G.R. No.

L-40411 August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.

Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.

MALCOLM, J.:

The issue in this case, as announced in the opening sentence of the decision in the trial court and as set
forth by counsel for the parties on appeal, involves the determination of the nature of the properties
described in the complaint. The trial judge found that those properties were personal in nature, and as a
consequence absolved the defendants from the complaint, with costs against the plaintiff.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine
Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of
Davao. However, the land upon which the business was conducted belonged to another person. On the
land the sawmill company erected a building which housed the machinery used by it. Some of the
implements thus used were clearly personal property, the conflict concerning machines which were placed
and mounted on foundations of cement. In the contract of lease between the sawmill company and the
owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings introduced and
erected by the party of the second part shall pass to the exclusive ownership of the party of the first part
without any obligation on its part to pay any amount for said improvements and buildings; also, in the event
the party of the second part should leave or abandon the land leased before the time herein stipulated, the
improvements and buildings shall likewise pass to the ownership of the party of the first part as though the
time agreed upon had expired: Provided, however, That the machineries and accessories are not included
in the improvements which will pass to the party of the first part on the expiration or abandonment of the
land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill
Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the
defendant in that action; a writ of execution issued thereon, and the properties now in question were levied
upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales
thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff
in that action, and the defendant herein having consummated the sale, proceeded to take possession of the
machinery and other properties described in the corresponding certificates of sale executed in its favor by
the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a
number of occasions treated the machinery as personal property by executing chattel mortgages in favor of
third persons. One of such persons is the appellee by assignment from the original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists
of —

1. Land, buildings, roads and constructions of all kinds adhering to the soil;

xxx xxx xxx

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for
use in connection with any industry or trade being carried on therein and which are expressly adapted to
meet the requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no
doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the
facts.

In the first place, it must again be pointed out that the appellant should have registered its protest before or
at the time of the sale of this property. It must further be pointed out that while not conclusive, the
characterization of the property as chattels by the appellant is indicative of intention and impresses upon
the property the character determined by the parties. In this connection the decision of this court in the case
of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes
the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is
machinery which is involved; moreover, machinery not intended by the owner of any building or land for use
in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it
was held that machinery which is movable in its nature only becomes immobilized when placed in a plant
by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of the owner. In the opinion written by
Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said:

To determine this question involves fixing the nature and character of the property from the point of view of
the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a
judgment creditor of the Altagracia Company and the rights derived by them from the execution levied on
the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican Code
treats as immovable (real) property, not only land and buildings, but also attributes immovability in some
cases to property of a movable nature, that is, personal property, because of the destination to which it is
applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by their own nature
or by their destination or the object to which they are applicable." Numerous illustrations are given in the
fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements
intended by the owner of the tenements for the industrial or works that they may carry on in any building or
upon any land and which tend directly to meet the needs of the said industry or works." (See also Code
Nap., articles 516, 518 et seq. to and inclusive of article 534, recapitulating the things which, though in
themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing —
machinery placed in the plant — it is plain, both under the provisions of the Porto Rican Law and of the
Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a
plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the
placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and
decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as
pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or
enjoyment of property is not presumed by the law to have applied movable property belonging to him so as
to deprive him of it by causing it by an act of immobilization to become the property of another. It follows
that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez
did not lose its character of movable property and become immovable by destination. But in the concrete
immobilization took place because of the express provisions of the lease under which the Altagracia held,
since the lease in substance required the putting in of improved machinery, deprived the tenant of any right
to charge against the lessor the cost such machinery, and it was expressly stipulated that the machinery so
put in should become a part of the plant belonging to the owner without compensation to the lessee. Under
such conditions the tenant in putting in the machinery was acting but as the agent of the owner in
compliance with the obligations resting upon him, and the immobilization of the machinery which resulted
arose in legal effect from the act of the owner in giving by contract a permanent destination to the
machinery.

xxx xxx xxx

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the
Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had the
right to levy on it under the execution upon the judgment in their favor, and the exercise of that right did not
in a legal sense conflict with the claim of Valdes, since as to him the property was a part of the realty which,
as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed
separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)

Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this
instance to be paid by the appellant.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

G.R. No. L-41643 July 31, 1935

B.H. BERKENKOTTER, plaintiff-appellant,

vs.

CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY, MABALACAT
SUGAR COMPANY and THE PROVINCE SHERIFF OF PAMPANGA, defendants-appellees.

Briones and Martinez for appellant.

Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.

No appearance for the other appellees.

VILLA-REAL, J.:

This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment of the Court of First Instance
of Manila, dismissing said plaintiff's complaint against Cu Unjiengs e Hijos et al., with costs.

In support of his appeal, the appellant assigns six alleged errors as committed by the trial court in its
decision in question which will be discussed in the course of this decision.

The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is
whether or not the lower court erred in declaring that the additional machinery and equipment, as
improvement incorporated with the central are subject to the mortgage deed executed in favor of the
defendants Cu Unjieng e Hijos.

It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar
central situated in Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan
secured by a first mortgage constituted on two parcels and land "with all its buildings, improvements, sugar-
cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is necessary
complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future
exist is said lots."

On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc.,
decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that
instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional machinery and
equipment was approximately P100,000. In order to carry out this plan, B.A. Green, president of said
corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount for the purchase
of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional
loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition
made in a letter dated October 5, 1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same year,
delivered the sum of P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the total amount
supplied by him to said B.A. Green having been P25,750. Furthermore, B.H. Berkenkotter had a credit of
P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000,
the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now in litigation.

On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos
for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by
said B.A. Green and installed in the sugar central after the execution of the original mortgage deed, on April
27, 1927, together with whatever additional equipment acquired with said loan. B.A. Green failed to obtain
said loan.

Article 1877 of the Civil Code provides as follows.

ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents not
collected when the obligation falls due, and the amount of any indemnities paid or due the owner by the
insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain, with the
declarations, amplifications, and limitations established by law, whether the estate continues in the
possession of the person who mortgaged it or whether it passes into the hands of a third person.

In the case of Bischoff vs. Pomar and Compañia General de Tabacos (12 Phil., 690), cited with approval in
the case of Cea vs. Villanueva (18 Phil., 538), this court laid shown the following doctrine:

1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND FIXTURES. — It is a

rule, established by the Civil Code and also by the Mortgage Law, with which the decisions of the courts of
the United States are in accord, that in a mortgage of real estate, the improvements on the same are
included; therefore, all objects permanently attached to a mortgaged building or land, although they may
have been placed there after the mortgage was constituted, are also included. (Arts. 110 and 111 of the
Mortgage Law, and 1877 of the Civil Code; decision of U.S. Supreme Court in the matter of Royal
Insurance Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)

2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. — In order that it may be understood that
the machinery and other objects placed upon and used in connection with a mortgaged estate are excluded
from the mortgage, when it was stated in the mortgage that the improvements, buildings, and machinery
that existed thereon were also comprehended, it is indispensable that the exclusion thereof be stipulated
between the contracting parties.

The appellant contends that the installation of the machinery and equipment claimed by him in the sugar
central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as B.A. Green, in
proposing to him to advance the money for the purchase thereof, made it appear in the letter, Exhibit E,
that in case B.A. Green should fail to obtain an additional loan from the defendants Cu Unjieng e Hijos, said
machinery and equipment would become security therefor, said B.A. Green binding himself not to mortgage
nor encumber them to anybody until said plaintiff be fully reimbursed for the corporation's indebtedness to
him.

Upon acquiring the machinery and equipment in question with money obtained as loan from the plaintiff-
appellant by B.A. Green, as president of the Mabalacat Sugar Co., Inc., the latter became owner of said
machinery and equipment, otherwise B.A. Green, as such president, could not have offered them to the
plaintiff as security for the payment of his credit.

Article 334, paragraph 5, of the Civil Code gives the character of real property to "machinery, liquid
containers, instruments or implements intended by the owner of any building or land for use in connection
with any industry or trade being carried on therein and which are expressly adapted to meet the
requirements of such trade or industry.

If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co.,
Inc., in lieu of the other of less capacity existing therein, for its sugar industry, converted them into real
property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent
in character because, as essential and principal elements of a sugar central, without them the sugar central
would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the
central is permanent in character, the necessary machinery and equipment installed for carrying on the
sugar industry for which it has been established must necessarily be permanent.

Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said
machinery and equipment as security for the payment of the latter's credit and to refrain from mortgaging or
otherwise encumbering them until Berkenkotter has been fully reimbursed therefor, is not incompatible with
the permanent character of the incorporation of said machinery and equipment with the sugar central of the
Mabalacat Sugar Co., Inc., as nothing could prevent B.A. Green from giving them as security at least under
a second mortgage.

As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had been
permanently incorporated with sugar central of the Mabalacat Sugar Co., Inc., and while the mortgage
constituted on said sugar central to Cu Unjieng e Hijos remained in force, only the right of redemption of the
vendor Mabalacat Sugar Co., Inc., in the sugar central with which said machinery and equipment had been
incorporated, was transferred thereby, subject to the right of the defendants Cu Unjieng e Hijos under the
first mortgage.

For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery
and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying
out the industrial functions of the latter and increasing production, constitutes a permanent improvement on
said sugar central and subjects said machinery and equipment to the mortgage constituted thereon (article
1877, Civil Code); (2) that the fact that the purchaser of the new machinery and equipment has bound
himself to the person supplying him the purchase money to hold them as security for the payment of the
latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent
character of the incorporation of said machinery and equipment with the central; and (3) that the sale of the
machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan,
to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central,
does not vest the creditor with ownership of said machinery and equipment but simply with the right of
redemption.

Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the
appellant. So ordered.

Malcolm, Imperial, Butte, and Goddard, JJ., concur.

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner,

vs.

WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.

Loreto C. Baduan for petitioner.

Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.

Jose V. Mancella for respondent.

DE CASTRO, J.:

Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court)
promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified
herein, of Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI,
issued in Civil Case No. 36040, as wen as the resolution dated September 22, 1981 of the said appellate
court, denying petitioner's motion for reconsideration.

It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and
Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several
receivables with the former under a Receivable Purchase Agreement. To secure the collection of the
receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory
as well as a machinery described as an Artos Aero Dryer Stentering Range.

Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into
private respondent's premises and was not able to effect the seizure of the aforedescribed machinery.
Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch
VI, docketed as Civil Case No. 36040, the case before the lower court.

Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of
which was however subsequently restrained upon private respondent's filing of a motion for
reconsideration. After several incidents, the lower court finally issued on February 11, 1981, an order lifting
the restraining order for the enforcement of the writ of seizure and an order to break open the premises of
private respondent to enforce said writ. The lower court reaffirmed its stand upon private respondent's filing
of a further motion for reconsideration.

On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent
and removed the main drive motor of the subject machinery.

The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private
respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized by the
sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin,
much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code,
the same being attached to the ground by means of bolts and the only way to remove it from respondent's
plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore
the writ was to take the main drive motor of said machinery. The appellate court rejected petitioner's
argument that private respondent is estopped from claiming that the machine is real property by
constituting a chattel mortgage thereon.

A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has
brought the case to this Court for review by writ of certiorari. It is contended by private respondent,
however, that the instant petition was rendered moot and academic by petitioner's act of returning the
subject motor drive of respondent's machinery after the Court of Appeals' decision was promulgated.

The contention of private respondent is without merit. When petitioner returned the subject motor drive, it
made itself unequivocably clear that said action was without prejudice to a motion for reconsideration of the
Court of Appeals decision, as shown by the receipt duly signed by respondent's representative. 1
Considering that petitioner has reserved its right to question the propriety of the Court of Appeals' decision,
the contention of private respondent that this petition has been mooted by such return may not be
sustained.

The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is
real or personal property from the point of view of the parties, with petitioner arguing that it is a personality,
while the respondent claiming the contrary, and was sustained by the appellate court, which accordingly
held that the chattel mortgage constituted thereon is null and void, as contended by said respondent.

A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking
through Justice J.B.L. Reyes, ruled:

Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant
to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now
be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a
rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not
in itself alone determine the status of the property, it does so when combined with other factors to sustain
the interpretation that the parties, particularly the mortgagors, intended to treat the house as personality.
Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong
Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the
defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel
mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-appellants,
having treated the subject house as personality.

Examining the records of the instant case, We find no logical justification to exclude the rule out, as the
appellate court did, the present case from the application of the abovequoted pronouncement. If a house of
strong materials, like what was involved in the above Tumalad case, may be considered as personal
property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so
agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may
not be likewise treated as such. This is really because one who has so agreed is estopped from denying
the existence of the chattel mortgage.

In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays
stress on the fact that the house involved therein was built on a land that did not belong to the owner of
such house. But the law makes no distinction with respect to the ownership of the land on which the house
is built and We should not lay down distinctions not contemplated by law.

It must be pointed out that the characterization of the subject machinery as chattel by the private
respondent is indicative of intention and impresses upon the property the character determined by the
parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties
to a contract may by agreement treat as personal property that which by nature would be real property, as
long as no interest of third parties would be prejudiced thereby.

Private respondent contends that estoppel cannot apply against it because it had never represented nor
agreed that the machinery in suit be considered as personal property but was merely required and dictated
on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of
signing. This contention lacks persuasiveness. As aptly pointed out by petitioner and not denied by the
respondent, the status of the subject machinery as movable or immovable was never placed in issue before
the lower court and the Court of Appeals except in a supplemental memorandum in support of the petition
filed in the appellate court. Moreover, even granting that the charge is true, such fact alone does not render
a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable
pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to
show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same.
On the other hand, as pointed out by petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of
another. Private respondent could not now therefore, be allowed to impugn the efficacy of the chattel
mortgage after it has benefited therefrom,

From what has been said above, the error of the appellate court in ruling that the questioned machinery is
real, not personal property, becomes very apparent. Moreover, the case of Machinery and Engineering
Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to the case at bar, the
nature of the machinery and equipment involved therein as real properties never having been disputed nor
in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more
nearly perfect parity with the instant case to be the more controlling jurisprudential authority.

WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set
aside, and the Orders of the lower court are hereby reinstated, with costs against the private respondent.

SO ORDERED.

Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.

Abad Santos, J., concurs in the result.

G.R. No. L-15334 January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY,
petitioners,

vs.

MANILA ELECTRIC COMPANY, respondent.

Assistant City Attorney Jaime R. Agloro for petitioners.

Ross, Selph and Carrascoso for respondent.

PAREDES, J.:

From the stipulation of facts and evidence adduced during the hearing, the following appear:

On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal
Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and
electric light, heat and power system in the City of Manila and its suburbs to the person or persons making
the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the terms and
conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila
Electric Co. (Meralco for short), became the transferee and owner of the franchise.

Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is
transmitted to the City of Manila by means of electric transmission wires, running from the province of
Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to
insulators attached on steel towers constructed by respondent at intervals, from its hydro-electric plant in
the province of Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A photograph of one of these steel towers is attached to
the petition for review, marked Annex A. Three steel towers were inspected by the lower court and parties
and the following were the descriptions given there of by said court:

The first steel tower is located in South Tatalon, España Extension, Quezon City. The findings were as
follows: the ground around one of the four posts was excavated to a depth of about eight (8) feet, with an
opening of about one (1) meter in diameter, decreased to about a quarter of a meter as it we deeper until it
reached the bottom of the post; at the bottom of the post were two parallel steel bars attached to the leg
means of bolts; the tower proper was attached to the leg three bolts; with two cross metals to prevent
mobility; there was no concrete foundation but there was adobe stone underneath; as the bottom of the
excavation was covered with water about three inches high, it could not be determined with certainty to
whether said adobe stone was placed purposely or not, as the place abounds with this kind of stone; and
the tower carried five high voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the
petitioner approximate more than one kilometer from the first tower. As in the first tower, the ground around
one of the four legs was excavate from seven to eight (8) feet deep and one and a half (1-½) meters wide.
There being very little water at the bottom, it was seen that there was no concrete foundation, but there soft
adobe beneath. The leg was likewise provided with two parallel steel bars bolted to a square metal frame
also bolted to each corner. Like the first one, the second tower is made up of metal rods joined together by
means of bolts, so that by unscrewing the bolts, the tower could be dismantled and reassembled.

The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given
above, the ground around the two legs of the third tower was excavated to a depth about two or three
inches beyond the outside level of the steel bar foundation. It was found that there was no concrete
foundation. Like the two previous ones, the bottom arrangement of the legs thereof were found to be
resting on soft adobe, which, probably due to high humidity, looks like mud or clay. It was also found that
the square metal frame supporting the legs were not attached to any material or foundation.

On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real
property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel
these declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon
City, which required respondent to pay the amount of P11,651.86 as real property tax on the said steel
towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for
review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958,
ordering the cancellation of the said tax declarations and the petitioner City Treasurer of Quezon City to
refund to the respondent the sum of P11,651.86. The motion for reconsideration having been denied, on
April 22, 1959, the instant petition for review was filed.

In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles"
which are declared exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel
towers are personal properties and are not subject to real property tax; and (3) the City Treasurer of
Quezon City is held responsible for the refund of the amount paid. These are assigned as errors by the
petitioner in the brief.

The tax exemption privilege of the petitioner is quoted hereunder:

PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including
poles, wires, transformers, and insulators), machinery and personal property as other persons are or may
be hereafter required by law to pay ... Said percentage shall be due and payable at the time stated in
paragraph nineteen of Part One hereof, ... and shall be in lieu of all taxes and assessments of whatsoever
nature and by whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires,
transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby
expressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise; emphasis supplied.)

The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as
typically the stem of a small tree stripped of its branches; also by extension, a similar typically cylindrical
piece or object of metal or the like". The term also refers to "an upright standard to the top of which
something is affixed or by which something is supported; as a dovecote set on a pole; telegraph poles; a
tent pole; sometimes, specifically a vessel's master (Webster's New International Dictionary 2nd Ed., p.
1907.) Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles,
and poles of the PLDT Co. which are made of two steel bars joined together by an interlacing metal rod.
They are called "poles" notwithstanding the fact that they are no made of wood. It must be noted from
paragraph 9, above quoted, that the concept of the "poles" for which exemption is granted, is not
determined by their place or location, nor by the character of the electric current it carries, nor the material
or form of which it is made, but the use to which they are dedicated. In accordance with the definitions, pole
is not restricted to a long cylindrical piece of wood or metal, but includes "upright standards to the top of
which something is affixed or by which something is supported. As heretofore described, respondent's steel
supports consists of a framework of four steel bars or strips which are bound by steel cross-arms atop of
which are cross-arms supporting five high voltage transmission wires (See Annex A) and their sole function
is to support or carry such wires.

The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a
novelty. Several courts of last resort in the United States have called these steel supports "steel towers",
and they denominated these supports or towers, as electric poles. In their decisions the words "towers" and
"poles" were used interchangeably, and it is well understood in that jurisdiction that a transmission tower or
pole means the same thing.

In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires
shall be constructed upon suitable poles, this term was construed to mean either wood or metal poles and
in view of the land being subject to overflow, and the necessary carrying of numerous wires and the
distance between poles, the statute was interpreted to include towers or poles. (Stemmons and Dallas Light
Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)

The term "poles" was also used to denominate the steel supports or towers used by an association used to
convey its electric power furnished to subscribers and members, constructed for the purpose of fastening
high voltage and dangerous electric wires alongside public highways. The steel supports or towers were
made of iron or other metals consisting of two pieces running from the ground up some thirty feet high,
being wider at the bottom than at the top, the said two metal pieces being connected with criss-cross iron
running from the bottom to the top, constructed like ladders and loaded with high voltage electricity. In form
and structure, they are like the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P.
2nd, 249-250.)

The term "poles" was used to denote the steel towers of an electric company engaged in the generation of
hydro-electric power generated from its plant to the Tower of Oxford and City of Waterbury. These steel
towers are about 15 feet square at the base and extended to a height of about 35 feet to a point, and are
embedded in the cement foundations sunk in the earth, the top of which extends above the surface of the
soil in the tower of Oxford, and to the towers are attached insulators, arms, and other equipment capable of
carrying wires for the transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101 Conn.
383, 126 Atl. p. 1).

In a case, the defendant admitted that the structure on which a certain person met his death was built for
the purpose of supporting a transmission wire used for carrying high-tension electric power, but claimed
that the steel towers on which it is carried were so large that their wire took their structure out of the
definition of a pole line. It was held that in defining the word pole, one should not be governed by the wire
or material of the support used, but was considering the danger from any elevated wire carrying electric
current, and that regardless of the size or material wire of its individual members, any continuous series of
structures intended and used solely or primarily for the purpose of supporting wires carrying electric
currents is a pole line (Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).

It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which
the franchise was granted. The poles as contemplated thereon, should be understood and taken as a part
of the electric power system of the respondent Meralco, for the conveyance of electric current from the
source thereof to its consumers. If the respondent would be required to employ "wooden poles", or
"rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century
behind the age of space. It should also be conceded by now that steel towers, like the ones in question, for
obvious reasons, can better effectuate the purpose for which the respondent's franchise was granted.

Granting for the purpose of argument that the steel supports or towers in question are not embraced within
the term poles, the logical question posited is whether they constitute real properties, so that they can be
subject to a real property tax. The tax law does not provide for a definition of real property; but Article 415
of the Civil Code does, by stating the following are immovable property:

(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;

xxx xxx xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object;

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried in a building or on a piece of land, and which tends directly to meet
the needs of the said industry or works;

xxx xxx xxx

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1,
because they do not constitute buildings or constructions adhered to the soil. They are not construction
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are
removable and merely attached to a square metal frame by means of bolts, which when unscrewed could
easily be dismantled and moved from place to place. They can not be included under paragraph 3, as they
are not attached to an immovable in a fixed manner, and they can be separated without breaking the
material or causing deterioration upon the object to which they are attached. Each of these steel towers or
supports consists of steel bars or metal strips, joined together by means of bolts, which can be
disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or
supports do not also fall under paragraph 5, for they are not machineries, receptacles, instruments or
implements, and even if they were, they are not intended for industry or works on the land. Petitioner is not
engaged in an industry or works in the land in which the steel supports or towers are constructed.

It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of
P11,651.86, despite the fact that Quezon City is not a party to the case. It is argued that as the City
Treasurer is not the real party in interest, but Quezon City, which was not a party to the suit,
notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. This
question has not been raised in the court below, and, therefore, it cannot be properly raised for the first time
on appeal. The herein petitioner is indulging in legal technicalities and niceties which do not help him any;
for factually, it was he (City Treasurer) whom had insisted that respondent herein pay the real estate taxes,
which respondent paid under protest. Having acted in his official capacity as City Treasurer of Quezon City,
he would surely know what to do, under the circumstances.

IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala, JJ.,
concur.

Makalintal, J., concurs in the result.

Dizon, J., took no part.

[G.R. No. 137705. August 22, 2000]

SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE,
INC., respondent.

DECISION

PANGANIBAN, J.:

After agreeing to a contract stipulating that a real or immovable property be considered as personal or
movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper
subject of a writ of replevin obtained by the other contracting party.

The Case

Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision[1] of the Court of
Appeals (CA)[2] in CA-GR SP No. 47332 and its February 26, 1999 Resolution[3] denying reconsideration.
The decretal portion of the CA Decision reads as follows:

WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated
March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction
issued on June 15, 1998 is hereby LIFTED.[4]

In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon City (Branch 218)[6] issued a
Writ of Seizure.[7] The March 18, 1998 Resolution[8] denied petitioners Motion for Special Protective
Order, praying that the deputy sheriff be enjoined from seizing immobilized or other real properties in
(petitioners) factory in Cainta, Rizal and to return to their original place whatever immobilized machineries
or equipments he may have removed.[9]

The Facts

The undisputed facts are summarized by the Court of Appeals as follows:[10]

On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with the
RTC-QC a complaint for [a] sum of money (Annex E), with an application for a writ of replevin docketed as
Civil Case No. Q-98-33500.

On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin
(Annex B) directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5
days and upon the payment of the necessary expenses.
On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one
machinery with [the] word that he [would] return for the other machineries.

On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power of
the court to control the conduct of its officers and amend and control its processes, praying for a directive
for the sheriff to defer enforcement of the writ of replevin.

This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal
and therefore still subject to seizure and a writ of replevin.

In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in
Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that to
give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI
Leasing [was] estopped from treating these machineries as personal because the contracts in which the
alleged agreement [were] embodied [were] totally sham and farcical.

On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the
remaining properties. He was able to take two more, but was prevented by the workers from taking the rest.

On April 7, 1998, they went to [the CA] via an original action for certiorari.

Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court held that the subject machines were personal
property, and that they had only been leased, not owned, by petitioners. It also ruled that the words of the
contract are clear and leave no doubt upon the true intention of the contracting parties. Observing that
Petitioner Goquiolay was an experienced businessman who was not unfamiliar with the ways of the trade, it
ruled that he should have realized the import of the document he signed. The CA further held:

Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case
below, since the merits of the whole matter are laid down before us via a petition whose sole purpose is to
inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing the assailed
Order and Resolution. The issues raised herein are proper subjects of a full-blown trial, necessitating
presentation of evidence by both parties. The contract is being enforced by one, and [its] validity is attacked
by the other a matter x x x which respondent court is in the best position to determine.

Hence, this Petition.[11]

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of
immobilization.

B. Whether or not the contract between the parties is a loan or a lease.[12]

In the main, the Court will resolve whether the said machines are personal, not immovable, property which
may be a proper subject of a writ of replevin. As a preliminary matter, the Court will also address briefly the
procedural points raised by respondent.

The Courts Ruling

The Petition is not meritorious.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether it was being filed under Rule 45
or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded Judge Hilario
Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds support in the very
title of the Petition, which is Petition for Review on Certiorari.[13]

While Judge Laqui should not have been impleaded as a respondent,[14] substantial justice requires that
such lapse by itself should not warrant the dismissal of the present Petition. In this light, the Court deems it
proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case.

Main Issue: Nature of the Subject Machinery

Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ
issued by the RTC, because they were in fact real property. Serious policy considerations, they argue,
militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property
only.[15] Section 3 thereof reads:

SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order
and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained
and requiring the sheriff forthwith to take such property into his custody.

On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:

ART. 415. The following are immovable property:

x x x....................................x x x....................................x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried on in a building or on a piece of land, and which tend directly to
meet the needs of the said industry or works;

x x x....................................x x x....................................x x x

In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners
in the factory built on their own land. Indisputably, they were essential and principal elements of their
chocolate-making industry. Hence, although each of them was movable or personal property on its own, all
of them have become immobilized by destination because they are essential and principal elements in the
industry.[16] In that sense, petitioners are correct in arguing that the said machines are real, not personal,
property pursuant to Article 415 (5) of the Civil Code.[17]

Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper
subjects of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be considered as
personal.[18] After agreeing to such stipulation, they are consequently estopped from claiming otherwise.
Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any
material fact found therein.

Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the parties to treat a house as a
personal property because it had been made the subject of a chattel mortgage. The Court ruled:
x x x. Although there is no specific statement referring to the subject house as personal property, yet by
ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have
meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should
not now be allowed to make an inconsistent stand by claiming otherwise.

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills[20] also held
that the machinery used in a factory and essential to the industry, as in the present case, was a proper
subject of a writ of replevin because it was treated as personal property in a contract. Pertinent portions of
the Courts ruling are reproduced hereunder:

x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be considered
as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the
contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why
a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may
not be likewise treated as such. This is really because one who has so agreed is estopped from denying
the existence of the chattel mortgage.

In the present case, the Lease Agreement clearly provides that the machines in question are to be
considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:[21]

12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building thereon, or attached in any
manner to what is permanent.

Clearly then, petitioners are estopped from denying the characterization of the subject machines as
personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed personal property
pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned.[22] Hence,
while the parties are bound by the Agreement, third persons acting in good faith are not affected by its
stipulation characterizing the subject machinery as personal.[23] In any event, there is no showing that any
specific third party would be adversely affected.

Validity of the Lease Agreement

In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.[24] Submitting
documents supposedly showing that they own the subject machines, petitioners also argue in their Petition
that the Agreement suffers from intrinsic ambiguity which places in serious doubt the intention of the parties
and the validity of the lease agreement itself.[25] In their Reply to respondents Comment, they further
allege that the Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil
action pending before the RTC. A resolution of these questions, therefore, is effectively a resolution of the
merits of the case. Hence, they should be threshed out in the trial, not in the proceedings involving the
issuance of the Writ of Seizure.

Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy under Rule 60 was that
questions involving title to the subject property questions which petitioners are now raising -- should be
determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was
either to post a counter-bond or to question the sufficiency of the plaintiffs bond. They were not allowed,
however, to invoke the title to the subject property. The Court ruled:

In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of
seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon therefor, as in
proceedings on preliminary attachment or injunction, and thereby put at issue the matter of the title or right
of possession over the specific chattel being replevied, the policy apparently being that said matter should
be ventilated and determined only at the trial on the merits.[28]

Besides, these questions require a determination of facts and a presentation of evidence, both of which
have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.[29]

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on record
shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent. Accordingly, it must be presumed valid and binding as
the law between the parties.

Makati Leasing and Finance Corporation[30] is also instructive on this point. In that case, the Deed of
Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed
because respondent had allegedly been required to sign a printed form of chattel mortgage which was in a
blank form at the time of signing. The Court rejected the argument and relied on the Deed, ruling as follows:

x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab
initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390
of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has
been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that if the Court allows these machineries to be seized, then its workers would be out of
work and thrown into the streets.[31] They also allege that the seizure would nullify all efforts to rehabilitate
the corporation.
Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and
jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come true, should
not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under
Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states:

SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicants bond, or of the
surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so
object, he may, at any time before the delivery of the property to the applicant, require the return thereof, by
filing with the court where the action is pending a bond executed to the applicant, in double the value of the
property as stated in the applicants affidavit for the delivery thereof to the applicant, if such delivery be
adjudged, and for the payment of such sum to him as may be recovered against the adverse party, and by
serving a copy bond on the applicant.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED.
Costs against petitioners.

SO ORDERED.

Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

G.R. No. 106041 January 29, 1993

BENGUET CORPORATION, petitioner,

vs.

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL ASSESSOR
OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN MARCELINO, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

CRUZ, J.:

The realty tax assessment involved in this case amounts to P11,319,304.00. It has been imposed on the petitioner's
tailings dam and the land thereunder over its protest.

The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said properties as taxable
improvements. The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. On
August 24, 1988, the appeal was dismissed mainly on the ground of the petitioner's "failure to pay the realty taxes
that fell due during the pendency of the appeal."

The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals,1 one of the herein
respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the appeal but, on the merits,
agreed that "the tailings dam and the lands submerged thereunder (were) subject to realty tax."

For purposes of taxation the dam is considered as real property as it comes within the object mentioned in
paragraphs (a) and (b) of Article 415 of the New Civil Code. It is a construction adhered to the soil which cannot be
separated or detached without breaking the material or causing destruction on the land upon which it is attached.
The immovable nature of the dam as an improvement determines its character as real property, hence taxable under
Section 38 of the Real Property Tax Code. (P.D. 464).

Although the dam is partly used as an anti-pollution device, this Board cannot accede to the request for tax
exemption in the absence of a law authorizing the same.

xxx xxx xxx

We find the appraisal on the land submerged as a result of the construction of the tailings dam, covered by Tax
Declaration Nos.

002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for Zambales which was reviewed
and allowed for use by the Ministry (Department) of Finance in the 1981-1982 general revision. No serious attempt
was made by Petitioner-Appellant Benguet Corporation to impugn its reasonableness, i.e., that the P50.00 per
square meter applied by Respondent-Appellee Provincial Assessor is indeed excessive and unconscionable. Hence,
we find no cause to disturb the market value applied by Respondent Appellee Provincial Assessor of Zambales on the
properties of Petitioner-Appellant Benguet Corporation covered by Tax Declaration Nos. 002-0260 and 002-0266.

This petition for certiorari now seeks to reverse the above ruling.

The principal contention of the petitioner is that the tailings dam is not subject to realty tax because it is not an
"improvement" upon the land within the meaning of the Real Property Tax Code. More particularly, it is claimed —

(1) as regards the tailings dam as an "improvement":

(a) that the tailings dam has no value separate from and independent of the mine; hence, by itself it cannot be
considered an improvement separately assessable;

(b) that it is an integral part of the mine;

(c) that at the end of the mining operation of the petitioner corporation in the area, the tailings dam will benefit
the local community by serving as an irrigation facility;

(d) that the building of the dam has stripped the property of any commercial value as the property is submerged
under water wastes from the mine;

(e) that the tailings dam is an environmental pollution control device for which petitioner must be commended
rather than penalized with a realty tax assessment;

(f) that the installation and utilization of the tailings dam as a pollution control device is a requirement imposed
by law;

(2) as regards the valuation of the tailings dam and the submerged lands:

(a) that the subject properties have no market value as they cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be based on its incidental use by petitioner as a water reservoir
and not on the alleged cost of construction of the dam and the annual build-up expense;

(c) that the "residual value formula" used by the Provincial Assessor and adopted by respondent CBAA is
arbitrary and erroneous; and

(3) as regards the petitioner's liability for penalties for

non-declaration of the tailings dam and the submerged lands for realty tax purposes:

(a) that where a tax is not paid in an honest belief that it is not due, no penalty shall be collected in addition to
the basic tax;

(b) that no other mining companies in the Philippines operating a tailings dam have been made to declare the
dam for realty tax purposes.

The petitioner does not dispute that the tailings dam may be considered realty within the meaning of Article 415. It
insists, however, that the dam cannot be subjected to realty tax as a separate and independent property because it
does not constitute an "assessable improvement" on the mine although a considerable sum may have been spent in
constructing and maintaining it.

To support its theory, the petitioner cites the following cases:

1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes and gates
constructed by the taxpayer in connection with a fishpond operation as integral parts of the fishpond.

2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a road constructed by
the timber concessionaire in the area, where this Court did not impose a realty tax on the road primarily for two
reasons:

In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to
the government by right of accession not only because it is inherently incorporated or attached to the timber land . .
. but also because upon the expiration of the concession said road would ultimately pass to the national
government. . . . In the second place, while the road was constructed by appellee primarily for its use and benefit,
the privilege is not exclusive, for . . . appellee cannot prevent the use of portions of the concession for homesteading
purposes. It is also duty bound to allow the free use of forest products within the concession for the personal use of
individuals residing in or within the vicinity of the land. . . . In other words, the government has practically reserved
the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be
considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same
cannot be the subject of assessment within the meaning of Section 2 of C.A.

No. 470.

Apparently, the realty tax was not imposed not because the road was an integral part of the lumber concession but
because the government had the right to use the road to promote its varied activities.

3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was declared that the
reservoir dam went with and formed part of the reservoir and that the dam would be "worthless and useless except
in connection with the outlet canal, and the water rights in the reservoir represent and include whatever utility or
value there is in the dam and headgates."

4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This case involved drain
tunnels constructed by plaintiff when it expanded its mining operations downward, resulting in a constantly
increasing flow of water in the said mine. It was held that:

Whatever value they have is connected with and in fact is an integral part of the mine itself. Just as much so as any
shaft which descends into the earth or an underground incline, tunnel, or drift would be which was used in
connection with the mine.

On the other hand, the Solicitor General argues that the dam is an assessable improvement because it enhances the
value and utility of the mine. The primary function of the dam is to receive, retain and hold the water coming from
the operations of the mine, and it also enables the petitioner to impound water, which is then recycled for use in the
plant.

There is also ample jurisprudence to support this view, thus:

. . . The said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to
which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without
them the gas station would be useless and which have been attached or affixed permanently to the gas station site
or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the
Real Property Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA 296).

We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as
improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the
two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil
needed by MERALCO for its operations. (Manila Electric Co. v. CBAA, 114 SCRA 273).
The pipeline system in question is indubitably a construction adhering to the soil. It is attached to the land in such a
way that it cannot be separated therefrom without dismantling the steel pipes which were welded to form the
pipeline. (MERALCO Securities Industrial Corp. v. CBAA, 114 SCRA 261).

The tax upon the dam was properly assessed to the plaintiff as a tax upon real estate. (Flax-Pond Water Co. v. City of
Lynn, 16 N.E. 742).

The oil tanks are structures within the statute, that they are designed and used by the owner as permanent
improvement of the free hold, and that for such reasons they were properly assessed by the respondent taxing
district as improvements. (Standard Oil Co. of New Jersey v. Atlantic City, 15 A 2d. 271)

The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is
imposed on "real property, such as lands, buildings, machinery and other improvements affixed or attached to real
property." In the absence of such a definition, we apply Article 415 of the Civil Code, the pertinent portions of which
state:

Art. 415. The following are immovable property.

(1) Lands, buildings and constructions of all kinds adhered to the soil;

xxx xxx xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom
without breaking the material or deterioration of the object.

Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the real
property, including land, buildings, machinery and other improvements" not specifically exempted in Section 3
thereof. A reading of that section shows that the tailings dam of the petitioner does not fall under any of the classes
of exempt real properties therein enumerated.

Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines improvement as
follows:

(k) Improvements — is a valuable addition made to property or an amelioration in its condition, amounting to
more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty
or utility or to adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical condition of the ground that are
reasonably permanent in character."2

The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein could not be operated
without the aid of the drain tunnels, which were indispensable to the successful development and extraction of the
minerals therein. This is not true in the present case.

Even without the tailings dam, the petitioner's mining operation can still be carried out because the primary function
of the dam is merely to receive and retain the wastes and water coming from the mine. There is no allegation that
the water coming from the dam is the sole source of water for the mining operation so as to make the dam an
integral part of the mine. In fact, as a result of the construction of the dam, the petitioner can now impound and
recycle water without having to spend for the building of a water reservoir. And as the petitioner itself points out,
even if the petitioner's mine is shut down or ceases operation, the dam may still be used for irrigation of the
surrounding areas, again unlike in the Ontario case.

As correctly observed by the CBAA, the Kendrick case is also not applicable because it involved water reservoir dams
used for different purposes and for the benefit of the surrounding areas. By contrast, the tailings dam in question is
being used exclusively for the benefit of the petitioner.

Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate existence, just as vigorously
contends that at the end of the mining operation the tailings dam will serve the local community as an irrigation
facility, thereby implying that it can exist independently of the mine.

From the definitions and the cases cited above, it would appear that whether a structure constitutes an
improvement so as to partake of the status of realty would depend upon the degree of permanence intended in its
construction and use. The expression "permanent" as applied to an improvement does not imply that the
improvement must be used perpetually but only until the purpose to which the principal realty is devoted has been
accomplished. It is sufficient that the improvement is intended to remain as long as the land to which it is annexed is
still used for the said purpose.

The Court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent
in character and it enhances both the value and utility of petitioner's mine. Moreover, the immovable nature of the
dam defines its character as real property under Article 415 of the Civil Code and thus makes it taxable under Section
38 of the Real Property Tax Code.

The Court will also reject the contention that the appraisal at P50.00 per square meter made by the Provincial
Assessor is excessive and that his use of the "residual value formula" is arbitrary and erroneous.

Respondent Provincial Assessor explained the use of the "residual value formula" as follows:
A 50% residual value is applied in the computation because, while it is true that when slime fills the dike, it will then
be covered by another dike or stage, the stage covered is still there and still exists and since only one face of the dike
is filled, 50% or the other face is unutilized.

In sustaining this formula, the CBAA gave the following justification:

We find the appraisal on the land submerged as a result of the construction of the tailings dam, covered by Tax
Declaration Nos.

002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for San Marcelino, Zambales, which
is fifty (50.00) pesos per square meter for third class industrial land (TSN, page 17, July 5, 1989) and Schedule of
Market Values for Zambales which was reviewed and allowed for use by the Ministry (Department) of Finance in the
1981-1982 general revision. No serious attempt was made by Petitioner-Appellant Benguet Corporation to impugn
its reasonableness, i.e, that the P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to disturb the market value applied by Respondent-
Appellee Provincial Assessor of Zambales on the properties of Petitioner-Appellant Benguet Corporation covered by
Tax Declaration Nos. 002-0260 and 002-0266.

It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial agencies like the CBAA,
which, because of the nature of its functions and its frequent exercise thereof, has developed expertise in the
resolution of assessment problems. The only exception to this rule is where it is clearly shown that the
administrative body has committed grave abuse of discretion calling for the intervention of this Court in the exercise
of its own powers of review. There is no such showing in the case at bar.

We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of the issue of the
propriety of the penalties imposed upon it, which was raised by the petitioner for the first time only on appeal. The
CBAA held that this "is an entirely new matter that petitioner can take up with the Provincial Assessor (and) can be
the subject of another protest before the Local Board or a negotiation with the local sanggunian . . ., and in case of
an adverse decision by either the Local Board or the local sanggunian, (it can) elevate the same to this Board for
appropriate action."

There is no need for this time-wasting procedure. The Court may resolve the issue in this petition instead of referring
it back to the local authorities. We have studied the facts and circumstances of this case as above discussed and find
that the petitioner has acted in good faith in questioning the assessment on the tailings dam and the land
submerged thereunder. It is clear that it has not done so for the purpose of evading or delaying the payment of the
questioned tax. Hence, we hold that the petitioner is not subject to penalty for its

non-declaration of the tailings dam and the submerged lands for realty tax purposes.

WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of respondent Central Board
of Assessment Appeals is tainted with grave abuse of discretion except as to the imposition of penalties upon the
petitioner which is hereby SET ASIDE. Costs against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo and
Campos, Jr., JJ., concur.

Feliciano, J., took no part.

[G.R. No. 156295. September 23, 2003]

MARCELO R. SORIANO, petitioner, vs. SPOUSES RICARDO and ROSALINA GALIT, respondents.

DECISION

YNARES-SANTIAGO, J.:

Petitioner was issued a writ of possession in Civil Case No. 6643[1] for Sum of Money by the Regional Trial Court of
Balanga, Bataan, Branch 1. The writ of possession was, however, nullified by the Court of Appeals in CA-G.R. SP No.
65891[2] because it included a parcel of land which was not among those explicitly enumerated in the Certificate of
Sale issued by the Deputy Sheriff, but on which stand the immovables covered by the said Certificate. Petitioner
contends that the sale of these immovables necessarily encompasses the land on which they stand.

Dissatisfied, petitioner filed the instant petition for review on certiorari.

Respondent Ricardo Galit contracted a loan from petitioner Marcelo Soriano, in the total sum of P480,000.00,
evidenced by four promissory notes in the amount of P120,000.00 each dated August 2, 1996;[3] August 15, 1996;[4]
September 4, 1996[5] and September 14, 1996.[6] This loan was secured by a real estate mortgage over a parcel of
land covered by Original Certificate of Title No. 569.[7] After he failed to pay his obligation, Soriano filed a complaint
for sum of money against him with the Regional Trial Court of Balanga City, Branch 1, which was docketed as Civil
Case No. 6643.[8]

Respondents, the Spouses Ricardo and Rosalina Galit, failed to file their answer. Hence, upon motion of Marcelo
Soriano, the trial court declared the spouses in default and proceeded to receive evidence for petitioner Soriano ex
parte.

On July 7, 1997, the Regional Trial Court of Balanga City, Branch 1 rendered judgment[9] in favor of petitioner
Soriano, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to
pay:

1. the plaintiff the amount of P350,000.00 plus 12% interest to be computed from the dates of maturity of the
promissory notes until the same are fully paid;

2. the plaintiff P20,000.00, as attorneys fees; and

3. the costs of suit.

SO ORDERED.[10]

The judgment became final and executory. Accordingly, the trial court issued a writ of execution in due course, by
virtue of which, Deputy Sheriff Renato E. Robles levied on the following real properties of the Galit spouses:

1. A parcel of land covered by Original Certificate of Title No. T-569 (Homestead Patent No. 14692) situated in the
Bo. of Tapulac, Orani, Bataan. Bounded on the SW, along line 1-2 by Lot No. 3, Cad. 145; containing an area of
THIRTY FIVE THOUSAND SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or less x x x;

2. STORE/HOUSE CONSTRUCTED on Lot No. 1103 made of strong materials G.I. roofing situated at Centro I, Orani,
Bataan, x x x containing an area of 30 sq. meters, more or less x x x (constructed on TCT No. T40785);

3. BODEGA constructed on Lot 1103, made of strong materials, G.I. roofing, situated in Centro I, Orani, Bataan, x x x
with a floor area of 42.75 sq. m. more or less x x x.[11]

At the sale of the above-enumerated properties at public auction held on December 23, 1998, petitioner was the
highest and only bidder with a bid price of P483,000.00. Accordingly, on February 4, 1999, Deputy Sheriff Robles
issued a Certificate of Sale of Execution of Real Property,[12] which reads:

CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY

TO ALL WHO MAY SEE THESE PRESENTS:

GREETINGS:

I HEREBY that (sic) by virtue of the writ of execution dated October 16, 1998, issued in the above-entitled case by the
HON. BENJAMIN T. VIANZON, ordering the Provincial Sheriff of Bataan or her authorized Deputy Sheriff to cause to
be made (sic) the sum of P350,000.00 plus 12% interest to be computed from the date of maturity of the promissory
notes until the same are fully paid; P20,000.00 as attorneys fees plus legal expenses in the implementation of the
writ of execution, the undersigned Deputy Sheriff sold at public auction on December 23, 1998 the rights and
interests of defendants Sps. Ricardo and Rosalina Galit, to the plaintiff Marcelo Soriano, the highest and only bidder
for the amount of FOUR HNDRED EIGHTY THREE THOUSAND PESOS (P483,000.00, Philippine Currency), the following
real estate properties more particularly described as follows :

ORIGINAL CERTIFICATE OF TITLE NO. T-569

A parcel of land (Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani, Bataan, x x x. Bounded on the
SW., along line 1-2 by Lot No. 3, Cad. 145, containing an area of THIRTY FIVE THOUSAND SEVEN HUNDRED FIFTY
NINE (35,759) SQUARE METERS, more or less x x x

TAX DEC. NO. PROPERTY INDEX NO. 018-09-001-02

STOREHOUSE constructed on Lot 1103, made of strong materials G.I. roofing situated at Centro I, Orani, Bataan x x x
containing an area of 30 sq. meters, more or less x x (constructed on TCT No. 40785)

TAX DEC. NO. 86 PROPERTY INDEX No. 018-09-001-02

BODEGA constructed on Lot 1103, made of strong materials G.I. roofing situated in Centro I, Orani, Bataan, x x x with
a floor area of 42.75 sq. m. more or less x x x

IT IS FURTHER CERTIFIED, that the aforesaid highest and lone bidder, Marcelo Soriano, being the plaintiff did not pay
to the Provincial Sheriff of Bataan the amount of P483,000.00, the sale price of the above-described property which
amount was credited to partial/full satisfaction of the judgment embodied in the writ of execution.

The period of redemption of the above described real properties together with all the improvements thereon will
expire One (1) year from and after the registration of this Certificate of Sale with the Register of Deeds.

This Certificate of Sheriffs Sale is issued to the highest and lone bidder, Marcelo Soriano, under guarantees
prescribed by law.

Balanga, Bataan, February 4, 1999.

On April 23, 1999, petitioner caused the registration of the Certificate of Sale on Execution of Real Property with the
Registry of Deeds.

The said Certificate of Sale registered with the Register of Deeds includes at the dorsal portion thereof the following
entry, not found in the Certificate of Sale on file with Deputy Sheriff Renato E. Robles:[13]

ORIGINAL CERTIFICATE OF TITLE NO. T-40785

A parcel of land (Lot No. 1103 of the Cadastral Survey of Orani) , with the improvements thereon, situated in the
Municipality of Orani, Bounded on the NE; by Calle P. Gomez; on the E. by Lot No. 1104; on the SE by Calle
Washington; and on the W. by Lot 4102, containing an area of ONE HUNDRED THIRTY NINE (139) SQUARE METERS,
more or less. All points referred to are indicated on the plan; bearing true; declination 0 deg. 40E., date of survey,
February 191-March 1920.

On February 23, 2001, ten months from the time the Certificate of Sale on Execution was registered with the
Registry of Deeds, petitioner moved[14] for the issuance of a writ of possession. He averred that the one-year period
of redemption had elapsed without the respondents having redeemed the properties sold at public auction; thus,
the sale of said properties had already become final. He also argued that after the lapse of the redemption period,
the titles to the properties should be considered, for all legal intents and purposes, in his name and favor.[15]

On June 4, 2001, the Regional Trial Court of Balanga City, Branch 1 granted the motion for issuance of writ of
possession.[16] Subsequently, on July 18, 2001, a writ of possession[17] was issued in petitioners favor which reads:

WRIT OF POSSESSION

Mr. Renato E. Robles

Deputy Sheriff

RTC, Br. 1, Balanga City

Greetings :

WHEREAS on February 3, 2001, the counsel for plaintiff filed Motion for the Issuance of Writ of Possession;

WHEREAS on June 4, 2001, this court issued an order granting the issuance of the Writ of Possession;

WHEREFORE, you are hereby commanded to place the herein plaintiff Marcelo Soriano in possession of the property
involved in this case situated (sic) more particularly described as:

1. STORE HOUSE constructed on Lot No. 1103 situated at Centro 1, Orani, Bataan covered by TCT No. 40785;

2. BODEGA constructed on Lot No. 1103 with an area of 42.75 square meters under Tax Declaration No. 86 situated
at Centro 1, Orani, Bataan;

3. Original Certificate of Title No. 40785 with an area of 134 square meters known as Lot No. 1103 of the Cadastral
Survey of Orani
against the mortgagor/former owners Sps. Ricardo and Rosalinda (sic) Galit, her (sic) heirs, successors, assigns and all
persons claiming rights and interests adverse to the petitioner and make a return of this writ every thirty (30) days
from receipt hereof together with all the proceedings thereon until the same has been fully satisfied.

WITNESS THE HONORABLE BENJAMIN T. VIANZON, Presiding Judge, this 18th day of July 2001, at Balanga City.

(Sgd) GILBERT S. ARGONZA

OIC

Respondents filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 65891,
assailing the inclusion of the parcel of land covered by Transfer Certificate of Title No. T-40785 among the list of real
properties in the writ of possession.[18] Respondents argued that said property was not among those sold on
execution by Deputy Sheriff Renato E. Robles as reflected in the Certificate of Sale on Execution of Real Property.

In opposition, petitioner prayed for the dismissal of the petition because respondent spouses failed to move for the
reconsideration of the assailed order prior to the filing of the petition. Moreover, the proper remedy against the
assailed order of the trial court is an appeal, or a motion to quash the writ of possession.

On May 13, 2002, the Court of Appeals rendered judgment as follows:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the writ of possession issued by the Regional Trial
Court of Balanga City, Branch 1, on 18 July 2001 is declared NULL and VOID.

In the event that the questioned writ of possession has already been implemented, the Deputy Sheriff of the
Regional Trial Court of Balanga City, Branch 1, and private respondent Marcelo Soriano are hereby ordered to cause
the redelivery of Transfer Certificate of Title No. T-40785 to the petitioners.

SO ORDERED.[19]

Aggrieved, petitioner now comes to this Court maintaining that

1.) THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 IS NOT THE PLAIN, SPEEDY AND ADEQUATE REMEDY
OF THE RESPONDENTS IN ASSAILING THE WRIT OF POSSESSION ISSUED BY THE LOWER COURT BUT THERE WERE
STILL OTHER REMEDIES AVAILABLE TO THEM AND WHICH WERE NOT RESORTED TO LIKE THE FILING OF A MOTION
FOR RECONSIDERATION OR MOTION TO QUASH OR EVEN APPEAL.
2.) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARAING THE CERTIFICATE OF SALE ON EXECUTION
OF REAL PROPERTY AS NULL AND VOID AND SUBSEQUENTLY THE WRIT OF POSSESSION BECAUSE THE SAME IS A
PUBLIC DOCUMENT WHICH ENJOYS THE PRESUMPTION OF REGULARITY AND IT CANNOT BE OVERCOME BY A MERE
STRANGE FEELING THAT SOMETHING IS AMISS ON ITS SURFACE SIMPLY BECAUSE THE TYPEWRITTEN WORDS ON
THE FRONT PAGE AND AT THE DORSAL PORTION THEREOF IS DIFFERENT OR THAT IT IS UNLIKELY FOR THE SHERIFF
TO USE THE DORSAL PORTION OF THE FIRST PAGE BECAUSE THE SECOND PAGE IS MERELY HALF FILLED AND THE
NOTATION ON THE DORSAL PORTION COULD STILL BE MADE AT THE SECOND PAGE.

On the first ground, petitioner contends that respondents were not without remedy before the trial court. He points
out that respondents could have filed a motion for reconsideration of the Order dated June 4, 1999, but they did not
do so. Respondents could also have filed an appeal but they, likewise, did not do so. When the writ of possession
was issued, respondents could have filed a motion to quash the writ. Again they did not. Respondents cannot now
avail of the special civil action for certiorari as a substitute for these remedies. They should suffer the consequences
for sleeping on their rights.

We disagree.

Concededly, those who seek to avail of the procedural remedies provided by the rules must adhere to the
requirements thereof, failing which the right to do so is lost. It is, however, equally settled that the Rules of Court
seek to eliminate undue reliance on technical rules and to make litigation as inexpensive as practicable and as
convenient as can be done.[20] This is in accordance with the primary purpose of the 1997 Rules of Civil Procedure
as provided in Rule 1, Section 6, which reads:

Section 6. Construction. These rules shall be liberally construed in order to promote their objective of securing a just,
speedy and inexpensive determination of every action and proceeding.[21]

The rules of procedure are not to be applied in a very rigid, technical sense and are used only to help secure
substantial justice. If a technical and rigid enforcement of the rules is made, their aim would be defeated.[22] They
should be liberally construed so that litigants can have ample opportunity to prove their claims and thus prevent a
denial of justice due to technicalities.[23] Thus, in China Banking Corporation v. Members of the Board of Trustees of
Home Development Mutual Fund,[24] it was held:

while certiorari as a remedy may not be used as a substitute for an appeal, especially for a lost appeal, this rule
should not be strictly enforced if the petition is genuinely meritorious.[25] It has been said that where the rigid
application of the rules would frustrate substantial justice, or bar the vindication of a legitimate grievance, the courts
are justified in exempting a particular case from the operation of the rules.[26] (Emphasis ours)

Indeed, well-known is the rule that departures from procedure may be forgiven where they do not appear to have
impaired the substantial rights of the parties.[27] Apropos in this regard is Cometa v. CA,[28] where we said that
There is no question that petitioners were remiss in attending with dispatch to the protection of their interests as
regards the subject lots, and for that reason the case in the lower court was dismissed on a technicality and no
definitive pronouncement on the inadequacy of the price paid for the levied properties was ever made. In this
regard, it bears stressing that procedural rules are not to be belittled or dismissed simply because their non-
observance may have resulted in prejudice to a partys substantive rights as in this case. Like all rules, they are
required to be followed except when only for the most persuasive of reasons they may be relaxed to relieve a
litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed.[29] (emphasis and italics supplied.)

In short, since rules of procedure are mere tools designed to facilitate the attainment of justice, their strict and rigid
application which would result in technicalities that tend to frustrate rather than promote substantial justice must
always be avoided.[30] Technicality should not be allowed to stand in the way of equitably and completely resolving
the rights and obligations of the parties.[31]

Eschewing, therefore, the procedural objections raised by petitioner, it behooves us to address the issue of whether
or not the questioned writ of possession is in fact a nullity considering that it includes real property not expressly
mentioned in the Certificate of Sale of Real Property.

Petitioner, in sum, dwells on the general proposition that since the certificate of sale is a public document, it enjoys
the presumption of regularity and all entries therein are presumed to be done in the performance of regular
functions.

The argument is not persuasive.

There are actually two (2) copies of the Certificate of Sale on Execution of Real Properties issued on February 4, 1999
involved, namely: (a) copy which is on file with the deputy sheriff; and (b) copy registered with the Registry of Deeds.
The object of scrutiny, however, is not the copy of the Certificate of Sale on Execution of Real Properties issued by
the deputy sheriff on February 4, 1999,[32] but the copy thereof subsequently registered by petitioner with the
Registry of Deeds on April 23, 1999,[33] which included an entry on the dorsal portion of the first page thereof
describing a parcel of land covered by OCT No. T-40785 not found in the Certificate of Sale of Real Properties on file
with the sheriff.

True, public documents by themselves may be adequate to establish the presumption of their validity. However,
their probative weight must be evaluated not in isolation but in conjunction with other evidence adduced by the
parties in the controversy, much more so in this case where the contents of a copy thereof subsequently registered
for documentation purposes is being contested. No reason has been offered how and why the questioned entry was
subsequently intercalated in the copy of the certificate of sale subsequently registered with the Registry of Deeds.
Absent any satisfactory explanation as to why said entry was belatedly inserted, the surreptitiousness of its inclusion
coupled with the furtive manner of its intercalation casts serious doubt on the authenticity of petitioners copy of the
Certificate of Sale. Thus, it has been held that while a public document like a notarized deed of sale is vested with the
presumption of regularity, this is not a guarantee of the validity of its contents.[34]
It must be pointed out in this regard that the issuance of a Certificate of Sale is an end result of judicial foreclosure
where statutory requirements are strictly adhered to; where even the slightest deviations therefrom will invalidate
the proceeding[35] and the sale.[36] Among these requirements is an explicit enumeration and correct description
of what properties are to be sold stated in the notice. The stringence in the observance of these requirements is
such that an incorrect title number together with a correct technical description of the property to be sold and vice
versa is deemed a substantial and fatal error which results in the invalidation of the sale.[37]

The certificate of sale is an accurate record of what properties were actually sold to satisfy the debt. The strictness in
the observance of accuracy and correctness in the description of the properties renders the enumeration in the
certificate exclusive. Thus, subsequently including properties which have not been explicitly mentioned therein for
registration purposes under suspicious circumstances smacks of fraud. The explanation that the land on which the
properties sold is necessarily included and, hence, was belatedly typed on the dorsal portion of the copy of the
certificate subsequently registered is at best a lame excuse unworthy of belief.

The appellate court correctly observed that there was a marked difference in the appearance of the typewritten
words appearing on the first page of the copy of the Certificate of Sale registered with the Registry of Deeds[38] and
those appearing at the dorsal portion thereof. Underscoring the irregularity of the intercalation is the clearly devious
attempt to let such an insertion pass unnoticed by typing the same at the back of the first page instead of on the
second page which was merely half-filled and could accommodate the entry with room to spare.

The argument that the land on which the buildings levied upon in execution is necessarily included is, likewise,
tenuous. Article 415 of the Civil Code provides:

ART. 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil.

xxxxxxxxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom
without breaking them material or deterioration of the object;

(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner
of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the
said industry or works;
(6) Animal houses, pigeon houses, beehives, fish ponds or breeding places of similar nature, in case their owner has
placed them or preserves them with the intention to have them permanently attached to the land, and forming a
permanent part of it; the animals in these places are also included;

xxxxxxxxx

(9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on
a river, lake or coast;

x x x x x x x x x.

The foregoing provision of the Civil Code enumerates land and buildings separately. This can only mean that a
building is, by itself, considered immovable.[39] Thus, it has been held that

. . . while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements
thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such
mortgage would be still a real estate mortgage for the building would still be considered immovable property even if
dealt with separately and apart from the land.[40] (emphasis and italics supplied)

In this case, considering that what was sold by virtue of the writ of execution issued by the trial court was merely the
storehouse and bodega constructed on the parcel of land covered by Transfer Certificate of Title No. T-40785, which
by themselves are real properties of respondents spouses, the same should be regarded as separate and distinct
from the conveyance of the lot on which they stand.

WHEREFORE, in view of all the foregoing, the petition is hereby DENIED for lack of merit. The Decision dated May 13,
2002 of the Court of Appeals in CA-G.R. SP No. 65891, which declared the writ of possession issued by the Regional
Trial Court of Balanga City, Branch 1, on July 18, 2001, null and void, is AFFIRMED in toto.

SO ORDERED.

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

G.R. No. L-26278 August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.

EMILIANO J. VALDEZ ET AL., defendants.

EMILIANO J. VALDEZ, appellee.

J. E. Blanco for appellant.

Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J.:

The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of December
1924. The facts are about as conflicting as it is possible for facts to be, in the trial causes.

As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province
of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the
defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land
described in the complaint in the third paragraph of the first cause of action; that within one year from the date of
the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the
amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he
may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept
the money and to return the sugar cane to the plaintiff.

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the
palay planted in four of the seven parcels mentioned in the first cause of action; that he had harvested and taken
possession of the palay in one of said seven parcels and in another parcel described in the second cause of action,
amounting to 300 cavans; and that all of said palay belonged to the plaintiff.

Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys
and agents, restraining them (1) from distributing him in the possession of the parcels of land described in the
complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3) from taking possession, or
harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be rendered in his favor and against
the defendants ordering them to consent to the redemption of the sugar cane in question, and that the defendant
Valdez be condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two
parcels above-mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by the
plaintiff, issued the writ of preliminary injunction prayed for in the complaint.

The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation
of the complaint and step up the following defenses:

(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to
redemption;

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint;

(c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5.

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction he was
unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of land, representing
a loss to him of P8,375.20 and that, in addition thereto, he suffered damages amounting to P3,458.56. He prayed, for
a judgment (1) absolving him from all liability under the complaint; (2) declaring him to be the absolute owner of the
sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of
P11,833.76, representing the value of the sugar cane and palay in question, including damages.

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the evidence, and
on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of
the defendants —

(1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption;

(2) Absolving the defendants from all liability under the complaint; and

(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and
severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08 as follows:

(a) P6,757.40, the value of the sugar cane;

(b) 1,435.68, the value of the sugar-cane shoots;

(c) 646.00, the value of palay harvested by plaintiff;

(d) 600.00, the value of 150 cavans of palay which the defendant was not able to raise by reason of the injunction, at
P4 cavan. 9,439.08 From that judgment the plaintiff appealed and in his assignments of error contends that the
lower court erred: (1) In holding that the sugar cane in question was personal property and, therefore, not subject to
redemption;

(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8, and that the palay
therein was planted by Valdez;

(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40 from the sugar cane
and P1,435.68 from sugar-cane shoots (puntas de cana dulce);

(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable to raise palay
on the land, which would have netted him the sum of P600; and.

(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.

It appears from the record:

(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of execution in civil case No.
20203 of the Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an attachment on eight
parcels of land belonging to said Leon Sibal, situated in the Province of Tarlac, designated in the second of
attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).

(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction held by the sheriff
of the Province of Tarlac, for the sum to P4,273.93, having paid for the said parcels separately as follows (Exhibit C,
and 2-A):

Parcel

1 ..................................................................... P1.00

2 ..................................................................... 2,000.00

3 ..................................................................... 120.93

4 ..................................................................... 1,000.00
5 ..................................................................... 1.00

6 ..................................................................... 1.00

7 with the house thereon .......................... 150.00

8 .....................................................................

1,000.00

==========

4,273.93

(3) That within one year from the sale of said parcel of land, and on the 24th day of September, 1923, the judgment
debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the redemption price of said parcels of
land, without specifying the particular parcels to which said amount was to applied. The redemption price said eight
parcels was reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit C and 2).

The record further shows:

(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a
writ of execution in civil case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.º — the same
parties in the present case), attached the personal property of said Leon Sibal located in Tarlac, among which was
included the sugar cane now in question in the seven parcels of land described in the complaint (Exhibit A).

(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties of Leon Sibal,
including the sugar cane in question to Emilio J. Valdez, who paid therefor the sum of P1,550, of which P600 was for
the sugar cane (Exhibit A).

(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached the real property of
said Leon Sibal in Tarlac, including all of his rights, interest and participation therein, which real property consisted of
eleven parcels of land and a house and camarin situated in one of said parcels (Exhibit A).

(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were bought by Emilio J.
Valdez at the auction held by the sheriff for the sum of P12,200. Said eight parcels were designated in the certificate
of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and camarin were situated on parcel 7 (Exhibit A).

(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and 13, were released
from the attachment by virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).

(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J. Valdez for P2,579.97 all of
its rights and interest in the eight parcels of land acquired by it at public auction held by the deputy sheriff of Tarlac
in connection with civil case No. 20203 of the Court of First Instance of Manila, as stated above. Said amount
represented the unpaid balance of the redemption price of said eight parcels, after payment by Leon Sibal of P2,000
on September 24, 1923, fro the account of the redemption price, as stated above. (Exhibit C and 2).

The foregoing statement of facts shows:

(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land described in the first
cause of action of the complaint at public auction on May 9 and 10, 1924, for P600.

(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the Province of
Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for the
account of the redemption price of said parcels.

(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and interest in the said
eight parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon Sibal had or might
have had on said eight parcels by virtue of the P2,000 paid by the latter to Macondray.

(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.

The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is
contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2
of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees,
plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable
property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de España,
which holds that, under certain conditions, growing crops may be considered as personal property. (Decision of
March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)

Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of
the recent decisions of the supreme Court of Spain, admits that growing crops are sometimes considered and
treated as personal property. He says:

No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante a la venta de toda
cosecha o de parte de ella cuando aun no esta cogida (cosa frecuente con la uvay y la naranja), y a la de lenas,
considerando ambas como muebles. El Tribunal Supremo, en sentencia de 18 de marzo de 1904, al entender sobre
un contrato de arrendamiento de un predio rustico, resuelve que su terminacion por desahucio no extingue los
derechos del arrendario, para recolectar o percibir los frutos correspondientes al año agricola, dentro del que
nacieron aquellos derechos, cuando el arrendor ha percibido a su vez el importe de la renta integra correspondiente,
aun cuando lo haya sido por precepto legal durante el curso del juicio, fundandose para ello, no solo en que de otra
suerte se daria al desahucio un alcance que no tiene, sino en que, y esto es lo interesante a nuestro proposito, la
consideracion de inmuebles que el articulo 334 del Codigo Civil atribuge a los frutos pendientes, no les priva del
caracter de productos pertenecientes, como tales, a quienes a ellos tenga derecho, Ilegado el momento de su
recoleccion.

xxx xxx xxx

Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de diciembre de 1909, con
las reformas introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo contrario, y
cualquiera que sea la naturaleza y forma de la obligacion que garantice, no comprende los frutos cualquiera que sea
la situacion en que se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be
sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of
an agricultural land, held that the lessee was entitled to gather the products corresponding to the agricultural year,
because said fruits did not go with the land but belonged separately to the lessee; and (3) that under the Spanish
Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products
existing thereon, unless the contract expressly provides otherwise.

An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we
are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil
Code, provides: "Standing crops and the fruits of trees not gathered, and trees before they are cut down, are
likewise immovable, and are considered as part of the land to which they are attached."

The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops"
may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106
La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the
fruits of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they
are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the
crop acquired by others than the owners of the property to which the crop is attached. . . . The existence of a right
on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable
quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop."
(Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629;
Lewis vs. Klotz, 39 La. Ann., 267.)

"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that "article 465
of the Revised Code says that standing crops are considered as immovable and as part of the land to which they are
attached, and article 466 declares that the fruits of an immovable gathered or produced while it is under seizure are
considered as making part thereof, and incurred to the benefit of the person making the seizure. But the evident
meaning of these articles, is where the crops belong to the owner of the plantation they form part of the immovable,
and where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold
by him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the
leased premises the result would be that it could not be sold under execution separate and apart from the land. If a
lessee obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging
to his debtor, but the land belonging to the lessor would be affected with the recorded privilege. The law cannot be
construed so as to result in such absurd consequences.

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:

If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be destructive of the very
objects of the act, it would render the pledge of the crop objects of the act, it would render the pledge of the crop
impossible, for if the crop was an inseparable part of the realty possession of the latter would be necessary to that of
the former; but such is not the case. True, by article 465 C. C. it is provided that "standing crops and the fruits of
trees not gathered and trees before they are cut down are likewise immovable and are considered as part of the
land to which they are attached;" but the immovability provided for is only one in abstracto and without reference
to rights on or to the crop acquired by other than the owners of the property to which the crop was attached. The
immovability of a growing crop is in the order of things temporary, for the crop passes from the state of a growing to
that of a gathered one, from an immovable to a movable. The existence of a right on the growing crop is a
mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired
thereon. The provision of our Code is identical with the Napoleon Code 520, and we may therefore obtain light by an
examination of the jurisprudence of France.

The rule above announced, not only by the Tribunal Supremo de España but by the Supreme Court of Louisiana, is
followed in practically every state of the Union.

From an examination of the reports and codes of the State of California and other states we find that the settle
doctrine followed in said states in connection with the attachment of property and execution of judgment is, that
growing crops raised by yearly labor and cultivation are considered personal property. (6 Corpuz Juris, p. 197; 17
Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161;
Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts
and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p.
438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably
certain to come into existence as the natural increment or usual incident of something already in existence, and then
belonging to the vendor, and then title will vest in the buyer the moment the thing comes into existence. (Emerson
vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are
said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He
may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given
time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or
what may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals not yet in existence; or
the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also
owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by
section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450
enumerates the property of a judgment debtor which may be subjected to execution. The pertinent portion of said
section reads as follows: "All goods, chattels, moneys, and other property, both real and personal, * * * shall be
liable to execution. Said section 450 and most of the other sections of the Code of Civil Procedure relating to the
execution of judgment were taken from the Code of Civil Procedure of California. The Supreme Court of California,
under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held, without variation, that
growing crops were personal property and subject to execution.

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said
Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a
mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing
crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly
to tend, care for and protect the crop while growing.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are
personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of
article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that
"ungathered products" as mentioned in said article of the Civil Code have the nature of personal property. In other
words, the phrase "personal property" should be understood to include "ungathered products."

At common law, and generally in the United States, all annual crops which are raised by yearly manurance and labor,
and essentially owe their annual existence to cultivation by man, . may be levied on as personal property." (23 C. J.,
p. 329.) On this question Freeman, in his treatise on the Law of Executions, says: "Crops, whether growing or
standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. They are,
therefore, liable to voluntary transfer as chattels. It is equally well settled that they may be seized and sold under
execution. (Freeman on Executions, vol. p. 438.)

We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of
the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and
for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The
lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as
such, was not subject to redemption.

All the other assignments of error made by the appellant, as above stated, relate to questions of fact only. Before
entering upon a discussion of said assignments of error, we deem it opportune to take special notice of the failure of
the plaintiff to appear at the trial during the presentation of evidence by the defendant. His absence from the trial
and his failure to cross-examine the defendant have lent considerable weight to the evidence then presented for the
defense.

Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the plaintiff
made a futile attempt to show that said two parcels belonged to Agustin Cuyugan and were the identical parcel 2
which was excluded from the attachment and sale of real property of Sibal to Valdez on June 25, 1924, as stated
above. A comparison of the description of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the
description of parcels 1 and 2 of the complaint will readily show that they are not the same.

The description of the parcels in the complaint is as follows:

1. La caña dulce sembrada por los inquilinos del ejecutado Leon Sibal 1.º en una parcela de terreno de la pertenencia
del citado ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas dos hectareas poco mas o menos de
superficie.

2. La caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, Ilamado Alejandro Policarpio, en una parcela
de terreno de la pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de unas dos hectareas de
superficie poco mas o menos." The description of parcel 2 given in the certificate of sale (Exhibit A) is as follows:

2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de superficie, linda al N.
con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mañu and others; al S. con
Alejandro Dayrit, Isidro Santos and Melecio Mañu; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854,
vador amillarado P4,200 pesos.

On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint were
included among the parcels bought by Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in
the deed of sale (Exhibit B and 2), and were also included among the parcels bought by Valdez at the auction of the
real property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the certificate of sale made by the
sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:

Parcels No. 4. — Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000 metros
cuadrados de superficie, lindante al Norte con Road of the barrio of Culubasa that goes to Concepcion; al Este con
Juan Dizon; al Sur con Lucio Maño y Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la
suma de P2,990. Tax No. 2856.

As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4 (Exhibit 2 and
B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the trial when the defendant
offered his evidence, we are inclined to give more weight to the evidence adduced by him that to the evidence
adduced by the plaintiff, with respect to the ownership of parcels 1 and 2 of the compliant. We, therefore, conclude
that parcels 1 and 2 of the complaint belong to the defendant, having acquired the same from Macondray & Co. on
June 25, 1924, and from the plaintiff Leon Sibal on the same date.

It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans. There
being no evidence of bad faith on his part, he is therefore entitled to one-half of the crop, or 95 cavans. He should
therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan, or the sum of P323, and not
for the total of 190 cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel 1 of the
deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to Valdez of real
property belonging to Sibal, executed by the sheriff as above stated (Exhibit A). Valdez is therefore the absolute
owner of said parcel, having acquired the interest of both Macondray and Sibal in said parcel.

With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of action, it
appears from the testimony of the plaintiff himself that said parcel corresponds to parcel 8 of the deed of sale of
Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of sale executed by the sheriff in favor of Valdez
(Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray
and Sibal therein.

In this connection the following facts are worthy of mention:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said execution. Said
parcels of land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On September 24,
1923, Leon Sibal paid to Macondray & Co. P2,000 on the redemption of said parcels of land. (See Exhibits B and C ).

Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar cane in
question. (Exhibit A) The said personal property so attached, sold at public auction May 9 and 10, 1924. April 29,
1924, the real property was attached under the execution in favor of Valdez (Exhibit A). June 25, 1924, said real
property was sold and purchased by Valdez (Exhibit A).

June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the 30th day of
July, 1923, to Valdez.

As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar cane in
question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have yielded an
average crop of 1039 picos and 60 cates; that one-half of the quantity, or 519 picos and 80 cates would have
corresponded to the defendant, as owner; that during the season the sugar was selling at P13 a pico (Exhibit 5 and 5-
A). Therefore, the defendant, as owner, would have netted P 6,757.40 from the sugar cane in question. The evidence
also shows that the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de cana)
and not 1,170,000 as computed by the lower court. During the season the shoots were selling at P1.20 a thousand
(Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 from sugar-cane shoots and not P1,435.68
as allowed by the lower court.

As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans, one-half of
said quantity should belong to the plaintiff, as stated above, and the other half to the defendant. The court erred in
awarding the whole crop to the defendant. The plaintiff should therefore pay the defendant for 95 cavans only, at
P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about 10
hectares of the land involved in the litigation. He expected to have raised about 600 cavans of palay, 300 cavans of
which would have corresponded to him as owner. The lower court has wisely reduced his share to 150 cavans only.
At P4 a cavan, the palay would have netted him P600.

In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la
Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly and severally the sum of
P8,900.80, instead of P9,439.08 allowed by the lower court, as follows:

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;

323.00 for the palay harvested by plaintiff in parcels 1 and 2;

600.00 for the palay which defendant could have raised.

8,900.80

============

In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.

Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.

G.R. No. L-55729 March 28, 1983

ANTONIO PUNSALAN, JR., petitioner,

vs.

REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A. ORTIZ, respondents.

Benjamin S. Benito & Associates for petitioner.

Expedito Yummul for private respondent.

MELENCIO-HERRERA, J.:

The sole issue presented by petitioner for resolution is whether or not respondent Court erred in denying the
Motion to Set Case for Pre-trial with respect to respondent Remedios Vda. de Lacsamana as the case had been
dismissed on the ground of improper venue upon motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of
340 square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB (Tarlac
Branch) in the amount of P10,000.00, but for failure to pay said amount, the property was foreclosed on December
16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings. However, the
bank secured title thereto only on December 14, 1977.

In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and with the alleged
acquiescence of respondent PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor, petitioner
constructed a warehouse on said property. Petitioner declared said warehouse for tax purposes for which he was
issued Tax Declaration No. 5619. Petitioner then leased the warehouse to one Hermogenes Sibal for a period of 10
years starting January 1975.

On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent Lacsamana
over the property. This contract was amended on July 31, 1978, particularly to include in the sale, the building and
improvement thereon. By virtue of said instruments, respondent - Lacsamana secured title over the property in her
name (TCT No. 173744) as well as separate tax declarations for the land and building. 1

On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages" against herein
respondents PNB and Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI, Quezon City,
essentially impugning the validity of the sale of the building as embodied in the Amended Deed of Sale. In this
connection, petitioner alleged:

xxx xxx xxx

22. That defendant, Philippine National Bank, through its Branch Manager ... by virtue of the request of
defendant ... executed a document dated July 31, 1978, entitled Amendment to Deed of Absolute Sale ... wherein
said defendant bank as Vendor sold to defendant Lacsamana the building owned by the plaintiff under Tax
Declaration No. 5619, notwithstanding the fact that said building is not owned by the bank either by virtue of the
public auction sale conducted by the Sheriff and sold to the Philippine National Bank or by virtue of the Deed of Sale
executed by the bank itself in its favor on September 21, 1977 ...;

23. That said defendant bank fraudulently mentioned ... that the sale in its favor should likewise have included
the building, notwithstanding no legal basis for the same and despite full knowledge that the Certificate of Sale
executed by the sheriff in its favor ... only limited the sale to the land, hence, by selling the building which never
became the property of defendant, they have violated the principle against 'pactum commisorium'.

Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana be declared null and void
and that damages in the total sum of P230,000.00, more or less, be awarded to him.2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense of lack of cause of
action in that she was a purchaser for value and invoked the principle in Civil Law that the "accessory follows the
principal".3

On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid
considering that the building was real property under article 415 (1) of the New Civil Code and therefore section 2(a)
of Rule 4 should apply. 4

Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale with damages
is in the nature of a personal action, which seeks to recover not the title nor possession of the property but to
compel payment of damages, which is not an action affecting title to real property.

On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows:

Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated March 13, 1980, considered
against the plaintiff's opposition thereto dated April 1, 1980, including the reply therewith of said defendant, this
Court resolves to DISMISS the plaintiff's complaint for improper venue considering that the plaintiff's complaint
which seeks for the declaration as null and void, the amendment to Deed of Absolute Sale executed by the
defendant Philippine National Bank in favor of the defendant Remedios T. Vda. de Lacsamana, on July 31, 1978,
involves a warehouse allegedly owned and constructed by the plaintiff on the land of the defendant Philippine
National Bank situated in the Municipality of Bamban, Province of Tarlac, which warehouse is an immovable
property pursuant to Article 415, No. 1 of the New Civil Code; and, as such the action of the plaintiff is a real action
affecting title to real property which, under Section 2, Rule 4 of the New Rules of Court, must be tried in the province
where the property or any part thereof lies.5

In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that the action to
annul does not involve ownership or title to property but is limited to the validity of the deed of sale and emphasized
that the case should proceed with or without respondent PNB as respondent Lacsamana had already filed her
Answer to the Complaint and no issue on venue had been raised by the latter.

On September 1, 1980,.respondent Court denied reconsideration for lack of merit.

Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana was concerned, as the
issues had already been joined with the filing of respondent Lacsamana's Answer.

In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial as the case was
already dismissed in the previous Orders of April 25, 1980 and September 1, 1980.

Hence, this Petition for Certiorari, to which we gave due course.

We affirm respondent Court's Order denying the setting for pre-trial.

The warehouse claimed to be owned by petitioner is an immovable or real property as provided in article 415(l) of
the Civil Code. 6 Buildings are always immovable under the Code. 7 A building treated separately from the land on
which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt with it
separate and apart from the land on which it stood in no wise changed its character as immovable property. 8

While it is true that petitioner does not directly seek the recovery of title or possession of the property in question,
his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property, the recovery of which is petitioner's primary
objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not
operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property.
It is a real action. 9

Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Section 2, Rule 4)
10, which was timely raised (Section 1, Rule 16) 11.

Petitioner's other contention that the case should proceed in so far as respondent Lacsamana is concerned as she
had already filed an Answer, which did not allege improper venue and, therefore, issues had already been joined, is
likewise untenable. Respondent PNB is an indispensable party as the validity of the Amended Contract of Sale
between the former and respondent Lacsamana is in issue. It would, indeed, be futile to proceed with the case
against respondent Lacsamana alone.

WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitioner Antonio
Punsalan, Jr. in the proper forum.

Costs against petitioner.

G.R. No. 168557 February 16, 2007

FELS ENERGY, INC., Petitioner,

vs.

THE PROVINCE OF BATANGAS and

THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents.

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

G.R. No. 170628 February 16, 2007

NATIONAL POWER CORPORATION, Petitioner,

vs.

LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the
Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial Assessor, Respondents.

DECISION

CALLEJO, SR., J.:

Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which were filed by
petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC), respectively. The first is a petition for
review on certiorari assailing the August 25, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and
its Resolution2 dated June 20, 2005; the second, also a petition for review on certiorari, challenges the February 9,
2005 Decision3 and November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were
dismissed on the ground of prescription.

The pertinent facts are as follows:

On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power
barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement5
(Agreement), was for a period of five years. Article 10 reads:

10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import duties, fees, charges and
other levies imposed by the National Government of the Republic of the Philippines or any agency or instrumentality
thereof to which POLAR may be or become subject to or in relation to the performance of their obligations under
this agreement (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal
Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees
and charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges.6

Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially opposed the
assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges from Provincial Assessor
Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered those due for 1994, amounted to
₱56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to
pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding
the real property assessment of the Provincial Assessor.

In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessor’s decision to assess real
property taxes on the power barges. However, the motion was denied on September 22, 1995, and the Provincial
Assessor advised NPC to pay the assessment.8 This prompted NPC to file a petition with the Local Board of
Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as non-taxable
items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the
necessary corrections.9

In its Answer to the petition, the Provincial Assessor averred that the barges were real property for purposes of
taxation under Section 199(c) of Republic Act (R.A.) No. 7160.

Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of
Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly stated that power barges are not
real property subject to real property assessment.

On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:

WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the amount of
₱56,184,088.40, for the year 1994.

SO ORDERED.12

The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are
nevertheless considered real property for taxation purposes because they are installed at a specific location with a
character of permanency. The LBAA also pointed out that the owner of the barges–FELS, a private corporation–is the
one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and
assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be
extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.

Aggrieved, FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA).

On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant by Distraint13
over the power barges, seeking to collect real property taxes amounting to ₱232,602,125.91 as of July 31, 1996. The
notice and warrant was officially served to FELS on November 8, 1996. It then filed a Motion to Lift Levy dated
November 14, 1996, praying that the Provincial Assessor be further restrained by the CBAA from enforcing the
disputed assessment during the pendency of the appeal.

On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the properties of FELS in order
not to preempt and render ineffectual, nugatory and illusory any resolution or judgment which the Board would
issue.

Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings before the CBAA. This
was approved by the CBAA in an Order16 dated September 22, 1998.

During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee the payment
of real property taxes assessed by the Provincial Assessor (in the event that the judgment be unfavorable to them).
The bonds were duly approved by the CBAA.

On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real property tax. The
dispositive portion reads:

WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of Batangas is hereby
reversed. Respondent-appellee Provincial Assessor of the Province of Batangas is hereby ordered to drop subject
property under ARP/Tax Declaration No. 018-00958 from the List of Taxable Properties in the Assessment Roll. The
Provincial Treasurer of Batangas is hereby directed to act accordingly.

SO ORDERED.18

Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since they are actually,
directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No.
7160.19 As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing
its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a motion
for reconsideration, which was opposed by FELS and NPC.

In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier decision. The fallo of
the resolution reads:

WHEREFORE, premises considered, it is the resolution of this Board that:

(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is dismissed.

(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed,

(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is likewise hereby affirmed.

SO ORDERED.21

FELS and NPC filed separate motions for reconsideration, which were timely opposed by the Provincial Assessor. The
CBAA denied the said motions in a Resolution22 dated October 19, 2001.

Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490. Meanwhile, NPC filed a
separate petition, docketed as CA-G.R. SP No. 67491.

On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No. 67490 praying for the
consolidation of its petition with CA-G.R. SP No. 67491. In a Resolution23 dated February 12, 2002, the appellate
court directed NPC to re-file its motion for consolidation with CA-G.R. SP No. 67491, since it is the ponente of the
latter petition who should resolve the request for reconsideration.

NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the appellate court
rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of prescription. The decretal portion
of the decision reads:

WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions dated July 31, 2001 and
October 19, 2001 of the Central Board of Assessment Appeals are AFFIRMED.

SO ORDERED.24

On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the appellate court’s
decision in CA-G.R. SP No. 67490.

Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as G.R. No. 165113,
assailing the appellate court’s decision in CA-G.R. SP No. 67490. The petition was, however, denied in this Court’s
Resolution25 of November 8, 2004, for NPC’s failure to sufficiently show that the CA committed any reversible error
in the challenged decision. NPC filed a motion for reconsideration, which the Court denied with finality in a
Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the right to question the
assessment of the Provincial Assessor had already prescribed upon the failure of FELS to appeal the disputed
assessment to the LBAA within the period prescribed by law. Since FELS had lost the right to question the
assessment, the right of the Provincial Government to collect the tax was already absolute.

NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the February 5, 2005 ruling
of the CA in CA-G.R. SP No. 67491. The motion was denied in a Resolution27 dated November 23, 2005.

The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for lack of merit in a
Resolution28 dated June 20, 2005.

On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising the following issues:

A. Whether power barges, which are floating and movable, are personal properties and therefore, not subject
to real property tax.

B. Assuming that the subject power barges are real properties, whether they are exempt from real estate tax
under Section 234 of the Local Government Code ("LGC").

C. Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it should be
NPC which should be made to pay the same under the law.

D. Assuming arguendo that the subject power barges are real properties, whether or not the same is subject to
depreciation just like any other personal properties.

E. Whether the right of the petitioner to question the patently null and void real property tax assessment on
the petitioner’s personal properties is imprescriptible.29

On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628), indicating the
following errors committed by the CA:

I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA WAS FILED OUT OF TIME.

II THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES ARE NOT SUBJECT TO REAL
PROPERTY TAXES.
III THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON THE POWER BARGES WAS
NOT MADE IN ACCORDANCE WITH LAW.30

Considering that the factual antecedents of both cases are similar, the Court ordered the consolidation of the two
cases in a Resolution31 dated March 8, 2006.1awphi1.net

In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their respective
Memoranda within 30 days from notice. Almost a year passed but the parties had not submitted their respective
memoranda. Considering that taxes—the lifeblood of our economy—are involved in the present controversy, the
Court was prompted to dispense with the said pleadings, with the end view of advancing the interests of justice and
avoiding further delay.

In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred. FELS argues that
when NPC moved to have the assessment reconsidered on September 7, 1995, the running of the period to file an
appeal with the LBAA was tolled. For its part, NPC posits that the 60-day period for appealing to the LBAA should be
reckoned from its receipt of the denial of its motion for reconsideration.

Petitioners’ contentions are bereft of merit.

Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:

SECTION 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the property who is
not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may,
within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of
Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.

We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7, 1995, contained the
following statement:

If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt hereof, appeal
to the Board of Assessment Appeals of the province by filing a petition under oath on the form prescribed for the
purpose, together with copies of ARP/Tax Declaration and such affidavits or documents submitted in support of the
appeal.32

Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for
reconsideration of the Provincial Assessor’s decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal
assessor in the assessment of the property. It follows then that the determination made by the respondent
Provincial Assessor with regard to the taxability of the subject real properties falls within its power to assess
properties for taxation purposes subject to appeal before the LBAA.33

We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No. 67491. The two
divisions of the appellate court cited the case of Callanta v. Office of the Ombudsman,34 where we ruled that under
Section 226 of R.A. No 7160,35 the last action of the local assessor on a particular assessment shall be the notice of
assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The
procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the
local assessor. The pertinent holding of the Court in Callanta is as follows:

x x x [T]he same Code is equally clear that the aggrieved owners should have brought their appeals before the LBAA.
Unfortunately, despite the advice to this effect contained in their respective notices of assessment, the owners
chose to bring their requests for a review/readjustment before the city assessor, a remedy not sanctioned by the
law. To allow this procedure would indeed invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high, and
then subsequently reduced upon the request of a property owner. In the latter instance, allusions of a possible
covert, illicit trade-off cannot be avoided, and in fact can conveniently take place. Such occasion for mischief must be
prevented and excised from our system.36

For its part, the appellate court declared in CA-G.R. SP No. 67491:

x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner or lawful possessor
of real property of its revised assessed value, the former shall no longer have any jurisdiction to entertain any
request for a review or readjustment. The appropriate forum where the aggrieved party may bring his appeal is the
LBAA as provided by law. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs
without interruption. This is what We held in SP 67490 and reaffirm today in SP 67491.37

To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due
with respect to the taxpayer’s property becomes absolute upon the expiration of the period to appeal.38 It also
bears stressing that the taxpayer’s failure to question the assessment in the LBAA renders the assessment of the
local assessor final, executory and demandable, thus, precluding the taxpayer from questioning the correctness of
the assessment, or from invoking any defense that would reopen the question of its liability on the merits.39

In fine, the LBAA acted correctly when it dismissed the petitioners’ appeal for having been filed out of time; the
CBAA and the appellate court were likewise correct in affirming the dismissal. Elementary is the rule that the
perfection of an appeal within the period therefor is both mandatory and jurisdictional, and failure in this regard
renders the decision final and executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred by res judicata; that
the final and executory judgment in G.R. No. 165113 (where there was a final determination on the issue of
prescription), effectively precludes the claims herein; and that the filing of the instant petition after an adverse
judgment in G.R. No. 165113 constitutes forum shopping.

FELS maintains that the argument of the Provincial Assessor is completely misplaced since it was not a party to the
erroneous petition which the NPC filed in G.R. No. 165113. It avers that it did not participate in the aforesaid
proceeding, and the Supreme Court never acquired jurisdiction over it. As to the issue of forum shopping, petitioner
claims that no forum shopping could have been committed since the elements of litis pendentia or res judicata are
not present.

We do not agree.

Res judicata pervades every organized system of jurisprudence and is founded upon two grounds embodied in
various maxims of common law, namely: (1) public policy and necessity, which makes it to the interest of the

State that there should be an end to litigation – republicae ut sit litium; and (2) the hardship on the individual of
being vexed twice for the same cause – nemo debet bis vexari et eadem causa. A conflicting doctrine would subject
the public peace and quiet to the will and dereliction of individuals and prefer the regalement of the litigious
disposition on the part of suitors to the preservation of the public tranquility and happiness.41 As we ruled in Heirs
of Trinidad De Leon Vda. de Roxas v. Court of Appeals:42

x x x An existing final judgment or decree – rendered upon the merits, without fraud or collusion, by a court of
competent jurisdiction acting upon a matter within its authority – is conclusive on the rights of the parties and their
privies. This ruling holds in all other actions or suits, in the same or any other judicial tribunal of concurrent
jurisdiction, touching on the points or matters in issue in the first suit.

xxx

Courts will simply refuse to reopen what has been decided. They will not allow the same parties or their privies to
litigate anew a question once it has been considered and decided with finality. Litigations must end and terminate
sometime and somewhere. The effective and efficient administration of justice requires that once a judgment has
become final, the prevailing party should not be deprived of the fruits of the verdict by subsequent suits on the same
issues filed by the same parties.

This is in accordance with the doctrine of res judicata which has the following elements: (1) the former judgment
must be final; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) the
judgment must be on the merits; and (4) there must be between the first and the second actions, identity of parties,
subject matter and causes of action. The application of the doctrine of res judicata does not require absolute identity
of parties but merely substantial identity of parties. There is substantial identity of parties when there is community
of interest or privity of interest between a party in the first and a party in the second case even if the first case did
not implead the latter.43

To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding real property
assessment. Therefore, when petitioner NPC filed its petition for review docketed as G.R. No. 165113, it did so not
only on its behalf but also on behalf of FELS. Moreover, the assailed decision in the earlier petition for review filed in
this Court was the decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was the petitioner. Thus,
the decision in G.R. No. 165116 is binding on petitioner FELS under the principle of privity of interest. In fine, FELS
and NPC are substantially "identical parties" as to warrant the application of res judicata. FELS’s argument that it is
not bound by the erroneous petition filed by NPC is thus unavailing.

On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists when, as a result of an
adverse judgment in one forum, a party seeks another and possibly favorable judgment in another forum other than
by appeal or special civil action or certiorari. There is also forum shopping when a party institutes two or more
actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a
favorable disposition.44

Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not present in the
cases at bar; however, as already discussed, res judicata may be properly applied herein. Petitioners engaged in
forum shopping when they filed G.R. Nos. 168557 and 170628 after the petition for review in G.R. No. 165116.
Indeed, petitioners went from one court to another trying to get a favorable decision from one of the tribunals
which allowed them to pursue their cases.

It must be stressed that an important factor in determining the existence of forum shopping is the vexation caused
to the courts and the parties-litigants by the filing of similar cases to claim substantially the same reliefs.45 The
rationale against forum shopping is that a party should not be allowed to pursue simultaneous remedies in two
different fora. Filing multiple petitions or complaints constitutes abuse of court processes, which tends to degrade
the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the
heavily burdened dockets of the courts.46

Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as represent the same
interests in both actions, (b) identity of rights asserted and relief prayed for, the relief being founded on the same
facts, and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other.47

Having found that the elements of res judicata and forum shopping are present in the consolidated cases, a
discussion of the other issues is no longer necessary. Nevertheless, for the peace and contentment of petitioners, we
shall shed light on the merits of the case.

As found by the appellate court, the CBAA and LBAA power barges are real property and are thus subject to real
property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to
sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good
faith, with the taxpayer having the burden of proving otherwise.48 Besides, factual findings of administrative bodies,
which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume
to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the
judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed.49 We find no reason to depart
from this rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a power company brought
an action to review property tax assessment. On the city’s motion to dismiss, the Supreme Court of New York held
that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel
oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges
were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though floating, are
intended by their nature and object to remain at a fixed place on a river, lake, or coast" are considered immovable
property. Thus, power barges are categorized as immovable property by destination, being in the nature of
machinery and other implements intended by the owner for an industry or work which may be carried on in a
building or on a piece of land and which tend directly to meet the needs of said industry or work.51

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of
R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and
controlled corporation engaged in the supply, generation, and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in
fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:

OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and
equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost.
POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into
electricity.52

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section
234 (c) of R.A. No. 7160, which reads:

SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property
tax:

xxx
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and
government-owned or controlled corporations engaged in the supply and distribution of water and/or generation
and transmission of electric power; x x x

Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned
or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5,
Article 5 of the Agreement provides:

OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel
pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into
electricity in accordance with Part A of Article 7.53

It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being
contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its
terms and conditions.54

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception.55 The law
does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by
words too plain to be mistaken and too categorical to be misinterpreted.56 Thus, applying the rule of strict
construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial
corporations, we hold that FELS is considered a taxable entity.

The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the
payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner
NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy
thereto, in this case, the Province of Batangas.

It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local government’s
deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude,
acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who are to pay for it.57 The right of local
government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is
consistent with the State policy to guarantee the autonomy of local governments58 and the objective of the Local
Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest
development as self-reliant communities and make them effective partners in the attainment of national goals.59

In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to
finance and support myriad activities of the local government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.60

WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED.
SO ORDERED.

G.R. No. 183416, October 05, 2016

PROVINCIAL ASSESSOR OF AGUSAN DEL SUR, Petitioner, v. FILIPINAS PALM OIL PLANTATION, INC., Respondent.

DECISION

LEONEN, J.:

The exemption from real property taxes given to cooperatives applies regardless of whether or not the land owned is
leased. This exemption benefits the cooperative's lessee. The characterization of machinery as real property is
governed by the Local Government Code and not the Civil Code.

This Petition1 for review assails the Decision2 dated September 26, 2007 and the Resolution3 dated May 26, 2008 of
the Court of Appeals in CA-G.R. SP No. 74060. The Court of Appeals affirmed the Decision of the Central Board of
Assessment Appeals (CBAA) exempting Filipinas Palm Oil Plantation Inc. from payment of real property
taxes.4chanrobleslaw

Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil plantation5 with a total land
area of more than 7,000 hectares of National Development Company (NDC) lands in Agusan del Sur.6 Harvested
fruits from oil palm trees are converted into oil through Filipinas' milling plant in the middle of the plantation area.7
Within the plantation, there are also three (3) plantation roads and a number of residential homes constructed by
Filipinas for its employees.8chanrobleslaw

After the Comprehensive Agrarian Reform Law9 was passed, NDC lands were transferred to Comprehensive Agrarian
Reform Law beneficiaries who formed themselves as the merged NDC-Guthrie Plantations, Inc. - NDC-Guthrie
Estates, Inc. (NGPI-NGEI) Cooperatives.10 Filipinas entered into a lease contract agreement with NGPI-
NGEI.11chanrobleslaw

The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency in charge with the
assessment of lands under the public domain.12 It assessed Filipinas' properties found within the plantation area,13
which Filipinas assailed before the Local Board of Assessment Appeals (LBAA) on the following grounds:

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(1.) The [petitioner] Provincial Assessors of Agusan del Sur ERRED in finding that the Market Value of a single fruit
bearing oil palm tree is P207.00 when it should only be P42.00 pesos per tree;

(2.) The [petitioner] ERRED in finding that the total number of standing and fruit bearing oil palm tree is PI 10 [sic]
trees per hectare when it should be only 92 trees;

(3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation roads
are:ChanRoblesVirtualawlibrary

A.) P270,000.00 per kilometer for primary roads

B.) P135,000.00 for secondary roads

C.) P67,567.00 for tertiary roads constructed by the company.

It should only be:ChanRoblesVirtualawlibrary

A.) P105,000.00 for primary roads

B.) P52,300.00 for secondary roads

C.) P26,250.00 for tertiary roads

Likewise, bridges, culverts, canals and pipes should not be assessed separately from plantation roads, the same
being components of the roads thereof;

(4.) The [petitioner] ERRED in imposing real property taxes against the petitioner for roads, bridges, culverts, pipes
and canals as these belonged to the cooperatives;
([5].) The [petitioner] ERRED in finding that the Market Value of NDC service area is P11,000.00 per hectare when it
should only be P6,000.00 per hectare;

([6].) The [petitioner] ERRED in imposing realty taxes on Residential areas built by [respondent] except for three of
them;

([7].) The [petitioner] ERRED when it included haulers and other equipments [sic] which are unmovable as taxable
real properties.14

In its Decision15 dated June 8, 1999, the LBAA found that the P207.00 market value declared in the assessment by
the Provincial Assessor was unreasonable.16 It found that the market value should not have been more than P85.00
per oil palm tree.17 The sudden increase of realty tax assessment level from P42.00 for each oil palm tree in 1993 to
P207.00 was confiscatory.18chanrobleslaw

The LBAA adopted Filipinas' claim that the basis for assessment should only be 98 trees.19 Although one (1) hectare
of land can accommodate 124 oil palm trees, the mountainous terrain of the plantation should be considered.20
Because of the terrain, not every meter of land can be fully planted with trees.21 The LBAA found that roads of any
kind, as well as all their improvements, should not be taxed since these roads were intermittently used by the
public.22 It resolved that the market valuation should be based on the laws of the Department of Agrarian Reform
since the area is owned by the NDC, a quasi-governmental body of the Philippines.23chanrobleslaw

The LBAA exempted the low-cost housing units from taxation except those with a market value of more than
P150,000.00 under the Local Government Code.24 Finally, the LBAA considered the road equipment and mini
haulers as movables that are vital to Filipinas' business.

Filipinas appealed before the CBAA on July 16, 1999.26 On November 21, 2001, the CBAA rendered a decision, the
dispositive portion of which reads:

WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision rendered by the Local
Board of Assessment Appeals of the Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled
"[F]ilipinas Palm Oil Co., Inc. Petitioner, versus the Provincial Assessors Office of Agusan del Sur, Respondent" and
hereby orders as follows:

A. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100 PESOS (57.55), effective January 1,
1991. The assessment for each municipality shall be based on the corresponding number of trees as listed in
Petitioner-Appellee's "Hectarage Statement" discussed hereinabove;

B. Petitioner-Appellee should not be made to pay for the real property taxes due on the roads starting from January
1, 1991;
C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands owned by the Multi-
purpose Cooperative;

D. The housing units with a market value of PI75,000.00 or less each shall be subjected to 0% assessment level,
starting 1994;

E. Road Equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is not liable for real
property tax thereon;

F. Any real property taxes already paid by Petitioner-Appellee which, by virtue "of this decision, were not due, shall
be applied to future taxes rightfully due from Petitioner-Appellee.

SO ORDERED.27 (Emphasis supplied)

The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor.28 The Provincial Assessor filed a
Petition for Review before the Court of Appeals, which, in turn, sustained the CBAA's Decision.29chanrobleslaw

The Court of Appeals held that the land owned by NGPI-NGEI, which Filipinas has been leasing, cannot be subjected
to real property tax since these are owned by cooperatives that are tax-exempt.30 Section 133(n) of the Local
Government Code provides:

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

....

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered
under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as
the "Cooperative Code of the Philippines." (Emphasis supplied)

Section 234(d) of the Local Government Code exempts duly registered cooperatives, like NGPI-NGEI, from payment
of real property taxes:

SECTION 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property
tax:
....

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938[.] (Emphasis
supplied)

The Court of Appeals held that the pertinent provisions "neither distinguishes nor specifies" that the exemption only
applies to real properties used by the cooperatives.31 It ruled that "[t]he clear absence of any restriction or
limitation in the provision could only mean that the exemption applies to wherever the properties are situated and
to whoever uses them."32 Therefore, the exemption privilege extends to Filipinas as the cooperatives'
lessee.33chanrobleslaw

On the roads constructed by Filipinas, the Court of Appeals held that although it is undisputed that the roads were
built primarily for Filipinas' benefit, the roads should be tax-exempt since these roads were also being used by the
cooperatives and the public.34 It applied, by analogy, Bislig Bay Lumber Company, Inc. v. Provincial Government of
Surigao:35chanrobleslaw

We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the
road that was constructed by appellee belongs to the government by right accession not only because it is inherently
incorporated or attached to the timber land leased to appellee but also because upon the expiration of the
concession, said road would ultimately pass to the national government. In the second place, while the road was
constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract
entered into by the appellee and the government and by public in by the general. Thus, under said lease contract,
appellee cannot prevent the use of portions, of the concession for homesteading purposes. It is also in duty bound to
allow the free use of forest products within the concession for the personal use of individuals residing in or within
the vicinity of the land. . . . In other words, the government has practically reserved the rights to use the road to
promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement
which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be the subject of
assessment within the meaning of section 2 of Commonwealth Act No. 470.36 (Citations omitted)

Furthermore, the Court of Appeals agreed with the CBAA that the roads constructed by Filipinas had become
permanent improvements on the land owned by NGPI-NGEI.37 Articles 440 and 445 of the Civil Code provide that
these improvements redound to the benefit of the land owner under the right of accession:38chanrobleslaw

Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or
which is incorporated or attached thereto, either naturally or artificially.

....

Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made
thereon, belong to the owner of the land, subject to the provisions of the following articles.
On the road equipment and mini haulers as real properties subject to tax, the Court of Appeals affirmed the CBAA's
Decision that these are only movables.39 Section 199(o) of the Local Government Code provides a definition of
machinery subject to real property taxation:

SECTION 199. Definition of Terms. — When used in this Title, the term:

....

(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus
which may or may not be attached, permanently or temporarily, to the real property. It includes the physical
facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or
self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively
used to meet the needs of the particular industry, business or activity and which by their very nature and purpose
are designed for, or necessary to its manufacturing, mining.

The Court of Appeals held that Section 19^(o) of the Local Government Code should be construed to include
machineries covered by the meaning of real properties provided for under Article 415(5) of the Civil
Code:40chanrobleslaw

Article 415. The following are immovable property:

....

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the
said industry or works[.]

The Court of Appeals cited Davao Sawmill Company v. Castillo,41 where it has been held that machinery that is
movable by nature becomes immobilized only when placed by the owner of the tenement, but not so when placed
by a tenant or any other person having a temporary right unless this person acts as an agent of the owner.42 Thus,
the mini haulers and other road equipment retain their nature as movables.43chanrobleslaw

The Provincial Assessor filed before this Court a Petition for Review raising the following issues:

First, whether the exemption privilege of NGPI-NGEI from payment of real property tax extends to respondent
Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by cooperatives; and

Second, whether respondent's road equipment and mini haulers are movable properties and have not been
immobilized by destination for real property taxation.
Petitioner argues that based on Mactan Cebu International Airport Authority v. Ferdinand J. Marcos,44 cooperatives
cannot extend its exemption from real property tax to taxable persons.45 It argues that Sections 198, 199, 205, and
217 of the Local Government Code provide that real property taxes are assessed based on actual use.46 Moreover,
the exemption of cooperatives applies only when it is the cooperative that actually, directly, and exclusively uses and
possesses the properties.47 Sections 198, 199, 205, and 217 of the Local Government Code provide:

SECTION 198. Fundamental Principles. — The appraisal, assessment, levy and collection of real property tax shall be
guided by the following fundamental principles:

....

(b) Real property shall be classified for assessment purposes on the basis of its actual use[.]

....

SECTION 199. Definition of Terms. — When used in this Title, the term:

....

(b) "Actual Use" refers to the purpose for which the property is principally or predominantly utilized by the person in
possession thereof[.]

....

SECTION 205. Listing of Real Property in the Assessment Rolls. —

....

(d) Real property owned by the Republic of the Philippines, its instrumentalities and political subdivisions, the
beneficial use of which has been granted, for consideration or otherwise, to a taxable person, shall be listed, valued
and assessed in the name of the possessor, grantee or of the public entity if such property has been acquired or held
for resale or lease.

....

SECTION 217. Actual Use of Real Property as Basis for Assessment. — Real property shall be classified, valued and
assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. (Emphasis
supplied)

Petitioner claims that Section 199(o) of the Local Government Code specifically covers respondent's road equipment
and mini haulers since these are directly and exclusively used to meet the needs of respondent's industry, business,
or activity.48 Article 415(5) of the Civil Code, which defines real property, should not be made to control the Local
Government Code,49 a subsequent legislation that specifically defines "machinery" for taxation
purposes.50chanrobleslaw

In the Resolution51 dated October 13, 2008, this Court denied the Petition for Review due to procedural missteps,
which included the failure to attach legible duplicate original or certified true copies of the assailed decision and
failure to pay proper fees. On November 25, 2008, petitioner moved for reconsideration,52 praying for the reversal
of the Petition's denial due to mere technicalities.
On January 26, 2009, this Court granted Petitioner's Motion for Reconsideration.53 It directed the reinstatement of
the Petition and required respondent to comment.54chanrobleslaw

On November 20, 2009, respondent filed its Comment.55chanrobleslaw

Respondent reiterates the rulings of the CBAA and the Court of Appeals that the exemption of cooperatives from
real property taxes extends to it as the lessee.56 It asserts that under its lease agreement with NGPI-NGEI, it pays an
Annual Fixed Rental, which includes the payment of taxes.57 It claims that in case NGPI-NGEI is liable to the local
government for real property tax on the land, the tax should be taken from the Annual Fixed Rental.58 To make
respondent pay real property taxes on the leased land would be equivalent to assessing it twice for the same
property.59chanrobleslaw

On the road equipment and mini haulers being subjected to real property taxation, respondent maintains that it
should be spared from real property tax since the equipment and mini haulers are movables.60chanrobleslaw

The Petition is granted to modify the Court of Appeals Decision, but only with respect to the nature of respondent's
road equipment and mini haulers.

Under Section 133(n) of the Local Government Code, the taxing power of local government units shall not extend to
the levy of taxes, fees, or charges on duly registered cooperatives under the Cooperative Code.61 Section 234(d) of
the Local Government Code specifically provides for real property tax exemption to cooperatives:

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SECTION 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property
tax:

....

(d) All real property owned by duly registered cooperatives as provided for under [Republic Act] No. 6938[.]
(Emphasis supplied)

NGPI-NGEI, as the owner of the land being leased by respondent, falls within the purview of the law. Section 234 of
the Local Government Code exempts all real property owned by cooperatives without distinction. Nothing in the law
suggests that the real property tax exemption only applies when the property is used by the cooperative itself.
Similarly, the instance that the real property is leased to either an individual or corporation is not a ground for
withdrawal of tax exemption.62chanrobleslaw
In arguing the first issue, petitioner hinges its claim on a misplaced reliance in Mactan, which refers to the revocation
of tax exemption due to the effectivity of the Local Government Code. However, Mactan does not refer to the tax
exemption extended to cooperatives. The portion that petitioner cited specifically mentions that the exemption
granted to cooperatives has not been withdrawn by the effectivity of the Local Government Code:

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[S]ection 232 must be deemed to qualify Section 133.

Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment] C[ode], we conclude that as a general
rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia,
"taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local
government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan
Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the
Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person," as provided in item (a) of the first paragraph of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including
government-owned and controlled corporations, Section 193 of the L[ocal] G[overnment] C[ode] prescribes the
general rule, viz., they are withdrawn upon the effectivity of the L[ocal] G[overnment] C[ode], except those granted
to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, and unless otherwise provided in the L[ocal] Gfovernment] C[ode]. The latter proviso could
refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of
Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting
the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon
the effectivity of the L[ocal] G[overnment] C[ode]. Moreover, even as to real property owned by the Republic of the
Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption
is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or
otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the L[ocal] G[overnment]
C[ode], exemptions from payment of real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in the said section, and the petitioner is,
undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in
Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the
petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now
asserts, since, as shown above, the said section is qualified by Sections 232 and 234.

In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local
government units cannot extend to the levy of:

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(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local
government units.

It must show that the parcels of land in question, which are real property, are any one of those enumerated in
Section 234, either by virtue of ownership, character, or use of the property.63 (Emphasis supplied)

The roads that respondent constructed within the leased area should not be assessed with real property taxes. Bislig
Bay finds application here. Bislig Bay Lumber Company, Inc. (Bislig Bay) was a timber concessionaire of a portion of
public forest in the provinces of Agusan and Surigao.64 To aid in developing its concession, Bislig Bay built a road at
its expense from a barrio leading towards its area.65 The Provincial Assessor of Surigao assessed Bislig Bay with real
property tax on the constructed road, which was paid by the company under protest.66 It claimed that even if the
road was constructed on public land, it should be subjected to real property tax because it was built by the company
for its own benefit.67 On the other hand, Bislig Bay asserted that the road should be exempted from real property
tax because it belonged to national government by right of accession.68 Moreover, the road constructed already
became an inseparable part of the land.69 The records also showed that the road was not only built for the benefit
of Bislig Bay, but also of the public.70 This Court ruled for Bislig Bay, thus:

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We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the
road that was constructed by appellee belongs to the government by right accession not only because it is inherently
incorporated or attached to the timber land leased to appellee but also because upon the expiration of the
concession, said road would ultimately pass to the national government. ... In the second place, while the road was
constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract
entered into by the appellee and the government and by public in by the general. Thus, under said lease contract,
appellee cannot prevent the use of portions, of the concession for homesteading purposes. ... It is also in duty bound
to allow the free use of forest products within the concession for the personal use of individuals residing in or within
the vicinity of the land. ... In other words, the government has practically reserved the rights to use the road to
promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement
which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be the subject of
assessment within the meaning of section 2 of Commonwealth Act No. 470.71

This was reiterated in Board of Assessment Appeals ofZamboanga del Sur v. Samar Mining Company, Inc.72 Samar
Mining Company, Inc. (Samar Mining) was a domestic corporation engaged in the mining industry.73 Since Samar
Mining's mining site and mill were in an inland location entailing long distance from its area to the loading point,
Samar Mining was constrained to construct a road for its convenience.74 Initially, Samar Mining filed miscellaneous
lease applications for a road right of way covering lands under the jurisdiction of the Bureau of Lands and the Bureau
of Forestry where the proposed road would pass through.75 Samar Mining was given a "temporary permit to occupy
and use the lands applied for by it";76 hence, it was able to build what was eventually known as the Samico Road.
Samar Mining was assessed by the Provincial Assessor of Zamboanga del Sur with real property taxes on the road,
which prompted it to appeal before the Board of Assessment Appeals.77 Invoking Bislig Bay, Samar Mining claimed
that it should not be assessed with real property tax since the road was constructed on public land. This Court ruled
for Samar Mining, thus:

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There is no question that the road constructed by respondent Saimar on the public lands leased to it by the
government is an improvement. But as to whether the same is taxable under the aforequoted provision of the
Assessment Law, this question has already been answered in the negaitive by this Court. In the case of Bislig Bay
Lumber Co., Inc. vs. Provincial Government of Surigao, where a similar issue was raised. . ..

....

. . . What is emphasized in the Bislig case is that the improvement is exempt from taxation because it is an integral
part of the public land on which it is constructed and the improvement is the property of the government by right of
accession. Under Section 3(a) of the Assessment Law, all properties owned by the government, without any
distinction, are exempt from taxation.79 (Emphasis supplied, citations omitted)

The roads that respondent constructed became permanent improvements on the land owned by the NGPI-NGEI by
right of accession under the Civil Code, thus:

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Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or
which is incorporated or attached thereto, either naturally or artificially.

....

Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made
thereon, belong to the owner of the land[.]

Despite the land being leased by respondent when the roads were constructed, the ownership of the improvement
still belongs to NGPI-NGEI. As provided under Article 440 and 445 of the Civil Code, the land is owned by the
cooperatives at the time respondent built the roads. Hence, whatever is incorporated in the land, either naturally or
artificially, belongs to the NGPI-NGEI as the landowner.

Although the roads were primarily built for respondent's benefit, the roads were also being used by the members of
NGPI and the public.80 Furthermore, the roads inured to the benefit of NGPI-NGEI as owners of the land not only by
right of accession but through the express provision in the lease agreement:

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On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie Plantations, Inc., as Lessee,
entered into a "Lease Agreement" . . . covering the agricultural lands transferred by NDC to the DAR, which lands the
DAR ultimately distributed undivided to qualified workers-beneficiaries. . . .

....
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased
Property except those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall
be for the account of the LESSEE."

Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent improvements, such as roads
and palm trees introduced on the Leased Property, shall automatically accrue to the LESSOR upon termination of this
Lease Agreement without need of reimbursement."

All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative and NDC-Guthrie
Plantations, Inc. were reconfirmed and reaffirmed in the Addendum to Lease Agreement entered into by and
between NGPI Multi-Purpose Cooperative and Filipinas Palmoil Plantations, Inc. on January 30, 1998. . . . The main
subject of the said Addendum was the extension of the term of the lease agreement up to December 31, 2032, along
with economic benefits to the lessor other than rentals.

There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative which leased the same
to Petitioner-Appellee. These roads belong to the Multi-Purpose Cooperative, not only by right of accession but also
by express provisions of the Contract of Lease[.]81

Respondent claims that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental, which includes
the payment of taxes.82 If NGPI-NGEI were liable to the local government for real property tax on the land, the tax
should be taken from the Annual Fixed Rental:

chanRoblesvirtualLawlibrary

"2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual
rentals:ChanRoblesVirtualawlibrary

"1) An annual fixed rental, in the following amount — "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE
PER ANNUM which would cover the following:

chanRoblesvirtualLawlibrary"(1) All Taxes on the Land

"(2) Administration Charges

"(3) Amortization charges

"It is understood that, if the annual fixed rental of "SIX HUNDRED THIRTY FIVE PESOS" (p 635.00) is insufficient to pay
any increase on the land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten
percent (10%) of the immediately preceding tax imposed on the land; provided further, that any increase beyond
these percentage shall be borne equally by the LESSOR and LESSEE.
"The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased
Property Primarily and principally lies with the LESSOR and any reference herein to payment by LESSEE of said taxes
is only for purposes of earmarking the proceeds of the rentals herein agreed upon."

Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased
Property except those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall
be for the account of the LESSEE."83 (Emphasis supplied)

Therefore, NGPI-NGEI, as owner of the roads that permanently became part of the land being leased by respondent,
shall be liable for real property taxes, if any. However, by express provision of the Local Government Code, NGPI-
NGEI is exempted from payment of real property tax.84chanrobleslaw

II

The road equipment and mini haulers shall be considered as real property, subject to real property tax.

Section 199(o) of the Local Government Code defines "machinery" as real property subject to real property tax,85
thus:

chanRoblesvirtualLawlibrary

SECTION 199. Definition of Terms. — When used in this Title, the term:

....

(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus
which may or may not be attached, permanently or temporarily, to the real property. It includes the physical
facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or
self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively
used to meet the needs of the particular industry, business or activity and which by their very nature and purpose
are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural
purposes[.]

Article 415(5) of the New Civil Code defines "machinery" as that which constitutes an immovable property:

chanRoblesvirtualLawlibrary

Article 415. The following are immovable property:

....
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the
said industry or works[.] (Emphasis supplied)

Petitioner contends that the second sentence of Section 199(o) includes the road equipment and mini haulers since
these are directly and exclusively used by respondent to meet the needs of its operations.86 It further claims that
Article 415(5) of the New Civil Code should not control the Local Government Code, a subsequent
legislation.87chanrobleslaw

On the other hand, respondent claims that the road equipment and mini haulers are movables by nature. It asserts
that although there may be a difference between the meaning of "machinery" under the Local Government Code
arid that of immovable property under Article 415(5) of the Civil Code, "the controlling interpretation of Section
199(o) of [the Local Government Code] is the interpretation of Article 415(5) of the Civil Code."88chanrobleslaw

In Manila Electric Company v. City Assessor,89 a similar issue of which definition of "machinery" prevails to warrant
the assessment of real property tax on it was raised.

Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code and the Local
Government Code and asserted that "machinery" contemplated under Section 199(o) of the Local Government must
still be within the contemplation of immovable property under Article 415 of the Civil Code.90 However, this Court
ruled that harmonizing such laws "would necessarily mean imposing additional requirements for classifying
machinery as real property for real property tax purposes not provided for, or even in direct conflict with, the
provisions of the Local Government Code."91 Thus:

chanRoblesvirtualLawlibrary

While the Local Government Code still does not provide for a specific definition of "real property," Sections 199(o)
and 232 of the said Code, respectively, gives an extensive definition of what constitutes "machinery" and
unequivocally subjects such machinery to real property tax. The Court reiterates that the machinery subject to real
property tax under the Local Government Code "may or may not be attached, permanently or temporarily to the
real property"; and the physical facilities for production, installations, and appurtenant service facilities, those which
are mobile, self-powered or self-propelled, or are not permanently attached must (a) be actually, directly, and
exclusively used to meet the needs of the particular industry, business, or activity; and (b) by their very nature and
purpose, be designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural
purposes.

....

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[m]achinery, receptacles,
instruments or implements intended by the owner of the tenement for an industry or works which may be carried
on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works." The
Civil Code, however, does not define "machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are
essentially movables, but by the purpose for which they have been placed in an immovable, partake of the nature of
the latter because of the added utility derived therefrom." These properties, including machinery, become
immobilized if the following requisites concur: (a) they are placed in the tenement by the owner of such tenement;
(b) they are destined for use in the industry or work in the tenement; and (c) they tend to directly meet the needs of
said industry or works. The first two requisites are not found anywhere in the Local Government Code.92 (Emphasis
supplied, citations omitted)

Section 199(o) of the Local Government prevails over Article 415(5) of the Civil Code. In Manila Electric Company:

chanRoblesvirtualLawlibrary

As between the Civil Code, a general law governing property and property relations, and the Local Government
Code, a special law granting local government units the power to impose real property tax, then the latter shall
prevail. As the Court pronounced in Disomangcop v. The Secretary of the Department of Public Works and Highways
Simeon A. Datumanong:ChanRoblesVirtualawlibrary

It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one.
Lex specialis derogant generali. As this Court expressed in the case of Leveriza v. Intermediate Appellate Court,
"another basic principle of statutory construction mandates that general legislation must give way to special
legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special
provisions are not applicable, that specific statute prevails over a general statute and that where two statutes are of
equal theoretical application to a particular case, the one designed therefor specially should prevail."

The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation that:

chanRoblesvirtualLawlibrary

A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read
together and harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts,
one of which is special and particular and the other general which, if standing alone, would include the same matter
and thus conflict with the special act, the special law must prevail since it evinces the legislative intent more clearly
than that of a general statute and must not be taken as intended to affect the more particular and specific provisions
of the earlier act, unless it is absolutely necessary so to construe it in order to give its words any meaning at all.

The circumstance that the special law is passed before or after the general act does not change the principle. Where
the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where
the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed
expressly or by necessary implication.

Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court acknowledged that "[i]t
is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle
might be considered personal property[.]"
Therefore, for determining whether machinery is real property subject to real property tax, the definition and
requirements under the Local Government Code are controlling.93 (Emphasis supplied, citations omitted)

Respondent is engaged in palm oil plantation.94 Thus, it harvests fruits from palm trees for oil conversion through its
milling plant.95 By the nature of respondent's business, transportation is indispensable for its operations.

Under the definition provided in Section 199(o) of the Local Government Code, the road equipment and the mini
haulers are classified as machinery, thus:

chanRoblesvirtualLawlibrary

SECTION 199. Definition of Terms. — When used in this Title, the terra:

....

(o) "Machinery" . . . includes the physical facilities for production, the installations and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property
which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity
and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging,
commercial, industrial or agricultural purposes [.] (Emphasis supplied)

Petitioner is correct in claiming that the phrase pertaining to physical facilities for production is comprehensive
enough to include the road equipment and mini haulers as actually, directly, and exclusively used by respondent to
meet the needs of its operations in palm oil production.96 Moreover, "mini-haulers are farm tractors pulling
attached trailers used in the hauling of seedlings during planting season and in transferring fresh palm fruits from the
farm [or] field to the processing plant within the plantation area."97 The indispensability of the road equipment and
mini haulers in transportation makes it actually, directly, and exclusively used in the operation of respondent's
business.

In its Comment, respondent claims that the equipment is no longer vital to its operation because it is currently
employing equipment outside the company to do the task.98 However, respondent never raised this contention
before the lower courts. Hence, this is a factual issue of which this Court cannot take cognizance. This Court is not a
trier of facts.99 Only questions of law are entertained in a petition for review assailing a Court of Appeals
decision.100chanrobleslaw

WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 26, 2007 and
the Resolution dated May 26, 2008 in CA-G.R. SP No. 74060 are AFFIRMED with MODIFICATION, in that the road
equipment and the mini haulers should be assessed with real property taxes.

SO ORDERED.
Carpio, (Chairperson), Del Castillo, , and Mendoza, JJ., concur.

Brion, J., on leave.

G.R. No. 179987 September 3, 2013

HEIRS OF MARIO MALABANAN, (Represented by Sally A. Malabanan), Petitioners,

vs.

REPUBLIC OF THE PHILIPPINES, Respondent.

RESOLUTION

BERSAMIN, J.:

For our consideration and resolution are the motions for reconsideration of the parties who both assail the decision
promulgated on April 29, 2009, whereby we upheld the ruling of the Court of Appeals (CA) denying the application of
the petitioners for the registration of a parcel of land situated in Barangay Tibig, Silang, Cavite on the ground that
they had not established by sufficient evidence their right to the registration in accordance with either Section 14(1)
or Section 14(2) of Presidential Decree No. 1529 (Property Registration Decree).

Antecedents

The property subject of the application for registration is a parcel of land situated in Barangay Tibig, Silang Cavite,
more particularly identified as Lot 9864-A, Cad-452-D, with an area of 71,324-square meters. On February 20, 1998,
applicant Mario Malabanan, who had purchased the property from Eduardo Velazco, filed an application for land
registration covering the property in the Regional Trial Court (RTC) in Tagaytay City, Cavite, claiming that the
property formed part of the alienable and disposable land of the public domain, and that he and his predecessors-in-
interest had been in open, continuous, uninterrupted, public and adverse possession and occupation of the land for
more than 30 years, thereby entitling him to the judicial confirmation of his title.1

To prove that the property was an alienable and disposable land of the public domain, Malabanan presented during
trial a certification dated June 11, 2001 issued by the Community Environment and Natural Resources Office
(CENRO) of the Department of Environment and Natural Resources (DENR), which reads:
This is to certify that the parcel of land designated as Lot No. 9864 Cad 452-D, Silang Cadastre as surveyed for Mr.
Virgilio Velasco located at Barangay Tibig, Silang, Cavite containing an area of 249,734 sq. meters as shown and
described on the Plan Ap-04-00952 is 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, 1982.2

After trial, on December 3, 2002, the RTC rendered judgment granting Malabanan’s application for land registration,
disposing thusly:

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.3

The Office of the Solicitor General (OSG) appealed the judgment to the CA, 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 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 February 23, 2007, the CA promulgated its decision reversing the RTC and dismissing the application for
registration of Malabanan. Citing the ruling in Republic v. Herbieto (Herbieto),4 the CA declared that under Section
14(1) of the Property Registration Decree, any period of possession prior to the classification of the land as alienable
and disposable was inconsequential and should be excluded from the computation of the period of possession.
Noting that the CENRO-DENR certification stated that the property had been declared alienable and disposable only
on March 15, 1982, Velazco’s possession prior to March 15, 1982 could not be tacked for purposes of computing
Malabanan’s period of possession.

Due to Malabanan’s intervening demise during the appeal in the CA, his heirs elevated the CA’s decision of February
23, 2007 to this Court through a petition for review on certiorari.

The petitioners assert that the ruling in Republic v. Court of Appeals and Corazon Naguit5 (Naguit) remains the
controlling doctrine especially if the property involved is agricultural land. In this regard, Naguit ruled that any
possession of agricultural land prior to its declaration as alienable and disposable could be counted in the reckoning
of the period of possession to perfect title under the Public Land Act (Commonwealth Act No. 141) and the Property
Registration Decree. They point out that the ruling in Herbieto, to the effect that the declaration of the land subject
of the application for registration as alienable and disposable should also date back to June 12, 1945 or earlier, was a
mere obiter dictum considering that the land registration proceedings therein were in fact found and declared void
ab initio for lack of publication of the notice of initial hearing.

The petitioners also rely on the ruling in Republic v. T.A.N. Properties, Inc.6 to support their argument that the
property had been ipso jure converted into private property by reason of the open, continuous, exclusive and
notorious possession by their predecessors-in-interest of an alienable land of the public domain for more than 30
years. According to them, what was essential was that the property had been "converted" into private property
through prescription at the time of the application without regard to whether the property sought to be registered
was previously classified as agricultural land of the public domain.

As earlier stated, we denied the petition for review on certiorari because Malabanan failed to establish by sufficient
evidence possession and occupation of the property on his part and on the part of his predecessors-in interest since
June 12, 1945, or earlier.

Petitioners’ Motion for Reconsideration

In their motion for reconsideration, the petitioners submit that the mere classification of the land as alienable or
disposable should be deemed sufficient to convert it into patrimonial property of the State. Relying on the rulings in
Spouses De Ocampo v. Arlos,7 Menguito v. Republic8 and Republic v. T.A.N. Properties, Inc.,9 they argue that the
reclassification of the land as alienable or disposable opened it to acquisitive prescription under the Civil Code; that
Malabanan had purchased the property from Eduardo Velazco believing in good faith that Velazco and his
predecessors-in-interest had been the real owners of the land with the right to validly transmit title and ownership
thereof; that consequently, the ten-year period prescribed by Article 1134 of the Civil Code, in relation to Section
14(2) of the Property Registration Decree, applied in their favor; and that when Malabanan filed the application for
registration on February 20, 1998, he had already been in possession of the land for almost 16 years reckoned from
1982, the time when the land was declared alienable and disposable by the State.

The Republic’s Motion for Partial Reconsideration

The Republic seeks the partial reconsideration in order to obtain a clarification with reference to the application of
the rulings in Naguit and Herbieto.

Chiefly citing the dissents, the Republic contends that the decision has enlarged, by implication, the interpretation of
Section 14(1) of the Property Registration Decree through judicial legislation. It reiterates its view that an applicant is
entitled to registration only when the land subject of the application had been declared alienable and disposable
since June 12, 1945 or earlier.

Ruling
We deny the motions for reconsideration.

In reviewing the assailed decision, we consider to be imperative to discuss the different classifications of land in
relation to the existing applicable land registration laws of the Philippines.

Classifications of land according to ownership

Land, which is an immovable property,10 may be classified as either of public dominion or of private ownership.11
Land is considered of public dominion if it either: (a) is intended for public use; or (b) belongs to the State, without
being for public use, and is intended for some public service or for the development of the national wealth.12 Land
belonging to the State that is not of such character, or although of such character but no longer intended for public
use or for public service forms part of the patrimonial property of the State.13 Land that is other than part of the
patrimonial property of the State, provinces, cities and municipalities is of private ownership if it belongs to a private
individual.

Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first introduced into the country from the West by
Spain through the Laws of the Indies and the Royal Cedulas,14 all lands of the public domain belong to the State.15
This means that the State is the source of any asserted right to ownership of land, and is charged with the
conservation of such patrimony.16

All lands not appearing to be clearly under private ownership are presumed to belong to the State. Also, public lands
remain part of the inalienable land of the public domain unless the State is shown to have reclassified or alienated
them to private persons.17

Classifications of public lands

according to alienability

Whether or not land of the public domain is alienable and disposable primarily rests on the classification of public
lands made under the Constitution. Under the 1935 Constitution,18 lands of the public domain were classified into
three, namely, agricultural, timber and mineral.19 Section 10, Article XIV of the 1973 Constitution classified lands of
the public domain into seven, specifically, agricultural, industrial or commercial, residential, resettlement, mineral,
timber or forest, and grazing land, with the reservation that the law might provide other classifications. The 1987
Constitution adopted the classification under the 1935 Constitution into agricultural, forest or timber, and mineral,
but added national parks.20 Agricultural lands may be further classified by law according to the uses to which they
may be devoted.21 The identification of lands according to their legal classification is done exclusively by and
through a positive act of the Executive Department.22

Based on the foregoing, the Constitution places a limit on the type of public land that may be alienated. Under
Section 2, Article XII of the 1987 Constitution, only agricultural lands of the public domain may be alienated; all other
natural resources may not be.
Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial lands of the State, or those
classified as lands of private ownership under Article 425 of the Civil Code,23 without limitation; and (b) lands of the
public domain, or the public lands as provided by the Constitution, but with the limitation that the lands must only
be agricultural. Consequently, lands classified as forest or timber, mineral, or national parks are not susceptible of
alienation or disposition unless they are reclassified as agricultural.24 A positive act of the Government is necessary
to enable such reclassification,25 and the exclusive prerogative to classify public lands under existing laws is vested
in the Executive Department, not in the courts.26 If, however, public land will be classified as neither agricultural,
forest or timber, mineral or national park, or when public land is no longer intended for public service or for the
development of the national wealth, thereby effectively removing the land from the ambit of public dominion, a
declaration of such conversion must be made in the form of a law duly enacted by Congress or by a Presidential
proclamation in cases where the President is duly authorized by law to that effect.27 Thus, until the Executive
Department exercises its prerogative to classify or reclassify lands, or until Congress or the President declares that
the State no longer intends the land to be used for public service or for the development of national wealth, the
Regalian Doctrine is applicable.

Disposition of alienable public lands

Section 11 of the Public Land Act (CA No. 141) provides the manner by which alienable and disposable lands of the
public domain, i.e., agricultural lands, can be disposed of, to wit:

Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows, and not otherwise:

(1) For homestead settlement;

(2) By sale;

(3) By lease; and

(4) By confirmation of imperfect or incomplete titles;

(a) By judicial legalization; or

(b) By administrative legalization (free patent).

The core of the controversy herein lies in the proper interpretation of Section 11(4), in relation to Section 48(b) of
the Public Land Act, which expressly requires possession by a Filipino citizen of the land since June 12, 1945, or
earlier, viz:
Section 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 thereafter, under the Land Registration Act, to wit:

xxxx

(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 applications
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. (Bold emphasis supplied)

Note that Section 48(b) of the Public Land Act used the words "lands of the public domain" or "alienable and
disposable lands of the public domain" to clearly signify that lands otherwise classified, i.e., mineral, forest or timber,
or national parks, and lands of patrimonial or private ownership, are outside the coverage of the Public Land Act.
What the law does not include, it excludes. The use of the descriptive phrase "alienable and disposable" further
limits the coverage of Section 48(b) to only the agricultural lands of the public domain as set forth in Article XII,
Section 2 of the 1987 Constitution. Bearing in mind such limitations under the Public Land Act, the applicant must
satisfy the following requirements in order for his application to come under Section 14(1) of the Property
Registration Decree,28 to wit:

1. The applicant, by himself or through his predecessor-in-interest, has been in possession and occupation of the
property subject of the application;

2. The possession and occupation must be open, continuous, exclusive, and notorious;

3. The possession and occupation must be under a bona fide claim of acquisition of ownership;

4. The possession and occupation must have taken place since June 12, 1945, or earlier; and

5. The property subject of the application must be an agricultural land of the public domain.

Taking into consideration that the Executive Department is vested with the authority to classify lands of the public
domain, Section 48(b) of the Public Land Act, in relation to Section 14(1) of the Property Registration Decree,
presupposes that the land subject of the application for registration must have been already classified as agricultural
land of the public domain in order for the provision to apply. Thus, absent proof that the land is already classified as
agricultural land of the public domain, the Regalian Doctrine applies, and overcomes the presumption that the land
is alienable and disposable as laid down in Section 48(b) of the Public Land Act. However, emphasis is placed on the
requirement that the classification required by Section 48(b) of the Public Land Act is classification or reclassification
of a public land as agricultural.

The dissent stresses that the classification or reclassification of the land as alienable and disposable agricultural land
should likewise have been made on June 12, 1945 or earlier, because any possession of the land prior to such
classification or reclassification produced no legal effects. It observes that the fixed date of June 12, 1945 could not
be minimized or glossed over by mere judicial interpretation or by judicial social policy concerns, and insisted that
the full legislative intent be respected.

We find, however, that the choice of June 12, 1945 as the reckoning point of the requisite possession and occupation
was the sole prerogative of Congress, the determination of which should best be left to the wisdom of the
lawmakers. Except that said date qualified the period of possession and occupation, no other legislative intent
appears to be associated with the fixing of the date of June 12, 1945. Accordingly, the Court should interpret only
the plain and literal meaning of the law as written by the legislators.

Moreover, an examination of Section 48(b) of the Public Land Act indicates that Congress prescribed no requirement
that the land subject of the registration should have been classified as agricultural since June 12, 1945, or earlier. As
such, the applicant’s imperfect or incomplete title is derived only from possession and occupation since June 12,
1945, or earlier. This means that the character of the property subject of the application as alienable and disposable
agricultural land of the public domain determines its eligibility for land registration, not the ownership or title over it.

Alienable public land held by a possessor, either personally or through his predecessors-in-interest, openly,
continuously and exclusively during the prescribed statutory period is converted to private property by the mere
lapse or completion of the period.29 In fact, by virtue of this doctrine, corporations may now acquire lands of the
public domain for as long as the lands were already converted to private ownership, by operation of law, as a result
of satisfying the requisite period of possession prescribed by the Public Land Act.30 It is for this reason that the
property subject of the application of Malabanan need not be classified as alienable and disposable agricultural land
of the public domain for the entire duration of the requisite period of possession.

To be clear, then, the requirement that the land should have been classified as alienable and disposable agricultural
land at the time of the application for registration is necessary only to dispute the presumption that the land is
inalienable.

The declaration that land is alienable and disposable also serves to determine the point at which prescription may
run against the State. The imperfect or incomplete title being confirmed under Section 48(b) of the Public Land Act is
title that is acquired by reason of the applicant’s possession and occupation of the alienable and disposable
agricultural land of the public domain. Where all the necessary requirements for a grant by the Government are
complied with through actual physical, open, continuous, exclusive and public possession of an alienable and
disposable land of the public domain, the possessor is deemed to have acquired by operation of law not only a right
to a grant, but a grant by the Government, because it is not necessary that a certificate of title be issued in order
that such a grant be sanctioned by the courts.31
If one follows the dissent, the clear objective of the Public Land Act to adjudicate and quiet titles to unregistered
lands in favor of qualified Filipino citizens by reason of their occupation and cultivation thereof for the number of
years prescribed by law32 will be defeated. Indeed, we should always bear in mind that such objective still prevails,
as a fairly recent legislative development bears out, when Congress enacted legislation (Republic Act No. 10023)33 in
order to liberalize stringent requirements and procedures in the adjudication of alienable public land to qualified
applicants, particularly residential lands, subject to area limitations.34

On the other hand, if a public land is classified as no longer intended for public use or for the development of
national wealth by declaration of Congress or the President, thereby converting such land into patrimonial or private
land of the State, the applicable provision concerning disposition and registration is no longer Section 48(b) of the
Public Land Act but the Civil Code, in conjunction with Section 14(2) of the Property Registration Decree.35 As such,
prescription can now run against the State.

To sum up, we now observe the following rules relative to the disposition of public land or lands of the public
domain, namely:

(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the public domain belong to the State and are
inalienable. Lands that are not clearly under private ownership are also presumed to belong to the State and,
therefore, may not be alienated or disposed;

(2) The following are excepted from the general rule, to wit:

(a) Agricultural lands of the public domain are rendered alienable and disposable through any of the exclusive modes
enumerated under Section 11 of the Public Land Act. If the mode is judicial confirmation of imperfect title under
Section 48(b) of the Public Land Act, the agricultural land subject of the application needs only to be classified as
alienable and disposable as of the time of the application, provided the applicant’s possession and occupation of the
land dated back to June 12, 1945, or earlier. Thereby, a conclusive presumption that the applicant has performed all
the conditions essential to a government grant arises,36 and the applicant becomes the owner of the land by virtue
of an imperfect or incomplete title. By legal fiction, the land has already ceased to be part of the public domain and
has become private property.37

(b) Lands of the public domain subsequently classified or declared as no longer intended for public use or for the
development of national wealth are removed from the sphere of public dominion and are considered converted into
patrimonial lands or lands of private ownership that may be alienated or disposed through any of the modes of
acquiring ownership under the Civil Code. If the mode of acquisition is prescription, whether ordinary or
extraordinary, proof that the land has been already converted to private ownership prior to the requisite acquisitive
prescriptive period is a condition sine qua non in observance of the law (Article 1113, Civil Code) that property of the
State not patrimonial in character shall not be the object of prescription.

To reiterate, then, the petitioners failed to present sufficient evidence to establish that they and their predecessors-
in-interest had been in possession of the land since June 12, 1945. Without satisfying the requisite character and
period of possession - possession and occupation that is open, continuous, exclusive, and notorious since June 12,
1945, or earlier - the land cannot be considered ipso jure converted to private property even upon the subsequent
declaration of it as alienable and disposable. Prescription never began to run against the State, such that the land
has remained ineligible for registration under Section 14(1) of the Property Registration Decree. Likewise, the land
continues to be ineligible for land registration under Section 14(2) of the Property Registration Decree unless
Congress enacts a law or the President issues a proclamation declaring the land as no longer intended for public
service or for the development of the national wealth.1âwphi1

WHEREFORE, the Court DENIES the petitioners' Motion for Reconsideration and the respondent's Partial Motion for
Reconsideration for their lack of merit.

SO ORDERED.

CHAVEZ V. PUBLIC ESTATES AUTHORITY

384 SCRA 152

FACTS:

President Marcos through a presidential decree created PEA, which was tasked with the development,
improvement, and acquisition, lease, and sale of all kinds of lands. The then president also transferred to PEA the
foreshore and offshore lands of Manila Bay under the Manila-Cavite Coastal

Road and Reclamation Project.

Thereafter, PEA was granted patent to the reclaimed areas of land and then, years later, PEA entered into a
JVA with AMARI for the development of the Freedom Islands. These two entered into a joint venture in the
absence of any public bidding.

Later, a privilege speech was given by Senator President Maceda denouncing the JVA as the grandmother
of all scams. An investigation was conducted and it was concluded that the lands that PEA was conveying to AMARI
were lands of the public domain; the certificates of title over the

Freedom Islands were void; and the JVA itself was illegal. This prompted Ramos to form an investigatory committee
on the legality of the JVA.

Petitioner now comes and contends that the government stands to lose billions by the conveyance or sale
of the reclaimed areas to AMARI. He also asked for the full disclosure of the renegotiations happening between
the parties.

ISSUE:

W/N stipulations in the amended JVA for the transfer to AMARI of the lands, reclaimed or to be reclaimed,
violate the Constitution.
HELD:

The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine, which
holds that the State owns all lands and waters of the public domain.

The 1987 Constitution recognizes the Regalian doctrine. It declares that all natural resources are owned by the
State and except for alienable agricultural lands of the public domain, natural resources cannot be alienated.

The Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750 hectare reclamation
project have been reclaimed, and the rest of the area are still submerged areas forming part of Manila Bay. Further,
it is provided that AMARI will reimburse the actual costs in reclaiming the areas of land and it will shoulder the
other reclamation costs to be incurred.

The foreshore and submerged areas of Manila Bay are part of the lands of the public domain, waters and other
natural resources and consequently owned by the State. As such, foreshore and submerged areas shall not be
alienable unless they are classified as agricultural lands of the public domain. The mere reclamation of these
areas by the PEA doesn’t convert these inalienable natural resources of the State into alienable and disposable
lands of the public domain. There must be a law or presidential

proclamation officially classifying these reclaimed lands as alienable and disposable if the law has reserved
them for some public or quasi-public use.

[G. R. No. 133250. May 6, 2003]

FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.

RESOLUTION

CARPIO, J.:

For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by
respondent Amari Coastal Bay Development Corporation (Amari for brevity) on September 13, 2002; (2) Motion to
Set Case for Hearing on Oral Argument filed by Amari on August 20, 2002; (3) Motion for Reconsideration and
Supplement to Motion for Reconsideration filed by Amari on July 26, 2002 and August 20, 2002, respectively; (4)
Motion for Reconsideration and Supplement to Motion for Reconsideration filed by respondent Public Estates
Authority (PEA for brevity) on July 26, 2002 and August 8, 2002, respectively; and (5) Motion for Reconsideration
and/or Clarification filed by the Office of the Solicitor General on July 25, 2002. Petitioner Francisco I. Chavez filed on
November 13, 2002 his Consolidated Opposition to the main and supplemental motions for reconsideration.

To recall, the Courts decision of July 9, 2002 (Decision for brevity) on the instant case states in its summary:
We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the
name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may
not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine
citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain
until classified as alienable or disposable lands open to disposition and declared no longer needed for public service.
The government can make such classification and declaration only after PEA has reclaimed these submerged areas.
Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the
government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside
the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the
Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still submerged areas of
Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits
the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these
submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and
further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the
public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409
of the Civil Code, contracts whose object or purpose is contrary to law, or whose object is outside the commerce of
men, are inexistent and void from the beginning. The Court must perform its duty to defend and uphold the
Constitution, and therefore declares the Amended JVA null and void ab initio.

Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice Carpio,
before his appointment to the Court, wrote in his Manila Times column of July 1, 1997, I have always maintained
that the law requires the public bidding of reclamation projects. Justice Carpio, then a private law practitioner, also
stated in the same column, The Amari-PEA reclamation contract is legally flawed because it was not bid out by the
PEA. Amari claims that because of these statements Justice Carpio should inhibit himself on the grounds of bias and
prejudgment and that the instant case should be re-deliberated after being assigned to a new ponente.

The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after Justice
Carpio had already rendered his opinion on the merits of the case. The rule is that a motion to inhibit must be denied
if filed after a member of the Court had already given an opinion on the merits of the case,[1] the rationale being
that a litigant cannot be permitted to speculate upon the action of the Court xxx (only to) raise an objection of this
sort after a decision has been rendered. Second, as can be readily gleaned from the summary of the Decision quoted
above, the absence of public bidding is not one of the ratio decidendi of the Decision which is anchored on violation
of specific provisions of the Constitution. The absence of public bidding was not raised as an issue by the parties. The
absence of public bidding was mentioned in the Decision only to complete the discussion on the law affecting
reclamation contracts for the guidance of public officials. At any rate, the Office of the Solicitor General in its Motion
for Reconsideration concedes that the absence of public bidding in the disposition of the Freedom Islands rendered
the Amended JVA null and void.[2] Third, judges and justices are not disqualified from participating in a case just
because they have written legal articles on the law involved in the case. As stated by the Court in Republic v.
Cocofed,[3] -

The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not disqualify him, in
the same manner that jurists will not be disqualified just because they may have given their opinions as textbook
writers on the question involved in a case.

Besides, the subject and title of the column in question was The CCP reclamation project and the column referred to
the Amari-PEA contract only in passing in one sentence.

Amaris motion to set the case for oral argument must also be denied since the pleadings of the parties have
discussed exhaustively the issues involved in the case.

The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall consider
in this Resolution only the new arguments raised by respondents.

In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply
prospectively, not retroactively to cover the Amended JVA. Amari argues that the existence of a statute or executive
order prior to its being adjudged void is an operative fact to which legal consequences are attached, citing De
Agbayani v. PNB,[4] thus:

x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act
must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed
their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done
while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as
a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and
justice then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, - with respect to particular relations, individual and
corporate, and particular conduct, private and official." This language has been quoted with approval in a resolution
in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. x x x.

xxx

x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all the more
reason then to yield assent to the now prevailing principle that the existence of a statute or executive order prior to
its being adjudged void is an operative fact to which legal consequences are attached.

Amari now claims that assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive Order Nos.
525 and 654 are inconsistent with the 1987 Constitution, the limitation imposed by the Decision on these decrees
and executive orders should only be applied prospectively from the finality of the Decision.

Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested rights. Amari
maintains that the new doctrine embodied in the Decision cannot apply retroactively on those who relied on the old
doctrine in good faith, citing Spouses Benzonan v. Court of Appeals,[5] thus:

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in
Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these
decisions for pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the
Constitution shall form a part of the legal system of the Philippines." But while our decisions form part of the law of
the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect
unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks
forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law
usually divests rights that have already become vested or impairs the obligations of contract and hence, is
unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).

The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines.
Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a
different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had
relied on the old doctrine and acted on the faith thereof.

There may be special cases where weighty considerations of equity and social justice will warrant a retroactive
application of doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and
orphans. In the present petitions, however, we find no such equitable considerations. Not only did the private
respondent apply for free agricultural land when he did not need it and he had no intentions of applying it to the
noble purposes behind the law, he would now repurchase for only P327,995.00, the property purchased by the
petitioners in good faith for P1,650,000.00 in 1979 and which, because of improvements and the appreciating value
of land must be worth more than that amount now.
The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the
property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase
the disputed lot given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot
be revived by relying on the 1988 case of Belisario. The right of petitioners over the subject lot had already become
vested as of that time and cannot be impaired by the retroactive application of the Belisario ruling.

Amaris reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the prevailing law or
doctrine at the time of the signing of the Amended JVA was that a private corporation could acquire alienable lands
of the public domain, and the Decision annulled the law or reversed this doctrine. Obviously, this is not the case
here.

Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public domain. But
since the effectivity of the 1973 Constitution, private corporations were banned from holding, except by lease,
alienable lands of the public domain. The 1987 Constitution continued this constitutional prohibition. The prevailing
law before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by
lease, alienable lands of the public domain. The Decision has not annulled or in any way changed the law on this
matter. The Decision, whether made retroactive or not, does not change the law since the Decision merely reiterates
the law that prevailed since the effectivity of the 1973 Constitution. Thus, De Agbayani, which refers to a law that is
invalidated by a decision of the Court, has no application to the instant case.

Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by a
subsequent decision which adopts a new doctrine. In the instant case, there is no previous doctrine that is overruled
by the Decision. Since the case of Manila Electric Company v. Judge Castro-Bartolome,[6] decided on June 29, 1982,
the Court has applied consistently the constitutional provision that private corporations cannot hold, except by
lease, alienable lands of the public domain. The Court reiterated this in numerous cases, and the only dispute in the
application of this constitutional provision is whether the land in question had already become private property
before the effectivity of the 1973 Constitution.[7] If the land was already private land before the 1973 Constitution
because the corporation had possessed it openly, continuously, exclusively and adversely for at least thirty years
since June 12, 1945 or earlier, then the corporation could apply for judicial confirmation of its imperfect title. But if
the land remained public land upon the effectivity of the 1973 Constitution, then the corporation could never hold,
except by lease, such public land. Indisputably, the Decision does not overrule any previous doctrine of the Court.

The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations cannot
hold, except by lease, alienable lands of the public domain. This is one of the two main reasons why the Decision
annulled the Amended JVA. The other main reason is that submerged areas of Manila Bay, being part of the sea, are
inalienable and beyond the commerce of man, a doctrine that has remained immutable since the Spanish Law on
Waters of 1886. Clearly, the Decision merely reiterates, and does not overrule, any existing judicial doctrine.

Even on the characterization of foreshore lands reclaimed by the government, the Decision does not overrule
existing law or doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and its foreshore
areas have always been part of the public domain. And since the enactment of Act No. 1654 on May 18, 1907 until
the effectivity of the 1973 Constitution, statutory law never allowed foreshore lands reclaimed by the government to
be sold to private corporations. The 1973 and 1987 Constitution enshrined and expanded the ban to include any
alienable land of the public domain.
There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution, hold that
the sale or transfer of the land may no longer be invalidated because of weighty considerations of equity and social
justice.[8] The invalidation of the sale or transfer may also be superfluous if the purpose of the statutory or
constitutional ban has been achieved. But none of these cases apply to Amari.

Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a
Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen.[9] Similarly, where the
alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since the purpose of the
constitutional ban to limit land ownership to Filipinos has been achieved.[10] In short, the law disregards the
constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or
the buyer himself becomes a qualified party. In the instant case, however, Amari has not transferred the Freedom
Islands, or any portion of it, to any qualified party. In fact, Amari admits that title to the Freedom Islands still remains
with PEA.[11]

The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under the
principle of res judicata, provided the requisites for res judicata are present.[12] Under this principle, the courts and
the parties are bound by a prior final decision, otherwise there will be no end to litigation. As the Court declared in
Toledo-Banaga v. Court of Appeals,[13] once a judgement has become final and executory, it can no longer be
disturbed no matter how erroneous it may be. In the instant case, there is no prior final decision adjudicating the
Freedom Islands to Amari.

There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim
good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the
instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even
before the filing of this petition, two Senate Committees[14] had already approved on September 16, 1997 Senate
Committee Report No. 560. This Report concluded, after a well-publicized investigation into PEAs sale of the
Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed
the Amended JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA.

Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom Islands. Amari
states that it has paid PEA only P300,000,000.00[15] out of the P1,894,129,200.00 total reimbursement cost agreed
upon in the Amended JVA. Moreover, Amari does not claim to have even initiated the reclamation of the 592.15
hectares of submerged areas covered in the Amended JVA, or to have started to construct any permanent
infrastructure on the Freedom Islands. In short, Amari does not claim to have introduced any physical improvement
or development on the reclamation project that is the subject of the Amended JVA. And yet Amari claims that it had
already spent a whopping P9,876,108,638.00 as its total development cost as of June 30, 2002.[16] Amari does not
explain how it spent the rest of the P9,876,108,638.00 total project cost after paying PEA P300,000,000.00. Certainly,
Amari cannot claim to be an innocent purchaser in good faith and for value.

In its Supplement to Motion for Reconsideration, PEA claims that it is similarly situated as the Bases Conversion
Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro Manila military
camps and other military reservations. PEAs comparison is incorrect. The Decision states as follows:
As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed
lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same
manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of
the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In
the hands of the government agency tasked and authorized to dispose of alienable or disposable lands of the public
domain, these lands are still public, not private lands.

PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of
Department of Environment and Natural Resources (DENR for brevity) as the government agency charged with
leasing or selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and
selling functions of DENR, reclaimed foreshore lands are public lands in the same manner that these same lands
would have been public lands in the hands of DENR. BCDA is an entirely different government entity. BCDA is
authorized by law to sell specific government lands that have long been declared by presidential proclamations as
military reservations for use by the different services of the armed forces under the Department of National
Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is general and national. BCDA holds
government lands that have been granted to end-user government entities the military services of the armed forces.
In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as
the government agency primarily responsible for integrating, directing, and coordinating all reclamation projects for
and on behalf of the National Government.

In Laurel v. Garcia,[17] cited in the Decision, the Court ruled that land devoted to public use by the Department of
Foreign Affairs, when no longer needed for public use, may be declared patrimonial property for sale to private
parties provided there is a law authorizing such act. Well-settled is the doctrine that public land granted to an end-
user government agency for a specific public use may subsequently be withdrawn by Congress from public use and
declared patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that declares
specific military reservations no longer needed for defense or military purposes and reclassifies such lands as
patrimonial property for sale to private parties.

Government owned lands, as long they are patrimonial property, can be sold to private parties, whether Filipino
citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No.
1120 are patrimonial property[18] which even private corporations can acquire by purchase. Likewise, reclaimed
alienable lands of the public domain if sold or transferred to a public or municipal corporation for a monetary
consideration become patrimonial property in the hands of the public or municipal corporation. Once converted to
patrimonial property, the land may be sold by the public or municipal corporation to private parties, whether Filipino
citizens or qualified private corporations.

We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR with
respect to reclaimed foreshore lands, thus:

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a
gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the
public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several
hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one
transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution
which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now
numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can
acquire x x x any and all kinds of lands. This will open the floodgates to corporations and even individuals acquiring
hundreds, if not thousands, of hectares of alienable lands of the public domain under the guise that in the hands of
PEA these lands are private lands. This will result in corporations amassing huge landholdings never before seen in
this country - creating the very evil that the constitutional ban was designed to prevent. This will completely reverse
the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations
to acquire not more than 1,024 hectares of public lands. The 1973 Constitution prohibited private corporations from
acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition.

Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged areas is
enormous and it would be difficult for PEA to accomplish such project without the participation of private
corporations.[19] The Decision does not bar private corporations from participating in reclamation projects and
being paid for their services in reclaiming lands. What the Decision prohibits, following the explicit constitutional
mandate, is for private corporations to acquire reclaimed lands of the public domain. There is no prohibition on the
directors, officers and stockholders of private corporations, if they are Filipino citizens, from acquiring at public
auction reclaimed alienable lands of the public domain. They can acquire not more than 12 hectares per individual,
and the land thus acquired becomes private land.

Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper proceedings,
on a quantum meruit basis, whatever Amari may have incurred in implementing the Amended JVA prior to its
declaration of nullity.

WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED with
FINALITY. The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral Argument
are likewise DENIED.

SO ORDERED.

[G.R. No. 152115. January 26, 2005]

NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.

[G.R. No. 155055. January 26, 2005]

LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.

DECISION

CORONA, J.:
Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first
petition, docketed as G.R. No. 152115, filed by Nimfa Usero, assails the September 19, 2001 decision[1] of the Court
of Appeals in CA-GR SP No. 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela,
assails the January 11, 2002 decision[2] of the Court of Appeals in CA-GR SP NO. 64181.

The undisputed facts follow.

Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2, Block 5, Golden Acres
Subdivision, Barrio Almanza, Las Pias City.

Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18 Anahaw St., Pilar Village,
Las Pias City, behind the lots of petitioners Samela and Usero.

Situated between the lots of the parties is a low-level strip of land, with a stagnant body of water filled with floating
water lilies; abutting and perpendicular to the lot of petitioner Samela, the lot of the Polinars and the low-level strip
of land is the perimeter wall of Pilar Village Subdivision.

Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and the strong current
passing through it causes considerable damage to the house of respondent Polinars. Frustrated by their
predicament, private respondent spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level
strip of land about three meters from their house and rip-rapped the soil on that portion of the strip of land.

Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that the spouses Apolinar
stop their construction but the spouses paid no heed, believing the strip to be part of a creek. Nevertheless, for the
sake of peace, the Polinars offered to pay for the land being claimed by petitioners Samela and Usero. However, the
parties failed to settle their differences.

On November 9, 1998, petitioners filed separate complaints for forcible entry against the Polinars at the
Metropolitan Trial Court of Las Pias City. The case filed by petitioner Samela was docketed as Civil Case No. 5242,
while that of petitioner Usero was docketed as Civil Case No. 5243.

In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer Certificate of Title, plan of
consolidation, subdivision survey, the tax declaration in her name, and affidavits of petitioner Usero and a certain
Justino Gamela whose property was located beside the perimeter wall of Pilar Village.

The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay certification as to the
existence of the creek; a certification from the district engineer that the western portion of Pilar Village is bound by a
tributary of Talon Creek throughout its entire length; boundary and index map of Pilar Village showing that the
village is surrounded by a creek and that the Polinar property is situated at the edge of said creek; and pictures of
the subject strip of land filled with water lilies.

On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:

WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at their expense
the improvements made on the subject lot; ordering the defendants to pay the plaintiff P1,000.00 a month as
reasonable compensation for the use of the portion encroached from the filing of the complaint until the same is
finally vacated; and to pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.[3]

In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order on February 29, 2000,
directing petitioner Usero and the Polinar spouses to commission a professional geodetic engineer to conduct a
relocation survey and to submit the report to the trial court.

On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation survey of Useros property
covered by TCT No. T- 29545. The result of the said relocation survey, as stated in his affidavit, was as follows:

1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT No. T-29545 registered in the
name of Nimfa O. Usero;

2. That according to my survey, I found out that there is no existing creek on the boundary of the said lot;

3. That based on the relocation plan surveyed by the undersigned, attached herewith, appearing is the
encroachment on the above-mentioned lot by Spouses Herminigildo and Cecilia Polinar with an area of FORTY THREE
(43) SQUARE METERS;

4. That this affidavit was made in compliance with Court Order dated February 23, 2000 of Metropolitan Trial Court,
Las Pias City, Branch LXXIX.[4]

On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them:

a) To vacate and remove at their expense the improvement made on the subject lot;
b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion encroached from the time of
the filing of the complaint until the same is finally vacated;

c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.

SO ORDERED.[5]

The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional Trial Court of Las Pias,
Branch 253 which heard the appeals separately.

On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the decision of the trial court
and ordered the dismissal of the complaint. It confirmed the existence of the creek between the northwestern
portion of the lot of petitioner Samela and the southwestern portion of the lot of the spouses Polinar:

Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee cannot therefore
lay claim of lawful ownership of that portion because the same forms part of public dominion. Consequently, she
cannot legally stop the defendants-appellants from rip-rapping the bank of the creek to protect the latters property
from soil erosion thereby avoiding danger to their lives and damage to property.

Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-appellants are not
duty bound to pay the former compensation for the use of the same. As a result, they may maintain the said
improvements introduced thereon subject to existing laws, rules and regulations and/or ordinances appurtenant
thereto.

WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial Court, Las Pias is
REVERSED. Accordingly, the instant complaint is DISMISSED.

SO ORDERED.[6]

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding of the Municipal Trial
Court:

From the foregoing, defendants-appellants may maintain the improvements introduced on the subject portion of the
lot subject to existing laws, rules and regulations and/or ordinances pertaining thereto. Consequently, no
compensation may be awarded in favor of the plaintiff-appellee.
WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the Las Pias City
Metropolitan Trial Court is REVERSED. Accordingly, the instant complaint is DISMISSED.

From the adverse decisions of the Regional Trial Court, petitioners filed their respective petitions for review on
certiorari to the Court of Appeals. Petitioner Samelas case was docketed as CA-G.R. SP 64181 while that of petitioner
Usero was docketed as CA-G.R. SP 64718.

Both petitions failed in the CA. Thus the instant consolidated petitions.

The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly encroached upon by the
spouses Polinar, is the private property of petitioners or part of the creek and therefore part of the public domain.
Clearly this an issue which calls for a review of facts already determined by the Court of Appeals.

The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the
evidence on record or the assailed judgment is based on a misapprehension of facts.[7] This is obviously not the case
here.

A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient evidence. That the
subject strip of land is a creek is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of
land; (2) a certification from the Second Manila Engineering District, NCR-DPWH, that the western portion of Pilar
Village where the subject strip of land is located is bounded by a tributary of Talon Creek and (3) photographs
showing the abundance of water lilies in the subject strip of land. The Court of Appeals was correct: the fact that
water lilies thrive in that strip of land can only mean that there is a permanent stream of water or creek there.

In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of
their respective lots to prove that there is no creek between their properties and that of the Polinars. However, an
examination of said TCTs reveals that the descriptions thereon are incomplete. In petitioner Samelas TCT No. T-
30088, there is no boundary description relative to the northwest portion of the property pertaining to the site of
the creek. Likewise in TCT No. T-22329-A of the spouses Polinar, the southeast portion which pertains to the site of
the creek has no described boundary. Moreover the tax declaration presented by petitioner is devoid of any entry on
the west boundary vis-a-vis the location of the creek. All the pieces of evidence taken together, we can only
conclude that the adjoining portion of these boundaries is in fact a creek and belongs to no one but the state.

Property is either of public dominion or of private ownership.[8] Concomitantly, Article 420 of the Civil Code
provides:

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

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

The phrase others of similar character includes a creek which is a recess or an arm of a river. It is property belonging
to the public domain which is not susceptible to private ownership.[9] Being public water, a creek cannot be
registered under the Torrens System in the name of any individual[10].

Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their
property.

WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R.
SP 64181 and CA-G.R. SP 64718 are affirmed in toto.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.

G.R. No. 97764 August 10, 1992

LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic Command, petitioner,

vs.

HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of Makati, Metro Manila,
MUNICIPALITY OF PARAÑAQUE, METRO MANILA, PALANYAG KILUSANG BAYAN FOR SERVICE, respondents.

Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.

Manuel de Guia for Municipality of Parañaque.

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the decision of the
Regional Trial Court of Makati, Branch 62, which granted the writ of preliminary injunction applied for by
respondents Municipality of Parañaque and Palanyag Kilusang Bayan for Service (Palanyag for brevity) against
petitioner herein.
The antecedent facts are as follows:

On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which authorized the
closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets located at Baclaran, Parañaque,
Metro Manila and the establishment of a flea market thereon. The said ordinance was approved by the municipal
council pursuant to MMC Ordinance No. 2, Series of 1979, authorizing and regulating the use of certain city and/or
municipal streets, roads and open spaces within Metropolitan Manila as sites for flea market and/or vending areas,
under certain terms and conditions.

On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the municipal council of
respondent municipality subject to the following conditions:

1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the residents do not
oppose the establishment of the flea market/vending areas thereon;

2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly, and that the
2 meters on both sides of the road shall be used by pedestrians;

3. That the time during which the vending area is to be used shall be clearly designated;

4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed areas are
developed and donated by the Public Estate Authority.

On June 20, 1990, the municipal council of Parañaque issued a resolution authorizing Parañaque Mayor Walfrido N.
Ferrer to enter into contract with any service cooperative for the establishment, operation, maintenance and
management of flea markets and/or vending areas.

On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative, entered into an
agreement whereby the latter shall operate, maintain and manage the flea market in the aforementioned streets
with the obligation to remit dues to the treasury of the municipal government of Parañaque. Consequently, market
stalls were put up by respondent Palanyag on the said streets.

On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan Traffic Command,
ordered the destruction and confiscation of stalls along G.G. Cruz and J. Gabriel St. in Baclaran. These stalls were
later returned to respondent Palanyag.

On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag giving the latter ten
(10) days to discontinue the flea market; otherwise, the market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint petition for
prohibition and mandamus with damages and prayer for preliminary injunction, to which the petitioner filed his
memorandum/opposition to the issuance of the writ of preliminary injunction.

On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from enforcing his
letter-order of October 16, 1990 pending the hearing on the motion for writ of preliminary injunction.

On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No. 86 s. 1990 of the
Municipality' of Parañaque and enjoining petitioner Brig. Gen. Macasiano from enforcing his letter-order against
respondent Palanyag.

Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging grave abuse of
discretion tantamount to lack or excess of jurisdiction on the part of the trial judge in issuing the assailed order.

The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by the municipal council
of Parañaque authorizing the lease and use of public streets or thoroughfares as sites for flea markets is valid.

The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public service and are
therefore public properties; that as such, they cannot be subject to private appropriation or private contract by any
person, even by the respondent Municipality of Parañaque. Petitioner submits that a property already dedicated to
public use cannot be used for another public purpose and that absent a clear showing that the Municipality of
Parañaque has been granted by the legislature specific authority to convert a property already in public use to
another public use, respondent municipality is, therefore, bereft of any authority to close municipal roads for the
establishment of a flea market. Petitioner also submits that assuming that the respondent municipality is authorized
to close streets, it failed to comply with the conditions set forth by the Metropolitan Manila Authority for the
approval of the ordinance providing for the establishment of flea markets on public streets. Lastly, petitioner
contends that by allowing the municipal streets to be used by market vendors the municipal council of respondent
municipality violated its duty under the Local Government Code to promote the general welfare of the residents of
the municipality.

In upholding the legality of the disputed ordinance, the trial court ruled:

. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of power given to local government
units, the Municipality of Parañaque as such, is empowered under that law to close its roads, streets or alley subject
to limitations stated therein (i.e., that it is in accordance with existing laws and the provisions of this code).

xxx xxx xxx

The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its power is in fact an
encroachment of power legally vested to the municipality, precisely because when the municipality enacted the
ordinance in question — the authority of the respondent as Police Superintendent ceases to be operative on the
ground that the streets covered by the ordinance ceases to be a public thoroughfare. (pp. 33-34, Rollo)

We find the petition meritorious. In resolving the question of whether the disputed municipal ordinance authorizing
the flea market on the public streets is valid, it is necessary to examine the laws in force during the time the said
ordinance was enacted, namely, Batas Pambansa Blg. 337, otherwise known as Local Government Code, in
connection with established principles embodied in the Civil Code an property and settled jurisprudence on the
matter.

The property of provinces, cities and municipalities is divided into property for public use and patrimonial property
(Art. 423, Civil Code). As to what consists of property for public use, Article 424 of Civil Code states:

Art. 424. Property for public use, in the provinces, cities and municipalities, consists of the provincial roads,
city streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said
provinces, cities or municipalities.

All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to
the provisions of special laws.

Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local roads used
for public service and are therefore considered public properties of respondent municipality. Properties of the local
government which are devoted to public service are deemed public and are under the absolute control of Congress
(Province of Zamboanga del Norte v. City of Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334). Hence, local
governments have no authority whatsoever to control or regulate the use of public properties unless specific
authority is vested upon them by Congress. One such example of this authority given by Congress to the local
governments is the power to close roads as provided in Section 10, Chapter II of the Local Government Code, which
states:

Sec. 10. Closure of roads. — A local government unit may likewise, through its head acting pursuant to a resolution
of its sangguniang and in accordance with existing law and the provisions of this Code, close any barangay,
municipal, city or provincial road, street, alley, park or square. No such way or place or any part of thereof shall be
close without indemnifying any person prejudiced thereby. A property thus withdrawn from public use may be used
or conveyed for any purpose for which other real property belonging to the local unit concerned might be lawfully
used or conveyed. (Emphasis ours).

However, the aforestated legal provision which gives authority to local government units to close roads and other
similar public places should be read and interpreted in accordance with basic principles already established by law.
These basic principles have the effect of limiting such authority of the province, city or municipality to close a public
street or thoroughfare. Article 424 of the Civil Code lays down the basic principle that properties of public dominion
devoted to public use and made available to the public in general are outside the commerce of man and cannot be
disposed of or leased by the local government unit to private persons. Aside from the requirement of due process
which should be complied with before closing a road, street or park, the closure should be for the sole purpose of
withdrawing the road or other public property from public use when circumstances show that such property is no
longer intended or necessary for public use or public service. When it is already withdrawn from public use, the
property then becomes patrimonial property of the local government unit concerned (Article 422, Civil Code; Cebu
Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29, 1975, 66 SCRA 481). It is only then that the
respondent municipality can "use or convey them for any purpose for which other real property belonging to the
local unit concerned might be lawfully used or conveyed" in accordance with the last sentence of Section 10, Chapter
II of Blg. 337, known as Local Government Code. In one case, the City Council of Cebu, through a resolution, declared
the terminal road of M. Borces Street, Mabolo, Cebu City as an abandoned road, the same not being included in the
City Development Plan. Thereafter, the City Council passes another resolution authorizing the sale of the said
abandoned road through public bidding. We held therein that the City of Cebu is empowered to close a city street
and to vacate or withdraw the same from public use. Such withdrawn portion becomes patrimonial property which
can be the object of an ordinary contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, et al., G.R. No.

L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are available to the public in
general and ordinarily used for vehicular traffic are still considered public property devoted to public use. In such
case, the local government has no power to use it for another purpose or to dispose of or lease it to private persons.
This limitation on the authority of the local government over public properties has been discussed and settled by this
Court en banc in "Francisco V. Dacanay, petitioner v. Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654,
May 6, 1992." This Court ruled:

There is no doubt that the disputed areas from which the private respondents' market stalls are sought to be evicted
are public streets, as found by the trial court in Civil Case No. C-12921. A public street is property for public use
hence outside the commerce of man (Arts. 420, 424, Civil Code). Being outside the commerce of man, it may not be
the subject of lease or others contract (Villanueva, et al. v. Castañeda and Macalino, 15 SCRA 142 citing the
Municipality of Cavite v. Rojas, 30 SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869; And Muyot v.
De la Fuente, 48 O.G. 4860).

As the stallholders pay fees to the City Government for the right to occupy portions of the public street, the City
Government, contrary to law, has been leasing portions of the streets to them. Such leases or licenses are null and
void for being contrary to law. The right of the public to use the city streets may not be bargained away through
contract. The interests of a few should not prevail over the good of the greater number in the community whose
health, peace, safety, good order and general welfare, the respondent city officials are under legal obligation to
protect.

The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del '96 Street as a vending area for
stallholders who were granted licenses by the city government contravenes the general law that reserves city streets
and roads for public use. Mayor Robles' Executive Order may not infringe upon the vested right of the public to use
city streets for the purpose they were intended to serve: i.e., as arteries of travel for vehicles and pedestrians.

Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed ordinance,
the same cannot be validly implemented because it cannot be considered approved by the Metropolitan Manila
Authority due to non-compliance by respondent municipality of the conditions imposed by the former for the
approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the residents do(es)
not oppose the establishment of the flea market/vending areas thereon;

2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly, and that the
2 meters on both sides of the road shall be used by pedestrians;

3. That the time during which the vending area is to be used shall be clearly designated;

4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed areas are
developed and donated by the Public Estate Authority. (p. 38, Rollo)

Respondent municipality has not shown any iota of proof that it has complied with the foregoing conditions
precedent to the approval of the ordinance. The allegations of respondent municipality that the closed streets were
not used for vehicular traffic and that the majority of the residents do not oppose the establishment of a flea market
on said streets are unsupported by any evidence that will show that this first condition has been met. Likewise, the
designation by respondents of a time schedule during which the flea market shall operate is absent.

Further, it is of public notice that the streets along Baclaran area are congested with people, houses and traffic
brought about by the proliferation of vendors occupying the streets. To license and allow the establishment of a flea
market along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not help in
solving the problem of congestion. We take note of the other observations of the Solicitor General when he said:

. . . There have been many instances of emergencies and fires where ambulances and fire engines, instead of using
the roads for a more direct access to the fire area, have to maneuver and look for other streets which are not
occupied by stalls and vendors thereby losing valuable time which could, otherwise, have been spent in saving
properties and lives.

Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the people rushing their
patients to the hospital cannot pass through G.G. Cruz because of the stalls and the vendors. One can only imagine
the tragedy of losing a life just because of a few seconds delay brought about by the inaccessibility of the streets
leading to the hospital.

The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal transportation flow is
disrupted and school children have to get off at a distance still far from their schools and walk, rain or shine.

Indeed one can only imagine the garbage and litter left by vendors on the streets at the end of the day. Needless to
say, these cause further pollution, sickness and deterioration of health of the residents therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners. Instead, respondents
want this Court to focus its attention solely on the argument that the use of public spaces for the establishment of a
flea market is well within the powers granted by law to a local government which should not be interfered with by
the courts.

Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down by toe
Constitution and the laws such as our Civil Code. Moreover, the exercise of such powers should be subservient to
paramount considerations of health and well-being of the members of the community. Every local government unit
has the sworn obligation to enact measures that will enhance the public health, safety and convenience, maintain
peace and order, and promote the general prosperity of the inhabitants of the local units. Based on this objective,
the local government should refrain from acting towards that which might prejudice or adversely affect the general
welfare.

As what we have said in the Dacanay case, the general public have a legal right to demand the demolition of the
illegally constructed stalls in public roads and streets and the officials of respondent municipality have the
corresponding duty arising from public office to clear the city streets and restore them to their specific public
purpose.

The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for lack of basis and
authority in laws applicable during its time. However, at this point, We find it worthy to note that Batas Pambansa
Blg. 337, known as Local Government Lode, has already been repealed by Republic Act No. 7160 known as Local
Government Code of 1991 which took effect on January 1, 1992. Section 5(d) of the new Code provides that rights
and obligations existing on the date of effectivity of the new Code and arising out of contracts or any other source of
prestation involving a local government unit shall be governed by the original terms and conditions of the said
contracts or the law in force at the time such rights were vested.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial Court dated December 17,
1990 which granted the writ of preliminary injunction enjoining petitioner as PNP Superintendent, Metropolitan
Traffic Command from enforcing the demolition of market stalls along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia
Extension and Opena streets is hereby RESERVED and SET ASIDE.

SO ORDERED.

G.R. No. L-28379 March 27, 1929

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-appellant,

vs.

CONSORCIA CABANGIS, ET AL., claimants-appellees.

Attorney-General Jaranilla for appellant.

Abad Santos, Camus & Delgado for appellees.

VILLA-REAL, J.:

The Government of the Philippine Islands appeals to this court from the judgment of the Court of First Instance of
Manila in cadastral proceeding No. 373 of the Court of First Instance of Manila, G. L. R. O. Cadastral Record No. 373,
adjudicating the title and decreeing the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of
the City of Manila in favor of Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts, and
dismissing the claims presented by the Government of the Philippine Islands and the City of Manila.

In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its
judgment, to wit:

1. The lower court erred in not holding that the lots in question are of the public domain, the same having been
gained from the sea (Manila Bay) by accession, by fillings made by the Bureau of Public Works and by the
construction of the break-water (built by the Bureau of Navigation) near the mouth of Vitas Estero.

2. The lower court erred in holding that the lots in question formed part of the big parcel of land belonging to the
spouses Maximo Cabangis and Tita Andres, and in holding that these spouses and their successors in interest have
been in continuous, public, peaceful and uninterrupted possession of said lots up to the time this case came up.

3. The lower court erred in holding that said lots existed before, but that due to the current of the Pasig River and to
the action of the big waves in Manila Bay during the south-west monsoons, the same disappeared.

4. The lower court erred in adjudicating the registration of the lands in question in the name of the appellees, and in
denying the appellant's motion for a new trial.

A preponderance of the evidence in the record which may properly be taken into consideration in deciding the case,
proves the following facts:

Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R. O. Record No. 373, were
formerly a part of a large parcel of land belonging to the predecessor of the herein claimants and appellees. From
the year 1896 said land began to wear away, due to the action of the waves of Manila Bay, until the year 1901 when
the said lots became completely submerged in water in ordinary tides, and remained in such a state until 1912 when
the Government undertook the dredging of Vitas Estuary in order to facilitate navigation, depositing all the sand and
silt taken from the bed of the estuary on the low lands which were completely covered with water, surrounding that
belonging to the Philippine Manufacturing Company, thereby slowly and gradually forming the lots, the subject
matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation, and it was only in the
year 1926 that Dr. Pedro Gil, in behalf of the claimants and appellees, declared lot No. 40 for such purpose.

In view of the facts just stated, as proved by a preponderance of the evidence, the question arises: Who owns lots
36, 39 and 40 in question?

The claimants-appellees contend that inasmuch as the said lots once formed a part of a large parcel of land
belonging to their predecessors, whom they succeeded, and their immediate predecessor in interest, Tomas
Cabangis, having taken possession thereof as soon as they were reclaimed, giving his permission to some fishermen
to dry their fishing nets and deposit their bancas thereon, said lots belong to them.

Article 339, subsection 1, of the Civil Code, reads:

Article 339. Property of public ownership is —

1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
riverbanks, shorts, roadsteads, and that of a similar character.

xxx xxx xxx

Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:

ARTICLE 1. The following are part of the national domain open to public use:

xxx xxx xxx

3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its
interior or terrestrial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable,
the shore begins on the land side at the line reached by the sea during ordinary storms or tempests.

In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of the Civil Code just
quoted, this court said:

We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb
and flow of the tide, private property may not become 'property of public ownership,' as defined in article 339 of the
code, where it appears that the owner has to all intents and purposes abandoned it and permitted it to be totally
destroyed, so as to become a part of the 'playa' (shore of the seas), 'rada' (roadstead), or the like. . . .

In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:

With relative frequency the opposite phenomenon occurs; that is, the sea advances and private properties are
permanently invaded by the waves, and in this case they become part of the shore or beach. They then pass to the
public domain, but the owner thus dispossessed does not retain any right to the natural products resulting from
their new nature; it is a de facto case of eminent domain, and not subject to indemnity.

Now then , when said land was reclaimed, did the claimants-appellees or their predecessors recover it as their
original property?

As we have seen, the land belonging to the predecessors of the herein claimants-appellees began to wear way in
1896, owing to the gradual erosion caused by the ebb and flow of the tide, until the year 1901, when the waters of
Manila Bay completely submerged a portion of it, included within lots 36, 39 and 40 here in question, remaining thus
under water until reclaimed as a result of certain work done by the Government in 1912. According to the above-
cited authorities said portion of land, that is, lots 36, 39 and 40, which was private property, became a part of the
public domain. The predecessors of the herein claimants-appellees could have protected their land by building a
retaining wall, with the consent of competent authority, in 1896 when the waters of the sea began to wear it away,
in accordance with the provisions of Article 29 of the aforecited Law of Waters of August 3, 1866, and their failure to
do so until 1901, when a portion of the same became completely covered by said waters, remaining thus submerged
until 1912, constitutes abandonment.

Now then: The lots under discussion having been reclaimed from the seas as a result of certain work done by the
Government, to whom do they belong?

The answer to this question is found in article 5 of the aforementioned Law of Waters, which is as follows:

ART. 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos
or private persons, with proper permission, shall become the property of the party constructing such works, unless
otherwise provided by the terms of the grant of authority.

The fact that from 1912 some fishermen had been drying their fishing nets and depositing their bancas on lots 36, 39
and 40, by permission of Tomas Cabangis, does not confer on the latter or his successors the ownership of said lots,
because, as they were converted into public land, no private person could acquire title thereto except in the form
and manner established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by the claimants-appellees, this
court, admitting the findings and holdings of the lower court, said the following:

If we heed the parol evidence, we find that the seashore was formerly about one hundred brazas distant from the
land in question; that, in the course of time, and by the removal of a considerable quantity of sand from the shore at
the back of the land for the use of the street car company in filling in Calle Cervantes, the sea water in ordinary tides
now covers part of the land described in the petition.

The fact that certain land, not the bed of a river or of the sea, is covered by sea water during the period of ordinary
high tide, is not a reason established by any law to cause the loss thereof, especially when, as in the present case, it
becomes covered by water owing to circumstances entirely independent of the will of the owner.

In the case of Director of Lands vs. Aguilar (G.R. No. 22034),1 also cited by the claimants-appellees, wherein the
Government adduced no evidence in support of its contention, the lower court said in part:

The contention of the claimants Cabangis is to the effect that said lots are a part of the adjoining land adjudicated to
their deceased father, Don Tomas Cabangis, which, for over fifty years had belonged to their deceased grandmother,
Tita Andres, and that, due to certain improvements made in Manila Bay, the waters of the sea covered a large part
of the lots herein claimed.

The Government of the Philippine Islands also claims the ownership of said lots, because, at ordinary high tide, they
are covered by the sea.

Upon petition of the parties, the lower court made an ocular inspection of said lots on September 12, 1923, and on
said inspection found some light material houses built thereon, and that on that occasion the waters of the sea did
not reach the aforesaid lots.

From the evidence adduced at the trial of this cause, it may be inferred that Tita Andres, during her lifetime was the
owner of a rather large parcel of land which was adjudicated by a decree to her son Tomas Cabangis; the lots now in
question are contiguous to that land and are covered by the waters of the sea at extraordinary high tide; some 50
years before the sea did not reach said strip of land, and on it were constructed, for the most part, light material
houses, occupied by the tenants of Tita Andres, to whom they paid rent. Upon her death, her son Tomas Cabangis
succeeded to the possession, and his children succeeded him, they being the present claimants, Consuelo, Jesus,
Tomas, and Consorcia Cabangis.

The Government of the Philippine Islands did not adduce any evidence in support of its contention, with the
exception of registry record No. 8147, to show that the lots here in question were not excluded from the application
presented in said proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited above, the rise of the waters
of the sea that covered the lands there in dispute, was due not to the action of the tide but to the fact that a large
quantity of sand was taken from the sea at the side of said land in order to fill in Cervantes Street, and this court
properly held that because of this act, entirely independent of the will of the owner of said land, the latter could not
lose the ownership thereof, and the mere fact that the waters of the sea covered it as a result of said act, is not
sufficient to convert it into public land, especially, as the land was high and appropriate for building purposes.

In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the Insular Government did not
present any evidence in support of its contention, thus leaving uncontradicted the evidence adduced by the
claimants Aguilar et al., as to the ownership, possession and occupation of said lots.

In the instant case the evidence shows that from 1896, the waves of Manila Bay had been gradually and constantly
washing away the sand that formed the lots here in question, until 1901, when the sea water completely covered
them, and thus they remained until the year 1912. In the latter year they were reclaimed from the sea by filling in
with sand and silt extracted from the bed of Vitas Estuary when the Government dredged said estuary in order to
facilitate navigation. Neither the herein claimants-appellees nor their predecessors did anything to prevent their
destruction.

In conclusion, then, we hold that the lots in question having disappeared on account of the gradual erosion due to
the ebb and flow of the tide, and having remained in such a state until they were reclaimed from the sea by the
filling in done by the Government, they are public land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs.
Government of the Philippine Islands, 28 Phil., 505).

By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of cadastral proceeding No.
373 of the City of Manila are held to be public land belonging to the Government of the United States under the
administration and control of the Government of the Philippine Islands. So ordered.

Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.

G.R. No. L40474 August 29, 1975

CEBU OXYGEN & ACETYLENE CO., INC., petitioner,

vs.

HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial District, and JOSE L. ESPELETA, Assistant
Provincial Fiscal, Province of Cebu, representing the Solicitor General's Office and the Bureau of Lands, respondents.

Jose Antonio R Conde for petitioner.

Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General Octavio R. Ramirez and Trial
Attorney David R. Hilario for respondents. .
CONCEPCION, Jr., J.:

This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioner's application
for registration of title over a parcel of land situated in the City of Cebu.

The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu City. On September
23, 1968, the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the
terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included in the
City Development Plan.1 Subsequently, on December 19, 1968, the City Council of Cebu passed Resolution No. 2755,
authorizing the Acting City Mayor to sell the land through a public bidding.2 Pursuant thereto, the lot was awarded
to the herein petitioner being the highest bidder and on March 3, 1969, the City of Cebu, through the Acting City
Mayor, executed a deed of absolute sale to the herein petitioner for a total consideration of P10,800.00.3 By virtue
of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of First instance of Cebu to
have its title to the land registered.4

On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground that
the property sought to be registered being a public road intended for public use is considered part of the public
domain and therefore outside the commerce of man. Consequently, it cannot be subject to registration by any
private individual.5

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioner's application
for registration of title.6 Hence, the instant petition for review.

For the resolution of this case, the petitioner poses the following questions:

(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph 34, give the City of
Cebu the valid right to declare a road as abandoned? and

(2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which
may be the object of a common contract?

(1) The pertinent portions of the Revised Charter of Cebu City provides:

Section 31. Legislative Powers. Any provision of law and executive order to the contrary notwithstanding, the
City Council shall have the following legislative powers:
xxx xxx xxx

(34) ...; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn from
public servitude may be used or conveyed for any purpose for which other real property belonging to the City may
be lawfully used or conveyed.

From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In the
case of Favis vs. City of Baguio,7 where the power of the city Council of Baguio City to close city streets and to vacate
or withdraw the same from public use was similarly assailed, this court said:

5. So it is, that appellant may not challenge the city council's act of withdrawing a strip of Lapu-Lapu Street at
its dead end from public use and converting the remainder thereof into an alley. These are acts well within the ambit
of the power to close a city street. The city council, it would seem to us, is the authority competent to determine
whether or not a certain property is still necessary for public use.

Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or
interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust will
be presumed. So the fact that some private interests may be served incidentally will not invalidate the vacation
ordinance.

(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn
from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an
ordinary contract.

Article 422 of the Civil Code expressly provides that "Property of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial property of the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that:
"Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real
property belonging to the City may be lawfully used or conveyed."

Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is
valid. Hence, the petitioner has a registerable title over the lot in question.

WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC
Rec. No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the
petitioner's application for registration of title.
SO ORDERED.

Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur.

G.R. No. L-24950 March 25, 1926

VIUDA DE TAN TOCO, plaintiff-appellant,

vs.

THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.

Arroyo & Evangelista for appellant.

Provincial Fiscal Borromeo Veloso for appelle.

VILLAMOR, J.:

It appears from the record that the widow of Tan Toco had sued the municipal council of Iloilo for the amount of
P42,966.40, being the purchase price of two strips of land, one on Calle J. M. Basa consisting of 592 square meters,
and the other on Calle Aldiguer consisting of 59 square meters, which the municipality of Iloilo had appropriated for
widening said street. The Court of First Instance of Iloilo sentenced the said municipality to pay the plaintiff the
amount so claimed, plus the interest, and the said judgment was on appeal affirmed by this court.1

On account of lack of funds the municipality of Iloilo was unable to pay the said judgment, wherefore plaintiff had a
writ of execution issue against the property of the said municipality, by virtue of which the sheriff attached two auto
trucks used for street sprinkling, one police patrol automobile, the police stations on Mabini street, and in Molo and
Mandurriao and the concrete structures, with the corresponding lots, used as markets by Iloilo, Molo, and
Mandurriao.

After notice of the sale of said property had been made, and a few days before the sale, the provincial fiscal of Iloilo
filed a motion which the Court of First Instance praying that the attachment on the said property be dissolved, that
the said attachment be declared null and void as being illegal and violative of the rights of the defendant
municipality.

Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12, 1925, declared the attachment
levied upon the aforementioned property of the defendant municipality null and void, thereby dissolving the said
attachment.

From this order the plaintiff has appealed by bill of exceptions. The fundamental question raised by appellant in her
four assignments of error is whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:

Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal corporations,
to be exercised by and through their respective municipal government in conformity with law.

It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be contracted
with, to acquire and hold real and personal property for municipal purposes, and generally to exercise the powers
hereinafter specified or otherwise conferred upon them by law.

For the purposes of the matter here in question, the Administrative Code does not specify the kind of property that a
municipality may acquire. However, article 343 of the Civil Code divides the property of provinces and towns
(municipalities) into property for public use and patrimonial property. According to article 344 of the same Code,
provincial roads and foot-path, squares, streets, fountains and public waters, drives and public improvements of
general benefit built at the expense of the said towns or provinces, are property for public use.

All other property possessed by the said towns and provinces is patrimonial and shall be subject to the provisions of
the Civil Code except as provided by special laws.

Commenting upon article 344, Mr. Manresa says that "In accordance with administrative legislation" (Spanish) we
must distinguish, as to the patrimonial property of the towns, "between that a common benefit and that which is
private property of the town. The first differs from property for public use in that generally its enjoyment is less, as it
is limited to neighbors or to a group or class thereof; and, furthermore, such use, more or less general, is not intrinsic
with this kind of property, for by its very nature it may be enjoyed as though it were private property. The third
group, that is, private property, is used in the name of the town or province by the entities representing it and, like
and private property, giving a source of revenue."

Such distinction, however, is of little practical importance in this jurisdiction in view of the different principles
underlying the functions of a municipality under the American rule. Notwithstanding this, we believe that the
principle governing property of the public domain of the State is applicable to property for public use of the
municipalities as said municipal is similar in character. The principle is that the property for public use of the State is
not within the commerce of man and, consequently, is inalienable and not subject to prescription. Likewise, property
for public of the municipality is not within the commerce of man so long as it is used by the public and,
consequently, said property is also inalienable.

The American Law is more explicit about this matter as expounded by Mcquilin in Municipal Corporations, volume 3,
paragraph 1160, where he says that:

States statutes often provide the court houses, jails and other buildings owned by municipalities and the lots on
which they stand shall be exempt from attachment and execution. But independent of express statutory exemption,
as a general proposition, property, real and personal, held by municipal corporations, in trust for the benefit of their
inhabitants, and used for public purposes, is exempt.

For example, public buildings, school houses, streets, squares, parks, wharves, engines and engine houses, and the
like, are not subject to execution. So city waterworks, and a stock of liquors carried in a town dispensary, are
exempt. The reason for the exemption is obvious. Municipal corporations are created for public purposes and for the
good of the citizens in their aggregate or public capacity. That they may properly discharge such public functions
corporate property and revenues are essential, and to deny them these means the very purpose of their creation
would be materially impeded, and in some instances practically destroy it. Respecting this subject the Supreme Court
of Louisiana remarked: "On the first view of this question there is something very repugnant to the moral sense in
the idea that a municipal corporation should contract debts, and that, having no resources but the taxes which are
due to it, these should not be subjected by legal process to the satisfaction of its creditors. This consideration,
deduced from the principles of moral equity has only given way to the more enlarged contemplation of the great
and paramount interests of public order and the principles of government."

It is generally held that property owned by a municipality, where not used for a public purpose but for quasi private
purposes, is subject to execution on a judgment against the municipality, and may be sold. This rule applies to shares
of stock owned by a municipal corporation, and the like. But the mere fact that corporate property held for public
uses is being temporarily used for private purposes does not make it subject execution.

If municipal property exempt from execution is destroyed, the insurance money stands in lieu thereof and is also
exempt.

The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the
municipality, except that in the New England States the individual liability of the inhabitant is generally maintained.

In Corpus Juris, vol 23, page 355, the following is found:

Where property of a municipal or other public corporation is sough to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to be determined
by the usage and purposes for which it is held. The rule is that property held for public uses, such as public buildings,
streets, squares parks, promenades, wharves, landing places fire engines, hose and hose carriages, engine houses,
public markets, hospitals, cemeteries, and generally everything held for governmental purposes, is not subject to
levy and sale under execution against such corporation. The rule also applies to funds in the hands of a public officer.
Likewise it has been held that taxes due to a municipal corporation or country cannot be seized under execution by a
creditor of such corporation. But where a municipal corporation or country owns in its proprietary, as distinguished
from its public or governmental capacity, property not useful or used for a public purpose but for quasi private
purposes, the general rule is that such property may be seized and sold under execution against the corporation,
precisely as similar property of individuals is seized and sold. But property held for public purposes is not subject to
execution merely because it is temporarily used for private purposes, although if the public use is wholly abandoned
it becomes subject to execution. Whether or not property held as public property is necessary for the public use is a
political, rather than a judicial question.
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it was held
that a wharf for unloading sugar and molasses, open to the public, was property for the public use of the City of New
Orleans and was not subject to attachment for the payment of the debts of the said city.

In that case it was proven that the said wharf was a parcel of land adjacent to the Mississippi River where all
shipments of sugar and molasses taken to New Orleans were unloaded.

That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that it might erect warehouses
so that the merchandise upon discharge might not be spoiled by the elements. The said company was given the
privilege of charging certain fees for storing merchandise in the said warehouses and the public in general had the
right to unload sugar and molasses there by paying the required fees, 10 per cent of which was turned over to the
city treasury.

The United States Supreme Court on an appeal held that the wharf was public property, that it never ceased to be
such in order to become private property of the city; wherefore the company could not levy execution upon the
wharf in order to collect the amount of the judgment rendered in favor thereof.

In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the Supreme Court of the United States
that a public wharf on the banks of the Mississippi River was public property and not subject to execution for the
payment of a debt of the City of New Orleans where said wharf was located.

In this case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and which
later enlarged itself by accession, was converted into a wharf by the city for public use, who charged a certain fee for
its use.

It was held that the land was public property as necessary as a public street and was not subject to execution on
account of the debts of the city. It was further held that the fees collected where also exempt from execution
because they were a part of the income of the city.

In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654), the question raised was
whether for the payment of a debt to a third person by the concessionaire of a public market, the said public market
could be attached and sold at public auction. The Supreme Court held that:

Even though a creditor is unquestionably entitled to recover out of his debtor's property, yet when among such
property there is included the special right granted by the Government of usufruct in a building intended for a public
service, and when this privilege is closely related to a service of a public character, such right of the creditor to the
collection of a debt owed him by the debtor who enjoys the said special privilege of usufruct in a public market is not
absolute and may be exercised only through the action of court of justice with respect to the profits or revenue
obtained under the special right of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market cannot be attached like any ordinary right, because
that would be to permit a person who has contracted with the state or with the administrative officials thereof to
conduct and manage a service of a public character, to be substituted, without the knowledge and consent of the
administrative authorities, by one who took no part in the contract, thus giving rise to the possibility of the regular
course of a public service being disturbed by the more or less legal action of a grantee, to the prejudice of the state
and the public interests.

The privilege or franchise granted to a private person to enjoy the usufruct of a public market cannot lawfully be
attached and sold, and a creditor of such person can recover his debt only out of the income or revenue obtained by
the debtor from the enjoyment or usufruct of the said privilege, in the same manner that the rights of such creditors
of a railroad company can be exercised and their credit collected only out of the gross receipts remaining after
deduction has been made therefrom of the operating expenses of the road. (Law of November 12, 1896, extended
to the overseas provinces by the royal order of August 3, 1886.)

For the reasons contained in the authorities above quoted we believe that this court would have reached the same
conclusion if the debtor had been municipality of Guinobatan and the public market had been levied upon by virtue
of the execution.

It is evident that the movable and immovable property of a municipality, necessary for governmental purpose, may
not be attached and sold for the payment of a judgment against the municipality. The supreme reason for this rule is
the character of the public use to which such kind of property is devoted. The necessity for government service
justifies that the property of public of the municipality be exempt from execution just as it is necessary to exempt
certain property of private individuals in accordance with section 452 of the Code of Civil Procedure.

Even the municipal income, according to the above quoted authorities, is exempt from levy and execution. In volume
1, page 467, Municipal Corporations by Dillon we find that:

Municipal corporations are instituted by the supreme authority of a state for the public good. They exercise, by
delegation from the legislature, a portion of the sovereign power. The main object of their creation is to act as
administrative agencies for the state, and to provide for the police and local government of certain designated civil
divisions of its territory. To this end they are invested with certain governmental powers and charged with civil,
political, and municipal duties. To enable them beneficially to exercise these powers and discharge these duties, they
are clothed with the authority to raise revenues, chiefly by taxation, and subordinately by other modes as by
licenses, fines, and penalties. The revenue of the public corporation is the essential means by which it is enabled to
perform its appointed work. Deprived of its regular and adequate supply of revenue, such a corporation is practically
destroyed and the ends of its erection thwarted. Based upon considerations of this character, it is the settled
doctrine of the law that only the public property but also the taxes and public revenues of such corporations cannot
be seized under execution against them, either in the treasury or when in transit to it. Judgments rendered for taxes,
and the proceeds of such judgments in the hands of officers of the law, are not subject to execution unless so
declared by statute. The doctrine of the inviolability of the public revenues by the creditor is maintained, although
the corporation is in debt, and has no means of payment but the taxes which it is authorized to collect.
Another error assigned by counsel for appellant is the holding of the court a quo that the proper remedy for
collecting the judgment in favor of the plaintiff was by way or mandamus.

While this question is not necessarily included in the one which is the subject of this appeal, yet we believe that the
holding of the court, assigned as error by appellant's counsel, is true when, after a judgment is rendered against a
municipality, it has no property subject to execution. This doctrine is maintained by Dillon (Municipal Corporations,
vol. 4, par. 1507, 5th ed.) based upon the decisions of several States of the Union upholding the same principle and
which are cited on page 2679 of the aforesaid work. In this sense this assignment of error, we believe, is groundless.

By virtue of all the foregoing, the judgment appealed from should be and is hereby affirmed with costs against the
appellant. So ordered.

Avanceña, C. J., Street, Malcolm, Ostrand, Johns, Romualdez and Villa-Real., JJ., concur.

G.R. No. L-29788 August 30, 1972

RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in his capacity as Governor of the
Land Authority; and LORENZO GELLA, in his capacity as Register of Deeds of Manila, petitioners-appellants,

vs.

HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila; ANTONIO J.
VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY OF MANILA, respondents-appellees.

Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor-General Antonio A. Torres, Solicitor Raul I. Goco
and Magno B. Pablo & Cipriano A. Tan, Legal Staff, Land Authority for petitioners-appellants.

Gregorio A. Ejercito and Felix C. Chavez for respondents-appellees.

ESGUERRA, J.:p

This is a petition for review of the decision of the Court of First Instance of Manila, Branch XXIII, in Civil Case No.
67946, dated September 23, 1968, the dispositive portion of which is as follows:

WHEREFORE, the Court renders judgment declaring Republic Act No. 4118 unconstitutional and invalid in that it
deprived the City of Manila of its property without due process and payment of just compensation. Respondent
Executive Secretary and Governor of the Land Authority are hereby restrained and enjoined from implementing the
provisions of said law. Respondent Register of Deeds of the City of Manila is ordered to cancel Transfer Certificate of
Title No. 80876 which he had issued in the name of the Land Tenure Administration and reinstate Transfer
Certificate of Title No. 22547 in the name of the City of Manila which he cancelled, if that is feasible, or issue a new
certificate of title for the same parcel of land in the name of the City of Manila.1

The facts necessary for a clear understanding of this case are as follows:

On February 24, 1919, the 4th Branch of the Court of First Instance of Manila, acting as a land registration court,
rendered judgment in Case No. 18, G.L.R.O. Record No. 111, declaring the City of Manila the owner in fee simple of a
parcel of land known as Lot No. 1, Block 557 of the Cadastral Survey of the City of Mani1a, containing an area of
9,689.8 square meters, more or less. Pursuant to said judgment the Register of Deeds of Manila on August 21, 1920,
issued in favor of the City of Manila, Original Certificate of Title No. 4329 covering the aforementioned parcel of
land. On various dates in 1924, the City of Manila sold portions of the aforementioned parcel of land in favor of Pura
Villanueva. As a consequence of the transactions Original Certificate of Title No. 4329 was cancelled and transfer
certificates of title were issued in favor of Pura Villanueva for the portions purchased by her. When the last sale to
Pura Villanueva was effected on August 22, 1924, Transfer Certificate of Title No. 21974 in the name of the City of
Manila was cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 22547 covering the residue thereof
known as Lot 1-B-2-B of Block 557, with an area of 7,490.10 square meters, was issued in the name of the City of
Manila.

On September 21, 1960, the Municipal Board of Manila, presided by then Vice-Mayor Antono J. Villegas, adopted a
resolution requesting His Excellency, the President of the Philippines to consider the feasibility of declaring the City
property bounded by Florida, San Andres, and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and
22547, containing a total area of 7,450 square meters as a patrimonial property of the City of Manila for the purpose
of reselling these lots to the actual occupants thereof.2

The said resolution of the Municipil Board of the City of Manila was officially transmitted to the President of the
Philippines by then Vice-Mayor Antonio J. Villegas on September 21, 1960, with the information that the same
resolution was, on the same date, transmitted to the Senate and House of Representatives of the Congress of the
Philippines.3

During the First Session of the Fifth Congress of the Philippines, House Bill No. 191 was filed in the House of
Representatives by then Congressman Bartolome Cabangbang seeking to declare the property in question as
patrimonial property of the City of Manila, and for other purposes. The explanatory note of the Bill gave the grounds
for its enactment, to wit:

In the particular case of the property subject of this bill, the City of Manila does not seem to have use thereof as a
public communal property. As a matter of fact, a resolution was adopted by the Municipal Board of Manila at its
regular session held on September 21, 1960, to request the feasibility of declaring the city property bounded by
Florida, San Andres and Nebraska Streets as a patrimonial property of the City of Manila for the purpose of reselling
these lots to the actual occupants thereof. Therefore, it will be to the best interest of society that the said property
be used in one way or another. Since this property has been occupied for a long time by the present occupants
thereof and since said occupants have expressed their willingness to buy the said property, it is but proper that the
same be sold to them.4
Subsequently, a revised version of the Bill was introduced in the House of Representatives by Congressmen Manuel
Cases, Antonio Raquiza and Nicanor Yñiguez as House Bill No. 1453, with the following explanatory note:

The accompanying bill seeks to convert one (1) parcel of land in the district of Malate, which is reserved as
communal property into a disposable or alienable property of the State and to provide its subdivision and sale to
bona fide occupants or tenants.

This parcel of land in question was originally an aggregate part of a piece of land with an area of 9,689.8 square
meters, more or less. ... On September 21, 1960, the Municipal Board of Manila in its regular session unanimously
adopted a resolution requesting the President of the Philippines and Congress of the Philippines the feasibility of
declaring this property into disposable or alienable property of the State. There is therefore a precedent that this
parcel of land could be subdivided and sold to bona fide occupants. This parcel of land will not serve any useful
public project because it is bounded on all sides by private properties which were formerly parts of this lot in
question.

Approval of this bill will implement the policy of the Administration of land for the landless and the Fifth Declaration
of Principles of the Constitution, which states that the promotion of Social Justice to insure the well-being and
economic security of all people should be the concern of the State. We are ready and willing to enact legislation
promoting the social and economic well-being of the people whenever an opportunity for enacting such kind of
legislation arises.

In view of the foregoing consideration and to insure fairness and justice to the present bona fide occupants thereof,
approval of this Bill is strongly urged.5

The Bill having been passed by the House of Representatives, the same was thereafter sent to the Senate where it
was thoroughly discussed, as evidenced by the Congressional Records for May 20, 1964, pertinent portion of which is
as follows:

SENATOR FERNANDEZ: Mr. President, it will be re called that when the late Mayor Lacson was still alive, we
approved a similar bill. But afterwards, the late Mayor Lacson came here and protested against the approval, and the
approval was reconsidered. May I know whether the defect in the bill which we approved, has already been
eliminated in this present bill?

SENATOR TOLENTINO: I understand Mr. President, that that has already been eliminated and that is why the City of
Manila has no more objection to this bill.

SENATOR FERNANDEZ: Mr. President, in view of that manifestation and considering that Mayor Villegas and
Congressman Albert of the Fourth District of Manila are in favor of the bill. I would not want to pretend to know
more what is good for the City of Manila.
SENATOR TOLENTINO: Mr. President, there being no objection, I move that we approve this bill on second reading.

PRESIDENT PRO-TEMPORE: The biII is approved on second reading after several Senetors said aye and nobody said
nay.

The bill was passed by the Senate, approved by the President on June 20, 1964, and became Republic Act No. 4118.
It reads as follows:

Lot I-B-2-B of Block 557 of the cadastral survey of the City of Manila, situated in the District of Malate, City of Manila,
which is reserved as communal property, is hereby converted into disposal or alienable land of the State, to be
placed under the disposal of the Land Tenure Administration. The Land Tenure Administration shall subdivide the
property into small lots, none of which shall exceed one hundred and twenty square meters in area and sell the
same on installment basis to the tenants or bona fide occupants thereof and to individuals, in the order mentioned:
Provided, That no down payment shall be required of tenants or bona fide occupants who cannot afford to pay such
down payment: Provided, further, That no person can purchase more than one lot: Provided, furthermore, That if
the tenant or bona fide occupant of any given lot is not able to purchase the same, he shall be given a lease from
month to month until such time that he is able to purchase the lot: Provided, still further, That in the event of lease
the rentals which may be charged shall not exceed eight per cent per annum of the assessed value of the property
leased: And provided, finally, That in fixing the price of each lot, which shall not exceed twenty pesos per square
meter, the cost of subdivision and survey shall not be included.

Sec. 2. Upon approval of this Act no ejectment proceedings against any tenant or bona fide occupant of the above
lots shall be instituted and any ejectment proceedings pending in court against any such tenant or bona fide
occupant shall be dismissed upon motion of the defendant: Provided, That any demolition order directed against any
tenant or bona fide occupant shall be lifted.

Sec. 3. Upon approval of this Act, if the tenant or bona fide occupant is in arrears in the payment of any rentals, the
amount legally due shall be liquidated and shall be payable in twenty-four equal monthly installments from the date
of liquidation.

Sec. 4. No property acquired by virtue of this Act shall be transferred, sold, mortgaged, or otherwise disposed of
within a period of five years from the date full ownership thereof has been vested in the purchaser without the
consent of the Land Tenure Administration.

Sec. 5. In the event of the death of the purchaser prior to the complete payment of the price of the lot purchased by
him, his widow and children shall succeed in all his rights and obligations with respect to his lot.

Sec. 6. The Chairman of the Land Tenure Administration shall implement and issue such rules and regulations as may
be necessary to carry out the provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos is appropriated out of any funds in the National Treasury not
otherwise appropriated, to carry out the purposes of this Act.

Sec. 8. All laws or parts of laws inconsistent with this Act are repealed or modified accordingly.

Sec. 9. This Act shall take effect upon its approval.

Approved, June 20, 1964.

To implement the provisions of Republic Act No. 4118, and pursuant to the request of the occupants of the property
involved, then Deputy Governor Jose V. Yap of the Land Authority (which succeeded the Land Tenure
Administration) addressed a letter, dated February 18, 1965, to Mayor Antonio Villegas, furnishing him with a copy
of the proposed subdivision plan of said lot as prepared for the Republic of the Philippines for resale of the
subdivision lots by the Land Authority to bona fide applicants.6

On March 2, 1965, the City Mayor of Manila, through his Executive and Technical Adviser, acknowledged receipt of
the proposed subdivision plan of the property in question and informed the Land Authority that his office would
interpose no objection to the implementation of said law, provided that its provisions be strictly complied with.7

With the above-mentioned written conformity of the City of Manila for the implementation of Republic Act No.
4118, the Land Authority, thru then Deputy Governor Jose V. Yap, requested the City Treasurer of Manila, thru the
City Mayor, for the surrender and delivery to the former of the owner's duplicate of Transfer Certificate of Title No.
22547 in order to obtain title thereto in the name of the Land Authority. The request was duly granted with the
knowledge and consent of the Office of the City Mayor.8

With the presentation of Transfer Certificate of Title No. 22547, which had been yielded as above stated by the, City
authorities to the Land Authority, Transfer Certificate of Title (T.C.T. No. 22547) was cancelled by the Register of
Deeds of Manila and in lieu thereof Transfer Certificate of Title No. 80876 was issued in the name of the Land Tenure
Administration (now Land Authority) pursuant to the provisions of Republic Act No.

4118.9

But due to reasons which do not appear in the record, the City of Manila made a complete turn-about, for on
December 20, 1966, Antonio J. Villegas, in his capacity as the City Mayor of Manila and the City of Manila as a duly
organized public corporation, brought an action for injunction and/or prohibition with preliminary injunction to
restrain, prohibit and enjoin the herein appellants, particularly the Governor of the Land Authority and the Register
of Deeds of Manila, from further implementing Republic Act No. 4118, and praying for the declaration of Republic
Act No. 4118 as unconstitutional.
With the foregoing antecedent facts, which are all contained in the partial stipulation of facts submitted to the trial
court and approved by respondent Judge, the parties waived the presentation of further evidence and submitted the
case for decision. On September 23, 1968, judgment was rendered by the trial court declaring Republic Act No. 4118
unconstitutional and invalid on the ground that it deprived the City of Manila of its property without due process of
law and payment of just compensation. The respondents were ordered to undo all that had been done to carry out
the provisions of said Act and were restrained from further implementing the same.

Two issues are presented for determination, on the resolution of which the decision in this case hinges, to wit:

I. Is the property involved private or patrimonial property of the City of Manila?

II. Is Republic Act No. 4118 valid and not repugnant to the Constitution?

I.

As regards the first issue, appellants maintain that the land involved is a communal land or "legua comunal" which is
a portion of the public domain owned by the State; that it came into existence as such when the City of Manila, or
any pueblo or town in the Philippines for that matter, was founded under the laws of Spain, the former sovereign;
that upon the establishment of a pueblo, the administrative authority was required to allot and set aside portions of
the public domain for a public plaza, a church site, a site for public buildings, lands to serve as common pastures and
for streets and roads; that in assigning these lands some lots were earmarked for strictly public purposes, and
ownership of these lots (for public purposes) immediately passed to the new municipality; that in the case of
common lands or "legua comunal", there was no such immediate acquisition of ownership by the pueblo, and the
land though administered thereby, did not automatically become its property in the absence of an express grant
from the Central Government, and that the reason for this arrangement is that this class of land was not absolutely
needed for the discharge of the municipality's governmental functions.

It is argued that the parcel of land involved herein has not been used by the City of Manila for any public purpose
and had not been officially earmarked as a site for the erection of some public buildings; that this circumstance
confirms the fact that it was originally "communal" land alloted to the City of Manila by the Central Government not
because it was needed in connection with its organization as a municipality but simply for the common use of its
inhabitants; that the present City of Manila as successor of the Ayuntamiento de Manila under the former Spanish
sovereign merely enjoys the usufruct over said land, and its exercise of acts of ownership by selling parts thereof did
not necessarily convert the land into a patrimonial property of the City of Manila nor divest the State of its
paramount title.

Appellants further argue that a municipal corporation, like a city is a governmental agent of the State with authority
to govern a limited portion of its territory or to administer purely local affairs in a given political subdivision, and the
extent of its authority is strictly delimited by the grant of power conferred by the State; that Congress has the
exclusive power to create, change or destroy municipal corporations; that even if We admit that legislative control
over municipal corporations is not absolute and even if it is true that the City of Manila has a registered title over the
property in question, the mere transfer of such land by an act of the legislature from one class of public land to
another, without compensation, does not invade the vested rights of the City.

Appellants finally argue that Republic Act No. 4118 has treated the land involved as one reserved for communal use,
and this classification is conclusive upon the courts; that if the City of Manila feels that this is wrong and its interests
have been thereby prejudiced, the matter should be brought to the attention of Congress for correction; and that
since Congress, in the exercise of its wide discretionary powers has seen fit to classify the land in question as
communal, the Courts certainly owe it to a coordinate branch of the Government to respect such determination and
should not interfere with the enforcement of the law.

Upon the other hand, appellees argue by simply quoting portions of the appealed decision of the trial court, which
read thus:

The respondents (petitioners-appellants herein) contend, among other defenses, that the property in question is
communal property. This contention is, however, disproved by Original Certificate of Title No. 4329 issued on August
21, 1920 in favor of the City of Manila after the land in question was registered in the City's favor. The Torrens Title
expressly states that the City of Manila was the owner in 'fee simple' of the said land. Under Sec. 38 of the Land
Registration Act, as amended, the decree of confirmation and registration in favor of the City of Manila ... shall be
conclusive upon and against all persons including the Insular Government and all the branches there ... There is
nothing in the said certificate of title indicating that the land was 'communal' land as contended by the respondents.
The erroneous assumption by the Municipal Board of Manila that the land in question was communal land did not
make it so. The Municipal Board had no authority to do that.

The respondents, however, contend that Congress had the power and authority to declare that the land in question
was 'communal' land and the courts have no power or authority to make a contrary finding. This contention is not
entirely correct or accurate. Congress has the power to classify 'land of the public domain', transfer them from one
classification to another and declare them disposable or not. Such power does not, however, extend to properties
which are owned by cities, provinces and municipalities in their 'patrimonial' capacity.

Art. 324 of the Civil Code provides that properties of provinces, cities and municipalities are divided into properties
for public use and patrimonial property. Art. 424 of the same code provides that properties for public use consist of
provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades and public works
for public service paid for by said province, cities or municipalities. All other property possessed by any of them is
patrimonial. Tested by this criterion the Court finds and holds that the land in question is patrimonial property of the
City of Manila.

Respondents contend that Congress has declared the land in question to be 'communal' and, therefore, such
designation is conclusive upon the courts. The Courts holds otherwise. When a statute is assailed as unconstitutional
the Courts have the power and authority to inquire into the question and pass upon it. This has long ago been
settled in Marbury vs. Madison, 2 L. ed. 60, when the United States Supreme Court speaking thru Chief Justice
Marshall held:
... If an act of the legislature, repugnant to the constitution, is void, does it, notwithstanding its validity, bind the
courts, and oblige them to give effect? It is emphatically the province and duty of the judicial department to say
what the law is ... So if a law be in opposition to the constitution; if both the law and the constitution apply to a
particular case, so that the court must either decide that case conformable to the constitution, disregarding the law,
the court must determine which of these conflicting rules governs the case. This is of the very essence of
unconstitutional judicial duty.

Appellees finally concluded that when the courts declare a law unconstitutional it does not mean that the judicial
power is superior to the legislative power. It simply means that the power of the people is superior to both and that
when the will of the legislature, declared in statutes, stands in opposition to that of the people, declared in the
Constitution, the judges ought to be governed by the Constitution rather than by the statutes.

There is one outstanding factor that should be borne in mind in resolving the character of the land involved, and it is
that the City of Manila, although declared by the Cadastral Court as owner in fee simple, has not shown by any shred
of evidence in what manner it acquired said land as its private or patrimonial property. It is true that the City of
Manila as well as its predecessor, the Ayuntamiento de Manila, could validly acquire property in its corporate or
private capacity, following the accepted doctrine on the dual character — public and private — of a municipal
corporation. And when it acquires property in its private capacity, it acts like an ordinary person capable of entering
into contracts or making transactions for the transmission of title or other real rights. When it comes to acquisition
of land, it must have done so under any of the modes established by law for the acquisition of ownership and other
real rights. In the absence of a title deed to any land claimed by the City of Manila as its own, showing that it was
acquired with its private or corporate funds, the presumption is that such land came from the State upon the
creation of the municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned no patrimonial
property except those that were granted by the State not for its public but for private use. Other properties it owns
are acquired in the course of the exercise of its corporate powers as a juridical entity to which category a municipal
corporation pertains.

Communal lands or "legua comunal" came into existence when a town or pueblo was established in this country
under the laws of Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes de Indios). The municipalities of the
Philippines were not entitled, as a matter of right, to any part of the public domain for use as communal lands. The
Spanish law provided that the usufruct of a portion of the public domain adjoining municipal territory might be
granted by the Government for communal purposes, upon proper petition, but, until granted, no rights therein
passed to the municipalities, and, in any event, the ultimate title remained in the sovereign (City of Manila vs. Insular
Government, 10 Phil. 327).

For the establishment, then, of new pueblos the administrative authority of the province, in representation of the
Governor General, designated the territory for their location and extension and the metes and bounds of the same;
and before alloting the lands among the new settlers, a special demarcation was made of the places which were to
serve as the public square of the pueblo, for the erection of the church, and as sites for the public buildings, among
others, the municipal building or the casa real, as well as of the lands whick were to constitute the common
pastures, and propios of the municipality and the streets and roads which were to intersect the new town were laid
out, ... . (Municipality of Catbalogan vs. Director of Lands, 17 Phil. 216, 220) (Emphasis supplied)

It may, therefore, be laid down as a general rule that regardless of the source or classification of land in the
possession of a municipality, excepting those acquired with its own funds in its private or corporate capacity, such
property is held in trust for the State for the benefit of its inhabitants, whether it be for governmental or proprietary
purposes. It holds such lands subject to the paramount power of the legislature to dispose of the same, for after all it
owes its creation to it as an agent for the performance of a part of its public work, the municipality being but a
subdivision or instrumentality thereof for purposes of local administration. Accordingly, the legal situation is the
same as if the State itself holds the property and puts it to a different use (2 McQuilin,Municipal Corporations, 3rd
Ed., p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd 241).

True it is that the legislative control over a municipal corporation is not absolute even when it comes to its property
devoted to public use, for such control must not be exercised to the extent of depriving persons of their property or
rights without due process of law, or in a manner impairing the obligations of contracts. Nevertheless, when it comes
to property of the municipality which it did not acquire in its private or corporate capacity with its own funds, the
legislature can transfer its administration and disposition to an agency of the National Government to be disposed of
according to its discretion. Here it did so in obedience to the constitutional mandate of promoting social justice to
insure the well-being and economic security of the people.

It has been held that a statute authorizing the transfer of a Municipal airport to an Airport Commission created by
the legislature, even without compensation to the city, was not violative of the due process clause of the American
Federal Constitution. The Supreme Court of Minnessota in Monagham vs. Armatage, supra, said:

... The case is controlled by the further rule that the legislature, having plenary control of the local municipality, of its
creation and of all its affairs, has the right to authorize or direct the expenditures of money in its treasury, though
raised, for a particular purpose, for any legitimate municipal purpose, or to order and direct a distribution thereof
upon a division of the territory into separate municipalities ... . The local municipality has no such vested right in or
to its public funds, like that which the Constitution protects in the individual as precludes legislative interferences.
People vs. Power, 25 Ill. 187; State Board (of Education) vs. City, 56 Miss. 518. As remarked by the supreme court of
Maryland in Mayor vs. Sehner, 37 Md. 180: "It is of the essence of such a corporation, that the government has the
sole right as trustee of the public interest, at its own good will and pleasure, to inspect, regulate, control, and direct
the corporation, its funds, and franchises."

We therefore hold that c.500, in authorizing the transfer of the use and possession of the municipal airport to the
commission without compensation to the city or to the park board, does not violate the Fourteenth Amendment to
the Constitution of the United States.

The Congress has dealt with the land involved as one reserved for communal use (terreno comunal). The act of
classifying State property calls for the exercise of wide discretionary legislative power and it should not be interfered
with by the courts.

This brings Us to the second question as regards the validity of Republic Act No. 4118, viewed in the light of Article
III, Sections 1, subsection (1) and (2) of the Constitution which ordain that no person shall be deprived of his
property without due process of law and that no private property shall be taken for public use without just
compensation.
II .

The trial court declared Republic Act No. 4118 unconstitutional for allegedly depriving the City of Manila of its
property without due process of law and without payment of just compensation. It is now well established that the
presumption is always in favor of the constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go Ching, et al. vs.
Dinglasan, et al., 45 O.G. No. 2, pp. 703, 705). To declare a law unconstitutional, the repugnancy of that law to the
Constitution must be clear and unequivocal, for even if a law is aimed at the attainment of some public good, no
infringement of constitutional rights is allowed. To strike down a law there must be a clear showing that what the
fundamental law condemns or prohibits, the statute allows it to be done (Morfe vs. Mutuc, et al., G.R. No. L-20387,
Jan. 31, 1968; 22 SCRA 424). That situation does not obtain in this case as the law assailed does not in any manner
trench upon the constitution as will hereafter be shown. Republic Act No. 4118 was intended to implement the
social justice policy of the Constitution and the Government program of "Land for the Landless". The explanatory
note of House Bill No. 1453 which became Republic Act No. 4118, reads in part as follows:

Approval of this bill will implement the policy of the administration of "land for the landless" and the Fifth
Declaration of Principles of the Constitution which states that "the promotion of social justice to insure the well-
being and economic security of all people should be the concern of the State." We are ready and willing to enact
legislation promoting the social and economic well-being of the people whenever an opportunity for enacting such
kind of legislation arises.

The respondent Court held that Republic Act No. 4118, "by converting the land in question — which is the
patrimonial property of the City of Manila into disposable alienable land of the State and placing it under the
disposal of the Land Tenure Administration — violates the provisions of Article III (Secs. 1 and 2) of the Constitution
which ordain that "private property shall not be taken for public use without just compensation, and that no person
shall be deprived of life, liberty or property without due process of law". In support thereof reliance is placed on the
ruling in Province of Zamboanga del Norte vs. City of Zamboanga, G.R. No. 2440, March 28, 1968; 22 SCRA 1334,
which holds that Congress cannot deprive a municipality of its private or patrimonial property without due process
of law and without payment of just compensation since it has no absolute control thereof. There is no quarrel over
this rule if it is undisputed that the property sought to be taken is in reality a private or patrimonial property of the
municipality or city. But it would be simply begging the question to classify the land in question as such. The
property, as has been previously shown, was not acquired by the City of Manila with its own funds in its private or
proprietary capacity. That it has in its name a registered title is not questioned, but this title should be deemed to be
held in trust for the State as the land covered thereby was part of the territory of the City of Manila granted by the
sovereign upon its creation. That the National Government, through the Director of Lands, represented by the
Solicitor General, in the cadastral proceedings did not contest the claim of the City of Manila that the land is its
property, does not detract from its character as State property and in no way divests the legislature of its power to
deal with it as such, the state not being bound by the mistakes and/or negligence of its officers.

One decisive fact that should be noted is that the City of Manila expressly recognized the paramount title of the
State over said land when by its resolution of September 20, 1960, the Municipal Board, presided by then Vice-
Mayor Antonio Villegas, requested "His Excellency the President of the Philippines to consider the feasibility of
declaring the city property bounded by Florida, San Andres and Nebraska Streets, under Transfer Certificate of Title
Nos. 25545 and 25547, containing an area of 7,450 square meters, as patrimonial property of the City of Manila for
the purpose of reselling these lots to the actual occupants thereof." (See Annex E, Partial Stipulation of Facts, Civil
Case No. 67945, CFI, Manila, p. 121, Record of the Case) [Emphasis Supplied]
The alleged patrimonial character of the land under the ownership of the City of Manila is totally belied by the City's
own official act, which is fatal to its claim since the Congress did not do as bidden. If it were its patrimonial property
why should the City of Manila be requesting the President to make representation to the legislature to declare it as
such so it can be disposed of in favor of the actual occupants? There could be no more blatant recognition of the fact
that said land belongs to the State and was simply granted in usufruct to the City of Manila for municipal purposes.
But since the City did not actually use said land for any recognized public purpose and allowed it to remain idle and
unoccupied for a long time until it was overrun by squatters, no presumption of State grant of ownership in favor of
the City of Manila may be acquiesced in to justify the claim that it is its own private or patrimonial property
(Municipality of Tigbauan vs. Director of Lands, 35 Phil. 798; City of Manila vs. Insular Government, 10 Phil. 327;
Municipality of Luzuriaga vs. Director of Lands, 24 Phil. 193). The conclusion of the respondent court that Republic
Act No. 4118 converted a patrimonial property of the City of Manila into a parcel of disposable land of the State and
took it away from the City without compensation is, therefore, unfounded. In the last analysis the land in question
pertains to the State and the City of Manila merely acted as trustee for the benefit of the people therein for whom
the State can legislate in the exercise of its legitimate powers.

Republic Act No. 4118 was never intended to expropriate the property involved but merely to confirm its character
as communal land of the State and to make it available for disposition by the National Government: And this was
done at the instance or upon the request of the City of Manila itself. The subdivision of the land and conveyance of
the resulting subdivision lots to the occupants by Congressional authorization does not operate as an exercise of the
power of eminent domain without just compensation in violation of Section 1, subsection (2), Article III of the
Constitution, but simply as a manifestation of its right and power to deal with state property.

It should be emphasized that the law assailed was enacted upon formal written petition of the Municipal Board of
Manila in the form of a legally approved resolution. The certificate of title over the property in the name of the City
of Manila was accordingly cancelled and another issued to the Land Tenure Administration after the voluntary
surrender of the City's duplicate certificate of title by the City Treasurer with the knowledge and consent of the City
Mayor. To implement the provisions of Republic Act No. 4118, the then Deputy Governor of the Land Authority sent
a letter, dated February 18, 1965, to the City Mayor furnishing him with a copy of the "proposed subdivision plan of
the said lot as prepared for the Republic of the Philippines for subdivision and resale by the Land Authority to bona
fide applicants." On March 2, 1965, the Mayor of Manila, through his Executive and Technical Adviser, acknowledged
receipt of the subdivision plan and informed the Land Authority that his Office "will interpose no objection to the
implementation of said law provided that its provisions are strictly complied with." The foregoing sequence of
events, clearly indicate a pattern of regularity and observance of due process in the reversion of the property to the
National Government. All such acts were done in recognition by the City of Manila of the right and power of the
Congress to dispose of the land involved.

Consequently, the City of Manila was not deprived of anything it owns, either under the due process clause or under
the eminent domain provisions of the Constitution. If it failed to get from the Congress the concession it sought of
having the land involved given to it as its patrimonial property, the Courts possess no power to grant that relief.
Republic Act No. 4118 does not, therefore, suffer from any constitutional infirmity.

WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with the free and
untrammeled implementation of Republic Act No. 4118 without any obstacle from the respondents. Without costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee and Antonio, JJ., concur.

G.R. No. L-24440 March 28, 1968

THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,

vs.

CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, defendants-appellants.

Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.

Office of the Solicitor General for defendants-appellants.

BENGZON, J.P., J.:

Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of
the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the
Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also provided that —

Buildings and properties which the province shall abandon upon the transfer of the capital to another place will
be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.

The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon, located
in the City of Zamboanga and covered individually by Torrens certificates of title in the name of Zamboanga
Province. As far as can be gleaned from the records, 1 said properties were being utilized as follows —

No. of Lots Use

1 ................................................ Capitol Site

3 ................................................ School Site

3 ................................................ Hospital Site

3 ................................................ Leprosarium

1 ................................................ Curuan School

1 ................................................ Trade School

2 ................................................ Burleigh School

2 ................................................ High School Playground

9 ................................................ Burleighs
1 ................................................ Hydro-Electric Site (Magay)

1 ................................................ San Roque

23 ................................................ vacant

It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. 2 Subsequently, or on
June 16, 1948, Republic Act 286 was approved creating the municipality of Molave and making it the capital of
Zamboanga Province.

On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to Commonwealth Act 39,
fixed the value of the properties and buildings in question left by Zamboanga Province in Zamboanga City at
P1,294,244.00. 3

On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga
del Norte and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided
between the two new ones, Sec. 6 of that law provided:

Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of
Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of
Zamboanga del Sur by the President of the Philippines, upon the recommendation of the Auditor General.

Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations of the
defunct Province of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur.
Zamboanga del Norte therefore became entitled to 54.39% of P1,294,244.00, the total value of the lots and buildings
in question, or P704,220.05 payable by Zamboanga City.

On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding that
Zamboanga del Norte had a vested right as owner (should be co-owner pro-indiviso) of the properties mentioned in
Sec. 50 of Commonwealth Act 39, and is entitled to the price thereof, payable by Zamboanga City. This ruling
revoked the previous Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and buildings thereon to
Zamboanga City for P1.00, effective as of 1945, when the provincial capital of the then Zamboanga Province was
transferred to Dipolog.

The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an amount equal to
25% of the regular internal revenue allotment for the City of Zamboanga for the quarter ending March 31, 1960,
then for the quarter ending June 30, 1960, and again for the first quarter of the fiscal year 1960-1961. The
deductions, all aggregating P57,373.46, was credited to the province of Zamboanga del Norte, in partial payment of
the P764,220.05 due it.

However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by
providing that —
 All buildings, properties and assets belonging to the former province of Zamboanga and located within the City
of Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga. (Stressed for emphasis).

Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal Revenue to
stop from effecting further payments to Zamboanga del Norte and to return to Zamboanga City the sum of
P57,373.46 taken from it out of the internal revenue allotment of Zamboanga del Norte. Zamboanga City admits that
since the enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has already been returned to it.

This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint entitled
"Declaratory Relief with Preliminary Mandatory Injunction" in the Court of First Instance of Zamboanga del Norte
against defendants-appellants Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue.
It was prayed that: (a) Republic Act 3039 be declared unconstitutional for depriving plaintiff province of property
without due process and just compensation; (b) Plaintiff's rights and obligations under said law be declared; (c) The
Secretary of Finance and the Internal Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46
to defendant City; and (d) The latter be ordered to continue paying the balance of P704,220.05 in quarterly
installments of 25% of its internal revenue allotments.

On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After defendants
filed their respective answers, trial was held. On August 12, 1963, judgment was rendered, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional insofar as it
deprives plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of land and the
improvements thereon under certificates of title (Exhibits "A" to "A-49") in the name of the defunct province of
Zamboanga; ordering defendant City of Zamboanga to pay to the plaintiff the sum of P704,220.05 payment thereof
to be deducted from its regular quarterly internal revenue allotment equivalent to 25% thereof every quarter until
said amount shall have been fully paid; ordering defendant Secretary of Finance to direct defendant Commissioner
of Internal Revenue to deduct 25% from the regular quarterly internal revenue allotment for defendant City of
Zamboanga and to remit the same to plaintiff Zamboanga del Norte until said sum of P704,220.05 shall have been
fully paid; ordering plaintiff Zamboanga del Norte to execute through its proper officials the corresponding public
instrument deeding to defendant City of Zamboanga the 50 parcels of land and the improvements thereon under the
certificates of title (Exhibits "A" to "A-49") upon payment by the latter of the aforesaid sum of P704,220.05 in full;
dismissing the counterclaim of defendant City of Zamboanga; and declaring permanent the preliminary mandatory
injunction issued on June 8, 1962, pursuant to the order of the Court dated June 4, 1962. No costs are assessed
against the defendants.

It is SO ORDERED.

Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to reconsider
praying that Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6% interest per annum.
Over defendants' opposition, the lower court granted plaintiff province's motion.
 The defendants then brought the case before Us on appeal.

Brushing aside the procedural point concerning the property of declaratory relief filed in the lower court on the
assertion that the law had already been violated and that plaintiff sought to give it coercive effect, since assuming
the same to be true, the Rules anyway authorize the conversion of the proceedings to an ordinary action, 5 We
proceed to the more important and principal question of the validity of Republic Act 3039.

The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For,
the matter involved here is the extent of legislative control over the properties of a municipal corporation, of which
a province is one. The principle itself is simple: If the property is owned by the municipality (meaning municipal
corporation) in its public and governmental capacity, the property is public and Congress has absolute control over
it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no
absolute control. The municipality cannot be deprived of it without due process and payment of just compensation.
6

The capacity in which the property is held is, however, dependent on the use to which it is intended and
devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal
Corporations, must be used in classifying the properties in question?

The Civil Code classification is embodied in its Arts. 423 and 424 which provide:1äwphï1.ñët

ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and
patrimonial property.

ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads,
city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities, or municipalities.

All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to
the provisions of special laws. (Stressed for emphasis).

Applying the above cited norm, all the properties in question, except the two (2) lots used as High School
playgrounds, could be considered as patrimonial properties of the former Zamboanga province. Even the capital site,
the hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for public use.
They would fall under the phrase "public works for public service" for it has been held that under the ejusdem
generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceding
enumerated properties in the first paragraph of Art 424. 7 The playgrounds, however, would fit into this category.

This was the norm applied by the lower court. And it cannot be said that its actuation was without
jurisprudential precedent for in Municipality of Catbalogan v. Director of Lands, 8 and in Municipality of Tacloban v.
Director of Lands, 9 it was held that the capitol site and the school sites in municipalities constitute their patrimonial
properties. This result is understandable because, unlike in the classification regarding State properties, properties
for public service in the municipalities are not classified as public. Assuming then the Civil Code classification to be
the chosen norm, the lower court must be affirmed except with regard to the two (2) lots used as playgrounds.

On the other hand, applying the norm obtaining under the principles constituting the law of Municipal
Corporations, all those of the 50 properties in question which are devoted to public service are deemed public; the
rest remain patrimonial. Under this norm, to be considered public, it is enough that the property be held and,
devoted for governmental purposes like local administration, public education, public health, etc. 10

Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF LANDS, 11 where
it was stated that "... where the municipality has occupied lands distinctly for public purposes, such as for the
municipal court house, the public school, the public market, or other necessary municipal building, we will, in the
absence of proof to the contrary, presume a grant from the States in favor of the municipality; but, as indicated by
the wording, that rule may be invoked only as to property which is used distinctly for public purposes...." (2) VIUDA
DE TANTOCO V. MUNICIPAL COUNCIL OF ILOILO 12 held that municipal properties necessary for governmental
purposes are public in nature. Thus, the auto trucks used by the municipality for street sprinkling, the police patrol
automobile, police stations and concrete structures with the corresponding lots used as markets were declared
exempt from execution and attachment since they were not patrimonial properties. (3) MUNICIPALITY OF
BATANGAS VS. CANTOS 13 held squarely that a municipal lot which had always been devoted to school purposes is
one dedicated to public use and is not patrimonial property of a municipality.

Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol site, school
sites and its grounds, hospital and leprosarium sites and the high school playground sites — a total of 24 lots — since
these were held by the former Zamboanga province in its governmental capacity and therefore are subject to the
absolute control of Congress. Said lots considered as public property are the following:

TCT Number Lot Number Use

2200 ...................................... 4-B ...................................... Capitol Site

2816 ...................................... 149 ...................................... School Site

3281 ...................................... 1224 ...................................... Hospital Site

3282 ...................................... 1226 ...................................... Hospital Site

3283 ...................................... 1225 ...................................... Hospital Site

3748 ...................................... 434-A-1 ...................................... School Site

5406 ...................................... 171 ...................................... School Site

5564 ...................................... 168 ...................................... High School Play-ground

5567 ...................................... 157 & 158 ...................................... Trade School

5583 ...................................... 167 ...................................... High School Play-ground

6181 ...................................... (O.C.T.) ...................................... Curuan School

11942 ...................................... 926 ...................................... Leprosarium

11943 ...................................... 927 ...................................... Leprosarium

11944 ...................................... 925 ...................................... Leprosarium

5557 ...................................... 170 ...................................... Burleigh School

5562 ...................................... 180 ...................................... Burleigh School

5565 ...................................... 172-B ...................................... Burleigh

5570 ...................................... 171-A ...................................... Burleigh

5571 ...................................... 172-C ...................................... Burleigh

5572 ...................................... 174 ...................................... Burleigh

5573 ...................................... 178 ...................................... Burleigh

5585 ...................................... 171-B ...................................... Burleigh

5586 ...................................... 173 ...................................... Burleigh

5587 ...................................... 172-A ...................................... Burleigh

We noticed that the eight Burleigh lots above described are adjoining each other and in turn are between the
two lots wherein the Burleigh schools are built, as per records appearing herein and in the Bureau of Lands. Hence,
there is sufficient basis for holding that said eight lots constitute the appurtenant grounds of the Burleigh schools,
and partake of the nature of the same.

Regarding the several buildings existing on the lots above-mentioned, the records do not disclose whether they
were constructed at the expense of the former Province of Zamboanga. Considering however the fact that said
buildings must have been erected even before 1936 when Commonwealth Act 39 was enacted and the further fact
that provinces then had no power to authorize construction of buildings such as those in the case at bar at their own
expense, 14 it can be assumed that said buildings were erected by the National Government, using national funds.
Hence, Congress could very well dispose of said buildings in the same manner that it did with the lots in question.

But even assuming that provincial funds were used, still the buildings constitute mere accessories to the lands,
which are public in nature, and so, they follow the nature of said lands, i.e., public. Moreover, said buildings, though
located in the city, will not be for the exclusive use and benefit of city residents for they could be availed of also by
the provincial residents. The province then — and its successors-in-interest — are not really deprived of the benefits
thereof.

But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value of the rest of
the 26 remaining lots which are patrimonial properties since they are not being utilized for distinctly, governmental
purposes. Said lots are:

TCT Number Lot Number Use

5577 ...................................... 177 ...................................... Mydro, Magay

13198 ...................................... 127-0 ...................................... San Roque

5569 ...................................... 169 ...................................... Burleigh 15

5558 ...................................... 175 ...................................... Vacant

5559 ...................................... 188 ...................................... "

5560 ...................................... 183 ...................................... "

5561 ...................................... 186 ...................................... "

5563 ...................................... 191 ...................................... "

5566 ...................................... 176 ...................................... "

5568 ...................................... 179 ...................................... "

5574 ...................................... 196 ...................................... "

5575 ...................................... 181-A ...................................... "

5576 ...................................... 181-B ...................................... "

5578 ...................................... 182 ...................................... "

5579 ...................................... 197 ...................................... "

5580 ...................................... 195 ...................................... "

5581 ...................................... 159-B ...................................... "

5582 ...................................... 194 ...................................... "

5584 ...................................... 190 ...................................... "

5588 ...................................... 184 ...................................... "

5589 ...................................... 187 ...................................... "

5590 ...................................... 189 ...................................... "

5591 ...................................... 192 ...................................... "

5592 ...................................... 193 ...................................... "

5593 ...................................... 185 ...................................... "

7379 ...................................... 4147 ...................................... "

Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly private in
nature. On the other hand, that the 24 lots used for governmental purposes are also registered is of no significance
since registration cannot convert public property to private. 16

We are more inclined to uphold this latter view. The controversy here is more along the domains of the Law of
Municipal Corporations — State vs. Province — than along that of Civil Law. Moreover, this Court is not inclined to
hold that municipal property held and devoted to public service is in the same category as ordinary private property.
The consequences are dire. As ordinary private properties, they can be levied upon and attached. They can even be
acquired thru adverse possession — all these to the detriment of the local community. Lastly, the classification of
properties other than those for public use in the municipalities as patrimonial under Art. 424 of the Civil Code — is
"... without prejudice to the provisions of special laws." For purpose of this article, the principles, obtaining under
the Law of Municipal Corporations can be considered as "special laws". Hence, the classification of municipal
property devoted for distinctly governmental purposes as public should prevail over the Civil Code classification in
this particular case.

Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without merit. Under
Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province arose only in 1949
after the Auditor General fixed the value of the properties in question. While in 1951, the Cabinet resolved transfer
said properties practically for free to Zamboanga City, a reconsideration thereof was seasonably sought. In 1952, the
old province was dissolved. As successor-in-interest to more than half of the properties involved, Zamboanga del
Norte was able to get a reconsideration of the Cabinet Resolution in 1959. In fact, partial payments were effected
subsequently and it was only after the passage of Republic Act 3039 in 1961 that the present controversy arose.
Plaintiff brought suit in 1962. All the foregoing, negative laches.

It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the former's
54.39% share in the 26 properties which are patrimonial in nature, said share to computed on the basis of the
valuation of said 26 properties as contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee
formed by the Auditor General.

Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already returned to
defendant City. The return of said amount to defendant was without legal basis. Republic Act 3039 took effect only
on June 17, 1961 after a partial payment of P57,373.46 had already been made. Since the law did not provide for
retroactivity, it could not have validly affected a completed act. Hence, the amount of P43,030.11 should be
immediately returned by defendant City to plaintiff province. The remaining balance, if any, in the amount of
plaintiff's 54.39% share in the 26 lots should then be paid by defendant City in the same manner originally adopted
by the Secretary of Finance and the Commissioner of Internal Revenue, and not in lump sum. Plaintiff's prayer,
particularly pars. 5 and 6, read together with pars. 10 and 11 of the first cause of action recited in the complaint 17
clearly shows that the relief sought was merely the continuance of the quarterly payments from the internal revenue
allotments of defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify lump
sum payment is inapplicable since there has been so far in legal contemplation no complete delivery of the lots in
question. The titles to the registered lots are not yet in the name of defendant Zamboanga City.

WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as
follows:.

(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the
amount of P43,030.11 which the former took back from the latter out of the sum of P57,373.46 previously paid to
the latter; and

(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of
plaintiff's 54.39% share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the
basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way
of quarterly payments from the allotments of defendant City, in the manner originally adopted by the Secretary of
Finance and the Commissioner of Internal Revenue. No costs. So ordered.

G.R. No. L-22006 July 28, 1975

BASILIO PEREZ and PETRA MONTALBO, petitioners,

vs.

NICOLAS MENDOZA, MARGARITA MACALALAD and the HONORABLE COURT OF APPEALS, respondents.

Pedro T. Panganiban for petitioners.

Julio D. Enriquez, Sr. for respondents.

MUNOZ PALMA, J.:

Civil Case 689 of the Court of First Instance of Batangas was an action to quiet title over a piece of land filed on
March 20, 1959, by spouses Basilio Perez and Petra Montalbo with spouses Nicolas Mendoza and Margarita
Macalalad as defendants. According to the complaint, the land in controversy is located in barrio Dagatan,
municipality of Taysan, Batangas, with an area of approximately 4,765 sq. meters, declared for taxation purposes in
the name of the "Heirs of Estanislao Montalbo", and is "bounded on the north by a school site, on the east by Calixto
Flores, on the south by a creek, and on the west by a creek and the land of Gregorio Mendoza." On the basis of
evidence adduced by the parties, the trial court then presided by Hon. Lorenzo Relova rendered judgment on
February 19, 1962, dismissing the complaint and declaring the spouses Mendoza "to have a better right to the
property in question."1

Spouses Perez elevated the Relova decision to the Court of Appeals which, however, affirmed in toto the findings of
the court a quo, and declared that "upon the evidence it has been shown by a great preponderance that the land in
question belongs to the defendants."2

The case is now before Us on a petition for certiorari filed by spouses Perez.

The findings of fact both of the trial court and the Court of Appeals may be briefly summarized as follows:

The litigated parcel of land was originally part of a bigger tract owned by Estanislao Montalbo. When Estanislao died
in 1918, his properties passed on to his children Petra, Felisa, and Pedro all surnamed Montalbo, and because Pedro
died single the two women remained as the only heirs. By mutual agreement Petra and Felisa divided between
themselves the lands of their father and the parcel of which the litigated land was a part was assigned to Felisa.
Sometime in 1922 Felisa exchanged the above-mentioned parcel with a land belonging to her aunt. Andrea
Montalbo, a sister of her father. The reason for the exchange was that Andrea wanted to donate a piece of land to
the municipality for use as a school site and the land of Felisa was what the municipality preferred as it was adjacent
to other properties of the municipality. (Exh. 5 for defendants Mendoza) Upon her acquisition of Felisa's
aforementioned land, Andrea donated to the municipality the northern portion thereof which constituted almost
one-half of the entire parcel, and since then that portion was declared for taxation purposes by the municipality
together with its adjoining properties (Exhs. 6, 6-A, 6-B).1äwphï1.ñët In 1927 the remainder of the lot was given by
Andrea Montalbo to her daughter Margarita Macalalad on the occasion of her marriage to Nicolas Mendoza, and
from the time of their marriage the couple possessed the said property. That donation was confirmed subsequently
in a public instrument dated August 15, 1951 (Exh. 2 for the Mendozas). Nicolas Mendoza sought to transfer the tax
declaration of the property to his name and of his wife and for that purpose he submitted a deed of exchange of
property dated January 14, 1922, allegedly executed by Felisa Montalbo and Andrea Montalbo in the presence of the
municipal secretary Rafael Manahan (Exh. 5). When Basilio Perez came to know about the supposed deed of
exchange, he had it investigated and upon discovering that the signature of Rafael Manahan appearing on the
document was forged, he filed a criminal complaint before the Fiscal's office which led to an accusation for
falsification of private document against Andrea Montalbo and Nicolas Mendoza. Only Nicolas Mendoza was
arraigned and tried and was convicted by the Court of First Instance of Batangas, but on appeal he was acquitted by
the Court of Appeals for insufficiency of evidence to show that he participated in affixing the signature of Rafael
Manahan or that he was aware of the falsity of the document in question when he presented it to the tax assessor's
office.3 Notwithstanding the forged signature of Rafael Manahan on the document Exhibit 5, there is sufficient
evidence to prove that an exchange of property did in fact occur in 1922 between Andrea and Felisa Montalbo, and
that Felisa's land passed on to Andrea who in turn gave part of it to the municipality and part to her daughter,
Margarita; hence, the decision in favor of the spouses Mendoza.

On the other hand, petitioners contend that the disputed property was inherited by Petra and Felisa Montalbo from
their father Estanislao who died in 1918 and since that date the two sisters were in possession of said land. In 1934 a
deed of partition of the various properties of Estanislao was executed between Petra and the heirs of Felisa, and the
land in question was divided equally, between them; among those who signed as witnesses to that agreement was
Andrea Montalbo(Exh. D for petitioners). In 1952 Felisa's husband, Jose Ortega, and children sold their one-half
share to spouses Petra Montalbo and Basilio Perez, now petitioners, but the deed of sale was lost a year after.
Sometime in 1946 petitioners leased the property to the Mendozas and when the lease expired in 1951 they
demanded for the return of the land but the Mendozas refused and so petitioners had to file an ejectment suit
before the justice of the peace court of Taysan which was still pending at the time of the trial of the civil case in
1960. (tsn. witness Basilio Perez, December 15, 1960, pp. 16-34)

For not giving credit to the foregoing evidence, petitioners now assail the adverse decision of respondent court on
four assigned errors.

1. Petitioners contend that respondent court erred in considering the criminal case for falsification res
adjudicata on the matter of ownership of the land in litigation when the "question of ownership was not actually and
directly in issue in the criminal case and the latter was not the proper vehicle for the determination of the ownership
of the land." (p. 9, petitioners brief) Petitioners refer to portions in the decision of respondent court, viz:

The land in question, together with that portion that was acquired by the municipality of Taysan, the identity of
which is admitted by the parties, belonged to Felisa Montalbo, as held in the decision of the Court of Appeals, thus
— "The said parcel of land previously belonged to Felisa Montalbo (married to Jose Ortega), who inherited it from
her deceased father, the aforecited Estanislao Montalbo;", and the land in question was donated propter nuptias by
Andrea Montalbo to Margarita Macalalad and Nicolas Mendoza, the defendants, (Margarita Macalalad is the
daughter of Andrea Montalbo) on the occasion of their marriage on February 27, 1927, as found and held in the
decision of the Court of Appeals, thus — "and this land was acquired by the donor (Andrea Montalbo) by means of a
barter with her own parcel of land planted with bamboos and mango trees"

Upon the basis of the findings of fact and conclusion arrived at in the decision of the Court of Appeals, it clearly
appears that although the document of exchange of the lands was found to be falsified, nevertheless the Court
found upon the facts as demonstrated by the evidence that the land in question "previously belonged to Felisa
Montalbo (married to Jose Ortega), who inherited it from her deceased father, the aforesaid Estanislao Montalbo
..."; that said land was donated propter nuptias by Andrea Montalbo to the defendants on the occasion of their
marriage on February 27, 1927; and that "this land was acquired by the donor by means of a barter with her own
parcel of land planted with bamboos and mango trees". From the context of the decision the natural and logical
inference is that factually the exchange of the lands had been consummated.... (pp. 6-7, CA decision at pp. 20-21,
rollo; emphasis supplied to indicate disputed statements)

Undoubtedly, there is merit to the contention of petitioners that the pronouncements or findings of fact made by
the Court of Appeals in the criminal case concerning the possession and ownership of the land now in litigation in
the civil case, do not constitute the law on the matter and cannot be taken or adopted as a basis for deciding the
question of ownership of said land in this civil case. Since there is no identity of parties in the two cases — the
petitioners here not being parties in the criminal case — and the object or subject matter in the criminal prosecution
is different, the latter being concerned with the guilt or innocence of accused Nicolas Mendoza for falsification of
private document, it follows that the judgment in the criminal action cannot be used as evidence in the civil case
where the issue is ownership of a piece of land. It is the rule that the plea of res judicata generally cannot be
interposed except where the parties, facts, and questions are the

same,4 hence, the judgment in a criminal case cannot be pleaded as res judicata in a civil action.5

But whatever error was committed by respondent court in this regard, the same is not sufficient to nullify the
appealed decision.

Analyzing the decision of respondent court. We see that the latter made its own appraisal and evaluation of the
evidence existing in the record relative to the possession and ownership of the land in question. Thus it said that the
conclusions arrived at by the Court of Appeals in the criminal case to wit(1) that there was an exchange of lands
consummated between Andrea and Felisa and (2) that the exchanged land was later donated by Andrea to her
daughter Margarita in 1927, "can hardly be doubted if we take account of the undisputed fact that the defendants
have been in possession of the land since 1927, and the plaintiffs (meaning spouses Perez) have not attempted to
disturb defendants' possession of the land until 1952 when said plaintiffs filed an action of unlawful detainer against
the defendants." (p. 7 of appealed decision at p. 21, SC rollo; emphasis supplied) Continuing, respondent court
expounded:

Contrary to the allegation in the complaint — "That plaintiffs were in possession of the land prior and up to January,
1946, when the same was leased to the defendants ...", and the testimony of Basilio Perez to the same tenor, the
evidence has conclusively shown that the defendants have been in continuous possession of the land since 1927 to
the present time, and they have built a house on the land in 1928 where they have resided and lived to the present,
as testified to by the defendant Mendoza, ....

The plaintiffs have contended, however, with the support of the testimony of Basilio Perez, that the possession of
the defendants since 1946 was that of a mere lessee of the land. On this matter, the trial court said, "the records do
not show any documentary evidence to support such contention. Nor is any document, say receipts of payment of
rentals presented to bolster their theory. On the contrary their averment has been strongly denied by the
defendants and the records show that it was only in 1952 that a civil action was instituted by the plaintiffs against
the defendants in the Justice of the Peace Court of Taysan, Batangas, for detainer and damages", and said allegation
of possession of the defendants as lessees of the land "is not supported by positive and convincing evidence". We
find no reason to disagree with the foregoing findings of fact and conclusion of the trial court because the same is
supported by the preponderance of evidence, and the plaintiffs have not pointed to us any fact of significance or
influence which have been disregarded by the court, other than the testimony of Basilio Perez who testified about
the supposed contract of lease. (pp. 21-22, 23, ibid.; emphasis supplied)

Digging further into the evidence of herein petitioners, respondent court found for itself that the agreement of
partition dated May 27, 1934, Exhibit D, is not incontrovertible proof that in 1934 the litigated property belonged in
common to Petra and the heirs of Felisa Montalbo both of whom may have been guided by the fact that the
property was still declared for taxation purposes in the name of Estanislao Montalbo, and that the document of
partition "did not overcome the evidence on record that Andrea Montalbo became the owner of the land, and that
since 1927 the defendants have been in continuous possession of the land, openly, adversely and in the concept of
owners thereby acquiring ownership of the land through acquisitive prescription." (p. 10 of CA decision at p. 24, SC
rollo)

Independently therefore of the pronouncements of the Court of Appeals in the criminal case, respondent court
examined the evidence in this civil case and made its own findings of fact on the basis of which it affirmed the
decision of the trial court.

We could have stopped here and resolved this petition under well-entrenched precepts in Philippine jurisprudence
that findings of fact of the Court of Appeals are as a rule conclusive and binding upon this Court;6 nonetheless, to set
our mind at rest that the conclusions of respondent court were not grounded on speculation, surmises or
conjectures,7 We went over the evidence before Us.

Certain salient facts strongly support the claim of respondents Mendoza over the property in dispute:

First, the northern boundary of the land in controversy is undisputably a school site which originally was part of a
bigger tract belonging to Estanislao Montalbo. This is admitted by petitioner Basilio Perez who to a question
propounded by his counsel, Atty. Panganiban, declared:

Mr. Panganiban: (Counsel of petitioners)

Q. According to these tax declarations which you said covers the land in question, the boundaries on the north,
school site; on the east, land of Calixto Flores; on the south, estero; and on the west, estero and Gregoria Mendoza,
why is it that there is a discrepancy?

A. Because from the whole parcel of land a portion was taken for the school site, and that which remains now
is the land in question, sir. (tsn December 15, 1960, pp. 22-23)

No explanation however was offered by Perez as to how that portion became a school site. On the other hand, there
is evidence of respondent Mendoza that because Andrea Montalbo wanted to donate a piece of land to be used as a
school site and the municipality preferred the location of the land inherited by Felisa from her father, the two
women exchanged lands after which Andrea gave one-half of the property to the municipality while the remaining
portion which is the land now in litigation was donated propter nuptias to her daughter Margarita way back in 1927.
(tsn October 24, 1961, pp. 14-18) This donation of Andrea was not disproved by any evidence of petitioners. On the
part of respondents Mendoza, their documentary evidence, Exhibits 6, 6-A and 6-B, show that the municipality of
Taysan declared the donated property in its name as early as July, 1925, which supports respondents' claim that the
exchange of properties between Andrea and Felisa Montalbo took place sometime in 1922.

Second, the provincial authorities authorities dealt with the Mendozas for the widening of the provincial road which
traverses the land in question. Nicolas Mendoza testified that the land covered by the complaint actually consists of
two lots which he described in his sketch, Exhibit 1, with letters "A" and "B" respectively, separated by a provincial
road leading to the municipality of Lobo; that lot "A" which is the bigger parcel is the one donated to his wife,
Margarita, by Andrea Montalbo on the occasion of their marriage in 1927 (Exh. 2); while lot "B" was bought from
Donata Mendoza in 1951 as shown by the deed of sale, Exhibit 7; that sometime in 1937-38, the province widened
the provincial road traversing the two lots, and he and his wife were approached by the provincial authorities more
particularly, Engineer Ramirez, for them to give without compensation from lot "A" a stretch of land of one meter in
width to widen said road, and they agreed. At that time Donata Mendoza still owned lot "B" and she was also asked
to give part of her land for the road but she was paid for the value of the plants destroyed in the process.(tsn
October 24, 1961, pp. 32-34) For his part, petitioner Perez admitted during the cross-examination conducted by the
opposite counsel, Atty. Julio Enriquez, that the provincial authorities did not deal with him at all during the widening
of that particular road. (tsn September 25, 1961, p. 34) This is of marked significance, because if it were true as
claimed by petitioners that they were in possession of the property since the death of Estanislao Montalbo in 1918
or even after the deed of partition in 1934, they would have been the persons approached by the authorities for the
widening of the road. The fact that the Mendozas were the ones who gave away part of the land for the widening of
the Lobo road shows that they were in possession of the property and were living there at the time.

Third, respondents Mendoza have been in possession of the property since 1927 in concept of owners thereof. We
have the testimony of respondent Nicolas Mendoza that after the land was donated to his wife in 1927 they built a
house on it and lived there continuously, witness referring particularly to what he described as lot "A" in his sketch
Exhibit 1. (tsn October 24, 1961, pp. 7, .30-31) Respondent's testimony was found both by the trial and appellate
courts credible because (1) petitioner Basilio Perez himself admitted during cross-examination that even before the
last world war the Mendozas had constructed a house on the land in litigation (tsn September 25, 1971, pp. 37-39;
see Exh. E-3) which admission disproves the allegation in the complaint and Perez' testimony that it was only in 1946
when the Mendozas occupied the property as lessees; (2) the testimony of Nicolas Mendoza was corroborated by
witness Adriano Gonzales, a retired justice of the peace of Taysan, Batangas, who declared that he knew the
Mendozas since 1937 and he saw them living on the land in question and they have not changed residence at all
since he had known them (tsn December 6, 1961, pp. 5-6); and (3) the respondents Mendoza were the ones who
were living on the property and not the petitioners at the time the provincial government in 1937 widened the Lobo
road which crosses said land.

The court a quo and the respondent appellate court did not err when they upheld the claim of ownership of the
Mendozas principally on the ground that the latter were in actual possession of the property since 1927 and were
sought to be dispossessed by petitioners herein only in 1952 when an ejectment suit was filed against them.

Possession is an indicium of ownership of the thing possessed and to the possessor goes the presumption that he
holds the thing under a claim of ownership.8 Article 433 of the Civil Code provides that "(A)ctual possession under
claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for
the recovery of the property." In Chan vs. Court of Appeals, et al., L-27488, June 30, 1970, 33 SCRA 737, this Court
upheld the finding of the Court of Appeals that the litigated property belonged to the private respondents therein
based on their possession of the property, not only because such findings of fact of the appellate court are
conclusive and binding on this Court but because the conclusion is in accordance with Articles 433 and 531 of the
Civil Code. 9

As we have here conflicting claims of possession by the parties over the land in controversy and because the fact of
possession cannot be recognized at the same time in two different personalities except in cases of co-possession, the
present possessor is to be preferred pursuant to Article 538 of the Civil Code which We quote:

Possession as a fact cannot be recognized at the same time in two different personalities except in the cases of co-
possession. Should a question arise regarding the fact of possession, the present possessor shall be preferred; if
there are two possessors, the one longer in possession; if the dates of the possession are the same, the one who
presents a title; and if all these conditions are equal, the thing shall be placed in judicial deposit pending
determination of its possession or ownership through proper proceedings." 10

The pretension of petitioners that the possession of the Mendozas is that of a mere lessee was not believed by the
trial judge and the appellate court not only because of the absence of any written or oral evidence on the matter
other than the bare testimony of petitioner Basilio Perez, but also due to the circumstances present in the case
which We indicated and enumerated at pages 7 to 9 of this decision. In fine, it is a fact that the Mendozas are
presently in possession of the property and the presumption of ownership in their favor has not been successfully
rebutted by evidence that they are mere lessees of the land in their possession as claimed by petitioners.

2. In their second assigned error, petitioners contend that respondent court should not have given weight to
the evidence of respondent Mendoza because the latter's Exhibit 5 was proven to be a falsified document.

To recall, Exhibit 5 is the alleged deed of exchange or barter of lands between Andrea and Felisa Montalbo dated
January 14, 1922. On this point, petitioners overlook the fact that Exhibit 5 was made the basis of a criminal
accusation of falsification of private document solely on the allegation that the signature of Rafael Manahan, the
person before whom the parties to the document allegedly appeared, was not his. There was no finding in that
criminal case as per decision rendered therein that the barter or exchange of lands between Andrea and Felisa
Montalbo did not in effect take place. On the contrary, what appears in said decision offered by petitioners as their
Exhibit J are the following findings of the Court of Appeals, viz: that the land donated by Andrea Montalbo to her
daughter Margarita Macalalad "was acquired by the donor by means of a barter with her own parcel of land planted
with bamboos and mango trees"; that while it is true that because of this presentation of the falsified document
appellant (now respondent Nicolas Mendoza) was able to secure the declaration of the property donated in his
name, no criminal liability should be imposed upon him in the absence of any evidence that he presented said
exhibit with the knowledge that it was forged "especially if we take into consideration the fact that he and his wife
were and are still in possession of the land donated since 1927"; that in fact, the color and appearance of the
document in question show that it is not a new document but an old one thus confirming Mendoza's theory that it
was executed in or about the year 1922 as appearing in the document or five years before his marriage. (pp. 1, 5, 6
of Exh. J, folder of exhibits) Thus, if the document Exhibit 5 was held to be forged, it was simply because the
municipal secretary, Rafael Manahan, did not sign it and not for any other reason. What is material and relevant to
the civil case is that both the trial court and respondent appellate court found for a fact that there was an exchange
of lands between Andrea and Felisa Montalbo on the basis of evidence other than the disputed Exhibit 5. As to what
the evidence is, has been discussed above.

Petitioners cite Gonzales vs. Mauricio, 53 Phil. 728 where this Court stated inter alia that the introduction of a forged
instrument by a witness renders the testimony of the latter practically worthless. That statement however is not
applicable to the situation before Us because in Gonzalez the particular document or receipt referred to was found
to be entirely false as to its contents, handwriting, and signature, whereas here all that was found to be false is the
signature of a witnessing official.

3. The last argument of petitioners is the object of the third assigned error. It is contended that the appellate
court erred in not giving effect to the deed of partition, Exhibit D, notwithstanding the fact that the name of Andrea
Montalbo appears in the document as one of the witnesses thereto.

Exhibit D appears to be a document dated May 27, 1934, wherein certain properties allegedly belonging to
Estanislao Montalbo were divided between Petra Montalbo and Jose Ortega, husband of deceased Felisa Montalbo.
Petitioner Basilio Perez declared that one of the parcels of land mentioned in the document is the land now in
litigation which is particularly marked as Exhibit D-1. He also testified that Exhibit D was signed by him and his wife,
Petra Montalbo, by Jose Ortega, husband of deceased Felisa Montalbo, and thumbmarked by the latter's children all
in his presence. (tsn December 15,1960, pp. 19-24) Surprisingly, however, Basilio Perez did not at all mention during
the course of his testimony that the old woman, Andrea Montalbo, signed the deed of partition as a witness. We
have gone over the transcript of Basilio Perez' declaration on direct and cross-examination (tsn December 15, 1960,
pp. 15-34; September 25, 1961, pp. 3-40) and at no instance did he ever state that Andrea Montalbo was present
during the preparation of the document, that she read or knew the contents thereof which by the way consists of six
handwritten pages, and that she signed her name on the document. It was incumbent upon petitioners to identify
the signature of Andrea Montalbo on the document if her signature was truly there. As a matter of fact, examining
the document Exhibit D We entertain doubts whether the name referred to by petitioners is "Andrea Montalbo", for,
as written, it also can read "Maria Montalbo". At any rate, whatever is the import of said deed of partition, the same
binds only the parties thereto but does not affect third persons such as Andrea Montalbo or the herein Mendozas in
the absence of proof that they participated in one way or another in the preparation and execution of thedocument.
As it is, Andrea Montalbo was a stranger to that deed of partition and any recital therein concerning the property
under litigation cannot be used as evidence to prejudice her and her successors-in-interest or place her in estoppel
as to her claims over the property. Res inter alios acta alteri nocere non debet. A transaction between two parties
ought not to operate to the prejudice of a third person or stranger. 11
4. In the fourth assignment of error, petitioners claim that the appellate court should have rendered a decision
in their favor. That both the trial court and respondent appellate court have correctly evaluated the evidence, has
been clearly demonstrated by Us.

IN VIEW OF ALL THE ABOVE CONSIDERATIONS, We find no reversible error in the decision under review and We
AFFIRM the same with costs against petitioners.

So Ordered.

Castro (Chairman), Makasiar, Esguerra and Martin, JJ., concur.

G.R. No. 101929 January 6, 1993

BENJAMIN DIZON, ZACARIAS DIZON, AFRICA DIZON, PERFECTO DIZON, CARMEN DIZON (Heirs of Paula Galang), JULIA
GALANG, CONSOLACION TABORA, ABELARDO TABORA, CECILIA TABORA, AVELINA TABORA, TRINIDAD TABORA,
REMEDIOS TABORA, VIRGINIA TABORA, DELFIN TABORA, PENINA TABORA, FRANCISCO TABORA, CIPRIANA GALANG,
RUFINO DELOS SANTOS, PEPITO DELOS SANTOS (Heirs of Donata Vergara), ARNEO VERGARA, BENIGNO VERGARA,
JOSE VERGARA, SCION VERGARA, DEMETRIA VERGARA (all heirs of Dionisio Galang), petitioners,

vs.

COURT OF APPEALS, AUREO REYES, AURELIO SAMIA, ALFONSO SAMIA, POTENCIANO GALANG, LEONCIA GARCIA,
BIENVENIDO TAPNIO, LYDIA BALINGIT VDA. DE GARCIA, BENEDICTO GARCIA, ROMULADO GARCIA, AMY GARCIA,
ALEXANDER GARCIA, LUDIVINA GARCIA, MONTANO GUEVARRA, CORAZON LAMPA, RUDY LAMPA, EDUARDO LAMPA,
ILLUMINADA GUEVARRA, CARMELITA MASANQUE VDA. DE GARCIA, MA. CONCEPCION AQUINO VDA. DE GUEVARRA,
HONZAI GUEVARRA, RODA REBECCA GUEVARRA, RUTH GUEVARRA, minors represented by their mother Ma.
Concepcion Vda. de Guevarra, PRIMITIVA GUEVARRA, JOSIAS N. GARCIA, LUCITA M. GARCIA, VICTOR M. GARCIA,
LUTERO M. GARCIA, SAMSON M. GARCIA, FELIXBERTO M. GARCIA, JR., HERMENIGILDA GARCIA, CONSTANCIO
GARCIA, REYNALDO GARCIA, AGAPITA GARCIA, ERNESTO GARCIA, NORICO GARCIA, PACIFICO GARCIA, NORMANDO
GARCIA, ARTURO GARCIA, ESTELLA GARCIA, DIOSDADO GARCIA (representing LEONCIA GARCIA), GREGORIA
MENDOZA, ELEUTERIA BAUTISTA, PEDRO ATIENZA, BENITA SAMANIEGO, NENE SAMANIEGO (representing FLAVIANA
GALANG), LETICIA REYES, MANUEL REYES (representing MARCIANA GALANG), CARMEN ROQUE VDA. DE DIMABUYU,
PORFIRIO R. DIMABUYU, CARMEN R. DIMABUYU, CARIDAD R. DIMABUYU, PEDRO R. DIMABUYU, MARCOS
DIMABUYU (representing GERTRUDES GALANG), respondents.

Heminio Z. Canlas for petitioners.

Lagunzad, Juan, Rubin & Cabaron Law Office for respondents.

PADILLA, J.:
In this petition for review on certiorari, petitioners seek to nullify the decision ** of the Court of Appeals, dated 29
April 1991, in CA-G.R. CV. No. 14312, the dispositive portion of which reads as follows:

WHEREFORE, the appealed judgment is hereby REVERSED; and the Deed of Extra-Judicial Settlement of the estate of
the deceased Dionisio Galang (Exh. "D"), in so far as it relates to Lots 3548 and 3562 the Bacolor Cadastre, and
Transfer Certificates of Title Nos. 182670-R and 182671-R issued by virtue thereof are hereby declared null and void.

Conformably, the Register of Deeds concerned is hereby ordered to cancel the said titles; and subject Lots 3548 and
3562 are hereby adjudicated to the heirs of the deceased co-owners to be partitioned among them as follows:

a. one-sixth to the Heirs of Marciana Galang;

b. one-sixth to the Heirs of Dionisio Galang;

c. one-sixth to the Heirs of Flaviana Galang;

d. one-sixth to the Heirs of Gertrudes Galang;

e. one-sixth to the Heirs of Potenciana Galang;

f. one-sixth to the Heirs of Leoncia Galang.

Costs against defendants-appellees.

SO ORDERED. 1

It appears that on 21 August 1984, Aureo Reyes, et al. (hereafter "respondents") filed an amended complaint before
the Regional Trial Court of San Fernando, Pampanga, docketed as Civil Case No. 6752, for the annulment of a deed of
extra-judicial settlement and partition of the estate of Dionisio Galang, claiming to have been deprived thereby of
their shares, as co-owners, in Lot Nos. 3548 and 3562 Bacolor cadastre, and that OCT Nos. 9010 and 9102, issued in
the name of Dionisio Galang, covering said lots, are fraudulent and should therefore be annulled and cancelled.

The facts of the case, as culled from the Court of Appeals decision, are as follows:
The spouses Hilario Galang and Martina Laxamana owned two (2) lots located in San Agustin, Potrero, Municipality
of Bacolor, Province of Pampanga. They had six (6) children, namely, Dionisio, Marciana, Potenciana, Flaviana,
Leonora and Gertrudes.

The spouses (Hilario and Martina) mortgaged the aforesaid lots to Camilo Angeles. It is alleged by the respondents
that Dionisio Galang redeemed these lots in his own name, despite the fact that part of the funds used for the
redemption came from his sisters.2 A cadastral survey involving the two (2) lots was conducted, and on 19 May
1919, the Court of First Instance ordered the issuance in Cadastral Case No. 14, of OCT Nos. 9010 (for lot 3548) and
9102 (for lot 3562) in the name solely of Dionisio Galang ( hereafter Galang).

Respondents, who are heirs of Galang's sisters, claim that Galang and his five (5) sisters had partitioned the subject
lots on 27 June 1920, as embodied in an unnotarized affidavit executed by Galang (Exh. "C"). As a consequence
thereof, Galang's sisters constructed their houses on Lot 3548. The structures passed on from generation to
generation, with each of Galang's sisters and their descendants enjoying the benefits therefrom. No one questioned
or disturbed them until the petitioners (heirs of Galang), informed them that the lots in question were titled in
Galang's name and had been partitioned, on the basis of a Deed of Extrajudicial Partition (Exh. "D"), into three (3)
equal parts corresponding to his (Galang's) three (3) children; that petitioners had succeeded in subdividing the lots
and in obtaining titles thereto in their name (TCT Nos. 182670-R and 182671-R) despite their (respondents') earlier
demands for an extrajudicial settlement of their dispute.

Petitioners, on the other hand, contend that the cadastral case which culminated in the issuance of the original
certificates of title over the subject lots in the sole name of Galang, was a proceeding in rem, thus binding on the
whole world; that when original certificates of title (OCT Nos. 9010 and 9102) were issued on 9 January 1922 to
Galang, respondents did not raise any objection until March 1983 when they filed the complaint in Civil Case No.
6752, or after a lapse of sixty-one (61) years.

The trial court3 upheld Galang's titles over the lots which, as aforestated, had been issued as early as 1922 in his
name. The trial court further held that respondents' action had long prescribed, having been filed only on 24 March
1983, or after a lapse of sixty-one (61) long years from the issuance of said titles. The court also noted respondents'
failure to establish their relationship to Galang's five (5) sisters, premising their claim solely on an unsubstantiated
assertion that they are descendants of the deceased Galang sisters.4 The presence or construction of the houses on
Lot No. 3548 was also not considered as evidence in respondents' favor, since no proof was submitted establishing
respondents' right to occupy the place. The documentary evidence (Exh. "C" and "C-1") allegedly showing co-
ownership among Dionisio and his co-heirs, was likewise ignored by the trial court as this did not specifically refer to
the disputed Lots 3548 and 3562.

On appeal by the respondents, respondent Court of Appeals reversed the trial court by upholding respondents'
rights. It focused on two (2) issues.

Thus —

Are the properties in question owned in common by the predecessors-in-interest of appellants and appellees? And
has appellants' present action for partition prescribed?5
The appellate court declared that co-ownership existed between respondents' predecessors-in-interest and those of
petitioners, on the basis of Galang's affidavit which, although unnotarized, was nonetheless an ancient document,
pursuant to Sec. 22, Rule 132 of the Rules of Court, since it was executed on 27 June 1920. As such, proof of its due
execution and authentication could be dispensed with, according to the appellate court.

Hence, this recourse in turn by the petitioners.

We find the petition impressed with merit.

It is a fact that Dionisio Galang's ownership over the disputed lots (3548 and 3562) had been judicially confirmed on
19 May 1919 in Cadastral Case No. 14, G.L.R.O. No. 51, which is a proceeding in rem and hence binding "on the
whole world." OCT No. 1056 (9010) and OCT No. 1057 (9102) were, as a consequence, issued on 9 January 1922.
None of Galang's co-heirs objected to or protested their issuance. These titles became indefeasible and
incontrovertible. Then it was only after sixty-one (61) years or on 24 March 1983 that the descendants of Galang's
co-heirs asserted co-ownership claims over the subject lots.

It is true that Galang executed an affidavit, unnotarized at that, on 27 June 1920 which states in part as follows (per
English translation [Exh.

"C-1"]):6

That on this date, I have received from all my sisters and nephews who are my co-heirs, namely Potenciana Galang,
Flaviana Galang, Gertrudes Galang, who are my sisters, and Silverio Garcia and Hilarion Samia, in their own names
and for their brothers and sisters who are also co-heirs, the sum of ONE HUNDRED AND SIX PESOS (P106.00),
Philippine Currency, as complete payment for the discharge of the land we co-inherited, which is the one we
partitioned this date also, which was mortgaged to the Angeles family.7

However, as can be gleaned from the foregoing, there is no reference to Lot Nos. 3548 and 3562. Said affidavit is not
therefore a sufficient basis or support for what is alleged by respondents as a partition among Dionisio and his now
deceased sisters. It does not, as correctly stated by the trial court, amount to anything insofar as the two (2) lots
involved in this case are concerned:

Even their presentation of the document purportedly executed by Dionisio Galang on June 27, 1910 (Exh. "C" and "C-
1") where the latter acknowledges that he and his co-heirs named therein as co-owners of a certain property which
they had mortgaged to a certain family surnamed Angeles does not amount to anything for nothing in this document
shows that it pertains to the two lots involved herein. It merely referred to a certain "land" which Dionisio Galang
and his co-heirs "co-inherited" and partitioned without any indication as to which property is being referred

to.8
We likewise agree with the trial court that in the absence of definite proof establishing respondents'
link/relationship to their alleged predecessors-in-interest, i.e., the Galang sisters, they do not have any cause of
action, and the suit for partition must necessarily fall. The trial court aptly observed:

. . . the plaintiffs thru their witnesses Bienvenido Tapnio, Marcos Dimabuyu, Pedro Atienza, and Carmelita Galang,
tried to prove that all the plaintiffs herein are heirs and direct descendants, respectively, of Marciana Galang,
Potenciana Galang, Flaviana Galang, Leoncia Galang and Gertrudes Galang who, in their lifetime, together with their
late brother Dionisio Galang, are the co-owners of these two lots, namely, Lots Nos. 3548 and 3562. Lamentably, all
that was proved in the process by the plaintiffs thru these witnesses despite several proddings and suggestions
made by the court toward this end was that each of these plaintiffs are just related to one another in varying
degrees of relationship. They failed to establish their connection or relationship with any of these five sisters save for
their unfounded averment that they are indeed descendants and heirs of these deceased individuals.9

WHEREFORE, the petition is GRANTED. The appealed decision of the Court of Appeals is hereby SET ASIDE and the
decision of the trial court dated 3 October 1986 in Civil Case No. 6752 is hereby REINSTATED. No costs.

SO ORDERED.

[G.R. No. 137013. May 6, 2005]

RUBEN SANTOS, petitioner, vs. SPOUSES TONY AYON and MERCY AYON, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the petition for review on certiorari assailing the Decision[1] of the Court of Appeals dated
October 5, 1998 in CA-G.R. SP No. 4735 and its Resolution[2] dated December 11, 1998 denying the motion for
reconsideration.

The petition alleges that on November 6, 1996, Ruben Santos, petitioner, filed with the Municipal Trial Court in Cities
(MTCC), Branch 2, Davao City a complaint for illegal detainer against spouses Tony and Mercy Ayon, respondents,
docketed as Civil Case No. 3506-B-96.

In his complaint, petitioner averred that he is the registered owner of three lots situated at Lanzona Subdivision,
Matina, Davao City, covered by Transfer Certificates of Title (TCT) Nos. 108174, 108175, and 108176. Respondent
spouses are the registered owners of an adjacent parcel of land covered by TCT No. T-247792. The previous
occupant of this property built a building which straddled both the lots of the herein parties. Respondents have been
using the building as a warehouse.

Petitioner further alleged in his complaint that in 1985, when he bought the three lots, he informed respondents
that the building occupies a portion of his land. However, he allowed them to continue using the building. But in
1996, he needed the entire portion of his lot, hence, he demanded that respondents demolish and remove the part
of the building encroaching his property and turn over to him their possession. But they refused. Instead, they
continued occupying the contested portion and even made improvements on the building. The dispute was then
referred to the barangay lupon, but the parties failed to reach an amicable settlement. Accordingly, on March 27,
1996, a certification to file action was issued.

In their answer, respondents sought a dismissal of this case on the ground that the court has no jurisdiction over it
since there is no lessor-lessee relationship between the parties. Respondents denied they were occupying
petitioners property by mere tolerance, claiming they own the contested portion and have been occupying the same
long before petitioner acquired his lots in 1985.

On July 31, 1997, the MTCC rendered its Decision in favor of petitioner, thus:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants ordering the latter, their
successors-in-interest and other persons acting in their behalf to vacate the portion of the subject properties and
peacefully surrender possession thereof to plaintiff as well as dismantle/remove the structures found thereon.

Defendants are further ordered to pay reasonable value for the use and occupation of the encroached area in the
amount of One Thousand Pesos (P1,000.00) a month beginning September 1996 and the subsequent months
thereafter until premises are vacated; to pay attorneys fees of Ten Thousand Pesos (P10,000.00); and to pay the
costs of suit.

SO ORDERED.[3]

On appeal, the Regional Trial Court (RTC), Branch 11, Davao City, in its Decision dated February 12, 1998 in Civil Case
No. 25, 654-97, affirmed in toto the MTCC judgment.[4] The RTC upheld the finding of the MTCC that respondents
occupation of the contested portion was by mere tolerance. Hence, when petitioner needed the same, he has the
right to eject them through court action.

Respondents then elevated the case to the Court of Appeals through a petition for review. In its Decision dated
October 5, 1988 now being challenged by petitioner, the Court of Appeals held that petitioners proper remedy
should have been an accion publiciana before the RTC, not an action for unlawful detainer, thus:

In this case, petitioners were already in possession of the premises in question at the time private respondent
bought three (3) lots at the Lanzona Subdivision in 1985, a portion of which is occupied by a building being used by
the former as a bodega. Apart from private respondents bare claim, no evidence was alluded to show that
petitioners possession was tolerated by (his) predecessor-in-interest. The fact that respondent might have tolerated
petitioners possession is not decisive. What matters for purposes of determining the proper cause of action is the
nature of petitioners possession from its inception. And in this regard, the Court notes that the complaint itself
merely alleges that defendants-petitioners have been occupying a portion of the above properties of the plaintiff for
the past several years by virtue of the tolerance of the plaintiff. Nowhere is it alleged that his predecessor likewise
tolerated petitioners possession of the premises. x x x.

Consequently, x x x, respondent should present his claim before the Regional Trial Court in an accion publiciana and
not before the Municipal Trial Court in a summary proceeding of unlawful detainer.

WHEREFORE, the decision under review is hereby REVERSED and SET ASIDE. Accordingly, the complaint for unlawful
detainer is ordered DISMISSED.[5]

Petitioner filed a motion for reconsideration, but was denied by the Appellate Court in its Resolution dated
December 11, 1998.

Hence, the instant petition for review on certiorari ascribing to the Court of Appeals the following errors:

THE HONORABLE COURT OF APPEALS MISAPPLIED THE LAW IN DISMISSING THE INSTANT CASE ON THE GROUND
THAT PETITIONER SHOULD PRESENT HIS CLAIM BEFORE THE REGIONAL TRIAL COURT IN AN ACCION PUBLICIANA.

II

THE FINDINGS OF THE HONORABLE COURT OF APPEALS IS NOT IN CONSONANCE WITH EXISTING LAWS AND
JURISPRUDENCE.

The sole issue here is whether the Court of Appeals committed a reversible error of law in holding that petitioners
complaint is within the competence of the RTC, not the MTCC.

Petitioner contends that it is not necessary that he has prior physical possession of the questioned property before
he could file an action for unlawful detainer. He stresses that he tolerated respondents occupancy of the portion in
controversy until he needed it. After his demand that they vacate, their continued possession became illegal. Hence,
his action for unlawful detainer before the MTCC is proper.

Respondents, in their comment, insisted that they have been in possession of the disputed property even before
petitioner purchased the same on April 10, 1985. Hence, he cannot claim that they were occupying the property by
mere tolerance because they were ahead in time in physical possession.
We sustain the petition.

It is an elementary rule that the jurisdiction of a court over the subject matter is determined by the allegations of the
complaint and cannot be made to depend upon the defenses set up in the answer or pleadings filed by the
defendant.[6] This rule is no different in an action for forcible entry or unlawful detainer.[7] All actions for forcible
entry or unlawful detainer shall be filed with the proper Metropolitan Trial Courts, the Municipal Trial Courts and the
Municipal Circuit Trial Courts, which actions shall include not only the plea for restoration of possession but also all
claims for damages and costs arising therefrom.[8] The said courts are not divested of jurisdiction over such cases
even if the defendants therein raises the question of ownership over the litigated property in his pleadings and the
question of possession cannot be resolved without deciding the issue of ownership.[9]

Section 1, Rule 70 on forcible entry and unlawful detainer of the 1997 Rules of Civil Procedure, as amended, reads:

Section 1. Who may institute proceedings, and when. Subject to the provisions of the next succeeding section, a
person deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a
lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld
after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or
the legal representatives or assigns of any such lessor, vendor, vendee or other person may, at any time within one
(1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial
Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons
claiming under them, for the restitution of such possession, together with damages and costs.

Under the above provision, there are two entirely distinct and different causes of action, to wit: (1) a case for
forcible entry, which is an action to recover possession of a property from the defendant whose occupation thereof
is illegal from the beginning as he acquired possession by force, intimidation, threat, strategy or stealth; and (2) a
case for unlawful detainer, which is an action for recovery of possession from defendant whose possession of the
property was inceptively lawful by virtue of a contract (express or implied) with the plaintiff, but became illegal
when he continued his possession despite the termination of his right thereunder.[10]

Petitioners complaint for unlawful detainer in Civil Case No. 3506-B-96 is properly within the competence of the
MTCC. His pertinent allegations in the complaint read:

4. That defendants (spouses) have constructed an extension of their residential house as well as other structures and
have been occupying a portion of the above PROPERTIES of the plaintiff for the past several years by virtue of the
tolerance of the plaintiff since at the time he has no need of the property;

5. That plaintiff needed the property in the early part of 1996 and made demands to the defendants to vacate and
turn over the premises as well as the removal (of) their structures found inside the PROPERTIES of plaintiff; that
without any justifiable reasons, defendants refused to vacate the portion of the PROPERTIES occupied by them to
the damage and prejudice of the plaintiff.
6. Hence, plaintiff referred the matter to the Office of the Barangay Captain of Matina Crossing 74-A, Davao City for a
possible settlement sometime in the latter part of February 1996. The barangay case reached the Pangkat but no
settlement was had. Thereafter, a Certification To File Action dated March 27, 1996 was issued x x x;

x x x.[11] (underscoring ours)

Verily, petitioners allegations in his complaint clearly make a case for an unlawful detainer. We find no error in the
MTCC assuming jurisdiction over petitioners complaint. A complaint for unlawful detainer is sufficient if it alleges
that the withholding of the possession or the refusal to vacate is unlawful without necessarily employing the
terminology of the law.[12] Here, there is an allegation in petitioners complaint that respondents occupancy on the
portion of his property is by virtue of his tolerance. Petitioners cause of action for unlawful detainer springs from
respondents failure to vacate the questioned premises upon his demand sometime in 1996. Within one (1) year
therefrom, or on November 6, 1996, petitioner filed the instant complaint.

It bears stressing that possession by tolerance is lawful, but such possession becomes unlawful when the possessor
by tolerance refuses to vacate upon demand made by the owner. Our ruling in Roxas vs. Court of Appeals[13] is
applicable in this case: A person who occupies the land of another at the latters tolerance or permission, without any
contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which,
a summary action for ejectment is the proper remedy against him.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 47435 are hereby REVERSED and SET ASIDE. The Decision dated February 12, 1998 of the Regional Trial Court,
Branch 11, Davao City in Civil Case No. 25, 654-97, affirming the Decision dated July 31, 1997 of the Municipal Trial
Court in Cities, Branch 2, Davao City in Civil Case No. 3506-B-96, is hereby REINSTATED.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

[G.R. No. 150755. June 28, 2005]

RENE GANILA,* EDUARDO DUMADA-OG, SR., RAFAEL GANILA, JOSE PASTRANA, LOURDES GANILA, FLORENTINO
GANILA, SERAFIN GANILA, LORETO ARELLANO, CONRADO GANILA, VIVENCIO ALVIOR, EDUARDO GANTALA, AMPARO
VILLANUEVA, ELEUTERIO SILVA, ADELINA GANILA, FELIZARDO GANILA, SR., ENRIQUE GANILA, ABRAHAM TANONG,
EMILIO ALFARAS, JR., BAPTIST CHRISTIAN LEARNING CENTER, petitioners, vs. HON. COURT OF APPEALS AND VIOLETA
C. HERRERA, respondents.

DECISION

QUISUMBING, J.:
For review on certiorari are the Decision[1] dated March 30, 2001 of the Court of Appeals in CA-G.R. SP No. 58191,
and its Resolution[2] dated October 18, 2001 denying the motion for reconsideration. The assailed decision denied
the petition to set aside the Resolution[3] of the Regional Trial Court (RTC) of San Miguel, Jordan, Guimaras, Branch
65, affirming the Order of the Municipal Circuit Trial Court (MCTC) for the 19 petitioners to vacate the contested
parcel of land.

The facts are as follows:

On March 19, 1997, private respondent Violeta Herrera filed 21 ejectment Complaints[4] before the 16th MCTC,
Jordan-Buenavista-Nueva Valencia, Jordan, Guimaras. Private respondent alleged that she owns Lot 1227 of the
Cadastral Survey of Jordan, Guimaras, with an area of 43,210 square meters; that she inherited the lot from her
parents; and that she only tolerated petitioners to construct residential houses or other improvements on certain
portions of the lot without rental. Sometime in September or October 1996, private respondent demanded that the
petitioners vacate the lot and remove their houses and other improvements thereon. Petitioners refused, despite
offer of money by way of assistance to them. After the barangay conciliation failed, private respondent filed the
complaints.

In their Answers,[5] eight[6] of the petitioners claimed that Lot 1227 was formerly a shoreline which they developed
when they constructed their respective houses. Another eight[7] maintained that their houses stood on Lot 1229 of
the Cadastral Survey of Jordan, Guimaras. The other three[8] asserted that Lot 1227 is a social forest area.

At the preliminary conference, the parties agreed to designate two geodetic engineers as commissioners of the
MCTC to conduct a relocation survey of Lot 1227 and to identify who among the petitioners have houses within the
lot.[9]

The commissioners reported that: (1) the house of Henry Gabasa, defendant in Civil Case No. 288-J, is almost outside
Lot 1227; (2) the house of Ludovico Amatorio, defendant in Civil Case No. 289-J, diagonally traversed the boundary;
and (3) the houses of the 19 petitioners are inside Lot 1227.[10]

Eight months after herein petitioners failure to comment on the manifestation of private respondent to terminate
the preliminary conference, the MCTC terminated the preliminary conference.[11] Thereafter, petitioners counsel
Atty. Nelia Jesusa L. Gonzales failed to file her clients position papers and affidavits, even after they sought a 30-day
extension to file the same.[12]

Consequently, the MCTC decided the cases as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff whereby each of the
twenty-one (21) defendants are hereby ordered:

1. To vacate Lot 1227 of the Cadastral Survey of Jordan, Guimaras;

2. To pay Two Hundred Pesos (P200.00) per month from October, 1996 as compensation for the use of the property
until the same is vacated; and

3. To pay Two Thousand Pesos (P2,000.00) as attorneys fees and litigation expenses.

SO ORDERED.[13]

Petitioners appealed to the RTC, Branch 65, at Jordan, Guimaras, which decided as follows:

WHEREFORE, premises considered, the decision in Civil Cases Nos. 0270-J, 0272-J, 0273-J, 0274-J, 0275-J, 0276-J,
0277-J, 0278-J, 0279-J, 0280-J, 0281-J, 0282-J, 0283-J, 0284-J, 0285-J, 0286-J, 0287-J, 0291-J and 0292-J are hereby
affirmed.

The decision of the court below in Civil Cases Nos. 0288-J and 0289-J are set aside. Civil Cases Nos. 0288-J and 0289-J
are hereby DISMISSED.

SO ORDERED.[14]

The RTC ruled that the evidence showed the better right of private respondent to possess Lot 1227. Private
respondents position paper, affidavit and tax declaration supported her allegations. In addition, the commissioners
report and sketch plan showed that indeed petitioners occupy Lot 1227. On the other hand, according to the RTC,
the petitioners failed to present evidence which would show that they are entitled to possess the lot.

Based on the sketch plan, the RTC dismissed the cases against Gabasa and Amatorio since their houses occupy only a
small area of Lot 1227. It declared that Gabasa and Amatorio believed in good faith that the whole area they
occupied was part of the seashore.

The 19 petitioners, who were ordered to vacate the lot, filed a joint petition for review with the Court of Appeals.
The appellate court denied the petition. Petitioners moved for reconsideration and filed an amended petition. The
Court of Appeals, however, affirmed the factual findings and conclusions arrived at by the trial courts and denied the
amended petition for lack of merit.[15] It also denied the motion for reconsideration.

Petitioners are now before us, on a petition for review, alleging that:
The Honorable Court of Appeals, with due respect and deference, committed a reversible error in the
interpretation/application of the law in the instant case and in the appreciation of the facts and evidence presented.
The Court of Appeals gravely abused its discretion when it denied and dismissed the petition filed by the
petitioners.[16]

After considering the parties submissions, we find three basic issues: (1) Did the MCTC err in taking jurisdiction over
and deciding the cases? (2) Did the RTC err in sustaining the MCTCs judgment? (3) Did the CA err in denying the
petition for review filed by the 19 petitioners ordered to be ejected?

Petitioners insist that private respondent should have filed an action to recover possession de jure, not a mere
complaint for ejectment, for two reasons. One, they possessed Lot 1227 in good faith for more than 30 years in the
concept of owners. And two, there was no withholding of possession since private respondent was not in prior
possession of the lot.

Private respondent states in her Comment before us that the allegations in her Complaints make out a clear case of
unlawful detainer which is cognizable by the MCTC. We are in agreement with her stance. There was no error in the
choice of the complainants remedy, a matter left to her determination as the suitor. And the complaint itself is
defined by the allegations therein, not the allegations of the defendants.

At the outset, we note that petitioners question the MCTCs jurisdiction yet they admit in their preliminary statement
that the Complaints filed are indeed for unlawful detainer, and that the only issue to be determined is mere physical
possession (possession de facto) and not juridical possession (possession de jure), much less ownership.[17]

While petitioners assert that this case involves only deprivation of possession, they confuse the remedy of an action
for forcible entry with that of unlawful detainer. In unlawful detainer, prior physical possession by the plaintiff is not
necessary. It is enough that plaintiff has a better right of possession. Actual, prior physical possession of a property
by a party is indispensable only in forcible entry cases. In unlawful detainer cases, the defendant is necessarily in
prior lawful possession of the property but his possession eventually becomes unlawful upon termination or
expiration of his right to possess.[18] Thus, the fact that petitioners are in possession of the lot does not
automatically entitle them to remain in possession. And the issue of prior lawful possession by the defendants does
not arise at all in a suit for unlawful detainer, simply because prior lawful possession by virtue of contract or other
reasons is given or admitted. Unlike in forcible entry where defendants, by force, intimidation, threat, strategy or
stealth, deprive the plaintiff or the prior physical possessor of possession. Here there is no evidence to show that
petitioners entered the lot by any of these acts.

If only to stress the fundamental principles related to present controversy, jurisdiction over unlawful detainer suits is
vested in municipal trial courts.[19] And in ejectment cases, the jurisdiction of the court is determined by the
allegations of the complaint.[20]

In this case for ejectment, private respondents allegations sufficiently present a case of unlawful detainer. She
alleged that (1) she owns Lot 1227; (2) she tolerated petitioners to construct their houses thereon; (3) she withdrew
her tolerance; and (4) petitioners refused to heed her demand to vacate the lot. The Complaints were also filed
within one year from the date of her demand. The cause of action for unlawful detainer between the parties springs
from the failure of petitioners to vacate the lot upon lawful demand of the private respondent. When they refused
to vacate the lot after her demand, petitioners continued possession became unlawful. Her complaint for ejectment
against respondent, to put it simply, is not without sufficient basis.

Petitioners contention that private respondent should have filed an action to recover possession de jure with the
RTC is not supported by law or jurisprudence. The distinction between a summary action of ejectment and a plenary
action for recovery of possession and/or ownership of the land is settled in our jurisprudence.

What really distinguishes an action for unlawful detainer from a possessory action (accion publiciana) and from a
reinvindicatory action (accion reinvindicatoria) is that the first is limited to the question of possession de facto. An
unlawful detainer suit (accion interdictal) together with forcible entry are the two forms of an ejectment suit that
may be filed to recover possession of real property. Aside from the summary action of ejectment, accion publiciana
or the plenary action to recover the right of possession and accion reinvindicatoria or the action to recover
ownership which includes recovery of possession, make up the three kinds of actions to judicially recover
possession.[21]

It is not up to defendants, now petitioners herein, to dictate upon plaintiff, now the private respondent, what her
initial recourse should be. Her choice of an action for ejectment against so-called squatters is well within her rights.

Petitioners cite the case of Bayubay v. Court of Appeals,[22] and argue that the MCTCs decision was without
jurisdictional or legal basis because the MCTC did not issue a preliminary conference order. They assert that the 10-
day period to file position papers and affidavits only starts after the parties had received a preliminary conference
order. They insist they were denied due process when the MCTC decided the cases based merely on private
respondents Complaints and affidavit, without considering their Answers.

For her part, private respondent maintains that there was substantial compliance with the rules in the MCTCs
conduct of the preliminary conference, hence there was no violation of due process nor disregard of its proper
jurisdiction.

Petitioners present contention was first raised only in their appeal to the RTC. Raising it before the appellate tribunal
is barred by estoppel.[23] They should have raised it in the proceedings before the MCTC. In our view, this issue is a
mere afterthought, when the MCTC decided against them. Basic rules of fair play, justice and due process require
that as a rule an issue cannot be raised by the petitioners for the first time on appeal.[24]

Besides, petitioners did not question initially the MCTCs Order dated February 19, 1999, when they moved for an
extension of time to file their position papers and affidavits. They wanted another 30 days on top of the 30 days set
by the MCTC, which strictly should have been 10 days only. In this regard, petitioners could not claim that they were
denied sufficient time to file their position papers and affidavits before the trial court. Further, they cannot validly
invoke our ruling[25] in Bayubay, for in that case there was no order at all terminating the preliminary conference
and requiring the parties to submit position papers and affidavits.
We note with dismay petitioners insistence that we order the MCTC to conduct the requisite preliminary conference.
The summary character of ejectment suits will be disregarded if we allow petitioners to further delay this case by
allowing a second preliminary conference. Ejectment by way of forcible entry and unlawful detainer cases are
summary proceedings, designed to provide an expeditious means of protecting actual possession or the right to
possession over the property involved. It is a timely procedure designed to remedy the delay in the resolution of
such cases.[26]

Lastly, petitioners aver that private respondent failed to prove her allegation of ownership of Lot 1227 as it is only
based on a tax declaration which is not an evidence of ownership. They also claim that their possession of the lot
was not and could not be by mere tolerance. However, this is a factual matter best left to the trial courts.

What we have now is sufficient evidence showing that private respondent has a better right to possess Lot 1227. The
commissioners report and sketch plan show that the 19 petitioners occupy the lot, which corroborate private
respondents allegation and disprove petitioners defense that Lot 1227 is a shoreline; or that Lot 1227 is a social
forest area. While not a conclusive evidence of ownership, private respondents tax declaration constitutes proof that
she has a claim of title over the lot. It has been held that:

Although tax declarations or realty tax payment of property are not conclusive evidence of ownership, nevertheless,
they are good indicia of possession in the concept of owner for no one in his right mind would be paying taxes for a
property that is not in his actual or at least constructive possession. They constitute at least proof that the holder has
a claim of title over the property. The voluntary declaration of a piece of property for taxation purposes manifests
not only ones sincere and honest desire to obtain title to the property and announces his adverse claim against the
State and all other interested parties, but also the intention to contribute needed revenues to the Government. Such
an act strengthens ones bona fide claim of acquisition of ownership.[27]

The lower courts did not err in adjudicating the issue of possession. Mere absence of title over the lot is not a ground
for the courts to withhold relief from the parties in an ejectment case. Plainly stated, the trial court has validly
exercised its jurisdiction over the ejectment cases below. The policy behind ejectment suits is to prevent breaches of
the peace and criminal disorder, and to compel the party out of possession to respect and resort to the law alone to
obtain what she claims is hers. The party deprived of possession must not take the law into his or her own
hands.[28] For their part, herein petitioners could not be barred from defending themselves before the court
adequately, as a matter of law and right.

However, petitioners in their defense should show that they are entitled to possess Lot 1227. If they had any
evidence to prove their defenses, they should have presented it to the MCTC with their position papers and
affidavits. But they ignored the courts order and missed the given opportunity to have their defenses heard, the very
essence of due process.[29] Their allegations were not only unsubstantiated but were also disproved by the plaintiffs
evidence.

In sum, we find no reversible error much less any grave abuse of discretion committed by the Court of Appeals. A
person who occupies the land of another at the latters tolerance or permission, without any contract between them,
is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for
ejectment is the proper remedy against him.[30] His status is analogous to that of a lessee or tenant whose term of
lease has expired but whose occupancy continued by tolerance of the owner. In such a case, the date of unlawful
deprivation or withholding of possession is to be counted from the date of the demand to vacate.[31]

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision of the Court of Appeals dated March 30,
2001 and its Resolution dated October 18, 2001 are AFFIRMED.

Costs against petitioners.

SO ORDERED.

U.S. Supreme Court

United States v. Causby, 328 U.S. 256 (1946)

United States v. Causby

No. 630

Argued May 1, 1946

Decided May 27, 1946

328 U.S. 256

CERTIORARI TO THE COURT OF CLAIMS

Syllabus

Respondents owned a dwelling and a chicken farm near a municipal airport. The safe path of glide to one of the
runways of the airport passed directly over respondents' property at 83 feet, which was 67 feet above the house, 63
feet above the barn and 18 feet above the highest tree. It was used 4% of the time in taking off and 7% of the time in
landing. The Government leased the use of the airport for a term of one month commencing June 1, 1942, with a
provision for renewals until June 30, 1967, or six months after the end of the national emergency, whichever was
earlier. Various military aircraft of the United States used the airport. They frequently came so close to respondents'
property that they barely missed the tops of trees, the noise was startling, and the glare from their landing lights
lighted the place up brightly at night. This destroyed the use of the property as a chicken farm and caused loss of
sleep, nervousness, and fright on the part of respondents. They sued in the Court of Claims to recover for an alleged
taking of their property and for damages to their poultry business. The Court of Claims found that the Government
had taken an easement over respondents' property, and that the value of the property destroyed and the easement
taken was $2,000; but it made no finding as to the precise nature or duration of the easement.

Held:

1. A servitude has been imposed upon the land for which respondents are entitled to compensation under the Fifth
Amendment. Pp. 328 U. S. 260-267.

(a) The common law doctrine that ownership of land extends to the periphery of the universe has no place in the
modern world. Pp. 328 U. S. 260-261.

(b) The air above the minimum safe altitude of flight prescribed by the Civil Aeronautics Authority is a public highway
and part of the public domain, as declared by Congress in the Air Commerce Act of 1926, as amended by the Civil
Aeronautics Act of 1938. Pp. 328 U. S. 260-261, 328 U. S. 266.

(c) Flights below that altitude are not within the navigable air space which Congress placed within the public domain,
even though they are within the path of glide approved by the Civil Aeronautics Authority. Pp. 328 U. S. 263-264.

Page 328 U. S. 257

(d) Flights of aircraft over private land which are so low and frequent as to be a direct and immediate interference
with the enjoyment and use of the land are as much an appropriation of the use of the land as a more conventional
entry upon it. Pp. 328 U. S. 261-262, 328 U. S. 264-267.

2. Since there was a taking of private property for public use, the claim was "founded upon the Constitution," within
the meaning of § 141(1) of the Judicial Code, and the Court of Claims had jurisdiction to hear and determine it. P.
328 U. S. 267.

3. Since the court's findings of fact contain no precise description of the nature or duration of the easement taken,
the judgment is reversed, and the cause is remanded to the Court of Claims so that it may make the necessary
findings. Pp. 328 U. S. 267-268.

(a) An accurate description of the easement taken is essential, since that interest vests in the United States. P. 328 U.
S. 267.
(b) Findings of fact on every "material issue" are a statutory requirement, and a deficiency in the findings cannot be
rectified by statements in the opinion. Pp. 328 U. S. 267-268.

(c) A conjecture in lieu of a conclusion from evidence would not be a proper foundation for liability of the United
States. P. 328 U. S. 268.

104 Ct.Cls. 342, 60 F.Supp. 751, reversed and remanded.

The Court of Claims granted respondents a judgment for the value of property destroyed and damage to their
property resulting from the taking of an easement over their property by low-flying military aircraft of the United
States, but failed to include in its findings of fact a specific description of the nature or duration of the easement. 104
Ct.Cls. 342, 60 F.Supp. 751. This Court granted certiorari. 327 U.S. 775. Reversed and remanded, p. 328 U. S. 268.

Page 328 U. S. 258

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

This is a case of first impression. The problem presented is whether respondents' property was taken within the
meaning of the Fifth Amendment by frequent and regular flights of army and navy aircraft over respondents' land at
low altitudes. The Court of Claims held that there was a taking, and entered judgment for respondent, one judge
dissenting. 60 F.Supp. 751. The case is here on a petition for a writ of certiorari which we granted because of the
importance of the question presented.

Respondents own 2.8 acres near an airport outside of Greensboro, North Carolina. It has on it a dwelling house, and
also various outbuildings which were mainly used for raising chickens. The end of the airport's northwest-southeast
runway is 2,220 feet from respondents' barn and 2,275 feet from their house. The path of glide to this runway passes
directly over the property -- which is 100 feet wide and 1,200 feet long. The 30 to 1 safe glide angle [Footnote 1]
approved by the Civil Aeronautics Authority [Footnote 2] passes over this property at 83 feet, which is 67 feet above
the house, 63 feet above the barn and 18 feet above the highest tree. [Footnote 3] The use by the United States of
this airport is pursuant to a lease executed in May, 1942, for a term commencing June 1, 1942 and ending June 30,
1942, with a provision for renewals until June 30, 1967, or six

Page 328 U. S. 259

months after the end of the national emergency, whichever is the earlier.
Various aircraft of the United States use this airport -- bombers, transports, and fighters. The direction of the
prevailing wind determines when a particular runway is used. The northwest-southeast runway in question is used
about four percent of the time in taking off and about seven percent of the time in landing. Since the United States
began operations in May, 1942, its four-motored heavy bombers, other planes of the heavier type, and its fighter
planes have frequently passed over respondents' land buildings in considerable numbers and rather close together.
They come close enough at times to appear barely to miss the tops of the trees, and at times so close to the tops of
the trees as to blow the old leaves off. The noise is startling. And, at night, the glare from the planes brightly lights
up the place. As a result of the noise, respondents had to give up their chicken business. As many as six to ten of
their chickens were killed in one day by flying into the walls from fright. The total chickens lost in that manner was
about 150. Production also fell off. The result was the destruction of the use of the property as a commercial chicken
farm. Respondents are frequently deprived of their sleep, and the family has become nervous and frightened.
Although there have been no airplane accidents on respondents' property, there have been several accidents near
the airport and close to respondents' place. These are the essential facts found by the Court of Claims. On the basis
of these facts, it found that respondents' property had depreciated in value. It held that the United States had taken
an easement over the property on June 1, 1942, and that the value of the property destroyed and the easement
taken was $2,000.

Page 328 U. S. 260

I. The United States relies on the Air Commerce Act of 1926, 44 Stat. 568, 49 U.S.C. § 171 et seq., as amended by the
Civil Aeronautics Act of 1938, 52 Stat. 973, 49 U.S.C. § 401 et seq. Under those statutes, the United States has
"complete and exclusive national sovereignty in the air space" over this country. 49 U.S.C. § 176(a). They grant any
citizen of the United States "a public right of freedom of transit in air commerce [Footnote 4] through the navigable
air space of the United States." 49 U.S.C. § 403. And "navigable air space" is defined as "airspace above the minimum
safe altitudes of flight prescribed by the Civil Aeronautics Authority." 49 U.S.C. § 180. And it is provided that "such
navigable airspace shall be subject to a public right of freedom of interstate and foreign air navigation." Id. It is
therefore argued that, since these flights were within the minimum safe altitudes of flight which had been
prescribed, they were an exercise of the declared right of travel through the airspace. The United States concludes
that, when flights are made within the navigable airspace without any physical invasion of the property of the
landowners, there has been no taking of property. It says that, at most, there was merely incidental damage
occurring as a consequence of authorized air navigation. It also argues that the landowner does not own
superadjacent airspace which he has not subjected to possession by the erection of structures or other occupancy.
Moreover, it is argued that, even if the United States took airspace owned by respondents, no compensable damage
was shown. Any damages are said to be merely consequential for which no compensation may be obtained under
the Fifth Amendment.

It is ancient doctrine that at common law ownership of the land extended to the periphery of the universe -- cujus

Page 328 U. S. 261

est solum ejus est usque and coelum. [Footnote 5] But that doctrine has no place in the modern world. The air is a
public highway, as Congress has declared. Were that not true, every transcontinental flight would subject the
operator to countless trespass suits. Common sense revolts at the idea. To recognize such private claims to the
airspace would clog these highways, seriously interfere with their control and development in the public interest,
and transfer into private ownership that to which only the public has a just claim.
But that general principle does not control the present case. For the United States conceded on oral argument that,
if the flights over respondents' property rendered it uninhabitable, there would be a taking compensable under the
Fifth Amendment. It is the owner's loss, not the taker's gain, which is the measure of the value of the property taken.
United States v. Miller, 317 U. S. 369. Market value fairly determined is the normal measure of the recovery. Id. And
that value may reflect the use to which the land could readily be converted, as well as the existing use. United States
v. Powelson, 319 U. S. 266, 319 U. S. 275, and cases cited. If, by reason of the frequency and altitude of the flights,
respondents could not use this land for any purpose, their loss would be complete. [Footnote 6] It would be as
complete as if the United States had entered upon the surface of the land and taken exclusive possession of it.

We agree that, in those circumstances, there would be a taking. Though it would be only an easement of flight

Page 328 U. S. 262

which was taken, that easement, if permanent and not merely temporary, normally would be the equivalent of a fee
interest. It would be a definite exercise of complete dominion and control over the surface of the land. The fact that
the planes never touched the surface would be as irrelevant as the absence in this day of the feudal livery of seisin
on the transfer of real estate. The owner's right to possess and exploit the land -- that is to say, his beneficial
ownership of it -- would be destroyed. It would not be a case of incidental damages arising from a legalized nuisance,
such as was involved in Richards v. Washington Terminal Co., 233 U. S. 546. In that case, property owners whose
lands adjoined a railroad line were denied recovery for damages resulting from the noise, vibrations, smoke, and the
like, incidental to the operations of the trains. In the supposed case, the line of flight is over the land. And the land is
appropriated as directly and completely as if it were used for the runways themselves.

There is no material difference between the supposed case and the present one, except that, here, enjoyment and
use of the land are not completely destroyed. But that does not seem to us to be controlling. The path of glide for
airplanes might reduce a valuable factory site to grazing land, an orchard to a vegetable patch, a residential section
to a wheat field. Some value would remain. But the use of the airspace immediately above the land would limit the
utility of the land and cause a diminution in its value. [Footnote 7] That was the philosophy of Portsmouth Harbor
Land & Hotel Co. v.

Page 328 U. S. 263

United States, 260 U. S. 327. In that case, the petition alleged that the United States erected a fort on nearby land,
established a battery and a fire control station there, and fired guns over petitioner's land. The Court, speaking
through Mr. Justice Holmes, reversed the Court of Claims which dismissed the petition on a demurrer, holding that
"the specific facts set forth would warrant a finding that a servitude has been imposed." [Footnote 8] 260 U.S. at 260
U. S. 330. And see Delta Air Corp. v. Kersey, 193 Ga. 862, 20 S.E.2d 245. Cf. United States v. 357.25 Acres of Land, 55
F.Supp. 461.

The fact that the path of glide taken by the planes was that approved by the Civil Aeronautics Authority does not
change the result. The navigable airspace which Congress has placed in the public domain is "airspace above the
minimum safe altitudes of flight prescribed by the Civil Aeronautics Authority." 49 U.S.C. § 180. If that agency
prescribed 83 feet as the minimum safe altitude, then we would have presented the question of the validity of the
regulation. But nothing of the sort has been done. The path of glide governs the method of operating -- of landing or
taking off. The altitude required for that operation is not the minimum safe altitude of flight which is the downward
reach of the navigable airspace. The minimum prescribed by the authority is 500 feet during the day and 1000 feet at
night for air carriers (Civil Air Regulations, Pt. 61, §§ 61.7400, 61.7401, Code Fed.Reg.Cum.Supp., Tit. 14, ch. 1) and
from 300 to 1000 feet for

Page 328 U. S. 264

other aircraft depending on the type of plane and the character of the terrain. Id., Pt. 60, §§ 60.350-60.3505,
Fed.Reg.Cum.Supp., supra. Hence, the flights in question were not within the navigable airspace which Congress
placed within the public domain. If any airspace needed for landing or taking off were included, flights which were so
close to the land as to render it uninhabitable would be immune. But the United States concedes, as we have said,
that, in that event, there would be a taking. Thus, it is apparent that the path of glide is not the minimum safe
altitude of flight within the meaning of the statute. The Civil Aeronautics Authority has, of course, the power to
prescribe air traffic rules. But Congress has defined navigable airspace only in terms of one of them -- the minimum
safe altitudes of flight.

We have said that the airspace is a public highway. Yet it is obvious that, if the landowner is to have full enjoyment
of the land, he must have exclusive control of the immediate reaches of the enveloping atmosphere. Otherwise
buildings could not be erected, trees could not be planted, and even fences could not be run. The principle is
recognized when the law gives a remedy in case overhanging structures are erected on adjoining land. [Footnote 9]
The landowner owns at least as much of the space above the ground as the can occupy or use in connection with the
land. See Hinman v. Pacific Air Transport, 84 F.2d 755. The fact that he does not occupy it in a physical sense -- by the
erection of buildings and the like -- is not material. As we have said, the flight of airplanes, which skim the surface
but do not touch it, is as much an appropriation of the use of the land as a more conventional entry upon it. We
would not doubt that, if the United States erected

Page 328 U. S. 265

an elevated railway over respondents' land at the precise altitude where its planes now fly, there would be a partial
taking, even though none of the supports of the structure rested on the land. [Footnote 10] The reason is that there
would be an intrusion so immediate and direct as to subtract from the owner's full enjoyment of the property and to
limit his exploitation of it. While the owner does not in any physical manner occupy that stratum of airspace or make
use of it in the conventional sense, he does use it in somewhat the same sense that space left between buildings for
the purpose of light and air is used. The superadjacent airspace at this low altitude is so close to the land that
continuous invasions of it affect the use of the surface of the land itself. We think that the landowner, as an incident
to his ownership, has a claim to it, and that invasions of it are in the same category as invasions of the surface.
[Footnote 11]

In this case, as in Portsmouth Harbor Land & Hotel Co. v. United States, supra, the damages were not merely
consequential. They were the product of a direct invasion of respondents' domain.
Page 328 U. S. 266

As stated in United States v. Cress, 243 U. S. 316, 243 U. S. 328,

". . . it is the character of the invasion, not the amount of damage resulting from it, so long as the damage is
substantial, that determines the question whether it is a taking."

We said in United States v. Powelson, supra, p. 319 U. S. 279, that, while the meaning of "property" as used in the
Fifth Amendment was a federal question, "it will normally obtain its content by reference to local law." If we look to
North Carolina law, we reach the same result. Sovereignty in the airspace rests in the State "except where granted to
and assumed by the United States." Gen.Stats.1943, § 63-11. The flight of aircraft is lawful

"unless at such a low altitude as to interfere with the then existing use to which the land or water, or the space over
the land or water, is put by the owner, or unless so conducted as to be imminently dangerous to persons or property
lawfully on the land or water beneath."

Id., § 63-13. Subject to that right of flight, "ownership of the space above the lands and waters of this State is
declared to be vested in the several owners of the surface beneath." Id., § 63-12. Our holding that there was an
invasion of respondents' property is thus not inconsistent with the local law governing a landowner's claim to the
immediate reaches of the superadjacent airspace.

The airplane is part of the modern environment of life, and the inconveniences which it causes are normally not
compensable under the Fifth Amendment. The airspace, apart from the immediate reaches above the land, is part of
the public domain. We need not determine at this time what those precise limits are. Flights over private land are
not a taking, unless they are so low and so frequent as to be a direct and immediate interference with the enjoyment
and use of the land. We need not speculate on that phase of the present case. For the findings of the Court

Page 328 U. S. 267

of Claims plainly establish that there was a diminution in value of the property, and that the frequent, low-level
flights were the direct and immediate cause. We agree with the Court of Claims that a servitude has been imposed
upon the land.

II. By § 145(1) of the Judicial Code, 28 U.S.C. § 250(1), the Court of Claims has jurisdiction to hear and determine

"All claims (except for pensions) founded upon the Constitution of the United States or . . . upon any contract,
express or implied, with the Government of the United States."
We need not decide whether repeated trespasses might give rise to an implied contract. Cf. Portsmouth Harbor Land
& Hotel Co. v. United States, supra. If there is a taking, the claim is "founded upon the Constitution," and within the
jurisdiction of the Court of Claims to hear and determine. See Hollister v. Benedict & Burnham Mfg. Co., 113 U. S. 59,
113 U. S. 67; Hurley v. Kincaid, 285 U. S. 95, 285 U. S. 104; Yearsley v. W. A. Ross Construction Co., 309 U. S. 18, 309
U. S. 21. Thus, the jurisdiction of the Court of Claims in this case is clear.

III. The Court of Claims held, as we have noted, that an easement was taken. But the findings of fact contain no
precise description as to its nature. It is not described in terms of frequency of flight, permissible altitude, or type of
airplane. Nor is there a finding as to whether the easement taken was temporary or permanent. Yet an accurate
description of the property taken is essential, since that interest vests in the United States. United States v. Cress,
supra, 243 U. S. 328-329, and cases cited. It is true that the Court of Claims stated in its opinion that the easement
taken was permanent. But the deficiency in findings cannot be rectified by statements in the opinion. United States
v. Esnault-Pelterie, 299 U. S. 201, 299 U. S. 205-206; United States v. Seminole Nation, 299 U. S. 417, 299 U. S. 422.
Findings of fact on every "material issue" are a statutory

Page 328 U. S. 268

requirement. 53 Stat. 752, 28 U.S.C. § 288. The importance of findings of fact based on evidence is emphasized here
by the Court of Claims' treatment of the nature of the easement. It stated in its opinion that the easement was
permanent because the United States "no doubt intended to make some sort of arrangement whereby it could use
the airport for its military planes whenever it had occasion to do so." That sounds more like conjecture, rather than a
conclusion from evidence, and if so, it would not be a proper foundation for liability of the United States. We do not
stop to examine the evidence to determine whether it would support such a finding, if made. For that is not our
function. United States v. Esnault-Pelterie, supra, p. 299 U. S. 206.

Since on this record it is not clear whether the easement taken is a permanent or a temporary one, it would be
premature for us to consider whether the amount of the award made by the Court of Claims was proper.

The judgment is reversed, and the cause is remanded to the Court of Claims so that it may make the necessary
findings in conformity with this opinion.

G.R. No. 4223 August 19, 1908

NICOLAS LUNOD, ET AL., plaintiffs-appellees,

vs.

HIGINO MENESES, defendant-appellant.

T. Icasiano, for appellant.

R. Salinas, for appellee.

TORRES, J.:

On the 14th of March, 1904, Nicolas Lunod, Juan de la Vega, Evaristo Rodriguez, Fernando Marcelo, Esteban Villena,
Benito Litao, Ventura Hernandez, and Casimiro Pantanilla, residents of the town of Bulacan, province of the same
name, filed a written complaint against Higino Meneses, alleging that they each owned and possessed farm lands,
situated in the places known as Maytunas and Balot, near a small lake named Calalaran; that the defendant is the
owner of a fish-pond and a strip of land situated in Paraanan, adjoining the said lake on one side, and the River
Taliptip on the other; that from time immemorial, and consequently for more than twenty years before 1901, there
existed and still exists in favor of the rice fields of the plaintiffs a statutory easement permitting the flow of water
over the said land in Paraanan, which easement the said plaintiffs enjoyed until the year 1901 and consisted in that
the water collected upon their lands and in the Calalaran Lake flow through Paraanan into the Taliptip River. From
that year however, the defendant, without any right or reason, converted the land in Paraanan into a fishpond and
by means of a dam and a bamboo net, prevented the free passage of the water through said place into the Taliptip
River, that in consequence the lands of the plaintiff became flooded and damaged by the stagnant waters, there
being no outlet except through the land in Paraanan; that their plantation were destroyed, causing the loss and
damages to the extent of about P1,000, which loss and damage will continue if the obstructions to the flow of the
water are allowed to remain, preventing its passage through said land and injuring the rice plantations of the
plaintiffs. They therefore asked that judgment be entered against the defendant, declaring that the said tract of land
in Paraanan is subject to a statutory easement permitting the flow of water from the property of the plaintiffs, and
that, without prejudice to the issuing of a preliminary injunction, the defendant be ordered to remove and destroy
the obstructions that impede the passage of the waters through Paraanan, and that in future, and forever, he
abstain from closing in any manner the aforesaid tract of land; that, upon judgment being entered, the said
injunction be declared to be final and that the defendant be sentenced to pay to the plaintiffs an indemnity of
P1,000, and the costs in the proceedings; that they be granted any other and further equitable or proper remedy in
accordance with the facts alleged and proven.

In view of the demurrer interposed by the plaintiffs to the answer of the defendant, the latter, on the 29th of
August, 1904, filed an amended answer, denying each and everyone of the allegations of the complaint, and alleged
that no statutory easement existed nor could exist in favor of the lands described in the complaint, permitting the
waters to flow over the fish pond that he, together with his brothers, owned in the sitio of Bambang, the area and
boundaries of which were stated by him, and which he and his brothers had inherited from their deceased mother.

Apolinara de Leon; that the same had been surveyed by a land surveyor in September, 1881, he also denied that he
had occupied or converted any land in the barrio of Bambang into a fishpond; therefore, and to sentence the
plaintiffs to pay the costs and corresponding damages.

Upon the evidence adduced by both parties to the suit, the court, on the 13th of March, 1907, entered judgment
declaring that the plaintiffs were entitled to a decision in their favor, and sentenced the defendant to remove the
dam placed on the east of the Paraanan passage on the side of the Taliptip River opposite the old dam in the barrio
of Bambang, as well as to remove and destroy the obstacles to the free passage of the waters through the strip of
land in Paraanan; to abstain in future, and forever, from obstructing or closing in any manner the course of the
waters through the said strip of land. The request that the defendant be sentenced to pay an indemnity was denied,
and no ruling was made as to costs.
The defendant excepted to the above judgment and furthermore asked for a new trial which was denied and also
excepted to, and, upon approval of the bill of exceptions, the question was submitted to this court.

Notwithstanding the defendant's denial in his amended answer, it appears to have been clearly proven in this case
that the lands owned by the plaintiffs in the aforesaid barrio, as well as the small adjoining lake, named Calalaran,
are located in places relatively higher than the sitio called Paraanan where the land and fish pond of the defendant
are situated, and which border on the Taliptip River; that during the rainy season the rain water which falls on he
land of the plaintiffs, and which flows toward the small Calalaran Lake at flood time, has no outlet to the Taliptip
River other than through the low land of Paraanan: that the border line between Calalaran and Paraanan there has
existed from time immemorial a dam, constructed by the community for the purpose of preventing the salt waters
from the Taliptip River, at high tide, from flooding the land in Calalaran, passing through the lowlands of Paraanan;
but when rainfall was abundant, one of the residents was designated in his turn by the lieutenant or justice of the
barrio to open the sluice gate in order to let out the water that flooded the rice fields, through the land of Paraanan
to the above-mentioned river, that since 1901, the defendant constructed another dam along the boundary of this
fishpond in Paraanan, thereby impeding the outlet of the waters that flood the fields of Calalaran, to the serious
detriment of the growing crops.

According to article 530 of the Civil Code, an easement is charge imposed upon one estate for the benefit of another
estate belonging to a different owner, and the realty in favor of which the easement is established is called the
dominant estate, and the one charged with it the servient estate.

The lands of Paraanan being the lower are subject to the easement of receiving and giving passage to the waters
proceeding from the higher lands and the lake of Calalaran; this easement was not constituted by agreement
between the interested parties; it is of a statutory nature, and the law had imposed it for the common public utility
in view of the difference in the altitude of the lands in the barrio Bambang.

Article 552 of the Civil code provides:

Lower estates must receive the waters which naturally and without the intervention of man descend from the higher
estates, as well as the stone or earth which they carry with them.

Neither may the owner of the lower estates construct works preventing this easement, nor the one of the higher
estate works increasing the burden.

Article 563 of the said code reads also:

The establishment, extent, form, and conditions of the easements of waters to which this section refers shall be
governed by the special law relating thereto in everything not provided for in this code.
The special law cited in the Law of Waters of August 3, 1866, article 111 of which, treating of natural easements
relating to waters, provides:

Lands situated at a lower level are subject to receive the waters that flow naturally, without the work of man, from
the higher lands together with the stone or earth which they carry with them.

Hence, the owner of the lower lands can not erect works that will impede or prevent such an easement or charge,
constituted and imposed by the law upon his estate for the benefit of the higher lands belonging to different
owners; neither can the latter do anything to increase or extend the easement.

According to the provisions of law above referred to, the defendant, Meneses, had no right to construct the works,
nor the dam which blocks the passage, through his lands and the outlet to the Taliptip River, of the waters which
flood the higher lands of the plaintiffs; and having done so, to the detriment of the easement charged on his estate,
he has violated the law which protects and guarantees the respective rights and regulates the duties of the owners
of the fields in Calalaran and Paraanan.

It is true that article 388 of said code authorizes every owner to enclose his estate by means of walls, ditches fences
or any other device, but his right is limited by the easement imposed upon his estate.

The defendant Meneses might have constructed the works necessary to make and maintain a fish pond within his
own land, but he was always under the strict and necessary obligation to respect the statutory easement of waters
charged upon his property, and had no right to close the passage and outlet of the waters flowing from the lands of
the plaintiffs and the lake of Calalaran into the Taliptip River. He could not lawfully injure the owners of the
dominant estates by obstructing the outlet to the Taliptip River of the waters flooding the upper lands belonging to
the plaintiffs.

It is perhaps useful and advantageous to the plaintiffs and other owners of high lands in Calalaran, in addition to the
old dike between the lake of said place and the low lands in Paraanan, to have another made by the defendant at
the border of Paraanan adjoining the said river, for the purpose of preventing the salt waters of the Taliptip River
flooding, at high tide, not only the lowlands in Paraanan but also the higher ones of Calalaran and its lake, since the
plaintiffs can not prevent the defendant from protecting his lands against the influx of salt water; but the defendant
could never be permitted to obstruct the flow of the waters through his lands to the Taliptip River during the heavy
rains, when the high lands in Calalaran and the lake in said place are flooded, thereby impairing the right of the
owners of the dominant estates.

For the above reasons, and accepting the findings of the court below in the judgment appealed from in so far as they
agree with the terms of this decision, we must and do hereby declare that the defendant, Higino Meneses, as the
owner of the servient estate, is obliged to give passage to and allow the flow of the waters descending from the
Calalaran Lake and from the land of the plaintiffs through his lands in Paraanan for their discharge into the Taliptip
River; and he is hereby ordered to remove any obstacle that may obstruct the free passage of the waters whenever
there may be either a small or large volume of running water through his lands in the sitio of Paraanan for their
discharge into the Taliptip River; and in future to abstain from impeding, in any manner, the flow of the waters
coming from the higher lands. The judgment appealed from is affirmed, in so far as it agrees with decision, and
reversed in other respects, with the costs of this instance against the appellants. So ordered.

Carson, Willard and Tracey, JJ., concur.

G.R. No. L-2659 October 12, 1950

In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY McDONALD BACHRACH, petitioner-
appellee,

vs.

SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants.

Ross, Selph, Carrascoso and Janda for appellants.

Delgado and Flores for appellee.

OZAETA, J.:

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus of the
estate, which pertains to the remainderman? That is the question raised in the appeal.

The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in his last will and
testament made various legacies in cash and willed the remainder of his estate as follows:

Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach for life all the
fruits and usufruct of the remainder of all my estate after payment of the legacies, bequests, and gifts provided for
above; and she may enjoy said usufruct and use or spend such fruits as she may in any manner wish.

The will further provided that upon the death of Mary McDonald Bachrach, one-half of the all his estate "shall be
divided share and share alike by and between my legal heirs, to the exclusion of my brothers."

The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co., Inc., received
from the latter 54,000 shares representing 50 per cent stock dividend on the said 108,000 shares. On June 10, 1948,
Mary McDonald Bachrach, as usufructuary or life tenant of the estate, petitioned the lower court to authorize the
Peoples Bank and Trust Company as administrator of the estate of E. M. Bachrach, to her the said 54,000 share of
stock dividend by endorsing and delivering to her the corresponding certificate of stock, claiming that said dividend,
although paid out in the form of stock, is fruit or income and therefore belonged to her as usufructuary or life
tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the deceased, opposed said petition on the ground that the
stock dividend in question was not income but formed part of the capital and therefore belonged not to the
usufructuary but to the remainderman. And they have appealed from the order granting the petition and overruling
their objection.

While appellants admits that a cash dividend is an income, they contend that a stock dividend is not, but merely
represents an addition to the invested capital. The so-called Massachusetts rule, which prevails in certain
jurisdictions in the United States, supports appellants' contention . It regards cash dividends, however large, as
income, and stock dividends, however made, as capital. (Minot vs. Paine, 99 Mass., 101; 96 Am. Dec., 705.) It holds
that a stock dividend is not in any true sense any true sense any dividend at all since it involves no division or
severance from the corporate assets of the dividend; that it does not distribute property but simply dilutes the
shares as they existed before; and that it takes nothing from the property of the corporation, and nothing to the
interests of the shareholders.

On the other hand, so called Pennsylvania rule, which prevails in various other jurisdictions in the United States,
supports appellee's contention. This rule declares that all earnings of the corporation made prior to the death of the
testator stockholder belong to the corpus of the estate, and that all earnings, when declared as dividends in
whatever form, made during the lifetime of the usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)

. . . It is clear that testator intent the remaindermen should have only the corpus of the estate he left in trust, and
that all dividends should go the life tenants. It is true that profits realized are not dividends until declared by the
proper officials of the corporation, but distribution of profits, however made, in dividends, and the form of the
distribution is immaterial. (In re Thompson's Estate, 262 Pa., 278; 105 Atl. 273, 274.)

In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky, speaking thru its Chief Justice,
said:

. . . Where a dividend, although declared in stock, is based upon the earnings of the company, it is in reality, whether
called by one name or another, the income of the capital invested in it. It is but a mode of distributing the profit. If it
be not income, what is it? If it is, then it is rightfully and equitably the property of the life tenant. If it be really profit,
then he should have it, whether paid in stock or money. A stock dividend proper is the issue of new shares paid for
by the transfer of a sum equal to their par value from the profits and loss account to that representing capital stock;
and really a corporation has no right to a dividend, either in cash or stock, except from its earnings; and a singular
state of case — it seems to us, an unreasonable one — is presented if the company, although it rests with it whether
it will declare a dividend, can bind the courts as to the proper ownership of it, and by the mode of payment
substitute its will for that of that of the testator, and favor the life tenants or the remainder-men, as it may desire. It
cannot, in reason, be considered that the testator contemplated such a result. The law regards substance, and not
form, and such a rule might result not only in a violation of the testator's intention, but it would give the power to
the corporation to beggar the life tenants, who, in this case, are the wife and children of the testator, for the benefit
of the remainder-men, who may perhaps be unknown to the testator, being unborn when the will was executed. We
are unwilling to adopt a rule which to us seems so arbitrary, and devoid of reason and justice. If the dividend be in
fact a profit, although declared in stock, it should be held to be income. It has been so held in Pennsylvania and
many other states, and we think it the correct rule. Earp's Appeal, 28 Pa. St. 368; Cook, Stocks & S. sec. 554. . . .
We think the Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. Under section
16 of our Corporation Law, no corporation may make or declare any dividend except from the surplus profits arising
from its business. Any dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil
Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the
property in usufruct. And articles 474 and 475 provide as follows:

ART. 474. Civil fruits are deemed to accrue day by day, and belong to the usufructuary in proportion to the time the
usufruct may last.

ART. 475. When a usufruct is created on the right to receive an income or periodical revenue, either in money or
fruits, or the interest on bonds or securities payable to bearer, each matured payment shall be considered as the
proceeds or fruits such right.

When it consists of the enjoyment of the benefits arising from an interest in an industrial or commercial enterprise,
the profits of which are not distributed at fixed periods, such profits shall have the same consideration.lawphil.net

In either case they shall be distributed as civil fruits, and shall be applied in accordance with the rules prescribed by
the next preceding article.

The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend are civil fruits of
the original investment. They represent profits, and the delivery of the certificate of stock covering said dividend is
equivalent to the payment of said profits. Said shares may be sold independently of the original shares, just as the
offspring of a domestic animal may be sold independently of its mother.

The order appealed from, being in accordance with the above-quoted provisions of the Civil Code, his hereby
affirmed, with costs against the appellants.

Moran, C. J., Paras, Feria, Pablo, Bengzon, Tuason, Montemayor and Reyes, JJ., concur.

G.R. No. 35223 September 17, 1931

THE BACHRACH MOTOR CO., INC., plaintiff-appellee,

vs.

TALISAY-SILAY MILLING CO., ET AL., defendants-appellees.

THE PHILIPPINE NATIONAL BANK, intervenor-appellant.

Roman J. Lacson for intervenor-appellant.

Mariano Ezpeleta for plaintiff-appellee.

Nolan and Hernaez for defendants-appellees Talisay-Silay Milling Co. and Cesar Ledesma.

ROMUALDEZ, J.:

This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against the Talisay-Silay Milling Co.,
Inc., for the delivery of the amount P13,850 or promissory notes or other instruments or credit for that sum payable
on June 30, 1930, as bonus in favor of Mariano Lacson Ledesma; the complaint further prays that the sugar central
be ordered to render an accounting of the amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or
otherwise, and to pay the plaintiff a sum sufficient to satisfy the judgment mentioned in the complaint, and that the
sale made by said Mariano Lacson Ledesma be declared null and void.

The Philippine National Bank filed a third party claim alleging a preferential right to receive any amount which
Mariano Lacson Ledesma might be entitled to from the Talisay-Silay Milling Co. as bonus, because that would be civil
fruits of the land mortgaged to said bank by said debtor for the benefit of the central referred to, and by virtue of a
deed of assignment, and praying that said central be ordered to delivered directly to the intervening bank said sum
on account of the latter's credit against the aforesaid Mariano Lacson Ledesma.

The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of Mariano Lacson Ledesma's
credit, P7,500 belonged to Cesar Ledesma because he had purchased it, and praying that it be absolved from the
complaint and that the proper party be named so that the remainder might be delivered.

Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a reconsideration of the P7,500
which is a part of the credit referred to above, answered praying that he be absolved from the complaint.

The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its credit against Mariano Lacson
Ledesma was prior and preferential to that of the intervening bank, and praying that the latter's complaint be
dismissed.

At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma of the P7,500
part of the credit in question, for which reason the trial court dismissed the complaint and cross-complaint against
Cesar Ledesma authorizing the defendant central to deliver to him the aforementioned sum of P7,500. And upon
conclusion of the hearing, the court held that the Bachrach Motor Co., Inc., had a preferred right to receive the
amount of P11,076.02 which was Mariano Lacson Ledesma's bonus, and it ordered the defendant central to deliver
said sum to the plaintiff.

The Philippine National Bank appeals, assigning the following alleged errors as committed by the trial court:
1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself to pay the planters who had
mortgaged their land to the Philippine National Bank to secure the payment of the debt of said central to said bank
is not civil fruits of said land.

2. In not holding that said bonus became subject to the mortgage executed by the defendant Mariano Lacson
Ledesma to the Philippine National Bank to secure the payment of his personal debt to said bank when it fell due.

3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on March 7, 1930, by Mariano Lacson
Ledesma to the Philippine National Bank to be applied to the payment of his debt to said Philippine National Bank is
fraudulent.

4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the Court of First Instance of Manila
levied a valid attachment upon the bonus in question.

5. In admitting and considering the supplementary complaint filed by the Bachrach Motor Co., Inc., alleging as
a cause of action the attachment of the bonus in question which said Bachrach Motor Co., Inc., in civil case No.
31821 of the Court of First Instance of Manila levied after the filing of the original complaint in this case, and after
Mariano Lacson Ledesma in this case had been declared in default.

6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive from the Talisay-Silay Milling
Co., Inc., the amount of P11,076.02 which is in the possession of said corporation as the bonus to be paid to Mariano
Lacson Ledesma, and in ordering the Talisay-Silay Milling Co., Inc., to deliver said amount to the Bachrach Motor Co.,
Inc.

7. In not holding that the Philippine National Bank has a preferential right to receive from the Talisay-Silay
Milling Co., Inc., the amount of P11,076.02 held by said corporation as Mariano Lacson Ledesma's bonus, and in not
ordering said Talisay-Silay Milling Co., Inc., to deliver said amount to the Philippine National Bank.

8. In not holding that the amended complaint and the supplementary complaint of the Bachrach Motor Co.,
Inc., do not state facts sufficient to constitute a cause of action in favor of the Bachrach Motor Co., Inc., and against
the Talisay-Silay Milling Co., Inc., or against the Philippine National Bank.

The appellant bank bases its preferential right upon the contention that the bonus in question is civil fruits of the
lands which the owners had mortgaged for the benefit of the central giving the bonus, and that, as civil fruits of said
land, said bonus was assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of the document Exhibit 9 of
said intervening institution, which admitted in its brief that "if the bonus in question is not civil fruits or rent which
became subject to the mortgage in favor of the Philippine National Bank when Mariano Lacson Ledesma's personal
obligation fell due, the assignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because it is fraudulent,
for there was no intent of fraud in executing the deed, but that the cause or consideration of the assignment was
erroneous, for it was based upon the proposition that the bonus was civil fruits of the land mortgaged to the
Philippine National Bank." (P. 31.)
The fundamental question, then, submitted to our consideration is whether or not the bonus in question is civil
fruits.

This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co., Inc., was indebted to
the Philippine National Bank. To secure the payment of its debt, it succeeded in inducing its planters, among whom
was Mariano Lacson Ledesma, to mortgage their land to the creditor bank. And in order to compensate those
planters for the risk they were running with their property under the mortgage, the aforesaid central, by a resolution
passed on that same date, i.e., December 22, 1923, undertook to credit the owners of the plantation thus mortgaged
every year with a sum equal to two per centum of the debt secured according to yearly balance, the payment of the
bonus being made at once, or in part from time to time, as soon as the central became free of its obligations to the
aforesaid bank, and of those contracted by virtue of the contract of supervision, and had funds which might be so
used, or as soon as it obtained from said bank authority to make such payment. (Exhibits 5, 6; P.N.B.)

Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second, the proceeds
from leases of lands; and, third, the income from perpetual or life annuities, or other similar sources of revenue. It
may be noted that according to the context of the law, the phrase "u otras analogas" refers only to rent or income,
for the adjectives "otras" and "analogas" agree with the noun "rentas," as do also the other adjectives "perpetuas"
and "vitalicias." That is why we say that by "civil fruits" the Civil Code understands one of three and only three
things, to wit: the rent of a building, the rent of land, and certain kinds of income.

As the bonus in question is not rent of a building or of land, the only meaning of "civil fruits" left to be examined is
that of "income."

Assuming that in broad juridical sense of the word "income" it might be said that the bonus in question is "income"
under article 355 of the Civil Code, it is obvious to inquire whether it is derived from the land mortgaged by Mariano
Lacson Ledesma to the appellant bank for the benefit of the central; for it is not obtained from that land but from
something else, it is not civil fruits of that land, and the bank's contention is untenable.

It is to be noted that the said bonus bears no immediate, but only a remote accidental relation to the land
mentioned, having been granted as compensation for the risk of having subjected one's land to a lien in favor of the
bank, for the benefit of the entity granting said bonus. If this bonus be income or civil fruits of anything, it is income
arising from said risk, or, if one chooses, from Mariano Lacson Ledesma's generosity in facing the danger for the
protection of the central, but certainly it is not civil fruits or income from the mortgaged property, which, as far as
this case is concerned, has nothing to do with it. Hence, the amount of the bonus, according to the resolution of the
central granting it, is not based upon the value, importance or any other circumstance of the mortgaged property,
but upon the total value of the debt thereby secured, according to the annual balance, which is something quite
distinct from and independent of the property referred to.

Finding no merit in this appeal, the judgment appealed from is affirmed, without express finding as to costs. So
ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Villa-Real, and Imperial, JJ., concur.