Republic of the Philippines


SUPREME COURT

Manila
EN BANC
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner, 

vs.

RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign
Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner, 

vs.

EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T.
GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING
COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT
PROPERTIES IN JAPAN, respondents.
Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding with the bidding for the sale of the 3,179
square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary restraining
order effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully disclose to
the public the basis of their decision to push through with the sale of the Roppongi property inspire of strong public opposition and to explain the proceedings
which effectively prevent the participation of Filipino citizens and entities in the bidding process.

The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13,
1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required
to file a comment by the Court's resolution dated February 22, 1990. The two petitions were consolidated
on March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for an
extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an
extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of
time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5,
1990 but calling the attention of the respondents to the length of time the petitions have been pending.
After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We
noted his motion and resolved to decide the two (2) cases.
I
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine
government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots
being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters
and categorized as a commercial lot now being used as a warehouse and parking lot for the consulate
staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential
lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for national
development projects are part of the indemnification to the Filipino people for their losses in life and
property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty
(20) years in accordance with annual schedules of procurements to be fixed by the Philippine and
Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law,
prescribes the national policy on procurement and utilization of reparations and development loans. The
procurements are divided into those for use by the government sector and those for private parties in
projects as the then National Economic Council shall determine. Those intended for the private sector
shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned
entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule
and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June 27,
1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine
Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the
Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi
building needed major repairs. Due to the failure of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan,
Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima
Corporation — which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be
the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two
(2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine Embassy
Chancery. At the end of the lease period, all the three leased buildings shall be occupied and used by the
Philippine government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment)
The Philippine government retains the title all throughout the lease period and thereafter. However, the
government has not acted favorably on this proposal which is pending approval and ratification between
the parties. Instead, on August 11, 1986, President Aquino created a committee to study the disposition/
utilization of Philippine government properties in Tokyo and Kobe, Japan through Administrative Order No.
3, followed by Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to
avail of separations' capital goods and services in the event of sale, lease or disposition. The four
properties in Japan including the Roppongi were specifically mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been pushing, with
great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has
twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since
only one bidder qualified. The second one, after postponements, has not yet materialized. The last
scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were
changed such that the $225 million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013
objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds
as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the
property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at
the same time for the objective is the same - to stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the
Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to
alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making the
property available for sale to non-Filipino citizens and entities. He also questions the bidding procedures
of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for being
discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be
informed about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were acquired
as part of the reparations from the Japanese government for diplomatic and consular use by the
Philippine government. Vice-President Laurel states that the Roppongi property is classified as one of
public dominion, and not of private ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under "property intended for public service" in
paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any one
can attach to it, not even by the State. The Roppongi and related properties were acquired for "sites for
chancery, diplomatic, and consular quarters, buildings and other improvements" (Second Year
Reparations Schedule). The petitioner states that they continue to be intended for a necessary service.
They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot
be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be alienated
nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting
the non-use of the Roppongi property at the moment, the petitioner avers that the same remains property
of public dominion so long as the government has not used it for other purposes nor adopted any
measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the subject property is not
governed by our Civil Code but by the laws of Japan where the property is located. They rely upon the
rule of lex situs which is used in determining the applicable law regarding the acquisition, transfer and
devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated January 27,
1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine law
regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the
Roppongi property has ceased to become property of public dominion. It has become patrimonial property
because it has not been used for public service or for diplomatic purposes for over thirteen (13) years now
(Citing Article 422, Civil Code) and because the intention by the Executive Department and the
Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the
transfer of the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the
possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order No.
296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law]
on June 10, 1988 which contains a provision stating that funds may be taken from the sale of Philippine
properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which
failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an
acknowledgment by the Senate of the government's intention to remove the Roppongi property from the
public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding
Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property
scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of Executive
Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on August 1,
1989. He now avers that the executive order contravenes the constitutional mandate to conserve and
develop the national patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino
citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141). i•t•c-aüsl

(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the
national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern (Section 7,
Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino citizens
of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No.
1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving public interest
(Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order
is a misapplication of public funds He states that since the details of the bidding for the Roppongi property
were never publicly disclosed until February 15, 1990 (or a few days before the scheduled bidding), the
bidding guidelines are available only in Tokyo, and the accomplishment of requirements and the selection
of qualified bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not
have the chance to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi
shall be sold for a minimum price of $225 million from which price capital gains tax under Japanese law of
about 50 to 70% of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the three
related properties were through reparations agreements, that these were assigned to the government
sector and that the Roppongi property itself was specifically designated under the Reparations Agreement
to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the
terms of the Reparations Agreement and the corresponding contract of procurement which bind both the
Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the property has
become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated.
Its ownership is a special collective ownership for general use and enjoyment, an application to the
satisfaction of collective needs, and resides in the social group. The purpose is not to serve the State as a
juridical person, but the citizens; it is intended for the common and public welfare and cannot be the object
of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the
Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private ownership.
ART. 420. The following things are property of public dominion
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks shores roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as
property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because the lot has
been Idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property
continues to be part of the public domain, not available for private appropriation or ownership until there is
a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of
Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials insinuating a change
of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi property
for public service and to make it patrimonial property under Article 422 of the Civil Code must be
definiteAbandonment cannot be inferred from the non-use alone specially if the non-use was attributable
not to the government's own deliberate and indubitable will but to a lack of financial support to repair and
improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must
be a certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi
property's original purpose. Even the failure by the government to repair the building in Roppongi is not
abandonment since as earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of government properties in Japan
were merely directives for investigation but did not in any way signify a clear intention to dispose of the
properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its
text expressly authorizing the sale of the four properties procured from Japan for the government sector.
The executive order does not declare that the properties lost their public character. It merely intends to
make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other
disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be
sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of
Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the
contrary notwithstanding, the above-mentioned properties can be made available for sale,
lease or any other manner of disposition to non-Filipino citizens or to entities owned by non-
Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three
other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No. 1789
differentiates the procurements for the government sector and the private sector (Sections 2 and 12, Rep.
Act No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos or
entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the properties of the Government in foreign countries,
did not withdraw the Roppongi property from being classified as one of public dominion when it mentions
Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not to those
reserved for public use or service. Rep Act No. 6657, therefore, does not authorize the Executive
Department to sell the Roppongi property. It merely enumerates possible sources of future funding to
augment (as and when needed) the Agrarian Reform Fund created under Executive Order No. 299.
Obviously any property outside of the commerce of man cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi property by insisting that
Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in
the sale of extremely valuable government property, Japanese law and not Philippine law should prevail.
The Japanese law - its coverage and effects, when enacted, and exceptions to its provision — is not
presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law should apply without
stating what that law provides. It is a ed on faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict
of law situation arises only when: (1) There is a dispute over the title or ownership of an immovable, such
that the capacity to take and transfer immovables, the formalities of conveyance, the essential validity and
effect of the transfer, or the interpretation and effect of a conveyance, are to be determined (See
Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and
its conveyance is asserted to conflict with a domestic law on the same matters. Hence, the need to
determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the property
belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of
property belonging to the State. And the validity of the procedures adopted to effect its sale. This is
governed by Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs rule
is misplaced. The opinion does not tackle the alienability of the real properties procured through
reparations nor the existence in what body of the authority to sell them. In discussing who are capable of
acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who can
acquire the properties so that the constitutional limitation on acquisition of lands of the public domain to
Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point in belaboring
whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi lot when
there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the
investigating committee to sell the Roppongi property was premature or, at the very least, conditioned on
a valid change in the public character of the Roppongi property. Moreover, the approval does not have the
force and effect of law since the President already lost her legislative powers. The Congress had already
convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public dominion,
there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government is a party. — In cases
in which the Government of the Republic of the Philippines is a party to any deed or other
instrument conveying the title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department Secretary shall prepare
the necessary papers which, together with the proper recommendations, shall be submitted
to the Congress of the Philippines for approval by the same. Such deed, instrument, or
contract shall be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the Government of the Philippines unless the
authority therefor be expressly vested by law in another officer. (Emphasis supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive
Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real property of the government on his or her own sole will.
Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires
executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi
property does not withdraw the property from public domain much less authorize its sale. It is a mere
resolution; it is not a formal declaration abandoning the public character of the Roppongi property. In fact,
the Senate Committee on Foreign Relations is conducting hearings on Senate Resolution No. 734 which
raises serious policy considerations and calls for a fact-finding investigation of the circumstances behind
the decision to sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold the
authority of the President to sell the Roppongi property. The Court stated that the constitutionality of the
executive order was not the real issue and that resolving the constitutional question was "neither
necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately
questions is the use of the proceeds of the disposition of the Roppongi property." In emphasizing that "the
decision of the Executive to dispose of the Roppongi property to finance the CARP ... cannot be
questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that the
property became alienable nor did it indicate that the President was authorized to dispose of the Roppongi
property. The resolution should be read to mean that in case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the proceeds of a sale may be used for national economic
development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale of
the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in
1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property from public
domain to make it alienable and a need for legislative authority to allow the sale of the property, we see no
compelling reason to tackle the constitutional issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions are properly
raised in appropriate cases and their resolution is necessary for the determination of the case (People v.
Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly
presented by the record if the case can be disposed of on some other ground such as the application of a
statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission
v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:
 The Roppongi property is not just like any piece of property. It was given to the Filipino
people in reparation for the lives and blood of Filipinos who died and suffered during the
Japanese military occupation, for the suffering of widows and orphans who lost their loved
ones and kindred, for the homes and other properties lost by countless Filipinos during the
war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino
people in the face of an invader; like the monuments of Rizal, Quezon, and other Filipino
heroes, we do not expect economic or financial benefits from them. But who would think of
selling these monuments? Filipino honor and national dignity dictate that we keep our
properties in Japan as memorials to the countless Filipinos who died and suffered. Even if
we should become paupers we should not think of selling them. For it would be as if we sold
the lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the Japanese government in
atonement for its past belligerence for the valiant sacrifice of life and limb and for deaths,
physical dislocation and economic devastation the whole Filipino people endured in World
War II.
It is for what it stands for, and for what it could never bring back to life, that its significance
today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of
the passage of 32 years since the property passed on to the Philippine government.
Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the inflated prices fetched
by real property in Tokyo but more so because of its symbolic value to all Filipinos — veterans and
civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy
determination where both the President and Congress must concur. Considering the properties'
importance and value, the laws on conversion and disposition of property of public dominion must be
faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is
issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo, Japan.
The February 20, 1990 Temporary Restraining Order is made PERMANENT.
SO ORDERED.
Republic of the Philippines

SUPREME COURT

Manila
EN BANC
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. 133250 July 9, 2002

FRANCISCO I. CHAVEZ, petitioner, 

vs.

P U B L I C E S T A T E S A U T H O R I T Y a n d A M A R I C O A S T A L B AY D E V E L O P M E N T
CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary
restraining order. The petition seeks to compel the Public Estates Authority ("PEA" for brevity) to disclose
all facts on PEA's then on-going renegotiations with Amari Coastal Bay and Development Corporation
("AMARI" for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from
signing a new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways, signed a
contract with the Construction and Development Corporation of the Philippines ("CDCP" for brevity) to
reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction of
Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in
consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating
PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged areas," and "to
develop, improve, acquire, x x x lease and sell any and all kinds of lands."1 On the same date, then
President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands reclaimed in the
foreshore and offshore of the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its
contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned by PEA."
Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981, which
stated:
"(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as
may be agreed upon by the parties, to be paid according to progress of works on a unit price/lump
sum basis for items of work to be agreed upon, subject to price escalation, retention and other
terms and conditions provided for in Presidential Decree No. 1594. All the financing required for
such works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in
favor of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land
reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold,
transferred or otherwise disposed of by CDCP as of said date, which areas consist of
 approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in the
Financial Center Area covered by land pledge No. 5 and approximately Three Million Three
Hundred Eighty Two Thousand Eight Hundred Eighty Eight (3,382,888) square meters of reclaimed
areas at varying elevations above Mean Low Water Level located outside the Financial Center
Area and the First Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and
transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of
the Municipality of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name
of PEA, covering the three reclaimed islands known as the "Freedom Islands" located at the southern
portion of the Manila-Cavite Coastal Road, Parañaque City. The Freedom Islands have a total land area of
One Million Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square
meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a private
corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250
hectares of submerged areas surrounding these islands to complete the configuration in the Master
Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA
through negotiation without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in its
Resolution No. 1245, confirmed the JVA.5 On June 8, 1995, then President Fidel V. Ramos, through then
Executive Secretary Ruben Torres, approved the JVA.6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the
Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate Committee on
Government Corporations and Public Enterprises, and the Committee on Accountability of Public Officers
and Investigations, conducted a joint investigation. The Senate Committees reported the results of their
investigation in Senate Committee Report No. 560 dated September 16, 1997.7 Among the conclusions of
their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the
public domain which the government has not classified as alienable lands and therefore PEA cannot
alienate these lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the
JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No. 365
creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate Committee
Report No. 560. The members of the Legal Task Force were the Secretary of Justice,8 the Chief
Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The Legal Task Force upheld the
legality of the JVA, contrary to the conclusions reached by the Senate Committees.11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-going
renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos.
According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy
Officer Sergio Cruz composed the negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application for
the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No. 132994
seeking to nullify the JVA. The Court dismissed the petition "for unwarranted disregard of judicial
hierarchy, without prejudice to the refiling of the case before the proper court."12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the
instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and
Temporary Restraining Order. Petitioner contends the government stands to lose billions of pesos in the
sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any
renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution
on the right of the people to information on matters of public concern. Petitioner assails the sale to AMARI
of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987 Constitution
prohibiting the sale of alienable lands of the public domain to private corporations. Finally, petitioner
asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of public
dominion.
After several motions for extension of time,13 PEA and AMARI filed their Comments on October 19, 1998
and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus Motion:
(a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance of a
temporary restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a
Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution
dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties
to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA," for
brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph
E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated contract be declared null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND
ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE
PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL
INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR
THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF
WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS
TO THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and academic because
of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations for a
new agreement." The petition also prays that the Court enjoin PEA from "privately entering into, perfecting
and/or executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on
June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in the
renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the renegotiations.
Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot because PEA and
AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office of the President
has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the
signing and approval of the Amended JVA before the Court could act on the issue. Presidential approval
does not resolve the constitutional issue or remove it from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot
operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement
the Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional grounds
necessarily includes preventing its implementation if in the meantime PEA and AMARI have signed one in
violation of the Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its
violation of Section 3, Article XII of the Constitution, which prohibits the government from alienating lands
of the public domain to private corporations. If the Amended JVA indeed violates the Constitution, it is the
duty of the Court to enjoin its implementation, and if already implemented, to annul the effects of such
unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single
private corporation. It now becomes more compelling for the Court to resolve the issue to insure the
government itself does not violate a provision of the Constitution intended to safeguard the national
patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from rendering
a decision if there is a grave violation of the Constitution. In the instant case, if the Amended JVA runs
counter to the Constitution, the Court can still prevent the transfer of title and ownership of alienable lands
of the public domain in the name of AMARI. Even in cases where supervening events had made the
cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate
controlling principles to guide the bench, bar, and the public.17
Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section
3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,
18 covered agricultural lands sold to private corporations which acquired the lands from private parties.

The transferors of the private corporations claimed or could claim the right to judicial confirmation of
their imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant
case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas
for non-agricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title III of CA No.
141. Certain undertakings by AMARI under the Amended JVA constitute the consideration for the
purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because the lands covered
by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title
requires open, continuous, exclusive and notorious occupation of agricultural lands of the public domain
for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for
judicial confirmation of imperfect title expired on December 31, 1987.20
Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because of the
possible transfer at any time by PEA to AMARI of title and ownership to portions of the reclaimed lands.
Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy percent proportionate
share in the reclaimed areas as the reclamation progresses. The Amended JVA even allows AMARI to
mortgage at any time the entire reclaimed area to raise financing for the reclamation project.21
Second issue: whether the petition merits dismissal for failing to observe the principle governing
the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court.
The principle of hierarchy of courts applies generally to cases involving factual questions. As it is not a
trier of facts, the Court cannot entertain cases involving factual issues. The instant case, however, raises
constitutional issues of transcendental importance to the public.22 The Court can resolve this case without
determining any factual issue related to the case. Also, the instant case is a petition for mandamus which
falls under the original jurisdiction of the Court under Section 5, Article VIII of the Constitution. We resolve
to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain
information without first asking PEA the needed information. PEA claims petitioner's direct resort to the
Court violates the principle of exhaustion of administrative remedies. It also violates the rule that
mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary course
of law.
PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted the petition for
mandamus even if the petitioners there did not initially demand from the Office of the President the
publication of the presidential decrees. PEA points out that in Tañada, the Executive Department had
an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of Commonwealth Act No.
63825 to publish the presidential decrees. There was, therefore, no need for the petitioners in Tañada to
make an initial demand from the Office of the President. In the instant case, PEA claims it has no
affirmative statutory duty to disclose publicly information about its renegotiation of the JVA. Thus, PEA
asserts that the Court must apply the principle of exhaustion of administrative remedies to the instant case
in view of the failure of petitioner here to demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation. Under
Section 79 of the Government Auditing Code,26 the disposition of government lands to private parties
requires public bidding. PEA was under a positive legal duty to disclose to the public the terms and
conditions for the sale of its lands. The law obligated PEA to make this public disclosure even without
demand from petitioner or from anyone. PEA failed to make this public disclosure because the original
JVA, like the Amended JVA, was the result of a negotiated contract, not of a public bidding. Considering
that PEA had an affirmative statutory duty to make the public disclosure, and was even in breach of this
legal duty, petitioner had the right to seek direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative
remedies does not apply when the issue involved is a purely legal or constitutional question.27 The
principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of the
constitutional ban prohibiting the alienation of lands of the public domain to private corporations. We rule
that the principle of exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that PEA refused to perform an affirmative duty
imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will suffer any
concrete injury because of the signing or implementation of the Amended JVA. Thus, there is no actual
controversy requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to
comply with its constitutional duties. There are two constitutional issues involved here. First is the right of
citizens to information on matters of public concern. Second is the application of a constitutional provision
intended to insure the equitable distribution of alienable lands of the public domain among Filipino
citizens. The thrust of the first issue is to compel PEA to disclose publicly information on the sale of
government lands worth billions of pesos, information which the Constitution and statutory law mandate
PEA to disclose. The thrust of the second issue is to prevent PEA from alienating hundreds of hectares of
alienable lands of the public domain in violation of the Constitution, compelling PEA to comply with a
constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,
28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental importance

to the public, thus -

"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is
an issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a
right to initiate and prosecute actions questioning the validity of acts or orders of government
agencies or instrumentalities, if the issues raised are of 'paramount public interest,' and if they
'immediately affect the social, economic and moral well being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the
proceeding involves the assertion of a public right, such as in this case. He invokes several
decisions of this Court which have set aside the procedural matter of locus standi, when the
subject of the case involved public interest.
xxx
In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object
of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real
parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in
the execution of the laws, he need not show that he has any legal or special interest in the result of
the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on
matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution,
in connection with the rule that laws in order to be valid and enforceable must be published in the
Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the
Court declared that the right they sought to be enforced 'is a public right recognized by no less
than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that 'when a
mandamus proceeding involves the assertion of a public right, the requirement of personal interest
is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public'
which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been
involved under the questioned contract for the development, management and operation of the
Manila International Container Terminal, 'public interest [was] definitely involved considering the
important role [of the subject contract] . . . in the economic development of the country and the
 magnitude of the financial consideration involved.' We concluded that, as a consequence, the
disclosure provision in the Constitution would constitute sufficient authority for upholding the
petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information and access to
official records, documents and papers — a right guaranteed under Section 7, Article III of the 1987
Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction
of the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1)
the enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar
should be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional
rights - to information and to the equitable diffusion of natural resources - matters of transcendental public
importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official information on on-
going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on matters of public
concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern shall be recognized.
Access to official records, and to documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research data used as basis for policy
development, shall be afforded the citizen, subject to such limitations as may be provided by
law." (Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces the people's
right to information on matters of public concern. This State policy is expressed in Section 28, Article II of
the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements
a policy of full public disclosure of all its transactions involving public interest." (Emphasis
supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making and in the
operations of the government, as well as provide the people sufficient information to exercise effectively
other constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If
the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens
say, even if expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at all times x x x accountable to the people,"29 for
unless citizens have the proper information, they cannot hold public officials accountable for anything.
Armed with the right information, citizens can participate in public discussions leading to the formulation of
government policies and their effective implementation. An informed citizenry is essential to the existence
and proper functioning of any democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30 –
"An essential element of these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that the government may perceive
and be responsive to the people's will. Yet, this open dialogue can be effective only to the extent
that the citizenry is informed and thus able to formulate its will intelligently. Only when the
participants in the discussion are aware of the issues and have access to information relating
thereto can such bear fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to information is
limited to "definite propositions of the government." PEA maintains the right does not include access to
"intra-agency or inter-agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the
closing of the transaction. To support its contention, AMARI cites the following discussion in the 1986
Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts,
agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the
consummation of the contract, or does he refer to the contract itself?
 Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both
steps leading to a contract and already a consummated contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the
transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke the right.
Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade the
quality of decision-making in government agencies. Government officials will hesitate to express their real
sentiments during deliberations if there is immediate public dissemination of their discussions, putting
them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to disclose publicly,
and information the constitutional right to information requires PEA to release to the public. Before the
consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the
public matters relating to the disposition of its property. These include the size, location, technical
description and nature of the property being disposed of, the terms and conditions of the disposition, the
parties qualified to bid, the minimum price and similar information. PEA must prepare all these data and
disclose them to the public at the start of the disposition process, long before the consummation of the
contract, because the Government Auditing Code requires public bidding. If PEA fails to make this
disclosure, any citizen can demand from PEA this information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being undertaken by the
bidding or review committee is not immediately accessible under the right to information. While the
evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the bids or
proposals. However, once the committee makes its official recommendation, there arises a "definite
proposition" on the part of the government. From this moment, the public's right to information attaches,
and any citizen can access all the non-proprietary information leading to such definite proposition.
In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the
PCGG and its officers, as well as other government representatives, to disclose sufficient public
information on any proposed settlement they have decided to take up with the ostensible owners
and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of
the government, not necessarily to intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the process of being
formulated or are in the "exploratory" stage. There is need, of course, to observe the same
restrictions on disclosure of information in general, as discussed earlier – such as on matters
involving national security, diplomatic or foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood
that the right to information "contemplates inclusion of negotiations leading to the consummation of
the transaction."Certainly, a consummated contract is not a requirement for the exercise of the right to
information. Otherwise, the people can never exercise the right if no contract is consummated, and if one
is consummated, it may be too late for the public to expose its defects. 1âwphi1.nêt

Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly
disadvantageous to the government or even illegal, becomes a fait accompli. This negates the State
policy of full transparency on matters of public concern, a situation which the framers of the Constitution
could not have intended. Such a requirement will prevent the citizenry from participating in the public
discussion of any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We
can allow neither an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy
of full disclosure of all its transactions involving public interest."
The right covers three categories of information which are "matters of public concern," namely: (1) official
records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3)
government research data used in formulating policies. The first category refers to any document that is
part of the public records in the custody of government agencies or officials. The second category refers
to documents and papers recording, evidencing, establishing, confirming, supporting, justifying or
explaining official acts, transactions or decisions of government agencies or officials. The third category
refers to research data, whether raw, collated or processed, owned by the government and used in
formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes of meetings, terms of reference and other
documents attached to such reports or minutes, all relating to the JVA. However, the right to information
does not compel PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of
the JVA.34 The right only affords access to records, documents and papers, which means the opportunity
to inspect and copy them. One who exercises the right must copy the records, documents and papers at
his expense. The exercise of the right is also subject to reasonable regulations to protect the integrity of
the public records and to minimize disruption to government operations, like rules specifying when and
how to conduct the inspection and copying.35
The right to information, however, does not extend to matters recognized as privileged information under
the separation of powers.36 The right does not also apply to information on military and diplomatic secrets,
information affecting national security, and information on investigations of crimes by law enforcement
agencies before the prosecution of the accused, which courts have long recognized as confidential.37 The
right may also be subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged information rooted in
the separation of powers. The information does not cover Presidential conversations, correspondences, or
discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme Court
and other collegiate courts, or executive sessions of either house of Congress,38 are recognized as
confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank
exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by
interested parties, is essential to protect the independence of decision-making of those tasked to exercise
Presidential, Legislative and Judicial power.39 This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information on on-going
negotiationsbefore a final contract. The information, however, must constitute definite propositions by the
government and should not cover recognized exceptions like privileged information, military and
diplomatic secrets and similar matters affecting national security and public order.40 Congress has also
prescribed other limitations on the right to information in several legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed
or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine
which holds that the State owns all lands and waters of the public domain. Upon the Spanish conquest of
the Philippines, ownership of all "lands, territories and possessions" in the Philippines passed to the
Spanish Crown.42 The King, as the sovereign ruler and representative of the people, acquired and owned
all lands and territories in the Philippines except those he disposed of by grant or sale to private
individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State, in
lieu of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the
foundation of the time-honored principle of land ownership that "all lands that were not acquired from the
Government, either by purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code
of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition of
reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654
which provided for the lease, but not the sale, of reclaimed lands of the government to corporations
and individuals. Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the
Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. On November 7, 1936, the National Assembly passed Commonwealth
Act No. 141, also known as the Public Land Act, which authorized the lease, but not the sale, of
reclaimed lands of the government to corporations and individuals. CA No. 141 continues to this day
as the general law governing the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the
maritime zone of the Spanish territory belonged to the public domain for public use.44 The Spanish Law of
Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by
the provinces, pueblos or private persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the
reclamation, provided the government issued the necessary permit and did not reserve ownership of the
reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is –
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, riverbanks, shores, roadsteads, and that of a similar character;
2. That belonging exclusively to the State which, without being of general public use, is employed
in some public service, or in the development of the national wealth, such as walls, fortresses, and
other works for the defense of the territory, and mines, until granted to private individuals."
Property devoted to public use referred to property open for use by the public. In contrast, property
devoted to public service referred to property used for some specific public service and open only to those
authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but also to property not so
used but employed to develop the national wealth. This class of property constituted property of public
dominion although employed for some economic or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into
private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of
the territory, shall become a part of the private property of the State."
This provision, however, was not self-executing. The legislature, or the executive department pursuant to
law, must declare the property no longer needed for public use or territorial defense before the
government could lease or alienate the property to private parties.45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed
and foreshore lands. The salient provisions of this law were as follows:
"Section 1. The control and disposition of the foreshore as defined in existing law, and the title
to all Government or public lands made or reclaimed by the Government by dredging or
filling or otherwise throughout the Philippine Islands, shall be retained by the
Government without prejudice to vested rights and without prejudice to rights conceded to the City
of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or
reclaimed by the Government by dredging or filling or otherwise to be divided into lots or blocks,
with the necessary streets and alleyways located thereon, and shall cause plats and plans of such
surveys to be prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall give notice to the
public that such parts of the lands so made or reclaimed as are not needed for public
purposes will be leased for commercial and business purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and best
bidder therefore, subject to such regulations and safeguards as the Governor-General may by
executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to all lands reclaimed by the
government. The Act also vested in the government control and disposition of foreshore lands. Private
parties could lease lands reclaimed by the government only if these lands were no longer needed for
public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act
No. 1654 made government reclaimed lands sui generis in that unlike other public lands which the
government could sell to private parties, these reclaimed lands were available only for lease to private
parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did
not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law of Waters.
Lands reclaimed from the sea by private parties with government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.46 The
salient provisions of Act No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture
and Natural Resources, shall from time to time classify the lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or disposable public
lands, the Governor-General, upon recommendation by the Secretary of Agriculture and
Natural Resources, shall from time to time declare what lands are open to disposition or
concession under this Act."
Sec. 8. Only those lands shall be declared open to disposition or concession which have
been officially delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall
be classified as suitable for residential purposes or for commercial, industrial, or other
productive purposes other than agricultural purposes, and shall be open to disposition or
concession, shall be disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed
of to private parties by lease only and not otherwise, as soon as the Governor-General, upon
recommendation by the Secretary of Agriculture and Natural Resources, shall declare that
the same are not necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease under the
provisions of this Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain into x x
x alienable or disposable"47 lands. Section 7 of the Act empowered the Governor-General to "declare what
lands are open to disposition or concession." Section 8 of the Act limited alienable or disposable lands
only to those lands which have been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be classified" as
government reclaimed, foreshore and marshy lands, as well as other lands. All these lands, however,
must be suitable for residential, commercial, industrial or other productive non-agricultural purposes.
These provisions vested upon the Governor-General the power to classify inalienable lands of the public
domain into disposable lands of the public domain. These provisions also empowered the Governor-
General to classify further such disposable lands of the public domain into government reclaimed,
foreshore or marshy lands of the public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain classified
as government reclaimed, foreshore and marshy lands "shall be disposed of to private parties by
lease only and not otherwise." The Governor-General, before allowing the lease of these lands to
private parties, must formally declare that the lands were "not necessary for the public service." Act No.
2874 reiterated the State policy to lease and not to sell government reclaimed, foreshore and marshy
lands of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed,
foreshore and marshy lands remained sui generis, as the only alienable or disposable lands of the public
domain that the government could not sell to private parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public
lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the
reason the government prohibited the sale, and only allowed the lease, of these lands to private parties.
The State always reserved these lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands
into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only
lands for non-agricultural purposes the government could sell to private parties. Thus, under Act No. 2874,
the government could not sell government reclaimed, foreshore and marshy lands to private parties,
unless the legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of the
Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government
permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The 1935
Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that –
"Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall
be limited to citizens of the Philippines or to corporations or associations at least sixty per centum
of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or
concession at the time of the inauguration of the Government established under this
Constitution. Natural resources, with the exception of public agricultural land, shall not be
alienated, and no license, concession, or lease for the exploitation, development, or utilization of
any of the natural resources shall be granted for a period exceeding twenty-five years, renewable
for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, in which cases beneficial use may be
the measure and limit of the grant." (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public agricultural lands, which
were the only natural resources the State could alienate. Thus, foreshore lands, considered part of the
State's natural resources, became inalienable by constitutional fiat, available only for lease for 25 years,
renewable for another 25 years. The government could alienate foreshore lands only after these lands
were reclaimed and classified as alienable agricultural lands of the public domain. Government reclaimed
and marshy lands of the public domain, being neither timber nor mineral lands, fell under the classification
of public agricultural lands.50 However, government reclaimed and marshy lands, although subject to
classification as disposable public agricultural lands, could only be leased and not sold to private parties
because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of
the public domain was only a statutory prohibition and the legislature could therefore remove such
prohibition. The 1935 Constitution did not prohibit individuals and corporations from acquiring government
reclaimed and marshy lands of the public domain that were classified as agricultural lands under existing
public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows:
"Section 2. No private corporation or association may acquire, lease, or hold public
agricultural lands in excess of one thousand and twenty four hectares, nor may any
individual acquire such lands by purchase in excess of one hundred and forty hectares, or
by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of
twenty-four hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be
leased to an individual, private corporation, or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874
to open for sale to private parties government reclaimed and marshy lands of the public domain. On the
contrary, the legislature continued the long established State policy of retaining for the government title
and ownership of government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the
Public Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as
amended, remains to this day the existing general law governing the classification and disposition of
lands of the public domain other than timber and mineral lands.51
Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or
disposable"52 lands of the public domain, which prior to such classification are inalienable and outside the
commerce of man. Section 7 of CA No. 141 authorizes the President to "declare what lands are open to
disposition or concession." Section 8 of CA No. 141 states that the government can declare open for
disposition or concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of CA
No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and
Commerce, shall from time to time classify the lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to another,53 for the
purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable public
lands, the President, upon recommendation by the Secretary of Agriculture and Commerce,
shall from time to time declare what lands are open to disposition or concession under this
Act.
Sec. 8. Only those lands shall be declared open to disposition or concession which have
been officially delimited and classified and, when practicable, surveyed, and which have not
been reserved for public or quasi-public uses, nor appropriated by the Government, nor in any
manner become private property, nor those on which a private right authorized and recognized by
this Act or any other valid law may be claimed, or which, having been reserved or appropriated,
have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain, the President must
first officially classify these lands as alienable or disposable, and then declare them open to disposition or
concession. There must be no law reserving these lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public
domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral
land, is intended to be used for residential purposes or for commercial, industrial, or other
productive purposes other than agricultural, and is open to disposition or concession, shall
be disposed of under the provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to
any person, corporation, or association authorized to purchase or lease public lands for agricultural
purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be
disposed of to private parties by lease only and not otherwise, as soon as the President,
upon recommendation by the Secretary of Agriculture, shall declare that the same are not
 necessary for the public service and are open to disposition under this chapter. The lands
included in class (d) may be disposed of by sale or lease under the provisions of this
Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No.
2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public
domain. All these lands are intended for residential, commercial, industrial or other non-agricultural
purposes. As before, Section 61 allowed only the lease of such lands to private parties. The government
could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-
agricultural purposes not classified as government reclaimed, foreshore and marshy disposable lands of
the public domain. Foreshore lands, however, became inalienable under the 1935 Constitution which only
allowed the lease of these lands to qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for
residential, commercial, industrial or other productive purposes other than agricultural "shall be disposed
of under the provisions of this chapter and not otherwise." Under Section 10 of CA No. 141, the term
"disposition" includes lease of the land. Any disposition of government reclaimed, foreshore and marshy
disposable lands for non-agricultural purposes must comply with Chapter IX, Title III of CA No.
141,54 unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of
Appeals,55Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed
by the government by dredging, filling, or other means. Act 1654 mandated that the control and
disposition of the foreshore and lands under water remained in the national government. Said law
allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919 and 1936 also declared
that the foreshore and lands reclaimed by the government were to be "disposed of to private
parties by lease only and not otherwise." Before leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and Natural Resources, had first to determine that
the land reclaimed was not necessary for the public service. This requisite must have been met
before the land could be disposed of. But even then, the foreshore and lands under water were
not to be alienated and sold to private parties. The disposition of the reclaimed land was
only by lease. The land remained property of the State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained in
effect at present."
The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy
alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after
the 1935 Constitution took effect. The prohibition on the sale of foreshore lands, however, became a
constitutional edict under the 1935 Constitution. Foreshore lands became inalienable as natural resources
of the State, unless reclaimed by the government and classified as agricultural lands of the public domain,
in which case they would fall under the classification of government reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the
public domain continued to be only leased and not sold to private parties.56 These lands remained sui
generis, as the only alienable or disposable lands of the public domain the government could not sell to
private parties.
Since then and until now, the only way the government can sell to private parties government reclaimed
and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such
sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands
into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that the government could sell to private
parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under
Section 59 that the government previously transferred to government units or entities could be sold to
private parties. Section 60 of CA No. 141 declares that –
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary
of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such
sale or lease is requested, and shall not exceed one hundred and forty-four hectares: Provided,
however, That this limitation shall not apply to grants, donations, or transfers made to a province,
 municipality or branch or subdivision of the Government for the purposes deemed by said entities
conducive to the public interest; but the land so granted, donated, or transferred to a province,
municipality or branch or subdivision of the Government shall not be alienated,
encumbered, or otherwise disposed of in a manner affecting its title, except when
authorized by Congress: x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority required
in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units
and entities from the maximum area of public lands that could be acquired from the State. These
government units and entities should not just turn around and sell these lands to private parties in
violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-agricultural
purposes to government units and entities could be used to circumvent constitutional limitations on
ownership of alienable or disposable lands of the public domain. In the same manner, such transfers
could also be used to evade the statutory prohibition in CA No. 141 on the sale of government reclaimed
and marshy lands of the public domain to private parties. Section 60 of CA No. 141 constitutes by
operation of law a lien on these lands.57
In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141,
Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows:
"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public
purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the
Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of such
authority, the Director of Lands shall give notice by public advertisement in the same manner as in
the case of leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to
the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or
disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of
Waters of 1866. Private parties could still reclaim portions of the sea with government permission.
However, the reclaimed land could become private land only if classified as alienable agricultural
land of the public domain open to disposition under CA No. 141. The 1935 Constitution prohibited the
alienation of all natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the
Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that –
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State."
Again, the government must formally declare that the property of public dominion is no longer needed for
public use or public service, before the same could be classified as patrimonial property of the State.59 In
the case of government reclaimed and marshy lands of the public domain, the declaration of their being
disposable, as well as the manner of their disposition, is governed by the applicable provisions of CA No.
141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those
properties of the State which, without being for public use, are intended for public service or the
"development of the national wealth." Thus, government reclaimed and marshy lands of the State, even
if not employed for public use or public service, if developed to enhance the national wealth, are classified
as property of public dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine.
Section 8, Article XIV of the 1973 Constitution stated that –
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong
to the State. With the exception of agricultural, industrial or commercial, residential, and
resettlement lands of the public domain, natural resources shall not be alienated, and no
license, concession, or lease for the exploration, development, exploitation, or utilization of any of
the natural resources shall be granted for a period exceeding twenty-five years, renewable for not
more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, in which cases, beneficial use may be
the measure and the limit of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception of "agricultural,
industrial or commercial, residential, and resettlement lands of the public domain." In contrast, the 1935
Constitution barred the alienation of all natural resources except "public agricultural lands." However, the
term "public agricultural lands" in the 1935 Constitution encompassed industrial, commercial, residential
and resettlement lands of the public domain.60 If the land of public domain were neither timber nor mineral
land, it would fall under the classification of agricultural land of the public domain. Both the 1935 and
1973 Constitutions, therefore, prohibited the alienation of all natural resources except agricultural
lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who
were citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were no
longer allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution. Section 11,
Article XIV of the 1973 Constitution declared that –
"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development
requirements of the natural resources, shall determine by law the size of land of the public domain
which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or
association, and the conditions therefor. No private corporation or association may hold
alienable lands of the public domain except by lease not to exceed one thousand hectares in
area nor may any citizen hold such lands by lease in excess of five hundred hectares or acquire by
purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or
association may hold by lease, concession, license or permit, timber or forest lands and other
timber or forest resources in excess of one hundred thousand hectares. However, such area may
be increased by the Batasang Pambansa upon recommendation of the National Economic and
Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain
only through lease. Only individuals could now acquire alienable lands of the public domain, and private
corporations became absolutely barred from acquiring any kind of alienable land of the public
domain. The constitutional ban extended to all kinds of alienable lands of the public domain, while the
statutory ban under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable
lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating
PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of
PD No. 1084, vests PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and
all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled
and/or operated by the government;
(c) To provide for, operate or administer such service as may be necessary for the efficient,
economical and beneficial utilization of the above properties.
 Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for
which it is created, have the following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to private corporations by
statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal,
ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for the attainment of
the purposes and objectives herein specified." (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain.
Foreshore areas are those covered and uncovered by the ebb and flow of the tide.61 Submerged areas
are those permanently under water regardless of the ebb and flow of the tide.62 Foreshore and submerged
areas indisputably belong to the public domain63 and are inalienable unless reclaimed, classified as
alienable lands open to disposition, and further declared no longer needed for public service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public
domain did not apply to PEA since it was then, and until today, a fully owned government corporation. The
constitutional ban applied then, as it still applies now, only to "private corporations and associations." PD
No. 1084 expressly empowers PEA "to hold lands of the public domain" even "in excess of the area
permitted to private corporations by statute." Thus, PEA can hold title to private lands, as well as title
to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there
must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in
view of Section 60 of CA No.141, which states –
"Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or
branch or subdivision of the Government shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when authorized by Congress; x x
x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and
submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to PEA to
sell its reclaimed alienable lands of the public domain would be subject to the constitutional ban on private
corporations from acquiring alienable lands of the public domain. Hence, such legislative authority could
only benefit private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian doctrine.
The 1987 Constitution declares that all natural resources are "owned by the State," and except for
alienable agricultural lands of the public domain, natural resources cannot be alienated. Sections 2 and 3,
Article XII of the 1987 Constitution state that –
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of agricultural lands, all other
natural resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral
lands, and national parks. Agricultural lands of the public domain may be further classified by law
according to the uses which they may be devoted. Alienable lands of the public domain shall
be limited to agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and not to exceed one thousand
hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or
acquire not more than twelve hectares thereof by purchase, homestead, or grant.
 Taking into account the requirements of conservation, ecology, and development, and subject to
the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the
public domain which may be acquired, developed, held, or leased and the conditions
therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations
from acquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold alienable lands of the public domain only through lease.
As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of
reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except through lease,
alienable lands of the public domain is not well understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:
`No private corporation or association may hold alienable lands of the public domain except by
lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the
1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public
lands. But it has not been very clear in jurisprudence what the reason for this is. In some of
the cases decided in 1982 and 1983, it was indicated that the purpose of this is to prevent
large landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the
Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a chapel stood
because the Supreme Court said it would be in violation of this." (Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:
"Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands
by private corporations is to equitably diffuse land ownership or to encourage 'owner-cultivatorship
and the economic family-size farm' and to prevent a recurrence of cases like the instant case.
Huge landholdings by corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply
limited the size of alienable lands of the public domain that corporations could acquire. The Constitution
could have followed the limitations on individuals, who could acquire not more than 24 hectares of
alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under
the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a
corporation would be more effective in preventing the break-up of farmlands. If the farmland is registered
in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation
instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands
into smaller and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from
acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional
ban, individuals who already acquired the maximum area of alienable lands of the public domain could
easily set up corporations to acquire more alienable public lands. An individual could own as many
corporations as his means would allow him. An individual could even hide his ownership of a corporation
by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to
circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public
domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited
area of alienable land of the public domain to a qualified individual. This constitutional intent is
safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public domain,
since the vehicle to circumvent the constitutional intent is removed. The available alienable public lands
are gradually decreasing in the face of an ever-growing population. The most effective way to insure
faithful adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to
individuals. This, it would seem, is the practical benefit arising from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to regularize
the configuration of the reclaimed area."65
PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further
reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently reclaim
another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-
hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are still
submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's "actual
cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the
reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the other
areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70
percent and 30 percent, respectively, the total net usable area which is defined in the Amended JVA as the
total reclaimed area less 30 percent earmarked for common areas. Title to AMARI's share in the net
usable area, totaling 367.5 hectares, will be issued in the name of AMARI. Section 5.2 (c) of the Amended
JVA provides that –
"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or
conveyance of the title pertaining to AMARI's Land share based on the Land Allocation Plan. PEA,
when requested in writing by AMARI, shall then cause the issuance and delivery of the
proper certificates of title covering AMARI's Land Share in the name of AMARI, x x x;
provided, that if more than seventy percent (70%) of the titled area at any given time pertains to
AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles pertaining to AMARI,
until such time when a corresponding proportionate area of additional land pertaining to PEA has
been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of
reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEA's
statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section
3.2.a of the Amended JVA states that –
"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland
Reclamation and Horizontal Development as well as own the Reclamation Area, thereby granting
the Joint Venture the full and exclusive right, authority and privilege to undertake the Project in
accordance with the Master Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its
supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended
JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and
3, Article XII of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. x x x.
xxx
 Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain except
by lease, x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its Memorandum,67 PEA admits that –
"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable
and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the government by dredging, filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365 admitted in
its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands are classified as
alienable and disposable lands of the public domain."69 The Legal Task Force concluded that –
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of
ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which
PEA, as owner, may validly convey the same to any qualified person without violating the
Constitution or any statute.
The constitutional provision prohibiting private corporations from holding public land, except by
lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands whose ownership
has passed on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay
are part of the "lands of the public domain, waters x x x and other natural resources" and consequently
"owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are
classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does
not convert these inalienable natural resources of the State into alienable or disposable lands of the public
domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as
alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be
classified as alienable or disposable if the law has reserved them for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or
concession which have been officially delimited and classified."72 The President has the authority to
classify inalienable lands of the public domain into alienable or disposable lands of the public domain,
pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive Department attempted to sell
the Roppongi property in Tokyo, Japan, which was acquired by the Philippine Government for use as the
Chancery of the Philippine Embassy. Although the Chancery had transferred to another location thirteen
years earlier, the Court still ruled that, under Article 42274 of the Civil Code, a property of public dominion
retains such character until formally declared otherwise. The Court ruled that –
"The fact that the Roppongi site has not been used for a long time for actual Embassy service does
not automatically convert it to patrimonial property. Any such conversion happens only if the
property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481
[1975]. A property continues to be part of the public domain, not available for private
appropriation or ownership 'until there is a formal declaration on the part of the government
to withdraw it from being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis
supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands
reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then
President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares
comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds
of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to
Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents.
To this day, these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom
Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or
disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of a land patent also
constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom
Islands are thus alienable or disposable lands of the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the
Freedom Islands although subsequently there were partial erosions on some areas. The government had
also completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of
Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the
public domain into "agricultural, forest or timber, mineral lands, and national parks." Being neither timber,
mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of
agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public
domain are the only natural resources that the State may alienate to qualified private parties. All other
natural resources, such as the seas or bays, are "waters x x x owned by the State" forming part of the
public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation,
reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public
Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the ownership of
reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed
lands are lands of the public domain which the State may not alienate."75 Article 5 of the Spanish Law of
Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by
the provinces, pueblos or private persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the terms of the grant of
authority." (Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with
"proper permission" from the State. Private parties could own the reclaimed land only if not "otherwise
provided by the terms of the grant of authority." This clearly meant that no one could reclaim from the sea
without permission from the State because the sea is property of public dominion. It also meant that the
State could grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea
from which it emerged, belonged to the State. Thus, a private person reclaiming from the sea without
permission from the State could not acquire ownership of the reclaimed land which would remain property
of public dominion like the sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the
time-honored principle of land ownership that "all lands that were not acquired from the government,
either by purchase or by grant, belong to the public domain."77
Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first be
classified as alienable or disposable before the government can alienate them. These lands must not be
reserved for public or quasi-public purposes.78 Moreover, the contract between CDCP and the government
was executed after the effectivity of the 1973 Constitution which barred private corporations from
acquiring any kind of alienable land of the public domain. This contract could not have converted the
Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of
areas under water and revested solely in the National Government the power to reclaim lands. Section 1
of PD No. 3-A declared that –
"The provisions of any law to the contrary notwithstanding, the reclamation of areas under
water, whether foreshore or inland, shall be limited to the National Government or any person
authorized by it under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under
water could now be undertaken only by the National Government or by a person contracted by the
National Government. Private parties may reclaim from the sea only under a contract with the National
Government, and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters
of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Government's
implementing arm to undertake "all reclamation projects of the government," which "shall be undertaken
by the PEA or through a proper contract executed by it with any person or entity." Under such
contract, a private party receives compensation for reclamation services rendered to PEA. Payment to the
contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the
constitutional ban on private corporations from acquiring alienable lands of the public domain. The
reclaimed land can be used as payment in kind only if the reclaimed land is first classified as alienable or
disposable land open to disposition, and then declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are
still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying
these submerged areas as alienable or disposable lands of the public domain open to disposition.
These submerged areas are not covered by any patent or certificate of title. There can be no dispute that
these submerged areas form part of the public domain, and in their present state are inalienable and
outside the commerce of man. Until reclaimed from the sea, these submerged areas are, under the
Constitution, "waters x x x owned by the State," forming part of the public domain and consequently
inalienable. Only when actually reclaimed from the sea can these submerged areas be classified as public
agricultural lands, which under the Constitution are the only natural resources that the State may alienate.
Once reclaimed and transformed into public agricultural lands, the government may then officially classify
these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare
these lands no longer needed for public service. Only then can these reclaimed lands be considered
alienable or disposable lands of the public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable lands
open to disposition is necessary because PEA is tasked under its charter to undertake public services that
require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA
include the following: "[T]o own or operate railroads, tramways and other kinds of land transportation, x x
x; [T]o construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o
construct, maintain and operate such storm drains as may be necessary." PEA is empowered to issue
"rules and regulations as may be necessary for the proper use by private parties of any or all of the
highways, roads, utilities, buildings and/or any of its properties and to impose or collect fees or tolls
for their use." Thus, part of the reclaimed foreshore and submerged lands held by the PEA would actually
be needed for public use or service since many of the functions imposed on PEA by its charter constitute
essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government." The same section also states that "[A]ll reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A
and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government
entity "to undertake the reclamation of lands and ensure their maximum utilization in promoting public
welfare and interests."79 Since large portions of these reclaimed lands would obviously be needed for
public service, there must be a formal declaration segregating reclaimed lands no longer needed for
public service from those still needed for public service.
1âwphi1.nêt

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned by the
PEA," could not automatically operate to classify inalienable lands into alienable or disposable lands of
the public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would
automatically become alienable once reclaimed by PEA, whether or not classified as alienable or
disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the
Department of Environment and Natural Resources ("DENR" for brevity) the following powers and
functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and disposable public lands,
mineral resources and, in the process of exercising such control, impose appropriate taxes, fees,
 charges, rentals and any such form of levy and collect such revenues for the exploration,
development, utilization or gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits,
concessions, lease agreements and such other privileges concerning the development,
exploration and utilization of the country's marine, freshwater, and brackish water and over
all aquatic resources of the country and shall continue to oversee, supervise and police our
natural resources; cancel or cause to cancel such privileges upon failure, non-compliance or
violations of any regulation, order, and for all other causes which are in furtherance of the
conservation of natural resources and supportive of the national interest;
(15) Exercise exclusive jurisdiction on the management and disposition of all lands of the
public domain and serve as the sole agency responsible for classification, sub-classification,
surveying and titling of lands in consultation with appropriate agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR exercises
"supervision and control over alienable and disposable public lands." DENR also exercises "exclusive
jurisdiction on the management and disposition of all lands of the public domain." Thus, DENR decides
whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not.
This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in
Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence,
DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 681 and
782 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then
recommends to the President the issuance of a proclamation classifying the lands as alienable or
disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio
S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative
Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is
vested with the power to undertake the physical reclamation of areas under water, whether directly or
through private contractors. DENR is also empowered to classify lands of the public domain into alienable
or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop,
sell or lease the reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the
reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA.
Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not
make the lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA.
Absent two official acts – a classification that these lands are alienable or disposable and open to
disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA
remain inalienable lands of the public domain. Only such an official classification and formal declaration
can convert reclaimed lands into alienable or disposable lands of the public domain, open to disposition
under the Constitution, Title I and Title III83 of CA No. 141 and other applicable laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the
reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing
Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the
government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its
title, except when authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which
states that –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed in
behalf of the government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to the Government.
The Court declared that -
 "It is not for the President to convey real property of the government on his or her own sole
will. Any such conveyance must be authorized and approved by a law enacted by the
Congress. It requires executive and legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell
its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that –
"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract
for the reclamation and construction of the Manila-Cavite Coastal Road Project between the
Republic of the Philippines and the Construction and Development Corporation of the Philippines
dated November 20, 1973 and/or any other contract or reclamation covering the same area is
hereby transferred, conveyed and assigned to the ownership and administration of the
Public Estates Authority established pursuant to PD No. 1084; Provided, however, That the
rights and interests of the Construction and Development Corporation of the Philippines pursuant
to the aforesaid contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the
Republic of the Philippines (Department of Public Highways) arising from, or incident to, the
aforesaid contract between the Republic of the Philippines and the Construction and Development
Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue
in favor of the Republic of the Philippines the corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public Estates Authority shall
execute such contracts or agreements, including appropriate agreements with the Construction
and Development Corporation of the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural Resources in favor
of the Public Estates Authority without prejudice to the subsequent transfer to the
contractor or his assignees of such portion or portions of the land reclaimed or to be
reclaimed as provided for in the above-mentioned contract. On the basis of such patents,
the Land Registration Commission shall issue the corresponding certificate of
title." (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be
responsible for its administration, development, utilization or disposition in accordance with the
provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the
sale, lease or use of reclaimed lands shall be used in accordance with the provisions of
Presidential Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands.
PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from Manila Bay to
PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by PEA." EO
No. 525 expressly states that PEA should dispose of its reclaimed lands "in accordance with the
provisions of Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by
the government."87(Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell
its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private
parties its patrimonial propertiesin accordance with the PEA charter free from constitutional limitations.
The constitutional ban on private corporations from acquiring alienable lands of the public domain does
not apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private individuals since,
with the legislative authority, there is no longer any statutory prohibition against such sales and the
constitutional ban does not apply to individuals. PEA, however, cannot sell any of its alienable or
disposable lands of the public domain to private corporations since Section 3, Article XII of the 1987
Constitution expressly prohibits such sales. The legislative authority benefits only individuals. Private
corporations remain barred from acquiring any kind of alienable land of the public domain, including
government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to
the "contractor or his assignees" (Emphasis supplied) would not apply to private corporations but only to
individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate both
the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition,
and further declared no longer needed for public service, PEA would have to conduct a public bidding in
selling or leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141
requiring public auction, in the absence of a law exempting PEA from holding a public auction.88 Special
Patent No. 3517 expressly states that the patent is issued by authority of the Constitution and PD No.
1084, "supplemented by Commonwealth Act No. 141, as amended." This is an acknowledgment that the
provisions of CA No. 141 apply to the disposition of reclaimed alienable lands of the public domain unless
otherwise provided by law. Executive Order No. 654,89 which authorizes PEA "to determine the kind and
manner of payment for the transfer" of its assets and properties, does not exempt PEA from the
requirement of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment,
whether in kind and in installment, but does not authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the
government is required to sell valuable government property through public bidding. Section 79 of PD No.
1445 mandates that –
"Section 79. When government property has become unserviceable for any cause, or is no
longer needed, it shall, upon application of the officer accountable therefor, be inspected by the
head of the agency or his duly authorized representative in the presence of the auditor concerned
and, if found to be valueless or unsaleable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the supervision of the
proper committee on award or similar body in the presence of the auditor concerned or other
authorized representative of the Commission, after advertising by printed notice in the Official
Gazette, or for not less than three consecutive days in any newspaper of general
circulation, or where the value of the property does not warrant the expense of publication, by
notices posted for a like period in at least three public places in the locality where the property is to
be sold. In the event that the public auction fails, the property may be sold at a private sale
at such price as may be fixed by the same committee or body concerned and approved by
the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case the Commission on
Audit must approve the selling price.90 The Commission on Audit implements Section 79 of the
Government Auditing Code through Circular No. 89-29691 dated January 27, 1989. This circular
emphasizes that government assets must be disposed of only through public auction, and a negotiated
sale can be resorted to only in case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore and
submerged alienable lands of the public domain. Private corporations are barred from bidding at the
auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a
condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize
the shape of the Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in favor of the
winning bidder.92 No one, however, submitted a bid. On December 23, 1994, the Government Corporate
Counsel advised PEA it could sell the Freedom Islands through negotiation, without need of another
public bidding, because of the failure of the public bidding on December 10, 1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional
250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares. The
original JVA, a negotiated contract, enlarged the reclamation area to 750 hectares.94 The failure of public
bidding on December 10, 1991, involving only 407.84 hectares,95 is not a valid justification for a negotiated
sale of 750 hectares, almost double the area publicly auctioned. Besides, the failure of public bidding
happened on December 10, 1991, more than three years before the signing of the original JVA on April
25, 1995. The economic situation in the country had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear:
"Private corporations or associations may not hold such alienable lands of the public domain except by
lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as legislative
authority to sell reclaimed lands to private parties, recognizes the constitutional ban. Section 6 of RA No.
6957 states –
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any
infrastructure projects undertaken through the build-operate-and-transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid
in the form of a share in the revenue of the project or other non-monetary payments, such as, but
not limited to, the grant of a portion or percentage of the reclaimed land, subject to the
constitutional requirements with respect to the ownership of the land: x x x." (Emphasis
supplied)
A private corporation, even one that undertakes the physical reclamation of a government BOT project,
cannot acquire reclaimed alienable lands of the public domain in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure
Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the repayment plan may consist of
the grant of a portion or percentage of the reclaimed land or the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar to that of the BOT
Law, the constitutional restrictions on land ownership automatically apply even though not expressly
mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor or
developer is an individual, portions of the reclaimed land, not exceeding 12 hectares96 of non-agricultural
lands, may be conveyed to him in ownership in view of the legislative authority allowing such conveyance.
This is the only way these provisions of the BOT Law and the Local Government Code can avoid a direct
collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public
respondent PEA transformed such lands of the public domain to private lands." This theory is echoed by
AMARI which maintains that the "issuance of the special patent leading to the eventual issuance of title
takes the subject land away from the land of public domain and converts the property into patrimonial or
private property." In short, PEA and AMARI contend that with the issuance of Special Patent No. 3517 and
the corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands have become
private lands of PEA. In support of their theory, PEA and AMARI cite the following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –
"Once the patent was granted and the corresponding certificate of title was issued, the land ceased
to be part of the public domain and became private property over which the Director of Lands has
neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate certificate of title based on a
public land patent, the land covered thereby automatically comes under the operation of Republic
Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose
Aliwalas,99 where the Court ruled -
"While the Director of Lands has the power to review homestead patents, he may do so only so
long as the land remains part of the public domain and continues to be under his exclusive control;
but once the patent is registered and a certificate of title is issued, the land ceases to be part of the
public domain and becomes private property over which the Director of Lands has neither control
nor jurisdiction."
 4. Manalo v. Intermediate Appellate Court,100 where the Court held –
"When the lots in dispute were certified as disposable on May 19, 1971, and free patents were
issued covering the same in favor of the private respondents, the said lots ceased to be part of the
public domain and, therefore, the Director of Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court stated –
"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land
grant to the Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the
whole lot, validly sufficient for initial registration under the Land Registration Act. Such land grant is
constitutive of a 'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center.
Thus, Section 122 of the Act, which governs the registration of grants or patents involving public
lands, provides that 'Whenever public lands in the Philippine Islands belonging to the Government
of the United States or to the Government of the Philippines are alienated, granted or conveyed to
persons or to public or private corporations, the same shall be brought forthwith under the
operation of this Act (Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the corresponding certificates of
titles issued to private parties. These four cases uniformly hold that the Director of Lands has no
jurisdiction over private lands or that upon issuance of the certificate of title the land automatically comes
under the Torrens System. The fifth case cited involves the registration under the Torrens System of a
12.8-hectare public land granted by the National Government to Mindanao Medical Center, a government
unit under the Department of Health. The National Government transferred the 12.8-hectare public land to
serve as the site for the hospital buildings and other facilities of Mindanao Medical Center, which
performed a public service. The Court affirmed the registration of the 12.8-hectare public land in the name
of Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is an example of a public
land being registered under Act No. 496 without the land losing its character as a property of public
dominion.
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly
government owned corporation performing public as well as proprietary functions. No patent or certificate
of title has been issued to any private party. No one is asking the Director of Lands to cancel PEA's patent
or certificates of title. In fact, the thrust of the instant petition is that PEA's certificates of title should remain
with PEA, and the land covered by these certificates, being alienable lands of the public domain, should
not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public
ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of
ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does
not give the registrant a better right than what the registrant had prior to the registration.102 The registration
of lands of the public domain under the Torrens system, by itself, cannot convert public lands into private
lands.103
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable
land of the public domain automatically becomes private land cannot apply to government units and
entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA
No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in
conformity with the provisions of Presidential Decree No. 1084, supplemented by
Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the
Public Estates Authority the aforesaid tracts of land containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical
description of which are hereto attached and made an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084.
Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of alienable lands of
the public domain that are transferred to government units or entities. Section 60 of CA No. 141
constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of the registered land even if
not annotated on the certificate of title.104Alienable lands of the public domain held by government entities
under Section 60 of CA No. 141 remain public lands because they cannot be alienated or encumbered
unless Congress passes a law authorizing their disposition. Congress, however, cannot authorize the sale
to private corporations of reclaimed alienable lands of the public domain because of the constitutional
ban. Only individuals can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not
automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable
lands of the public domain must be transferred to qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise,
the constitutional ban will become illusory if Congress can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow
private corporations to acquire directly from government agencies limitless areas of lands which, prior to
such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National Government to
reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that –
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation
Projects
Whereas, there are several reclamation projects which are ongoing or being proposed to be
undertaken in various parts of the country which need to be evaluated for consistency with national
programs;
Whereas, there is a need to give further institutional support to the Government's declared policy to
provide for a coordinated, economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the
National Government or any person authorized by it under proper contract;
Whereas, a central authority is needed to act on behalf of the National Government which
shall ensure a coordinated and integrated approach in the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a
government corporation to undertake reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing authority to
reorganize the national government including the transfer, abolition, or merger of functions and
offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby
order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National
Government. All reclamation projects shall be approved by the President upon recommendation of
the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any
person or entity; Provided, that, reclamation projects of any national government agency or entity
authorized under its charter shall be undertaken in consultation with the PEA upon approval of the
President.
x x x ."
As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to
sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or
selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not
private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose
of private lands but alienable lands of the public domain. Only when qualified private parties acquire these
lands will the lands become private lands. In the hands of the government agency tasked and
authorized to dispose of alienable of disposable lands of the public domain, these lands are still
public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well
as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the
mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and
issued land patents or certificates of title in PEA's name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will
sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain. PEA will simply turn around, as PEA has now done under the
Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed
lands to a single private corporation in only one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably
the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million
strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since
PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even
individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that in
the hands of PEA these lands are private lands. This will result in corporations amassing huge
landholdings never before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional development in this
country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of
public lands.105 The 1973 Constitution prohibited private corporations from acquiring any kind of public
land, and the 1987 Constitution has unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529,
automatically become private lands is contrary to existing laws. Several laws authorize lands of the public
domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their
character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively,
provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of
the Philippine Islands are alienated, granted, or conveyed to persons or the public or private
corporations, the same shall be brought forthwith under the operation of this Act and shall
become registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated,
granted or conveyed to any person, the same shall be brought forthwith under the operation of
this Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529
includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or
branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be registered
under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is
expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not be alienated,
encumbered or otherwise disposed of in a manner affecting its title, except when authorized by
Congress." This provision refers to government reclaimed, foreshore and marshy lands of the public
domain that have been titled but still cannot be alienated or encumbered unless expressly authorized by
Congress. The need for legislative authority prevents the registered land of the public domain from
becoming private land that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be
registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government
is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of
the agency or instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public wharf may be
titled in the name of a government corporation regulating port operations in the country. Private property
purchased by the National Government for expansion of an airport may also be titled in the name of the
government agency tasked to administer the airport. Private property donated to a municipality for use as
a town plaza or public school site may likewise be titled in the name of the municipality.106 All these
properties become properties of the public domain, and if already registered under Act No. 496 or PD No.
1529, remain registered land. There is no requirement or provision in any existing law for the de-
registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the
Register of Deeds to issue in the name of the National Government new certificates of title covering such
expropriated lands. Section 85 of PD No. 1529 states –
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is
expropriated or taken by eminent domain, the National Government, province, city or municipality,
or any other agency or instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an adequate description,
the particular property or interest expropriated, the number of the certificate of title, and the nature
of the public use. A memorandum of the right or interest taken shall be made on each certificate of
title by the Register of Deeds, and where the fee simple is taken, a new certificate shall be
issued in favor of the National Government, province, city, municipality, or any other agency
or instrumentality exercising such right for the land so taken. The legal expenses incident to the
memorandum of registration or issuance of a new certificate of title shall be for the account of the
authority taking the land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or
patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of
the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA
"is not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by PEA
for the earlier reclamation and construction works performed by the CDCP under its 1973 contract with the
Republic." Whether the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA
requires PEA to "cause the issuance and delivery of the certificates of title conveying AMARI's Land Share
in the name of AMARI."107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private
corporations "shall not hold such alienable lands of the public domain except by lease." The transfer of
title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands other than by
lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a transaction
considered a sale or alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3,
Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part
of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form
part of the public domain and are also inalienable, unless converted pursuant to law into alienable or
disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis,
not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their
inherent potential as areas for public use or public service. Alienable lands of the public domain,
increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing
population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private
corporations from acquiring any kind of alienable land of the public domain. Those who attempt to dispose
of inalienable natural resources of the State, or seek to circumvent the constitutional ban on alienation of
lands of the public domain to private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by
certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease
these lands to private corporations but may not sell or transfer ownership of these lands to private
corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of
the public domain until classified as alienable or disposable lands open to disposition and declared
no longer needed for public service. The government can make such classification and declaration
only after PEA has reclaimed these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural resources the government can
 alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and
outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34
hectares110of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII
of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable
land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of still
submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of
the 1987 Constitution which prohibits the alienation of natural resources other than agricultural
lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government
can classify the reclaimed lands as alienable or disposable, and further declare them no longer
needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain
to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under
Article 1409112 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is
outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its
duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab
initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether the Amended
JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last issue.
Besides, the Court is not a trier of facts, and this last issue involves a determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint
Venture Agreement which is hereby declared NULL and VOID ab initio.
SO ORDERED

G.R. No. 133250 November 11, 2003

FRANCISCO I. CHAVEZ, petitioner, 

vs.

PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
RESOLUTION
CARPIO, J.:
This Court is asked to legitimize a government contract that conveyed to a private entity 157.84 hectares
of reclaimed public lands along Roxas Boulevard in Metro Manila at the negotiated price of P1,200 per
square meter. However, published reports place the market price of land near that area at that time at a
high of P90,000 per square meter.1 The difference in price is a staggering P140.16 billion, equivalent to
the budget of the entire Judiciary for seventeen years and more than three times the Marcos Swiss
deposits that this Court forfeited in favor of the government.
Many worry to death that the private investors will lose their investments, at most not more than one-half
billion pesos in legitimate expenses,2 if this Court voids the contract. No one seems to worry about the
more than tens of billion pesos that the hapless Filipino people will lose if the contract is allowed to stand.
There are those who question these figures, but the questions arise only because the private entity
somehow managed to inveigle the government to sell the reclaimed lands without public bidding in patent
violation of the Government Auditing Code.
Fortunately for the Filipino people, two Senate Committees, the Senate Blue Ribbon Committee and the
Committee on Accountability of Public Officers, conducted extensive public hearings to determine the
actual market value of the public lands sold to the private entity. The Senate Committees established
the clear, indisputable and unalterable fact that the sale of the public lands is grossly and
unconscionably undervalued based on official documents submitted by the proper government
agencies during the Senate investigation. We quote the joint report of these two Senate Committees,
Senate Committee Report No. 560, as approved by the Senate in plenary session on 27 September
1997:3
The Consideration for the Property
PEA, under the JVA, obligated itself to convey title and possession over the Property, consisting of
approximately One Million Five Hundred Seventy Eight Thousand Four Hundred Forty One
(1,578,441) Square Meters for a total consideration of One Billion Eight Hundred Ninety Four
Million One Hundred Twenty Nine Thousand Two Hundred (P1,894,129,200.00) Pesos, or a price
of One Thousand Two Hundred (P1,200.00) Pesos per square meter.
According to the zonal valuation of the Bureau of Internal Revenue, the value of the
Property is Seven Thousand Eight Hundred Pesos (P7,800.00) per square meter. The
Municipal Assessor of Parañaque, Metro Manila, where the Property is located, pegs the
market value of the Property at Six Thousand Pesos (P6,000.00) per square meter. Based on
these alone, the price at which PEA agreed to convey the property is a pittance. And PEA cannot
claim ignorance of these valuations, at least not those of the Municipal Assessors’ office, since it
has been trying to convince the Office of the Municipal Assessor of Parañaque to reduce the
valuation of various reclaimed properties thereat in order for PEA to save on accrued real property
taxes.
PEA’s justification for the purchase price are various appraisal reports, particularly the following:
(1) An appraisal by Vic T. Salinas Realty and Consultancy Services concluding that the
Property is worth P500.00 per square meter for the smallest island and P750.00 per square
meter for the two other islands, or a total of P1,170,000.00 as of 22 February 1995;
(2) An appraisal by Valencia Appraisal Corporation concluding that the Property is worth
P850 per square meter for Island I, P800 per square meter for Island II and P600 per
square meter for the smallest island, or a total of P1,289,732,000, also as of 22 February
1995; and
(3) An Appraisal by Asian Appraisal Company, Inc. (AACI), stating that the Property is worth
approximately P1,000 per square meter for Island I, P950 per square meter for Island II and
P600 per square meter for Island III, or a total of P1,518,805,000 as of 27 February 1995.
The credibility of the foregoing appraisals, however, are [sic] greatly impaired by a subsequent
appraisal report of AACI stating that the property is worth P4,500.00 per square meter as of 26
March 1996. Such discrepancies in the appraised value as appearing in two different reports by the
same appraisal company submitted within a span of one year render all such appraisal reports
unworthy of even the slightest consideration. Furthermore, the appraisal report submitted by
the Commission on Audit estimates the value of the Property to be approximately
P33,673,000,000.00, or P21,333.07 per square meter.
There were also other offers made for the property from other parties which indicate that the
Property has been undervalued by PEA. For instance, on 06 March 1995, Mr. Young D. See,
President of Saeil Heavy Industries Co., Ltd., (South Korea), offered to buy the property at
P1,400.00 and expressed its willingness to issue a stand-by letter of credit worth $10 million. PEA
did not consider this offer and instead finalized the JVA with AMARI. Other offers were made on
various dates by Aspac Management and Development Group Inc. (for P1,600 per square meter),
Universal Dragon Corporation (for P1,600 per square meter), Cleene Far East Manila Incorporated
and Hyosan Prime Construction Co. Ltd. which had prepared an Irrevocable Clean Letter of Credit
for P100,000,000.
In addition, AMARI agreed to pay huge commissions and bonuses to various persons, amounting
to P1,596,863,050.00 (P1,754,707,150.00 if the bonus is included), as will be discussed fully
below, which indicate that AMARI itself believed the market value to be much higher than the
agreed purchase price. If such commissions are added to the purchase price, AMARI’s acquisition
cost for the Property will add-up to P3,490,992,250.00 (excluding the bonus). If AMARI was willing
to pay such amount for the Property, why was PEA willing to sell for only P1,894,129,200.00,
making the Government stand to lose approximately P1,596,863,050.00?
 x x x
Even if we simply assume that the market value of the Property is half of the market value fixed by
the Municipal Assessors Office of Parañaque for lands along Roxas Boulevard, or P3,000.00 per
square meter, the Government now stands to lose approximately P2,841,193,800.00. But an even
better assumption would be that the value of the Property is P4,500.00 per square meter, as per
the AACI appraisal report dated 26 March 1996, since this is the valuation used to justify the
issuance of P4 billion worth of shares of stock of Centennial City Inc. (CCI) in exchange for
4,800,000 AMARI shares with a total par value of only P480,000,000.00. With such valuation, the
Government’s loss will amount to P5,208,855,300.00.
Clearly, the purchase price agreed to by PEA is way below the actual value of the Property,
thereby subjecting the Government to grave injury and enabling AMARI to enjoy
tremendous benefit and advantage. (Emphasis supplied)
The Senate Committee Report No. 560 attached the following official documents from the Bureau of
Internal Revenue, the Municipal Assessor of Parañaque, Metro Manila, and the Commission on
Audit:
1. Annex "M," Certified True Copy of BIR Zonal Valuations as certified by Antonio F. Montemayor,
Revenue District Officer. This official document fixed the market value of the 157.84 hectares
at P7,800 per square meter.
2. Annex "N," Certification of Soledad S. Medina-Cue, Municipal Assessor, Parañaque, dated 10
December 1996. This official document fixed the market value at P6,000 per square meter.
3. Exhibit "1-Engr. Santiago," the Appraisal Report of the Commission on Audit. This official
document fixed the market value at P21,333.07 per square meter.
Whether based on the official appraisal of the BIR, the Municipal Assessor or the Commission on Audit,
the P1,200 per square meter purchase price, or a total of P1.894 billion for the 157.84 hectares of
government lands, is grossly and unconscionably undervalued. The authoritative appraisal, of course, is
that of the Commission on Audit which valued the 157.84 hectares at P21,333.07 per square meter or a
total of P33.673 billion. Thus, based on the official appraisal of the Commission on Audit, the
independent constitutional body that safeguards government assets, the actual loss to the Filipino
people is a shocking P31.779 billion.
This gargantuan monetary anomaly, aptly earning the epithet "Grandmother of All Scams,"4 is not the
major defect of this government contract. The major flaw is not even the P1.754 billion in
commissions the Senate Committees discovered the private entity paid to various persons to secure the
contract,5 described in Senate Report No. 560 as follows:
A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai Karnasuta and Emmanuel
Sy for and in behalf of AMARI, on the one hand, and stockholders of AMARI namely, Mr. Chin San
Cordova (a.k.a. Benito Co) and Mr. Chua Hun Siong (a.k.a. Frank Chua), on the other, sets forth
various payments AMARI paid or agreed to pay the aforesaid stockholders by way of fees for
"professional efforts and services in successfully negotiating and securing for AMARI the
Joint Venture Agreement", as follows:
Form of Payment Paid/Payable On Amount
Manager’s Checks 28 April 1995 P 400,000,000.00
Manager’s Checks Upon signing of letter 262,500,000.00
10 Post Dated Checks 60 days from date of 127,000,000.00
(PDCs) letter
24 PDCs 31 Aug. ’95 to 31 Jan. 150,000,000.00
’98
48 PDCs Monthly, over a 12- 357,363,050.00
month pd. from date of
letter
Cash bonus When sale of land not exceeding
begins
 157,844,100.00
D e v e l o p e d l a n d f r o m Upon completion of Costing
Project each phase
300,000,000.00
TOTAL P1,754,707,150.0
0
=============
=
Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said Letter-Agreement
was approved by the AMARI Board.6 (Emphasis supplied)
The private entity that purchased the reclaimed lands for P1.894 billion expressly admitted before the
Senate Committees that it spent P1.754 billion in commissions to pay various individuals for
"professional efforts and services in successfully negotiating and securing" the contract. By any
legal or moral yardstick, the P1.754 billion in commissions obviously constitutes bribe
money. Nonetheless, there are those who insist that the billions in investments of the private entity
deserve protection by this Court. Should this Court establish a new doctrine by elevating grease money to
the status of legitimate investments deserving of protection by the law? Should this Court reward the
patently illegal and grossly unethical business practice of the private entity in securing the contract?
Should we allow those with hands dripping with dirty money equitable relief from this Court?
Despite these revolting anomalies unearthed by the Senate Committees, the fatal flaw of this contract is
that it glaringly violates provisions of the Constitution expressly prohibiting the alienation of lands of the
public domain.
Thus, we now come to the resolution of the second Motions for Reconsideration7 filed by public
respondent Public Estates Authority ("PEA") and private respondent Amari Coastal Bay Development
Corporation ("Amari"). As correctly pointed out by petitioner Francisco I. Chavez in his Consolidated
Comment,8 the second Motions for Reconsideration raise no new issues.
However, the Supplement to "Separate Opinion, Concurring and Dissenting" of Justice Josue N. Bellosillo
brings to the Court’s attention the Resolutions of this Court on 3 February 1965 and 24 June 1966 in L-
21870 entitled "Manuel O. Ponce, et al. v. Hon. Amador Gomez, et al." and No. L-22669 entitled "Manuel
O. Ponce, et al. v. The City of Cebu, et al." ("Ponce Cases"). In effect, the Supplement to the
Dissenting Opinion claims that these two Resolutions serve as authority that a single private
corporation like Amari may acquire hundreds of hectares of submerged lands, as well as
reclaimed submerged lands, within Manila Bay under the Amended Joint Venture Agreement
("Amended JVA").
We find the cited Ponce Cases inapplicable to the instant case.
First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit
that "submerged lands still belong to the National Government."9 The correct formulation, however, is
that submerged lands are owned by the State and are inalienable. Section 2, Article XII of the 1987
Constitution provides:
All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. x x x. (Emphasis supplied)
Submerged lands, like the waters (sea or bay) above them, are part of the State’s inalienable natural
resources. Submerged lands are property of public dominion, absolutely inalienable and outside the
commerce of man.10 This is also true with respect to foreshore lands. Any sale of submerged or foreshore
lands is void being contrary to the Constitution.11
This is why the Cebu City ordinance merely granted Essel, Inc. an "irrevocable option" to purchase the
foreshore lands after the reclamation and did not actually sell to Essel, Inc. the still to be reclaimed
foreshore lands. Clearly, in the Ponce Cases the option to purchase referred to reclaimed lands, and not
to foreshore lands which are inalienable. Reclaimed lands are no longer foreshore or submerged lands,
and thus may qualify as alienable agricultural lands of the public domain provided the requirements of
public land laws are met.
In the instant case, the bulk of the lands subject of the Amended JVA are still submerged lands even to
this very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject of
the Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under
the waters of Manila Bay. Under the Amended JVA, the PEA conveyed to Amari the submerged lands
even before their actual reclamation, although the documentation of the deed of transfer and issuance of
the certificates of title would be made only after actual reclamation.
The Amended JVA states that the PEA "hereby contributes to the Joint Venture its rights and
privileges to perform Rawland Reclamation and Horizontal Development as well as own the
Reclamation Area."12 The Amended JVA further states that "the sharing of the Joint Venture Proceeds
shall be based on the ratio of thirty percent (30%) for PEA and seventy percent (70%) for AMARI."13 The
Amended JVA also provides that the PEA "hereby designates AMARI to perform PEA’s rights and
privileges to reclaim, own and develop the Reclamation Area."14 In short, under the Amended JVA the
PEA contributed its rights, privileges and ownership over the Reclamation Area to the Joint
Venture which is 70% owned by Amari. Moreover, the PEA delegated to Amari the right and
privilege to reclaim the submerged lands.
The Amended JVA mandates that the PEA had "the duty to execute without delay the necessary deed of
transfer or conveyance of the title pertaining to AMARI’s Land share based on the Land Allocation
Plan."15 The Amended JVA also provides that "PEA, when requested in writing by AMARI, shall then cause
the issuance and delivery of the proper certificates of title covering AMARI’s Land Share in the name of
AMARI, x x x."16
In the Ponce Cases, the City of Cebu retained ownership of the reclaimed foreshore lands and Essel, Inc.
only had an "irrevocable option" to purchase portions of the foreshore lands once actually reclaimed. In
sharp contrast, in the instant case ownership of the reclamation area, including the submerged lands, was
immediately transferred to the joint venture. Amari immediately acquired the absolute right to own 70%
percent of the reclamation area, with the deeds of transfer to be documented and the certificates of title to
be issued upon actual reclamation. Amari’s right to own the submerged lands is immediately effective
upon the approval of the Amended JVA and not merely an option to be exercised in the future if and when
the reclamation is actually realized. The submerged lands, being inalienable and outside the commerce of
man, could not be the subject of the commercial transactions specified in the Amended JVA.
Second, in the Ponce Cases the Cebu City ordinance granted Essel, Inc. an "irrevocable option" to
purchase from Cebu City not more than 70% of the reclaimed lands. The ownership of the reclaimed
lands remained with Cebu City until Essel, Inc. exercised its option to purchase. With the subsequent
enactment of the Government Auditing Code (Presidential Decree No. 1445) on 11 June 1978, any sale of
government land must be made only through public bidding. Thus, such an "irrevocable option" to
purchase government land would now be void being contrary to the requirement of public bidding
expressly required in Section 7917 of PD No. 1445. This requirement of public bidding is reiterated in
Section 37918 of the 1991 Local Government Code.19 Obviously, the ingenious reclamation scheme
adopted in the Cebu City ordinance can no longer be followed in view of the requirement of public bidding
in the sale of government lands. In the instant case, the Amended JVA is a negotiated contract which
clearly contravenes Section 79 of PD No. 1445.
Third, Republic Act No. 1899 authorized municipalities and chartered cities to reclaim foreshore lands.
The two Resolutions in the Ponce Cases upheld the Cebu City ordinance only with respect to foreshore
areas, and nullified the same with respect to submerged areas. Thus, the 27 June 1965 Resolution made
the injunction of the trial court against the City of Cebu "permanent insofar x x x as the area outside or
beyond the foreshore land proper is concerned."
As we held in the 1998 case of Republic Real Estate Corporation v. Court of Appeals,20 citing the
Ponce Cases, RA No. 1899 applies only to foreshore lands, not to submerged lands. In his concurring
opinion in Republic Real Estate Corporation, Justice Reynato S. Puno stated that under
Commonwealth Act No. 141, "foreshore and lands under water were not to be alienated and sold to
private parties," and that such lands "remained property of the State." Justice Puno emphasized that
"Commonwealth Act No. 141 has remained in effect at present." The instant case involves principally
submerged lands within Manila Bay. On this score, the Ponce Cases, which were decided based on RA
No. 1899, are not applicable to the instant case.
Fourth, the Ponce Cases involve the authority of the City of Cebu to reclaim foreshore areas pursuant to a
general law, RA No. 1899. The City of Cebu is a public corporation and is qualified, under the 1935, 1973,
and 1987 Constitutions, to hold alienable or even inalienable lands of the public domain. There is no
dispute that a public corporation is not covered by the constitutional ban on acquisition of alienable public
lands. Both the 9 July 2002 Decision and the 6 May 2003 Resolution of this Court in the instant case
expressly recognize this.
Cebu City is an end user government agency, just like the Bases Conversion and Development Authority
or the Department of Foreign Affairs.21 Thus, Congress may by law transfer public lands to the City of
Cebu to be used for municipal purposes, which may be public or patrimonial. Lands thus acquired by the
City of Cebu for a public purpose may not be sold to private parties. However, lands so acquired by the
City of Cebu for a patrimonial purpose may be sold to private parties, including private corporations.
However, in the instant case the PEA is not an end user agency with respect to the reclaimed lands under
the Amended JVA. As we explained in the 6 May 2003 Resolution:
PEA is the central implementing agency tasked to undertake reclamation
projects nationwide. PEA took the place of the 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 (or submerged lands) lands are public lands in the same
manner that these same lands would have been public lands in the hands of
DENR. (Emphasis supplied)
Our 9 July 2002 Decision explained the rationale for treating the PEA in the same manner as the DENR
with respect to reclaimed foreshore or submerged lands in this wise:
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. (Emphasis supplied)
Finally, the Ponce Cases were decided under the 1935 Constitution which allowed private corporations to
acquire alienable lands of the public domain. However, the 1973 Constitution prohibited private
corporations from acquiring alienable lands of the public domain, and the 1987 Constitution reiterated this
prohibition. Obviously, the Ponce Cases cannot serve as authority for a private corporation to acquire
alienable public lands, much less submerged lands, since under the present Constitution a private
corporation like Amari is barred from acquiring alienable lands of the public domain.
Clearly, the facts in the Ponce Cases are different from the facts in the instant case. Moreover, the
governing constitutional and statutory provisions have changed since the Ponce Cases were disposed of
in 1965 and 1966 through minute Resolutions of a divided (6 to 5) Court.
This Resolution does not prejudice any innocent third party purchaser of the reclaimed lands covered by
the Amended JVA. Neither the PEA nor Amari has sold any portion of the reclaimed lands to third parties.
Title to the reclaimed lands remains with the PEA. As we stated in our 9 July 2002 Decision:
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a
wholly government owned corporation performing public as well as proprietary functions. No patent
or certificate of title has been issued to any private party. No one is asking the Director of Lands to
cancel PEA’s patent or certificates of title. In fact, the thrust of the instant petition is that PEA’s
certificates of title should remain with PEA, and the land covered by these certificates, being
alienable lands of the public domain, should not be sold to a private corporation.
As we held in our 9 July 2002 Decision, the Amended JVA "violates glaringly Sections 2 and 3, Article XII
of the 1987 Constitution." In our 6 May 2003 Resolution, we DENIED with FINALITY respondents’
Motions for Reconsideration. Litigations must end some time. It is now time to write finis to this
"Grandmother of All Scams."
WHEREFORE, the second Motions for Reconsideration filed by Public Estates Authority and Amari
Coastal Bay Development Corporation are DENIED for being prohibited pleadings. In any event, these
Motions for Reconsideration have no merit. No further pleadings shall be allowed from any of the parties.