiff's president to the effect that he did not know until 1949 that the land on which the Provincial Hospital Building stands is Lot 378. Yet, it held that plaintiff was "not a purchaser in good faith for having constructive knowledge of defendant's possession of the property at the time it was bought by the plaintiff", because Carlos P. Benares — whose right to buy the Hacienda Mandalagan from the Bank was acquired by plaintiff — "is a part owner of the Capitol Subdivision and holds a responsible position therein"; because the hospital was already constructed in Lot 378 since 1926 and the lot was declared in the name of the Government" and "when plaintiff bought the lot in 1935 the purchaser should have inquired as to its location and improvement"; because "it took

the plaintiff 14 years to sleep over the supposed rights to take possession of lot No. 378"; and because "of the overwhelming fact that lot No. 378 was erroneously or inadvertently included by the deeds of sale (Exhibits Q & R) executed by the Philippine National Bank in favor of the plaintiff subdivision and that same lot was occupied by the defendant government for the provincial hospital for the last 34 years, as owner thereof".

As above stated, however, and the lower court conceded, plaintiff's president did not know until 1949 that lot 378 was the very land occupied by the provincial hospital. Moreover, there is a total absence of evidence that this fact was known to Carlos P. Benares before 1949. Neither may such knowledge be deduced from the circumstances that he is a son of its former owner, Jose Benares, for even the latter appears not to be well-posted on the status of his properties. Indeed, Jose Benares did not apparently know that there were two (2) expropriation proceedings effecting said properties: that the P12,000 received by him from the Government was not meant for Lot 378; and that this lot was one of the properties mortgaged by him to the Bank.

"Upon the other hand, the main purpose of the Torrens System is to avoid possible conflicts of title in and to real estate, and to facilitate transactions relative thereto giving the public the right to rely upon the face of Torrens certificate of title and to dispense with the of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry (Tiburcio vs. PHHC, L-13479, October 31, 1959; Revilla vs. Galindez, G.R. No. L-19940, March 30, 1960; Manacop, Jr. vs. Cansino, G.R. No. L-13791, February 27, 1961). In the case at bar plaintiff had no such actual knowledge, it being an established fact that he was not aware until 1949 that the land on which the provincial hospital stood was Lot 378. Furthermore, since the year 1921, or before the expropriation case for the hospital site had begun, said lot was mortgaged to the Bacolod-Murcia Milling Co., and the mortgage, duly registered, as well as annotated on the corresponding certificate of title, was not cancelled until September 28, 1935. Prior to this date, or on December 26, 1926, Lot 378 was subjected to a second mortgage in favor of the Bank, which acquired title thereto, thru foreclosure proceedings, in 1934. When the Bank agreed on November 8, 1935, to sell the property to Carlos P. Benares and the latter, subsequently conveyed his rights to plaintiff herein, as well as when the bank executed the deed of absolute sale in plaintiff's favor on September 20, 1949, the title to the property was in the name of the Bank. Considering that sugar centrals as well as banks are known to have an array of experienced and competent lawyers, it cannot be said that plaintiff was not justified in assuming that said institutions had scrutinized the background of Lot 378 and were satisfied that the same belonged to the mortgagor when said mortgages were constituted, and to the Bank when said deed of sale was executed. In short, we find that plaintiff herein is a purchaser in good faith and for value..

As regards the compensation that, as such, it may collect from the defendant, we are of the opinion, and so hold, that, since the latter's right to expropriate Lot 378 is not contested, and is seemingly conceded, the plaintiff may demand what is due by reason

of the expropriation of said lot. In short, plaintiff is entitled to recover from the defendant the fair and full equivalent to Lot 378, as of the time when possession thereof was actually taken by the defendant, plus consequential damages — including attorney's fees — from which consequential damages the consequential benefits, if any, should be deducted, with interests, at the legal rate, on the aggregate sum due to the plaintiff, from and after the date of said actual taking. The case should be remanded, therefore, to the lower court for the reception of evidence on the date of said actual taking and the amount of compensation collectible from the defendant, and the rendition, thereafter, of the corresponding decision thereon..

WHEREFORE, the decision appealed from is hereby reversed and the records remanded to the lower court for further proceedings, as above stated, with costs against the defendant. It is so ordered..

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur. Makalintal, J., took no part.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-41278 April 15, 1988

DIRECTOR OF LANDS, petitioner, vs. HON. PEDRO T. SANTIAGO, Presiding Judge, Court of First Instance of Bataan, Branch II, MARIA O. GARCIA, and IMPERIAL DEVELOPMENT CORPORATION, respondents.

The Solicitor General for petitioner.

Filoteo T. Banzon for respondents.

SARMIENTO, J.:

On September 8, 1973, an application for land registration was filed by respondent Maria O. Garcia in the Second Branch of the Court of First Instance of Bataan; 1 a copy of the application was forwarded to the Solicitor General thru the Director of Lands. On February 19, 1974, the Director of Lands filed an opposition to this application, and at the same time the Solicitor General entered his appearance and authorized the Provincial Fiscal to appear on his behalf at the hearings of the same. Subsequently, respondent Inperial Development Corporation, with the conformity of respondent Garcia, filed a Motion to Substitute Party Applicant from Maria O. Garcia to Imperial Development Corporation without amending the boundaries and the area of the parcels of land stated in the original application, which motion was granted by the respondent Judge. A Notice of Initial Hearing was sent by the respondent Judge to all parties concerned, with the warning that a party who failed to appear would be declared in default. The same notice was likewise published in the Official Gazette and posted by the sheriff as required by law. On January 23, 1975, the date of the initial hearing, neither petitioner nor his counsel was present; an order of general default was issued by the respondent Judge on the same date. After the reception of evidence for the applicant before the clerk of court, the respondent Judge rendered the questioned decision and adjudicated the lands in favor of the respondent corporation.

Thereafter, the petitioner filed a Motion for New Trial on the grounds that the failure of his counsel to appear at the initial hearing was excusable, and that the decision was contrary to the facts and to law. The motion was, however, denied.

The instant petition is for certiorari, to nullify and set aside the following orders and decision of the respondent Judge:

a) Order of the respondent Judge dated September 30, 1974, admitting the Amended Application for Registration;

b) Order of the respondent Judge dated January 23, 1975 declaring, in effect, the Director of Lands in default;

c) Decision of the respondent Judge dated February 17, 1975, adjudicating the parcels of land in favor of the respondent corporation; and

d) Order of the respondent Judge dated August 7, 1976, denying the petitioner's Motion for New Trial;

and for mandamus, to order the respondent Judge to give due course to the petitioner's Motion for New Trial; alternatively, the petitioner prays for the dismissal of the respondent corporation's application for registration. 2

According to Sec. 34 of the Land Registration Act, and as adopted in Sec. 151 of the Public Land Act:

Any person claiming an interest, whether named in the notice or not, may appear and file an answer on or before the return day, or within such further time as may be allowed by the court. The answer shall state all the objections to the application, and shall set forth the interest claimed by the party filing the same and apply for the remedy desired, and shall be signed and sworn to by him or by some person in his behalf. (As amended by Sec. 1, Act No. 3621.)

It is undisputed that on February 19, 1974, or prior to the issuance of the Notice of Initial Hearing, an opposition was filed by the petitioner Director of Lands to the original application for land registration of respondent Garcia. 3That verified opposition was precisely the answer referred to in the above-quoted section, for, as therein alleged by the Director of Lands, neither the applicant nor her predecessors-in-interest possess sufficient title to acquire ownership in fee simple of the parcels of land applied for; neither the applicant nor her predecessors-in-interest, have been in open, continuous, exclusive, and notorious possession and occupation of the lands in question for at least 30 years immediately preceding the filing of the present application; that the said parcels of land are a portion of the public domain belonging to the Republic of the Philippines, and that, therefore, the same should be declared part of the public domain. 4 As a matter of fact, under the Property Registration Decree, issued on June 11, 1978, which supersedes all other laws relative to registration of property, the word used is "opposition" and not "answer." 5

Thus, the opposition or answer, which is based on substantial grounds, having been formally filed, it was improper for the respondent Judge taking cognizance of such registration case to declare the oppositor in default simply because he failed to appear on the day set for the initial hearing. The pertinent provision of law which states: "If no person appears and answers within the time allowed, the court may at once upon motion of the applicant, no reason to the contrary appearing, order a general default to be recorded ...," 6 cannot be interpreted to mean that the court can just disregard the answer before it, which has long been filed, for such an interpretation would be nothing less than illogical, unwarranted, and unjust. Had the law intended that failure of the oppositor to appear on the date of the initial hearing would be a ground for default despite his having filed an answer, it would have been so stated in unmistakable terms, considering the serious consequences of an order of default. Especially in this case where the greater public interest is involved as the land sought to be registered is alleged to be public land, the respondent Judge should have received the applicant's evidence and set another date for the reception of the oppositor's evidence. The oppositor in the Court below and petitioner herein should have been accorded ample opportunity to establish the government's claim.

True, an amended application was submitted but it is admitted by the respondents themselves that no significant alterations were made therein, hence, the opposition already filed should have been considered as the answer to the amended application as well. Parenthetically, since the amendment in the application consisted merely in the substitution of the name of the applicant, it was not absolutely necessary to furnish the Solicitor General with a copy of the amended application, and it sufficed that the substitution was stated in the Notice of Initial Hearing. 7

The respondent corporation maintains that the appropriate remedy in this instance is appeal, which is expressly provided in Section 2, Rule 41 of the Rules of Court, and not certiorari. We do not agree. The declaration of default against the petitioner was patently invalid because when the same was made, he had already entered an appearance and filed his opposition or answer. In Omico Mining and Industrial Corporation vs. Vallejos we laid down the doctrine that appeal is not an adequate remedy where a party is illegally declared in default. Thus, we stated:

The remedy provided for in the above-quoted rule (i.e. Sec. 2, Rule 41) is properly, though not exclusively, available to a defendant who has been validly declared in default. It does not preclude a defendant who has been illegally declared in default from pursuing a more speedy and efficacious remedy, like a petition for certiorari to have the judgment by default set aside as a nullity. 8

Indeed, for the above reason, we gave due course to this petition. 9

Additionally, the respondent Judge, in denying the petitioner's Motion for New Trial, ignored the established rule that courts should be liberal in setting aside a default

judgment. "The Court, in the exercise of wise discretion, could have restored their standing in court and given them an even chance to face their opponents." 10

Further, we hold that the lower court gravely abused its discretion when it granted the respondent corporation's application for registration, without sufficient proof that the applicant possessed an imperfect and incomplete title that is registrable under Sec. 48, par. b, of Commonwealth Act 141, as amended by Republic Act 6236, otherwise known as the Public Land Act. Verily, we said in Director of Lands vs. Intermediate Appellate Court that: "No proof being admissible to overcome a conclusive presumption, confirmation proceedings would, in truth, be little more than formality, at the most limited to ascertaining whether the possession claimed is of the required character and length of time; and registration thereunder would not confer title, but simply recognize a title already vested." 11But precisely we are not convinced with the conclusion of the respondent Judge and with the arguments of the respondent corporation that the latter, through its predecessors-in- interest, has been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years.

First, it appears that Maria Garcia and Vicente Obdin, from whom the respondent corporation purchased the subject lots, have pending sales applications as evidenced in the plans submitted to the land registration court by Maria Garcia herself which contain the following footnotes: "This survey is covered by S.A. (x-5) 582" ... "This is covered by S.A. No. (x-5) 583," S.A. being the short form for Sales Application. As such sales applicants, they manifestly acknowledge that they do not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the applications were submitted. 12 Therefore, their possession was not that of an owner, as required by law. We note that the private respondents were conspicuously silent on this point, as if they were trying to conceal this vital fact.

Secondly, if it is true that the original owner and possessor, Generosa Santiago, had been in possession since 1925, why were the subject lands declared for taxation purposes for the first time only in 1968, and in the names of Garcia and Obdin? For although tax receipts and declarations of ownership for taxation purposes are not incontrovertible evidence of ownership, they constitute at least proof that the holder had a claim of title over the property. 13

More than anything else, however, registration in this instance can not be granted on the basis of Section 48, paragraph b, of the Public Land Act, to wit:

SEC. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims, and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

xxx xxx xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

as the above provision applies exclusively to agricultural lands of the public domain. It appears from Forestry Administrative Order No. 4-1157, dated April 28, 1971, 14 that the subject lands, with an approximate area of 56,598 square meters and situated at Sitio Babuyan, Cabcaben, Mariveles, Bataan, under Project No. 4-A, were forest lands and only later, declared as alienable or disposable by the Secretary of Agriculture and Natural Resources. Thus, even on the assumption that the applicant herein, through its predecessors-in-interest, had been in possession for at least thirty years, such possession never ripened into private ownership. The respondent Garcia and Vicente Obdin must have applied for sales patents precisely because they wanted to acquire ownership over the subject lands. An examination of the dates will show that the filing of the sales applications, apparently on October 24, 1971, was done after the lands had been declared as alienable and disposable.

In view of the basic presumption that lands of whatever clasification belong to the State, courts must scrutinize with care applications to private ownership of real estate. But this the respondent Judge sadly failed to heed; the tax declarations and plans submitted by the private respondents were not carefully analyzed, and the allegations in the petitioner's opposition to the application were so casually ignored.

We no longer deem it imperative to order a new trial of this case which would only prolong the litigation unnecessarily, for as we said in a recent case, the remand of a case to the lower court for Lither reception of evidence is not necessary where the court is in a position to resolve the dispute based on the records before on the records before it. 15

WHEREFORE, in view of the foregoing, the petition is GRANTED; the Order of general default, dated January 23, 1975, as against the petitioner, and the Order dated August 7, 1975 denying the Motion For New Trial, the Decision dated February 17, 1975, as well as the decree of registration issued pursuant thereto, if any, are all declared VOID and SET ASIDE. The respondent corporation's subject application for land registration is hereby DISMISSED. No costs.

This decision is IMMEDIATELY EXECUTORY.

SO ORDERED.

Yap, (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

Footnotes

1 Presided by Judge Pedro T. Santiago, at Balanga, Bataan, Fifth Judicial District, "Land Registration Case No. N-260, Maria O. Garcia, applicant."

2 Petition, 2-3, 16; Rollo, 9-10, 23.

3 Decision 1; Rollo, 26.

4 Opposition, 1; Rollo, 33.

5 Section 25, Presidential Decree No. 1529.

6 Section 26, Ibid.

7 Section 23, Act No. 496: "Amendments to the application, including joinder, substitution, or discontinuing as to parties, shall be allowed by the court at any time upon terms that are just and reasonable. But all amendments shall be in writ, signed and sworn to like the original."

8 Omico Mining and Industrial Corporation v. Vallejos, L-38974, March 25, 1975, 63 SCRA 285, citing Matute v. Court of Appeals, 26 SCRA 768; see also Pioneer Insurance and Surety Corporation vs. Hontanosas, No. L-35951, August 31, 1977, 78 SCRA 447.

9 Resolution dated March 3, 1976.

10 Pioneer Insurance & Surety Corp. vs. Hontanosas, supra.

11 G.R. No. L-73002, December 29, 1986, 146 SCRA 509.

12 Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, No. L-25914, March 21, 1672, 44 SCRA 15.

13 Director of Lands vs. Reyes, No. L-27594, November 28, 1975, 68 SCRA 177.

14 A certified true copy of this Forestry Administrative Order is attached as Annex "A" of the Memorandum, dated May 17, 1976, of the petitioner.

15 Lianga Bay Logging Co. v. Court of Appeals, No. L-37783, January 28, 1988.

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-43445 January 20, 1988

EUFEMIA VILLANUEVA VDA. DE BARROGA and SATURNINA VILLANUEVA VDA. DE PACADA, oppositors-appellants, vs. ANGEL ALBANO, ARSENIO ALBANO, ENCARNACION ALBANO, ROSALIA ALBANO, assisted by her husband, JUANITO ALBANO, ROSITA ALBANO, assisted by her husband, ALFREDO RAMIREZ, MIGUEL ALBANO, CHARITO ALBANO, and PEDRO ALBANO, petitioners-appellees. RICARDO Y. NAVARRO, in his capacity as Judge of Sala I, Court of First Instance of Ilocos Norte, respondent.

NARVASA, J.:

On November 24, 1925 judgment was promulgated by this Court in Manlapas, et al. v. Llorente, etc., et al., 1 ruling that: (1) a party in whose favor a decree of registration is issued by a cadastral court in accordance with the Torrens Act (Act No. 496), or his successor-in-interest, has "a perfect right not only to the title of the land, but also to its possession;" (2) he has the right, too, under Section 17 of the same Act, to a writ of possession as against any "party to the registration proceeding and who is directly and personally affected and reached by the decree" (or who had been served with process therein but had not appeared nor answered); 2 and (3) his right to obtain a writ of possession is not subject to the provisions of the Code of Civil Procedure regarding execution of judgments, 3 since the decree "is to exist forever." These doctrines have since been reiterated and reaffirmed.

"The fundamental rule," the Court said some forty-three years later, 4 "is that a writ of possession can be issued not only against the original oppositors in a land registration case and their representatives and successors-in-interest, but also against any person unlawfully and adversely occupying said lot at any time before and up to the issuance of the final decree." It also pointed out that neither laches nor the statute of limitations applies to a decision in a land registration case, citing Sta. Ana v. Menla, et al. 5 to the following effect:

We fail to understand the arguments of the appellant. ... except insofar as it supports his theory that after a decision in a land registration case has become final, it may not be enforced after the lapse of a period of 10 years, except by another proceeding to enforce the judgment. ... (Sec. 6, Rule 39). This provision of the Rules refers to civil actions and is not

applicable to special proceedings, such as a land registration case. This is so because a party in a civil action must immediately enforce a judgment that is secured as against the adverse party, and his failure to act to enforce the same within a reasonable time as provided in the Rules makes the decision unenforceable against the losing party. In special proceedings the purpose is to establish a status, condition or fact; in land registration proceedings, the ownership by a person of a parcel of land is sought to be established. After the ownership has been proved and confirmed by judicial declaration, no further proceedings to enforce said ownership is necessary, except when the adverse or losing party had been in possession of the land and the winning party desires to oust him therefrom.

Furthermore, there is no provision in the Land Registration Act similar to Sec. 6, Rule 39, regarding the execution of a judgment in a civil action, except the proceedings to place the winner in possession by virtue of a writ of possession. The decision in a land registration case, unless the adverse or losing party is in possession, becomes final without any further action, upon the expiration of the period for perfecting an appeal. ...

... There is nothing in the law that limits the period within which the court may order or issue a decree. The reason is ... that the judgment is merely declaratory in character and does not need to be asserted or enforced against the adverse party. Furthermore, the issuance of a decree is a ministerial duty both of the judge and of the Land Registration Commission; failure of the court or of the clerk to issue the decree for the reason that no motion therefor has been filed can not prejudice the owner, or the person in whom the land is ordered to be registered.

The Court restated those same principles in Lucero v. Loot 6 some months later and took occasion to stress that inMarcelo v. Mencias, decided in 1960, the Court had gone "so far as to hold that if the writ of possession issued in a land registration proceeding implies the delivery of possession of the land to the successful litigant therein, ... a writ of demolition must, likewise, issue, especially considering that the latter writ is but a complement of the former which, without said writ of demolition, would be ineffective."

The appeal at bar entails nothing more than the application of these established jurisprudential precepts to the undisputed facts.

In Cadastral Proceeding No. 44 (LRC Rec. No. 1203) of the then Court of First Instance of Ilocos Norte, a decision was rendered on July 31, 1941 adjudicating a parcel of land known as Lot No. 9821 in favor of Delfina Aquino. 7One of the oppositors was Ruperta Pascual, who was declared in default. 8 However, for reasons not disclosed by the record, but as to which no sinister or prejudicial character is imputed by the appellants, the decree of registration did not issue except until after the lapse of fourteen (14) years or so, or on October 14, 1955; and it was only after twenty-four (24) years had passed,

or on November 17, 1979, that an original certificate of title (No. C-2185) was issued in Delfina Aquino's name. 9

On August 11, 1970, after the decree of registration had been handed down but before title issued in Delfina Aquino's favor, the children and heirs of Ruperta Pascual — appellants Eufemia Barroga and Saturnina Padaca-brought suit in the same Court of First Instance against the children and heirs of Delfina Aquino — appellees Angel Albano, et al. 10 Said appellants alleged that they, and their mother, Ruperta Pascual, had been in possession of Lot 9821 since 1941 and were the real owners thereof; and they prayed that Delfina Aquino's title be voided and cancelled, that the defendants be commanded to reconvey the land to them, and that a new title be made out in their names. 11

It appears, parenthetically, that Delfina Aquino's title encroached upon a 4-square-meter portion of an adjoining lot, No. 9822, belonging to a Cesar Castro. So, Castro filed, with leave of court, a complaint in intervention on February 22, 1987 for the recovery thereof.

After trial on the merits, judgment was rendered dismissing the Barroga's and Padaca's complaint, and declaring intervenor Castro owner of the 4-square-meter portion overlapped by Delfina Aquino's title. 12

The correctness of this judgment cannot be gainsaid in light of the recorded facts. The familiar doctrine of res adjudicata operated to blot out any hope of success of Barroga's and Padaca's suit for recovery of title Lot No. 9821. Their action was clearly barred by the prior judgment in the cadastral proceeding affirming Delfina Aquino's ownership over the property, and in which proceeding the former's predecessor-in-interest, Ruperta Pascual, had taken part as oppositor but had been declared in default. The judgment of the cadastral court was one "against a specific thing" and therefore "conclusive upon the title to the thing." 13 It was a judgment in rem, binding generally upon the whole world, inclusive of persons not parties thereto, 14 and particularly upon those who had actually taken part in the proceeding (like the appellants' predecessor, Ruperta Pascual, who had intervened therein as an oppositor) as well as "their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity. 15

The judgment became final and executory, the appeal taken therefrom to the Court of appeals by Barroga and Padaca having been dismissed because of their failure to file brief, and this Court having thereafter refused to set aside that dismissal on certiorari. Thereafter, at the instance of defendants Angel Albano, et al., the Court of First Instance ordered execution of the judgment on December 6, 1973. Plaintiffs Barroga and Padaca - moved to quash the writ of execution, on December 22, 1973. They argued that there was nothing to execute since the verdict was simply one of dismiss of the complaint; they moreover invoked Section 11, Rule 51 of the Rules of Court. 16 But here the matter apparently ended. No further development anent this case appears in the record.

What the record does show is that on August 8, 1975, the Cadastral Court promulgated an Order in Case No. 44, LRC Rec. No. 1203, granting the motion of Angel Albano, et al. for a writ of possession as regards Lot No. 9821; and pursuant thereto, a writ of possession dated August 28, 1975 was issued. Again Barroga and Padaca sought to frustrate acquisition of possession by Angel Albano, et al. They filed a "Motion to Nullify Order to Lift Writ of Execution Issued and to Revoke Writ of Possession Issued" under date of September 23, 1975. 17 Their argument was that as possessors of the lot in question, they could not be ejected therefrom by a mere motion for writ of possession.

The motion was heard on October 24, 1975, at which time the parties and their counsel stipulated upon the following facts, to wit:

1. That the claimants-petitioners Angel Albano, Arsenio Albano, Encarnacion Albano, Rosalia Albano, Rosita Albano, Miguel Albano, Jr., Charito Albano, Federico Albano, Jr. and Pedrito Albano are the children-heirs and successors of Delfina Aquino, who is the registered owner of Lot No. 9821 covered by O.C.T. No. 0-2185, which decree was issued on July 31, 1941, marked Exh. A for the petitioners-claimants;

2. That movants-oppositors Eufemia Villanueva de Barroga and Saturnina Vda. de Pacada are the children-heirs and successors of Ruperta Pascual, who was an oppositor in Lot No. 9821, Cad. Case No. 44, LRC Rec. No. 1203, and who was defaulted in said cadastral case, and decided on July 31, 1941 as follows:

Lote No. 9821 — Por incomparecencia injustificada de la opositora Ruperta Pascual, se desestima su contestacion. Se adjudica este lote No. 9821, con las mejoras en el existentes, en nombre de Delfina Q. Aquino, filipina, major de edad, viuda y residents del municipio de Lauag de la provincia de Ilocos Norte.

3. That the heirs of Ruperta Pascual, namely, Eufemia Villanueva de Barroga and Saturnina Vda. de Padaca , are in possession of the lot in question since 1941 up to the present time. 18

The motion was thereafter denied by the Court a quo, by Order dated September 22, 1975. The Court stated that the writ of possession could properly issue despite the not inconsiderable period of time that had elapsed from the date of the registration decree, since the right to the same does not prescribe pursuant to the rulings in Heirs of Cristobal Marcos v. de Banuvar and Lucero v. Loot, 19 It also declared that the segregation of the 4-square meter portion from Lot 9821 and its restoration as integral part of Lot 9822, had no effect whatever on the Albanos' right to the writ of possession, which was the appropriate process for the enforcement of the judgment in the cadastral case. Barroga and Padaca moved for reconsideration. When this proved unavailing, they appealed to this Court.

The inevitable verdict should by now be apparent. Conformably with the established axioms set out in the opening paragraphs of this opinion, the appellees, Angel Albano, et al. must be declared to be entitled to a writ of possession over Lot No. 9821 in enforcement of the decree of registration and vindication of the title issued in favor of their predecessor-in-interest, Delfina Q. Aquino; the writ may correctly be enforced against the appellants, Barroga and Padaca, as successors-in-interest of Ruperta Pascual, who was a party in the registration proceedings which resulted in the declaration of Delfina Q. Aquino as the owner of the land subject thereof; and the appellees are entitled to said writ of possession, despite the lapse of many, many years, their right thereto being imprescriptible at least as against the persons who were parties to the cadastral case or their successors-in-interest. 20 The appellants, it must be said, have succeeded in prolonging the controversy long enough. They should no longer be allowed to continue doing so.

WHEREFORE, the appeal taken by appellants Eufemia Villanueva Vda. de Barroga and Saturnina Villanueva Vda. de Padaca is DISMISSED, and the Orders of the Court a quo dated August 8, 1975, September 22, 1975 and March 17, 1976 are AFFIRMED, as being in accord with the facts and the law. This decision is immediately executory, and no motion for extension of time to file a motion for reconsideration will be entertained.

Teehankee, C.J., Cruz, Paras * and Gancayco, JJ., concur.

Footnotes

1 48 Phil. 298, 306-308.

2 The Pasay Estate Co., Ltd. v. The Hon Simplicio del Rosario, et al., 11 Phil. 391, 392.

3 The counter part provision in the present Rules of Court is Section 6, Rule 39 entitled Execution by motion or by independent action, which provides that, "A judgment may be executed on motion within five (5) years from the date of its entry or from the date it becomes final and executory. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action."

4 Heirs of Cristobal Marcos v. De Banuvar, 25 SCRA 316, 323, citing Demorar v. Ibanez, et al., 97 Phil. 72, 74, and adverting, too, to Sorongon v. Makalintal, 80 Phil. 259, 260-261, Abulocion, et al. v. CFI of Iloilo, et al., 100 Phil. 554, 561-562.

5 1 SCRA 1297-1298 [1961].

6 25 SCRA 687, 691.

7 Rollo, p. 65.

8 Id.

9 Id., p. 74,

10 Docketed as Civil Case No. 4573.

11 Rollo, p. 45.

12 Id., p. 46.

13 Sec. 49 (a), Rule 39, Rules of Court.

14 See Moran, Comments on the Rules of Court, 1979 ed., Vol. 2, pp. 347-348, citing Manalo v.Paredes, 47 Phil. 938; In re Estate of Johnson, 39 Phil. 156.

15 Sec. 49 (b), Rule 39; See e.g., Vda. de Sta. Romana v. PCIB, 118 SCRA 330 Geralde v. Sabido, 115 SCRA 839.

16 Id.

17 Id., p. 47.

18 Id., pp. 65-66.

19 See footnotes 4 and 6, supra.

20 See Heirs of Cristobal Marcos v.De Banuvar, 25 SCRA 316, 322-324, supra.

* Designated a Special Member of the First Division.

EN BANC

HEIRS OF MARIO MALABANAN, G.R. No. 179987

Petitioner,

Present:

PUNO, C.J.,

QUISUMBING,

YNARES-SANTIAGO,

CARPIO,

- versus - AUSTRIA-MARTINEZ,

CORONA,

CARPIO MORALES,

TINGA,

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA,

LEONARDO DE CASTRO,

BRION,

REPUBLIC OF THE PHILIPPINES, PERALTA, and

Respondent. BERSAMIN, JJ.

Promulgated:

April 29, 2009

x--------------------------------------------------------------------------- x

D E C I S I O N

TINGA, J.:

One main reason why the informal sector has not become formal is that

from Indonesia to Brazil, 90 percent of the informal lands are not titled and registered.

This is a generalized phenomenon in the so-called Third World. And it has many

consequences.

xxx

The question is: How is it that so many governments, from Suharto's

in Indonesia to Fujimori's in Peru, have wanted to title these people and have not

been able to do so effectively? One reason is that none of the state systems

in Asia or Latin America can gather proof of informal titles. In Peru, the informals

have means of proving property ownership to each other which are not the same

means developed by the Spanish legal system. The informals have their own

papers, their own forms of agreements, and their own systems of registration, all of

which are very clearly stated in the maps which they use for their own informal

business transactions.

If you take a walk through the countryside, from Indonesia to Peru, and you

walk by field after field--in each field a different dog is going to bark at you. Even

dogs know what private property is all about. The only one who does not know it is

the government. The issue is that there exists a "common law" and an "informal

law" which the Latin American formal legal system does not know how to

recognize.

- Hernando De Soto[1]

This decision inevitably affects all untitled lands currently in possession of

persons and entities other than the Philippine government. The petition, while

unremarkable as to the facts, was accepted by the Court en banc in order to

provide definitive clarity to the applicability and scope of original registration

proceedings under Sections 14(1) and 14(2) of the Property Registration Decree.

In doing so, the Court confronts not only the relevant provisions of the Public

Land Act and the Civil Code, but also the reality on the ground. The countrywide

phenomenon of untitled lands, as well as the problem of informal settlement it

has spawned, has unfortunately been treated with benign neglect. Yet our current

laws are hemmed in by their own circumscriptions in addressing the

phenomenon. Still, the duty on our part is primarily to decide cases before us in

accord with the Constitution and the legal principles that have developed our

public land law, though our social obligations dissuade us from casting a blind eye

on the endemic problems.

I.

On 20 February 1998, Mario Malabanan filed an application for land

registration covering a parcel of land identified as Lot 9864-A, Cad-452-D, Silang

Cadastre,[2] situated in Barangay Tibig, Silang Cavite, and consisting of 71,324

square meters. Malabanan claimed that he had purchased the property from

Eduardo Velazco,[3] and that he and his predecessors-in-interest had been in

open, notorious, and continuous adverse and peaceful possession of the land for

more than thirty (30) years.

The application was raffled to the Regional Trial Court of (RTC) Cavite-

Tagaytay City, Branch 18. The Office of the Solicitor General (OSG) duly

designated the Assistant Provincial Prosecutor of Cavite, Jose Velazco, Jr., to

appear on behalf of the State.[4] Apart from presenting documentary evidence,

Malabanan himself and his witness, Aristedes Velazco, testified at the hearing.

Velazco testified that the property was originally belonged to a twenty-two

hectare property owned by his great-grandfather, Lino Velazco. Lino had four

sons– Benedicto, Gregorio, Eduardo and Esteban–the fourth being Aristedes’s

grandfather. Upon Lino’s death, his four sons inherited the property and divided it

among themselves. But by 1966, Esteban’s wife, Magdalena, had become the

administrator of all the properties inherited by the Velazco sons from their father,

Lino. After the death of Esteban and Magdalena, their son Virgilio succeeded

them in administering the properties, including Lot 9864-A, which originally

belonged to his uncle, Eduardo Velazco. It was this property that was sold by

Eduardo Velazco to Malabanan.[5]

Assistant Provincial Prosecutor Jose Velazco, Jr. did not cross-examine

Aristedes Velazco. He further manifested that he “also [knew] the property and I

affirm the truth of the testimony given by Mr. Velazco.”[6] The Republic of

the Philippines likewise did not present any evidence to controvert the

application.

Among the evidence presented by Malabanan during trial was a

Certification dated 11 June 2001, issued by the Community Environment &

Natural Resources Office, Department of Environment and Natural Resources

(CENRO-DENR), which stated that the subject property was “verified to be within

the Alienable or Disposable land per Land Classification Map No. 3013 established

under Project No. 20-A and approved as such under FAO 4-1656 on March 15,

1982.”[7]

On 3 December 2002, the RTC rendered judgment in favor of Malabanan,

the dispositive portion of which reads:

WHEREFORE, this Court hereby approves this application for registration and

thus places under the operation of Act 141, Act 496 and/or P.D. 1529, otherwise known

as Property Registration Law, the lands described in Plan Csd-04-0173123-D, Lot 9864-A

and containing an area of Seventy One Thousand Three Hundred Twenty Four (71,324)

Square Meters, as supported by its technical description now forming part of the record

of this case, in addition to other proofs adduced in the name of MARIO MALABANAN,

who is of legal age, Filipino, widower, and with residence at Munting Ilog, Silang, Cavite.

Once this Decision becomes final and executory, the corresponding decree of

registration shall forthwith issue.

SO ORDERED.

The Republic interposed an appeal to the Court of Appeals, arguing that

Malabanan had failed to prove that the property belonged to the alienable and

disposable land of the public domain, and that the RTC had erred in finding that

he had been in possession of the property in the manner and for the length of

time required by law for confirmation of imperfect title.

On 23 February 2007, the Court of Appeals rendered a Decision[8] reversing

the RTC and dismissing the application of Malabanan. The appellate court held

that under Section 14(1) of the Property Registration Decree any period of

possession prior to the classification of the lots as alienable and disposable was

inconsequential and should be excluded from the computation of the period of

possession. Thus, the appellate court noted that since the CENRO-DENR

certification had verified that the property was declared

alienable and disposable only on 15 March 1982, the Velazcos’ possession

prior to that date could not be factored in the computation of the period of

possession. This interpretation of the Court of Appeals of Section 14(1) of the

Property Registration Decree was based on the Court’s ruling in Republic v.

Herbieto.[9]

Malabanan died while the case was pending with the Court of

Appeals;[10] hence, it was his heirs who appealed the decision of the appellate

court. Petitioners, before this Court, rely on our ruling in Republic v.

Naguit,[11] which was handed down just four months prior to Herbieto. Petitioners

suggest that the discussion in Herbieto cited by the Court of Appeals is

actually obiter dictum since the Metropolitan Trial Court therein which had

directed the registration of the property had no jurisdiction in the first place since

the requisite notice of hearing was published only after the hearing had already

begun. Naguit, petitioners argue, remains the controlling doctrine, especially

when the property in question is agricultural land. Therefore, with respect to

agricultural lands, any possession prior to the declaration of the alienable

property as disposable may be counted in reckoning the period of possession to

perfect title under the Public Land Act and the Property Registration Decree.

The petition was referred to the Court en banc,[12] and on 11 November

2008, the case was heard on oral arguments. The Court formulated the principal

issues for the oral arguments, to wit:

1. In order that an alienable and disposable land of the public domain may

be registered under Section 14(1) of Presidential Decree No. 1529, otherwise known as

the Property Registration Decree, should the land be classified as alienable and

disposable as of June 12, 1945 or is it sufficient that such classification occur at any time

prior to the filing of the applicant for registration provided that it is established that the

applicant has been in open, continuous, exclusive and notorious possession of the land

under a bona fide claim of ownership since June 12, 1945 or earlier?

2. For purposes of Section 14(2) of the Property Registration Decree may a

parcel of land classified as alienable and disposable be deemed private land and

therefore susceptible to acquisition by prescription in accordance with the Civil Code?

3. May a parcel of land established as agricultural in character either

because of its use or because its slope is below that of forest lands be registrable under

Section 14(2) of the Property Registration Decree in relation to the provisions of the Civil

Code on acquisitive prescription?

4. Are petitioners entitled to the registration of the subject land in their

names under Section 14(1) or Section 14(2) of the Property Registration Decree or

both?[13]

Based on these issues, the parties formulated their respective positions.

With respect to Section 14(1), petitioners reiterate that the analysis of the

Court in Naguit is the correct interpretation of the provision. The seemingly

contradictory pronouncement inHerbieto, it is submitted, should be

considered obiter dictum, since the land registration proceedings therein was

void ab initio due to lack of publication of the notice of initial hearing. Petitioners

further point out that in Republic v. Bibonia,[14] promulgated in June of 2007, the

Court applied Naguit and adopted the same observation that the preferred

interpretation by the OSG of Section 14(1) was patently absurd. For its part, the

OSG remains insistent that for Section 14(1) to apply, the land should have been

classified as alienable and disposable as of 12 June 1945. Apart from Herbieto, the

OSG also cites the subsequent rulings in Buenaventura v. Republic,[15] Fieldman

Agricultural Trading v. Republic[16] and Republic v. Imperial Credit

Corporation,[17] as well as the earlier case of Director of Lands v. Court of

Appeals.[18]

With respect to Section 14(2), petitioners submit that open, continuous,

exclusive and notorious possession of an alienable land of the public domain for

more than 30 years ipso jureconverts the land into private property, thus placing

it under the coverage of Section 14(2). According to them, it would not matter

whether the land sought to be registered was previously classified as agricultural

land of the public domain so long as, at the time of the application, the property

had already been “converted” into private property through prescription. To

bolster their argument, petitioners cite extensively from our 2008 ruling

in Republic v. T.A.N. Properties.[19]

The arguments submitted by the OSG with respect to Section 14(2) are

more extensive. The OSG notes that under Article 1113 of the Civil Code, the

acquisitive prescription of properties of the State refers to “patrimonial

property,” while Section 14(2) speaks of “private lands.” It observes that the

Court has yet to decide a case that presented Section 14(2) as a ground for

application for registration, and that the 30-year possession period refers to the

period of possession under Section 48(b) of the Public Land Act, and not the

concept of prescription under the Civil Code. The OSG further submits that,

assuming that the 30-year prescriptive period can run against public lands, said

period should be reckoned from the time the public land was declared alienable

and disposable.

Both sides likewise offer special arguments with respect to the particular

factual circumstances surrounding the subject property and the ownership

thereof.

II.

First, we discuss Section 14(1) of the Property Registration Decree. For a full

understanding of the provision, reference has to be made to the Public Land Act.

A.

Commonwealth Act No. 141, also known as the Public Land Act, has, since

its enactment, governed the classification and disposition of lands of the public

domain. The President is authorized, from time to time, to classify the lands of the

public domain into alienable and disposable, timber, or mineral

lands.[20] Alienable and disposable lands of the public domain are further

classified according to their uses into (a) agricultural; (b) residential, commercial,

industrial, or for similar productive purposes; (c) educational, charitable, or other

similar purposes; or (d) reservations for town sites and for public and quasi-public

uses.[21]

May a private person validly seek the registration in his/her name of

alienable and disposable lands of the public domain? Section 11 of the Public

Land Act acknowledges that public lands suitable for agricultural purposes may be

disposed of “by confirmation of imperfect or incomplete titles” through “judicial

legalization.”[22] Section 48(b) of the Public Land Act, as amended by P.D. No.

1073, supplies the details and unmistakably grants that right, subject to the

requisites stated therein:

Sec. 48. The following described citizens of the Philippines, occupying lands of

the public domain or claiming to own any such land or an interest therein, but whose

titles have not been perfected or completed, may apply to the Court of First Instance of

the province where the land is located for confirmation of their claims and the issuance

of a certificate of title therefor, under the Land Registration Act, to wit:

xxx

(b) Those who by themselves or through their predecessors in interest have

been in open, continuous, exclusive, and notorious possession and occupation of

alienable and disposable lands of the public domain, under a bona fide claim of

acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the

filing of the application for confirmation of title except when prevented by war or force

majeure. These shall be conclusively presumed to have performed all the conditions

essential to a Government grant and shall be entitled to a certificate of title under the

provisions of this chapter.

Section 48(b) of Com. Act No. 141 received its present wording in 1977

when the law was amended by P.D. No. 1073. Two significant amendments were

introduced by P.D. No. 1073. First, the term “agricultural lands” was changed to

“alienable and disposable lands of the public domain.” The OSG submits that this

amendment restricted the scope of the lands that may be registered.[23] This is not

actually the case. Under Section 9 of the Public Land Act, “agricultural lands” are a

mere subset of “lands of the public domain alienable or open to disposition.”

Evidently, alienable and disposable lands of the public domain are a larger class

than only “agricultural lands.”

Second, the length of the requisite possession was changed from possession

for “thirty (30) years immediately preceding the filing of the application” to

possession “since June 12, 1945 or earlier.” The Court in Naguit explained:

When the Public Land Act was first promulgated in 1936, the period of

possession deemed necessary to vest the right to register their title to agricultural lands

of the public domain commenced from July 26, 1894. However, this period was amended

by R.A. No. 1942, which provided that the bona fide claim of ownership must have been

for at least thirty (30) years. Then in 1977, Section 48(b) of the Public Land Act was again

amended, this time by P.D. No. 1073, which pegged the reckoning date at June 12, 1945.

xxx

It bears further observation that Section 48(b) of Com. Act No, 141 is

virtually the same as Section 14(1) of the Property Registration Decree. Said

Decree codified the various laws relative to the registration of property, including

lands of the public domain. It is Section 14(1) that operationalizes the registration

of such lands of the public domain. The provision reads:

SECTION 14. Who may apply.— The following persons may file in the

proper Court of First Instance an application for registration of title to land,

whether personally or through their duly authorized representatives:

(1) those who by themselves or through their predecessors-in-interest

have been in open, continuous, exclusive and notorious possession

and occupation of alienable and disposable lands of the public

domain under a bona fide claim of ownership since June 12, 1945,

or earlier.

Notwithstanding the passage of the Property Registration Decree and the

inclusion of Section 14(1) therein, the Public Land Act has remained in effect. Both

laws commonly refer to persons or their predecessors-in-interest who “have been

in open, continuous, exclusive and notorious possession and occupation of

alienable and disposable lands of the public domain under a bona fideclaim of

ownership since June 12, 1945, or earlier.” That circumstance may have led to the

impression that one or the other is a redundancy, or that Section 48(b) of the

Public Land Act has somehow been repealed or mooted. That is not the case.

The opening clauses of Section 48 of the Public Land Act and Section 14 of

the Property Registration Decree warrant comparison:

Sec. 48 [of the Public Land Act]. The following described citizens of the

Philippines, occupying lands of the public domain or claiming to own any such land or

an interest therein, but whose titles have not been perfected or completed, may apply

to the Court of First Instance of the province where the land is located for confirmation

of their claims and the issuance of a certificate of title therefor, under the Land

Registration Act, to wit:

xxx

Sec. 14 [of the Property Registration Decree]. Who may apply.— The

following persons may file in the proper Court of First Instance an application for

registration of title to land, whether personally or through their duly authorized

representatives:

xxx

It is clear that Section 48 of the Public Land Act is more descriptive of the

nature of the right enjoyed by the possessor than Section 14 of the Property

Registration Decree, which seems to presume the pre-existence of the right,

rather than establishing the right itself for the first time. It is proper to assert that

it is the Public Land Act, as amended by P.D. No. 1073 effective 25 January 1977,

that has primarily established the right of a Filipino citizen who has been “in open,

continuous, exclusive, and notorious possession and occupation of alienable and

disposable lands of the public domain, under a bona fide claim of acquisition of

ownership, since June 12, 1945” to perfect or complete his title by applying with

the proper court for the confirmation of his ownership claim and the issuance of

the corresponding certificate of title.

Section 48 can be viewed in conjunction with the afore-quoted Section 11

of the Public Land Act, which provides that public lands suitable for agricultural

purposes may be disposed of by confirmation of imperfect or incomplete titles,

and given the notion that both provisions declare that it is indeed the Public Land

Act that primarily establishes the substantive ownership of the possessor who has

been in possession of the property since 12 June 1945. In turn, Section 14(a) of

the Property Registration Decree recognizes the substantive right granted under

Section 48(b) of the Public Land Act, as well provides the corresponding original

registration procedure for the judicial confirmation of an imperfect or incomplete

title.

There is another limitation to the right granted under Section 48(b). Section

47 of the Public Land Act limits the period within which one may exercise the right

to seek registration under Section 48. The provision has been amended several

times, most recently by Rep. Act No. 9176 in 2002. It currently reads thus:

Section 47. The persons specified in the next following section are hereby

granted time, not to extend beyond December 31, 2020 within which to avail of the

benefits of this Chapter: Provided, That this period shall apply only where the area

applied for does not exceed twelve (12) hectares: Provided, further, That the several

periods of time designated by the President in accordance with Section Forty-Five of this

Act shall apply also to the lands comprised in the provisions of this Chapter, but this

Section shall not be construed as prohibiting any said persons from acting under this

Chapter at any time prior to the period fixed by the President.[24]

Accordingly under the current state of the law, the substantive right granted

under Section 48(b) may be availed of only until 31 December 2020.

B.

Despite the clear text of Section 48(b) of the Public Land Act, as amended

and Section 14(a) of the Property Registration Decree, the OSG has adopted the

position that for one to acquire the right to seek registration of an alienable and

disposable land of the public domain, it is not enough that the applicant and

his/her predecessors-in-interest be in possession under a bona fideclaim of

ownership since 12 June 1945; the alienable and disposable character of the

property must have been declared also as of 12 June 1945. Following the OSG’s

approach, all lands certified as alienable and disposable after 12 June

1945 cannot be registered either under Section 14(1) of the Property Registration

Decree or Section 48(b) of the Public Land Act as amended. The absurdity of such

an implication was discussed in Naguit.

Petitioner suggests an interpretation that the alienable and disposable character

of the land should have already been established since June 12, 1945 or earlier. This is

not borne out by the plain meaning of Section 14(1). “Since June 12, 1945,” as used in

the provision, qualifies its antecedent phrase “under a bonafide claim of ownership.”

Generally speaking, qualifying words restrict or modify only the words or

phrases to which they are immediately associated, and not those distantly or remotely

located.[25] Ad proximum antecedents fiat relation nisi impediatur sentencia.

Besides, we are mindful of the absurdity that would result if we adopt

petitioner’s position. Absent a legislative amendment, the rule would be, adopting the

OSG’s view, that all lands of the public domain which were not declared alienable or

disposable before June 12, 1945 would not be susceptible to original registration, no

matter the length of unchallenged possession by the occupant. Such interpretation

renders paragraph (1) of Section 14 virtually inoperative and even precludes the

government from giving it effect even as it decides to reclassify public agricultural lands

as alienable and disposable. The unreasonableness of the situation would even be

aggravated considering that before June 12, 1945, the Philippines was not yet even

considered an independent state.

Accordingly, the Court in Naguit explained:

[T]he more reasonable interpretation of Section 14(1) is that it merely requires

the property sought to be registered as already alienable and disposable at the time the

application for registration of title is filed. If the State, at the time the application is

made, has not yet deemed it proper to release the property for alienation or disposition,

the presumption is that the government is still reserving the right to utilize the property;

hence, the need to preserve its ownership in the State irrespective of the length of

adverse possession even if in good faith. However, if the property has already been

classified as alienable and disposable, as it is in this case, then there is already an

intention on the part of the State to abdicate its exclusive prerogative over the property.

The Court declares that the correct interpretation of Section 14(1) is that

which was adopted in Naguit. The contrary pronouncement in Herbieto, as

pointed out in Naguit, absurdly limits the application of the provision to the point

of virtual inutility since it would only cover lands actually declared alienable and

disposable prior to 12 June 1945, even if the current possessor is able to establish

open, continuous, exclusive and notorious possession under a bona fide claim of

ownership long before that date.

Moreover, the Naguit interpretation allows more possessors under a bona

fide claim of ownership to avail of judicial confirmation of their imperfect titles

than what would be feasible underHerbieto. This balancing fact is significant,

especially considering our forthcoming discussion on the scope and reach of

Section 14(2) of the Property Registration Decree.

Petitioners make the salient observation that the contradictory passages

from Herbieto are obiter dicta since the land registration proceedings therein is

void ab initio in the first place due to lack of the requisite publication of the notice

of initial hearing. There is no need to explicitly overturn Herbieto, as it suffices

that the Court’s acknowledgment that the particular line of argument used

therein concerning Section 14(1) is indeed obiter.

It may be noted that in the subsequent case of Buenaventura,[26]

the Court,

citing Herbieto, again stated that “[a]ny period of possession prior to the date when

the [s]ubject [property was] classified as alienable and disposable is

inconsequential and should be excluded from the computation of the period of

possession…” That statement, in the context of Section 14(1), is certainly

erroneous. Nonetheless, the passage as cited in Buenaventura should again be

considered as obiter. The application therein was ultimately granted, citing Section

14(2). The evidence submitted by petitioners therein did not establish any mode of

possession on their part prior to 1948, thereby precluding the application of Section

14(1). It is not even apparent from the decision whether petitioners therein had

claimed entitlement to original registration following Section 14(1), their position

being that they had been in exclusive possession under a bona fide claim of

ownership for over fifty (50) years, but not before 12 June 1945.

Thus, neither Herbieto nor its principal discipular ruling Buenaventura has

any precedental value with respect to Section 14(1). On the other hand, the ratio

of Naguit is embedded in Section 14(1), since it precisely involved situation

wherein the applicant had been in exclusive possession under a bona fide claim of

ownership prior to 12 June 1945. The Court’s interpretation of Section 14(1)

therein was decisive to the resolution of the case. Any doubt as to which

between Naguit or Herbieto provides the final word of the Court on Section 14(1)

is now settled in favor ofNaguit.

We noted in Naguit that it should be distinguished from Bracewell v. Court

of Appeals[27] since in the latter, the application for registration had been

filed before the land was declared alienable or disposable. The dissent though

pronounces Bracewell as the better rule between the two. Yet two years

after Bracewell, its ponente, the esteemed Justice Consuelo Ynares-Santiago,

penned the ruling in Republic v. Ceniza,[28] which involved a claim of possession

that extended back to 1927 over a public domain land that was declared alienable

and disposable only in 1980.Ceniza cited Bracewell, quoted extensively from it,

and following the mindset of the dissent, the attempt at registration

in Ceniza should have failed. Not so.

To prove that the land subject of an application for registration is alienable, an

applicant must establish the existence of a positive act of the government such as a

presidential proclamation or an executive order; an administrative action; investigation

reports of Bureau of Lands investigators; and a legislative act or a statute.

In this case, private respondents presented a certification dated November 25,

1994, issued by Eduardo M. Inting, the Community Environment and Natural Resources

Officer in the Department of Environment and Natural Resources Office in Cebu City,

stating that the lots involved were "found to be within the alienable and disposable (sic)

Block-I, Land Classification Project No. 32-A, per map 2962 4-I555 dated December 9,

1980." This is sufficient evidence to show the real character of the land subject of

private respondents’ application. Further, the certification enjoys a presumption of

regularity in the absence of contradictory evidence, which is true in this case. Worth

noting also was the observation of the Court of Appeals stating that:

[n]o opposition was filed by the Bureaus of Lands and Forestry

to contest the application of appellees on the ground that the property

still forms part of the public domain. Nor is there any showing that the

lots in question are forestal land....

Thus, while the Court of Appeals erred in ruling that mere possession of public

land for the period required by law would entitle its occupant to a confirmation of

imperfect title, it did not err in ruling in favor of private respondents as far as the first

requirement in Section 48(b) of the Public Land Act is concerned, for they were able to

overcome the burden of proving the alienability of the land subject of their application.

As correctly found by the Court of Appeals, private respondents were able to

prove their open, continuous, exclusive and notorious possession of the subject land

even before the year 1927. As a rule, we are bound by the factual findings of the Court

of Appeals. Although there are exceptions, petitioner did not show that this is one of

them.[29]

Why did the Court in Ceniza, through the same eminent member who

authored Bracewell, sanction the registration under Section 48(b) of public

domain lands declared alienable or disposable thirty-five (35) years and 180 days

after 12 June 1945? The telling difference is that in Ceniza, the application for

registration was filed nearly six (6) years after the land had been declared

alienable or disposable, while in Bracewell, the application was filed nine (9)

years before the land was declared alienable or disposable. That crucial

difference was also stressed inNaguit to contradistinguish it from Bracewell, a

difference which the dissent seeks to belittle.

III.

We next ascertain the correct framework of analysis with respect to Section

14(2). The provision reads:

SECTION 14. Who may apply. — The following persons may file in the

proper Court of First Instance an application for registration of title to land,

whether personally or through their duly authorized representatives:

xxx

(2) Those who have acquired ownership over private lands by

prescription under the provisions of existing laws.

The Court in Naguit offered the following discussion concerning Section

14(2), which we did even then recognize, and still do, to be an obiter dictum, but

we nonetheless refer to it as material for further discussion, thus:

Did the enactment of the Property Registration Decree and the amendatory P.D.

No. 1073 preclude the application for registration of alienable lands of the public

domain, possession over which commenced only after June 12, 1945? It did not,

considering Section 14(2) of the Property Registration Decree, which governs and

authorizes the application of “those who have acquired ownership of private lands by

prescription under the provisions of existing laws.”

Prescription is one of the modes of acquiring ownership under the Civil Code.[[30]]

There is a consistent jurisprudential rule that properties classified as alienable public land

may be converted into private property by reason of open, continuous and exclusive

possession of at least thirty (30) years.[[31]] With such conversion, such property may now

fall within the contemplation of “private lands” under Section 14(2), and thus susceptible

to registration by those who have acquired ownership through prescription. Thus, even if

possession of the alienable public land commenced on a date later than June 12, 1945,

and such possession being been open, continuous and exclusive, then the possessor may

have the right to register the land by virtue of Section 14(2) of the Property Registration

Decree.

Naguit did not involve the application of Section 14(2), unlike in this case

where petitioners have based their registration bid primarily on that provision,

and where the evidence definitively establishes their claim of possession only as

far back as 1948. It is in this case that we can properly appreciate the nuances of

the provision.

A.

The obiter in Naguit cited the Civil Code provisions on prescription as the

possible basis for application for original registration under Section 14(2).

Specifically, it is Article 1113 which provides legal foundation for the application.

It reads:

All things which are within the commerce of men are susceptible of

prescription, unless otherwise provided. Property of the State or any of its

subdivisions not patrimonial in character shall not be the object of prescription.

It is clear under the Civil Code that where lands of the public domain are

patrimonial in character, they are susceptible to acquisitive prescription. On the

other hand, among the public domain lands that are not susceptible to acquisitive

prescription are timber lands and mineral lands. The Constitution itself proscribes

private ownership of timber or mineral lands.

There are in fact several provisions in the Civil Code concerning the

acquisition of real property through prescription. Ownership of real property may

be acquired by ordinary prescription of ten (10) years,[32] or through extraordinary

prescription of thirty (30) years.[33] Ordinary acquisitive prescription requires

possession in good faith,[34] as well as just title.[35]

When Section 14(2) of the Property Registration Decree explicitly provides

that persons “who have acquired ownership over private lands by prescription

under the provisions of existing laws,” it unmistakably refers to the Civil Code as a

valid basis for the registration of lands. The Civil Code is the only existing law that

specifically allows the acquisition by prescription of private lands, including

patrimonial property belonging to the State. Thus, the critical question that needs

affirmation is whether Section 14(2) does encompass original registration

proceedings over patrimonial property of the State, which a private person has

acquired through prescription.

The Naguit obiter had adverted to a frequently reiterated jurisprudence

holding that properties classified as alienable public land may be converted into

private property by reason of open, continuous and exclusive possession of at

least thirty (30) years.[36] Yet if we ascertain the source of the “thirty-year” period,

additional complexities relating to Section 14(2) and to how exactly it operates

would emerge. For there are in fact two distinct origins of the thirty (30)-year

rule.

The first source is Rep. Act No. 1942, enacted in 1957, which amended

Section 48(b) of the Public Land Act by granting the right to seek original

registration of alienable public lands through possession in the concept of an

owner for at least thirty years.

The following-described citizens of the Philippines, occupying lands of the

public domain or claiming to own any such lands or an interest therein, but whose titles

have not been perfected or completed, may apply to the Court of First Instance of the

province where the land is located for confirmation of their claims and the issuance of

a certificate of title therefor, under the Land Registration Act, to wit:

x x x x x x x x x

(b) Those who by themselves or through their predecessors in interest have

been in open, continuous, exclusive and notorious possession and occupation of

agricultural lands of the public domain, under a bona fide claim of acquisition of

ownership, for at least thirty years immediately preceding the filing of the application

for confirmation of title, except when prevented by war or force majeure. These shall

be conclusively presumed to have performed all the conditions essential to a

Government grant and shall be entitled to a certificate of title under the provisions of

this Chapter. (emphasis supplied)[37]

This provision was repealed in 1977 with the enactment of P.D. 1073, which

made the date 12 June 1945 the reckoning point for the first time. Nonetheless,

applications for registration filed prior to 1977 could have invoked the 30-year

rule introduced by Rep. Act No. 1942.

The second source is Section 14(2) of P.D. 1529 itself, at least by

implication, as it applies the rules on prescription under the Civil Code, particularly

Article 1113 in relation to Article 1137. Note that there are two kinds of

prescription under the Civil Code–ordinary acquisitive prescription and

extraordinary acquisitive prescription, which, under Article 1137, is completed

“through uninterrupted adverse possession… for thirty years, without need of title

or of good faith.”

Obviously, the first source of the thirty (30)-year period rule, Rep. Act No.

1942, became unavailable after 1977. At present, the only legal basis for the thirty

(30)-year period is the law on prescription under the Civil Code, as mandated

under Section 14(2). However, there is a material difference between how the

thirty (30)-year rule operated under Rep. Act No. 1942 and how it did under the

Civil Code.

Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1942, did

not refer to or call into application the Civil Code provisions on prescription. It

merely set forth a requisite thirty-year possession period immediately preceding

the application for confirmation of title, without any qualification as to whether

the property should be declared alienable at the beginning of, and continue as

such, throughout the entire thirty-(30) years. There is neither statutory nor

jurisprudential basis to assert Rep. Act No. 1942 had mandated such a

requirement,[38] similar to our earlier finding with respect to the present language

of Section 48(b), which now sets 12 June 1945 as the point of reference.

Then, with the repeal of Rep. Act No. 1942, the thirty-year possession

period as basis for original registration became Section 14(2) of the Property

Registration Decree, which entitled those “who have acquired ownership over

private lands by prescription under the provisions of existing laws” to apply for

original registration. Again, the thirty-year period is derived from the rule on

extraordinary prescription under Article 1137 of the Civil Code. At the same time,

Section 14(2) puts into operation the entire regime of prescription under the Civil

Code, a fact which does not hold true with respect to Section 14(1).

B.

Unlike Section 14(1), Section 14(2) explicitly refers to the principles on

prescription under existing laws. Accordingly, we are impelled to apply the civil

law concept of prescription, as set forth in the Civil Code, in our interpretation of

Section 14(2). There is no similar demand on our part in the case of Section 14(1).

The critical qualification under Article 1113 of the Civil Code is thus:

“[p]roperty of the State or any of its subdivisions not patrimonial in character shall

not be the object of prescription.” The identification what consists of patrimonial

property is provided by Articles 420 and 421, which we quote in full:

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

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and

bridges constructed by the State, banks, shores, roadsteads, and others of similar

character;

(2) Those which belong to the State, without being for public use, and are intended

for some public service or for the development of the national wealth.

Art. 421. All other property of the State, which is not of the character stated in

the preceding article, is patrimonial property

It is clear that property of public dominion, which generally includes

property belonging to the State, cannot be the object of prescription or, indeed,

be subject of the commerce of man.[39]Lands of the public domain, whether

declared alienable and disposable or not, are property of public dominion and

thus insusceptible to acquisition by prescription.

Let us now explore the effects under the Civil Code of a declaration by the

President or any duly authorized government officer of alienability and

disposability of lands of the public domain. Would such lands so declared

alienable and disposable be converted, under the Civil Code, from property of the

public dominion into patrimonial property? After all, by connotative definition,

alienable and disposable lands may be the object of the commerce of man; Article

1113 provides that all things within the commerce of man are susceptible to

prescription; and the same provision further provides that patrimonial property of

the State may be acquired by prescription.

Nonetheless, Article 422 of the Civil Code states that “[p]roperty of public

dominion, when no longer intended for public use or for public service, shall form

part of the patrimonial property of the State.” It is this provision that controls

how public dominion property may be converted into patrimonial property

susceptible to acquisition by prescription. After all, Article 420 (2) makes clear

that those property “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” are public dominion property. For as long as the property belongs to the

State, although already classified as alienable or disposable, it remains property of

the public dominion if when it is “intended for some public service or for the

development of the national wealth”.

Accordingly, there must be an express declaration by the State that the

public dominion property is no longer intended for public service or the

development of the national wealth or that the property has been converted

into patrimonial. Without such express declaration, the property, even if

classified as alienable or disposable, remains property of the public dominion,

pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is

only when such alienable and disposable lands are expressly declared by the

State to be no longer intended for public service or for the development of the

national wealth that the period of acquisitive prescription can begin to run.

Such declaration shall be in the form of a law duly enacted by Congress or a

Presidential Proclamation in cases where the President is duly authorized by

law.

It is comprehensible with ease that this reading of Section 14(2) of the

Property Registration Decree limits its scope and reach and thus affects the

registrability even of lands already declared alienable and disposable to the

detriment of the bona fide possessors or occupants claiming title to the lands. Yet

this interpretation is in accord with the Regalian doctrine and its concomitant

assumption that all lands owned by the State, although declared alienable or

disposable, remain as such and ought to be used only by the Government.

Recourse does not lie with this Court in the matter. The duty of the Court is

to apply the Constitution and the laws in accordance with their language and

intent. The remedy is to change the law, which is the province of the legislative

branch. Congress can very well be entreated to amend Section 14(2) of the

Property Registration Decree and pertinent provisions of the Civil Code to

liberalize the requirements for judicial confirmation of imperfect or incomplete

titles.

The operation of the foregoing interpretation can be illustrated by an actual

example. Republic Act No. 7227, entitled “An Act Accelerating The Conversion Of

Military Reservations Into Other Productive Uses, etc.,” is more commonly known

as the BCDA law. Section 2 of the law authorizes the sale of certain military

reservations and portions of military camps in Metro Manila,

including Fort Bonifacio and Villamor Air Base. For purposes of effecting the sale

of the military camps, the law mandates the President to transfer such military

lands to the Bases Conversion Development Authority (BCDA)[40] which in turn is

authorized to own, hold and/or administer them.[41] The President is authorized to

sell portions of the military camps, in whole or in part.[42]Accordingly, the BCDA

law itself declares that the military lands subject thereof are “alienable and

disposable pursuant to the provisions of existing laws and regulations governing

sales of government properties.”[43]

From the moment the BCDA law was enacted the subject military lands

have become alienable and disposable. However, said lands did not become

patrimonial, as the BCDA law itself expressly makes the reservation that these

lands are to be sold in order to raise funds for the conversion of the former

American bases at Clark and Subic.[44] Such purpose can be tied to either “public

service” or “the development of national wealth” under Article 420(2). Thus, at

that time, the lands remained property of the public dominion under Article

420(2), notwithstanding their status as alienable and disposable. It is upon their

sale as authorized under the BCDA law to a private person or entity that such

lands become private property and cease to be property of the public dominion.

C.

Should public domain lands become patrimonial because they are declared

as such in a duly enacted law or duly promulgated proclamation that they are no

longer intended for public service or for the development of the national wealth,

would the period of possession prior to the conversion of such public dominion

into patrimonial be reckoned in counting the prescriptive period in favor of the

possessors? We rule in the negative.

The limitation imposed by Article 1113 dissuades us from ruling that the

period of possession before the public domain land becomes patrimonial may be

counted for the purpose of completing the prescriptive period. Possession of

public dominion property before it becomes patrimonial cannot be the object of

prescription according to the Civil Code. As the application for registration under

Section 14(2) falls wholly within the framework of prescription under the Civil

Code, there is no way that possession during the time that the land was still

classified as public dominion property can be counted to meet the requisites of

acquisitive prescription and justify registration.

Are we being inconsistent in applying divergent rules for Section 14(1) and

Section 14(2)? There is no inconsistency. Section 14(1) mandates registration on

the basis of possession,while Section 14(2) entitles registration on the basis

of prescription. Registration under Section 14(1) is extended under the aegis of

the Property Registration Decree and the Public Land Act while registration

under Section 14(2) is made available both by the Property Registration Decree

and the Civil Code.

In the same manner, we can distinguish between the thirty-year period

under Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1472, and

the thirty-year period available through Section 14(2) of the Property Registration

Decree in relation to Article 1137 of the Civil Code. The period under the former

speaks of a thirty-year period of possession, while the period under the latter

concerns a thirty-year period of extraordinary prescription. Registration under

Section 48(b) of the Public Land Act as amended by Rep. Act No. 1472 is based

on thirty years of possession alone without regard to the Civil Code, while the

registration under Section 14(2) of the Property Registration Decree is founded

on extraordinary prescription under the Civil Code.

It may be asked why the principles of prescription under the Civil Code

should not apply as well to Section 14(1). Notwithstanding the vaunted status of

the Civil Code, it ultimately is just one of numerous statutes, neither superior nor

inferior to other statutes such as the Property Registration Decree. The legislative

branch is not bound to adhere to the framework set forth by the Civil Code when

it enacts subsequent legislation. Section 14(2) manifests a clear intent to

interrelate the registration allowed under that provision with the Civil Code, but

no such intent exists with respect to Section 14(1).

IV.

One of the keys to understanding the framework we set forth today is

seeing how our land registration procedures correlate with our law on

prescription, which, under the Civil Code, is one of the modes for acquiring

ownership over property.

The Civil Code makes it clear that patrimonial property of the State may be

acquired by private persons through prescription. This is brought about by Article

1113, which states that “[a]ll things which are within the commerce of man are

susceptible to prescription,” and that [p]roperty of the State or any of its

subdivisions not patrimonial in character shall not be the object of prescription.”

There are two modes of prescription through which immovables may be

acquired under the Civil Code. The first is ordinary acquisitive prescription, which,

under Article 1117, requires possession in good faith and with just title; and,

under Article 1134, is completed through possession of ten (10) years. There is

nothing in the Civil Code that bars a person from acquiring patrimonial property

of the State through ordinary acquisitive prescription, nor is there any apparent

reason to impose such a rule. At the same time, there are indispensable

requisites–good faith and just title. The ascertainment of good faith involves the

application of Articles 526, 527, and 528, as well as Article 1127 of the Civil

Code,[45] provisions that more or less speak for themselves.

On the other hand, the concept of just title requires some

clarification. Under Article 1129, there is just title for the purposes of prescription

“when the adverse claimant came into possession of the property through one of

the modes recognized by law for the acquisition of ownership or other real rights,

but the grantor was not the owner or could not transmit any right.” Dr. Tolentino

explains:

Just title is an act which has for its purpose the transmission of ownership, and

which would have actually transferred ownership if the grantor had been the owner. This

vice or defect is the one cured by prescription. Examples: sale with delivery, exchange,

donation, succession, and dacion in payment.[46]

The OSG submits that the requirement of just title necessarily precludes the

applicability of ordinary acquisitive prescription to patrimonial property. The

major premise for the argument is that “the State, as the owner and grantor,

could not transmit ownership to the possessor before the completion of the

required period of possession.”[47] It is evident that the OSG erred when it

assumed that the grantor referred to in Article 1129 is the State. The grantor is

the one from whom the person invoking ordinary acquisitive prescription derived

the title, whether by sale, exchange, donation, succession or any other mode of

the acquisition of ownership or other real rights.

Earlier, we made it clear that, whether under ordinary prescription or

extraordinary prescription, the period of possession preceding the classification of

public dominion lands as patrimonial cannot be counted for the purpose of

computing prescription. But after the property has been become patrimonial, the

period of prescription begins to run in favor of the possessor. Once the requisite

period has been completed, two legal events ensue: (1) the patrimonial property

is ipso jure converted into private land; and (2) the person in possession for the

periods prescribed under the Civil Code acquires ownership of the property by

operation of the Civil Code.

It is evident that once the possessor automatically becomes the owner of

the converted patrimonial property, the ideal next step is the registration of the

property under the Torrens system. It should be remembered that registration of

property is not a mode of acquisition of ownership, but merely a mode of

confirmation of ownership.[48]

Looking back at the registration regime prior to the adoption of the

Property Registration Decree in 1977, it is apparent that the registration system

then did not fully accommodate the acquisition of ownership of patrimonial

property under the Civil Code. What the system accommodated was the

confirmation of imperfect title brought about by the completion of a period of

possession ordained under the Public Land Act (either 30 years following Rep. Act

No. 1942, or since 12 June 1945 following P.D. No. 1073).

The Land Registration Act[49] was noticeably silent on the requisites for

alienable public lands acquired through ordinary prescription under the Civil

Code, though it arguably did not preclude such registration.[50] Still, the gap was

lamentable, considering that the Civil Code, by itself, establishes ownership over

the patrimonial property of persons who have completed the prescriptive periods

ordained therein. The gap was finally closed with the adoption of the Property

Registration Decree in 1977, with Section 14(2) thereof expressly authorizing

original registration in favor of persons who have acquired ownership over private

lands by prescription under the provisions of existing laws, that is, the Civil Code

as of now.

V.

We synthesize the doctrines laid down in this case, as follows:

(1) In connection with Section 14(1) of the Property Registration Decree,

Section 48(b) of the Public Land Act recognizes and confirms that “those who by

themselves or through their predecessors in interest have been in open,

continuous, exclusive, and notorious possession and occupation of alienable and

disposable lands of the public domain, under a bona fide claim of acquisition of

ownership, since June 12, 1945” have acquired ownership of, and registrable title

to, such lands based on the length and quality of their possession.

(a) Since Section 48(b) merely requires possession since 12 June

1945 and does not require that the lands should have been alienable and

disposable during the entire period of possession, the possessor is entitled

to secure judicial confirmation of his title thereto as soon as it is declared

alienable and disposable, subject to the timeframe imposed by Section 47

of the Public Land Act.[51]

(b) The right to register granted under Section 48(b) of the Public

Land Act is further confirmed by Section 14(1) of the Property Registration

Decree.

(2) In complying with Section 14(2) of the Property Registration Decree,

consider that under the Civil Code, prescription is recognized as a mode of

acquiring ownership of patrimonial property. However, public domain lands

become only patrimonial property not only with a declaration that these are

alienable or disposable. There must also be an express government manifestation

that the property is already patrimonial or no longer retained for public service or

the development of national wealth, under Article 422 of the Civil Code. And only

when the property has become patrimonial can the prescriptive period for the

acquisition of property of the public dominion begin to run.

(a) Patrimonial property is private property of the

government. The person acquires ownership of patrimonial property by

prescription under the Civil Code is entitled to secure registration thereof

under Section 14(2) of the Property Registration Decree.

(b) There are two kinds of prescription by which patrimonial

property may be acquired, one ordinary and other extraordinary. Under

ordinary acquisitive prescription, a person acquires ownership of a

patrimonial property through possession for at least ten (10) years, in good

faith and with just title. Under extraordinary acquisitive prescription, a

person’s uninterrupted adverse possession of patrimonial property for at

least thirty (30) years, regardless of good faith or just title, ripens into

ownership.

B.

We now apply the above-stated doctrines to the case at bar.

It is clear that the evidence of petitioners is insufficient to establish that

Malabanan has acquired ownership over the subject property under Section 48(b)

of the Public Land Act. There is no substantive evidence to establish that

Malabanan or petitioners as his predecessors-in-interest have been in possession

of the property since 12 June 1945 or earlier. The earliest that petitioners can

date back their possession, according to their own evidence—the Tax

Declarations they presented in particular—is to the year 1948. Thus, they cannot

avail themselves of registration under Section 14(1) of the Property Registration

Decree.

Neither can petitioners properly invoke Section 14(2) as basis for

registration. While the subject property was declared as alienable or disposable in

1982, there is no competent evidence that is no longer intended for public use

service or for the development of the national evidence, conformably with Article

422 of the Civil Code. The classification of the subject property as alienable and

disposable land of the public domain does not change its status as property of the

public dominion under Article 420(2) of the Civil Code. Thus, it is insusceptible to

acquisition by prescription.

VI.

A final word. The Court is comfortable with the correctness of the legal

doctrines established in this decision. Nonetheless, discomfiture over the

implications of today’s ruling cannot be discounted. For, every untitled property

that is occupied in the country will be affected by this ruling. The social

implications cannot be dismissed lightly, and the Court would be abdicating its

social responsibility to the Filipino people if we simply levied the law without

comment.

The informal settlement of public lands, whether declared alienable or not,

is a phenomenon tied to long-standing habit and cultural acquiescence, and is

common among the so-called “Third World” countries. This paradigm powerfully

evokes the disconnect between a legal system and the reality on the ground. The

law so far has been unable to bridge that gap. Alternative means of acquisition of

these public domain lands, such as through homestead or free patent, have

proven unattractive due to limitations imposed on the grantee in the

encumbrance or alienation of said properties.[52] Judicial confirmation of

imperfect title has emerged as the most viable, if not the most attractive means

to regularize the informal settlement of alienable or disposable lands of the public

domain, yet even that system, as revealed in this decision, has considerable limits.

There are millions upon millions of Filipinos who have individually or

exclusively held residential lands on which they have lived and raised their

families. Many more have tilled and made productive idle lands of the State with

their hands. They have been regarded for generation by their families and their

communities as common law owners. There is much to be said about the virtues

of according them legitimate states. Yet such virtues are not for the Court to

translate into positive law, as the law itself considered such lands as property of

the public dominion. It could only be up to Congress to set forth a new phase of

land reform to sensibly regularize and formalize the settlement of such lands

which in legal theory are lands of the public domain before the problem becomes

insoluble. This could be accomplished, to cite two examples, by liberalizing the

standards for judicial confirmation of imperfect title, or amending the Civil Code

itself to ease the requisites for the conversion of public dominion property into

patrimonial.

One’s sense of security over land rights infuses into every aspect of well-

being not only of that individual, but also to the person’s family. Once that sense

of security is deprived, life and livelihood are put on stasis. It is for the political

branches to bring welcome closure to the long pestering problem.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals

dated 23 February 2007 and Resolution dated 2 October 2007 are AFFIRMED. No

pronouncement as to costs.

SO ORDERED.

DANTE O. TINGA

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chief Justice

LEONARDO A. QUISUMBING

Associate Justice

CONSUELO YNARES-SANTIAGO

Associate Justice

ANTONIO T. CARPIO

Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

RENATO C. CORONA

Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

TERESITA J. LEONARDO DE CASTO

Associate Justice

ARTURO D. BRION

Associate Justice

DIOSDADO M. PERALTA

Associate Justice

LUCAS P. BERSAMIN Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby

certified that the conclusions in the above Decision were reached in

consultation before the case was assigned to the writer of the opinion of the

Court.

REYNATO S. PUNO

Chief Justice

[1]

“Hernando de Soto Interview” by Reason Magazine dated 30 November 1999,

at http://www.reason.com/news/show/32213.html (Last visited, 21 April 2009).

[2]

More particularly described and delineated in Plan CSD-04-017123. Records, p. 161.

[3]

But see note 5.

[4]

Id.

[5]

The trial court decision identified Eduardo Velazco as the vendor of the property, notwithstanding the

original allegation in the application that Malabanan purchased the same from Virgilio Velazco. See note 3. In his

subsequent pleadings, including those before this Court, Malabanan or his heirs stated that the property was

purchased from Eduardo Velazco, and not Virgilio. On this point, the appellate court made this observation:

“More importantly, Malabanan failed to prove his ownership over Lot 9864-A. In his application for land

registration, Malabanan alleged that he purchased the subject lot from Virgilio Velazco. During the trial of the case,

however, Malabanan testified that he purchased the subject lot from Eduardo Velazco, which was corroborated by

his witness, Aristedes Velazco, a son of Virgilio Velazco, who stated that Eduardo was a brother of his

grandfather. As aptly observed by the Republic, no copy of the deed of sale covering Lot 9864-A, executed either

by Virgilio or Eduardo Velazco, in favor of Malabanan was marked and offered in evidence. In the appealed

Decision, the court a quo mentioned of a deed of sale executed in 1995 by Eduardo Velazco in favor of Malabanan

which was allegedly marked as Exhibit “I.” It appears, however, that what was provisionally marked as Exhibit “I”

was a photocopy of the deed of sale executed by Virgilio Velazco in favor of Leila Benitez and Benjamin

Reyes. Section 34, Rule 132 of the Rules of Court provides that the court shall consider no evidence which has not

been formally offered. The offer is necessary because it is the duty of a judge to rest his findings of facts and his

judgment only and strictly upon the evidence offered by the parties at the trial. Thus, Malabanan has not proved that

Virgilio or Eduardo Velazco was his predecessor-in-interest.” Rollo, pp. 39-40.

[6]

Rollo, p. 74.

[7]

Id. at 38. Emphasis supplied.

[8]

Penned by Associate Justice Marina Buzon of the Court of Appeals Fifth Division, and concurred in by

Associate Justices Edgardo Sundiam and Monina Arevalo-Zenarosa.

[9]

G.R. No. 156117, 26 May 2005, 459 SCRA 183.

[10]

See rollo, p. 11.

[11]

G.R. No. 144507, 17 January 2005, 448 SCRA 442.

[12]

Through a Resolution dated 5 December 2007. See rollo, p. 141.

[13]

Id. at 186-187.

[14]

G.R. No. 157466, 21 June 2007, 525 SCRA 268.

[15]

G.R. No. 166865, 2 March 2007, 459 SCRA 271.

[16]

G.R. No. 147359, 28 March 2008, 550 SCRA 92.

[17]

G.R. No. 173088, 25 June 2008, 555 SCRA 314.

[18]

G.R. No. 85322, 30 April 1991, 178 SCRA 708.

[19]

G.R. No. 154953, 16 June 2008.

[20]

Section 6, Com. Act No. 141, as amended.

[21]

Section 9, Com. Act No. 141, as amended.

[22]

Section 11, Com. Act No. 141, as amended.

[23]

OSG Memorandum, p. 13.

[24]

Section 47, Public Land Act, as amended by Rep. Act No. 9176.

[25]R. AGPALO, STATUTORY CONSTRUCTION (3

rd ed., 1995) at 182.

[26]

See note 3.

[27]

380 Phil. 156 (2000).

[28]

Also known as Republic v. Court of Appeals, 440 Phil. 697 (2002).

[29]

Id. at 710-712.

[30]

See CIVIL CODE, Art. 1113.

[31]

See e.g., Director of Lands v. IAC, G.R. No. 65663, 16 October 1992, 214 SCRA 604, 611; Republic v.

Court of Appeals, G.R. No. 108998, 24 August 1994, 235 SCRA 567, 576; Group Commander, Intelligence and

Security Group v. Dr. Malvar, 438 Phil. 252, 275 (2002).

[32]

See Article 1134, CIVIL CODE.

[33]

See Article 1137, CIVIL CODE.

[34]

See Article 1117 in relation to Article 1128, Civil Code. See also Articles 526, 527, 528 & 529, Civil

Code on the conditions of good faith required.

[35]

See Article 1117, in relation to Article 1129, Civil Code.

[36]

Citing Director of Lands v. IAC, G.R. No. 65663, 16 October 1992, 214 SCRA 604, 611; Republic v.

Court of Appeals, G.R. No. 108998, 24 August 1994, 235 SCRA 567, 576; Group Commander, Intelligence and

Security Group v. Dr. Malvar, 438 Phil. 252, 275 (2002).

[37]

Section 48(b) of the Public Land Act, immediately before its amendment by Rep. Act No. 1942, reads as

follows:

“Those who by themselves or through their predecessors in interest have been in open, continuous,

exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona

fide claim of acquisition of ownership, except as against the Government, since July twenty-sixth, eighteen hundred

and ninety-four, except when prevented by war or force majeure. These shall be conclusively presumed to have

performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the

provisions of this Chapter.”

[38]

Again, Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1942, was superseded by P.D.

No. 1073, which imposed the 12 June 1945 reckoning point, and which was then incorporated in Section 14(1) of

the Property Registration Decree.

[39]

See Vllarico v. Sarmiento, G.R. No. 136438, 11 November 2004, 442 SCRA 110.

[40]

Rep. Act No. 7227, Sec.7.

[41]

Rep. Act No. 7227, Sec. 4(a).

[42]

Rep. Act No. 7227, Sec. 7.

[43]

Id.

[44]

Section 2, Rep. Act No. 7227.

[45]

See CIVIL CODE, Art. 1128.

[46]

A. TOLENTINO, IV CIVIL CODE OF THE PHILIPPINES (1991 ed.) at 26; citing 2 Castan 175.

[47]

Memorandum of the OSG, p. 21.

[48]

See Angeles v. Samia, 66 Phil. 44 (1938).

[49]

Act No. 496.

[50]

See Section 19, Land Registration Act, which allowed application for registration of title by “person or

persons claiming, singly or collectively, to own the legal estate in fee simple.”

[51]

See note 24.

[52]

See Section 118, Com. Act No. 141, as amended.

“Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free

patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the

application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they

become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements

or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after

issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval

shall not be denied except on constitutional and legal grounds.”