Chapter 3/ Cases in Property

Republic of the PhilippinesSUPREME COURT

ManilaTHIRD DIVISION

G.R. No. 79167 May 7, 1992THE HEIRS OF PROCESO BAUTISTA represented by PEDRO BAUTISTA, petitioners, vs.SPOUSES SEVERO BARZA and ESTER P. BARZA, and COURT OF APPEALS, respondents.Miguel and Valenson Law Offices for petitioners.Rogelio A. Barba and Aguinaldo, Barza & Associates for private respondents. ROMERO, J.:The facts of this case began as far back as 1946, when the Philippines was still a new republic and frontier lands and bountiful natural resources down south beckoned the adventurous-like Proceso Bautista and Ester Barza.It was on October 25, 1946, to be exact, when Proceso Bautista applied for a fishpond permit over a thirty-hectare parcel of marshy public land located in Sitio Central, Lupon, Davao (Fishpond Application No. 1205). The application was acknowledge on December 12, 1946, by the then Division of Fisheries. Said application was, however, rejected by the same office on November 9, 1948 because the area applied for was needed for firewood production as certified to by the Bureau of Forestry. The rejection covered an area of 49 hectares as against the 30 hectares applied for by Proceso Bautista. 1 Between October 25, 1946 and November 9, 1948, Bautista occupied an area which extended beyond the boundary of the one he had applied for and introduced improvements thereon. 2On September 23, 1948, Ester Barza filed a fishpond application covering an area of approximately 14.85 hectares at Sitio Bundas, Lupon, Davao (Fishpond Application. No. 2984). Subsequent investigation revealed that the portion applied for by Barza overlapped the area originally applied for by Proceso Bautista. 3Despite the rejection of his application, Proceso Bautista filed another fishpond application on February 8, 1949 with the Bureau of Fisheries (Fishpond Application No. 3346). The 49 hectares applied for was in Sitio Bundas instead of Sitio Central. 4The records of the Bureau of Fisheries further show that while the 14.85 hectares applied for by Barza in Fishpond Application No. 2984 had been released by the Bureau of Forestry as available for fishpond purposes, the 49 hectares applied for by Bautista in Fishpond Application No. 3346 had not yet been similarly released by the said bureau. It must be emphasized that the area, including the portion applied for by Barza had been greatly improved by Proceso Bautista. 5 As expected, an administrative case involving the two applicants arose.On September 19, 1953, the Director of Fisheries ruled in favor of Ester Barza. The dispositive portion 6 of his order reads:

IN VIEW OF THE FOREGOING, Fp. A. No. 2984 of Ester F. Barza should be, as hereby it is, GIVEN DUE COURSE, subject however to the reimbursement of the amounts of improvements in the area to Proceso Bautista within a period of sixty days from the date hereof, the said amounts to be appraised and determined by the District Fishery Officer at Davao City; and Fp. A. No. 3346 of Proceso Bautista should be, as hereby it is, REJECTED.SO ORDERED.

Bautista appealed the said order to the Secretary of Agriculture and Natural Resources (DANR Case No. 836). In a decision dated April 28, 1954, the Secretary, through Undersecretary Jaime M. Ferrer, dismissed the appeal and affirmed in toto the order of the Director of Fisheries giving due course to the fishpond application of Barza. 7 Bautista moved for reconsideration but the same was denied on October 8, 1954. 8It was not until February 2, 1955, that the Director of Fisheries, in pursuance of the order of September 19, 1953, required Ester Barza to remit the amount of P3,391.34 which represented the value of the improvements introduced by Bautista. 9 This figure was protested by Mrs. Barza in her letter dated March 6, 1955 where she expressed her willingness to pay the amount of P1,763.31 only. On April 18, 1955, the Director of Fisheries advised her to remit a reappraised amount of P2,263.33. Subsequent reappraisals on the value of the improvements became necessary in view of Bautista's claim that the improvements were worth P14,000. 10Meanwhile, since the parties could not agree on the amount of reimbursement, on October 13, 1956, Bautista moved for the rejection of the fishpond application of Barza in view of her non-compliance with the order of the Director of Fisheries dated September 19, 1953 mandating Barza's deposit of the value of the improvements. 11 Bautista appealed to the then Secretary of Agriculture and Natural Resources, who, in his decision dated May 5, 1959 denied Bautista's appeal thereby enforcing the Director of Fisheries order of September 19, 1953. 12On October 19, 1960, Jose Montilla, Assistant Director of Fisheries, ordered Ester Barza by letter to reimburse Bautista P1,789.18, the total value of the improvements pursuant to the appraisal report of District Fishery Officer Crispin Mondragon dated October 31, 1958. 13 On December 22, 1960, Barza, agreeing to said appraisal, consigned the sum of

P1,789.18 with the then Justice of the Peace of Lupon, Davao. 14 Bautista, however, refused to accept the same. On July 11, 1961, another reappraisal of the improvements was made establishing the value of the dikes, dams, trees and houses in the area involved to be P14,569.08. 15 On December 12, 1962, this amount was reduced to P9,514.33 in view of the finding that certain improvements were suitable for agricultural and not for fishpond purposes. 16 In the meantime, the decision of the Secretary of Agriculture and Natural Resources dated May 5, 1959 became final. 17More than seven years after the last reappraisal of the improvements or on December 12, 1968, Ester Barza and her husband, Engr. Severo M. Barza, filed in the then Court of First Instance of Davao Oriental, an action against Bautista praying for recovery of possession over the 14.85-hectare fishpond area she had applied for, a declaration of the validity of the consignation made before the Justice of the Peace of Lupon, and damages and attorney's fees. On January 30, 1971, while the case was pending resolution, Proceso Bautista died. 18 Consequently, his heirs were substituted as party defendants.The lower court at first dismissed the case for lack of jurisdiction but later, it reconsidered the dismissal. 19 After a protracted trial, on November 15, 1983, the Regional Trial Court of Davao Oriental, 20 rendered a decision 21 in favor of defendant Bautista. While disagreeing with the Bautistas that the priority rule in applications for permits was inapplicable because Proceso Bautista's application was made before the area was declared available for fishpond purposes, the lower court ruled that the Barzas had not acquired a vested right to possess the areas concerned as they had not complied with the "condition precedent" to such possession –– the reimbursement of the value of the improvements made by Bautista. Hence, the court ruled, it was premature for the Barzas to demand possession of the area.On whether the action for recovery of possession had prescribed, 22 the lower court said:

. . . Besides, a review of the established facts and circumstances would show that Proceso Bautista started to possess the property adversely as early as 1946. It was only on September 23, 1948 when Ester Barza filed her application and protested Bautista's entry. Under Article 2253 of the New Civil Code, "the Civil Code of 1899 and other previous laws shall govern rights originating, under said laws, from acts done or events which took place under their regime, even though this Code may regulate them in a different manner or may not recognize them." Prescription therefore which started prior to the effectivity of the New Civil Code on August 30, 1950 should be governed by the law prior to the effectivity of the New Civil Code, which was the Code of Civil Procedure, under which the action of recovery of (possession) prescribed within ten (10) years. In this case, the adverse possession of Proceso Bautista which could be a basis for prescription was interrupted with the filing of the application of Ester Barza and her protest against the acts of the former which she lodged with the Bureau of Fisheries in 1948. When the decision of the Department of Agriculture and Natural Resources dated May 5, 1959 became final on July 4, 1959 as per Exhibit "D" and as in fact admitted by the parties, the said prescription by adverse possession continued (sic). This is clear from the provision of Art. 1123 of the New Civil Code which provides that civil interruption of possession for the purpose of prescription is produced by the judicial summons to the possessor which, in the conflict between the parties, took the form of the fishpond application and the protest filed by Ester Barza with the Bureau of Fisheries in 1948. From July 4, 1959 to December 12, 1968, a period of more than nine (9) years elapsed, and as the same should be tacked with the period of almost two (2) years which elapsed from 1946 to 1948, when Proceso Bautista started to adversely possess the area and when, on September 23, 1948, Ester Barza filed her application, more than ten (10) years had expired and therefore by reason of prescription, the recovery of possession is also barred.

Emphasizing that Barza's failure to reimburse Bautista for the improvements introduced on the area was inconsistent with good faith, the lower court held that the order of the Director of Fisheries giving due course to her fishpond application and the decision of the Secretary of Agriculture and Natural Resources "had all become stale." Moreover, the consignation of the amount of P1,789.18 was illegal as it was not in accordance with Art. 1258 of the New Civil Code and, the court added, Barza's failure to pay the sum required of her and to file the necessary action within ten years was tantamount to a non-user of her rights under the September 19, 1953 order of the Director of Fisheries. Citing by analogy Art. 506 of the Civil Code providing that the right to make use of public waters is extinguished by the lapse of the concession and by non-user for five (5) years, the lower court held that the cancellation of Barza's application, as recommended by Fishery Product Examiner Abdul Bakir, was proper.On the other hand, the lower court ruled that Bautista's right to retain possession over his improvements was implied by the order of September 19, 1953 while Barza's failure to pay the value of the improvements was "unfair and unsporting" and violative of Art. 19 of the New Civil Code. The lower court believed that P9,514.33 was the "right amount" that Barza should have properly consigned. The dispositive portion of the decision 23 reads:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs, dismissing the complaint and the plaintiffs are hereby directed to pay defendants the sum of P10,000 by way of litigation expenses and P10,000 by way of attorney's fees and to pay the costs.SO ORDERED.

The Barzas appealed to the Court of Appeals. On June 30, 1986 said court reversed the decision of the lower court. 24 It

interpreted the decision of the Secretary of Agriculture and Natural Resources as an "official imprimatur" on the application of Barza and as an implication that Bautista had no right to continue possession over the 49 hectares covered by Fishpond Application No. 3346.While stating that consignation in an action for recovery of possession of realty is not required by law and that the reimbursement of the value of the improvements is not an obligation, the appellate court nonetheless held that the consignation of P1,789.18 was "proper and effective." 25 It found that Bautista was not a possessor in good faith nor a planter in good faith because he filed Fishpond Application No. 3346 after Barza had filed Fishpond Application No. 2984. It concluded that Bautista's claim to prescriptive rights, acquired or vested, did not arise "because it infringe(d) on the rights of other(s) like Barza whose Fishpond Application No. 2984 was given due course by the proper officials of the government." 26 It disposed of the case as follows:

Wherefore, the decision a quo is hereby set aside and reversed and another one is rendered ordering the heirs of Proceso Bautista to accept or withdraw the sum of P1,789.18 from the Municipal Trial Court Lupon, Davao Oriental (formerly Municipal Court of Lupon, Davao Oriental) representing the value of the improvements introduced on the controverted area and to surrender possession of the contested area to the heirs of Ester Barza both within 10 days from receipt of the entry of judgment. No damages and cost.SO ORDERED. (Rollo, p. 55)

On July 29, 1986, petitioners filed a motion for reconsideration of the decision of the Court of Appeals but the same was denied on June 18, 1987. 27Hence, this recourse. Petitioners contend that the private respondents cannot be given the right to possess the fishpond in question as they themselves did not comply with the Director of Fisheries' order to reimburse Bautista for the improvements thereon. They assert that whatever rights the Barzas had under their fishpond application had become stale by non-user.At the outset, it should be remembered that until timber or forest lands are released as disposable or alienable, neither the Bureau of Lands nor the Bureau of Fisheries has authority to lease, grant, sell, or otherwise dispose of these lands for homesteads, sales patents, leases for grazing purposes, fishpond leases and other modes of utilization. 28 On October 25, 1946 when Bautista filed Fishpond Application No. 1205, the area applied for could not yet be granted to him as it was yet to be released for public utilization. The situation, however, changed when Barza filed Fishpond Application No. 2984 for the area had, by then, been opened for fishpond purposes.Thus, even if Bautista were ahead of Barza by two years in terms of occupation, possession and introduction of substantial improvements, he was not placed in a better position than Barza. The priority rule under Fisheries Administrative Order No. 14 applies only to public lands already released by the Bureau of Fisheries. Until such lands had been properly declared available for fishpond purposes, any application is ineffective because there is no disposable land to speak of. 29 Accordingly, Bautista's application was premature and the ruling of the Director of Fisheries on this matter was, therefore, correct.Although in administrative decision does not necessarily bind us, it is entitled to great weight and respect. It should be stressed that the function of administering and disposing of lands of the public domain in the manner prescribed by law is not entrusted to the courts but to executive officials. 30 Matters involved in the grant, cancellation, reinstatement and revision of fishpond licenses and permits are vested under the executive supervision of the appropriate department head who in this case is the Secretary of Agriculture and Natural Resources. As such, his discretion must be respected in the absence of a clear showing of abuse. 31 This is in consonance with our well settled ruling that administrative decisions on matters within the jurisdiction of the executive department can only be set aside on proof of gross abuse of jurisdiction, fraud or error of law. 32 As earlier noted, and there being no motion for its reconsideration, the decision of the Secretary of Agriculture and Natural Resources become final on July 3, 1959, thirty (30) days from receipt by the parties of copies of the decision. 33Petitioners' contention that the action for recovery of possession had prescribed when the Barzas filed it on December 12, 1968 is erroneous for it was filed within the ten-year period for enforcing a judgment, which in this case is the May 5, 1959 decision of the Secretary of Agriculture and Natural Resources, as provided for in Art. 1144 of the Civil Code. Hence, the ultimate issue in this case is whether or not the Barzas may rightfully seek enforcement of the decision of the Director of Fisheries and that of the Secretary of Agriculture and Natural Resources, notwithstanding their refusal to reimburse the Bautistas for the improvements in the area. We find that the peculiar circumstances of this case compel as to rule in the affirmative.Although Bautista was in possession of the area for quite a number of years, he ceased to become a bona fide possessor upon receipt of the decision of the Director of Fisheries granting due course to Barza's fishpond application. Under Art. 528 of the Civil Code, "(p)ossession acquired in good faith does not lose its character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully." Thus, Bautista should have desisted from introducing improvements on the property when he learned that Barza's application had been approved.However, Bautista may not be solely faulted for holding on to the area notwithstanding that he had no right over it. The Barzas, after receiving the administrative decision in their favor, should have complied with its directive to reimburse the

Bautistas for the improvements introduced thereon. This is not to say; however, that such failure to abide by the decision of the Director of Fisheries rendered "stale" the said decision. There is also the established fact that Bautista refused the payments tendered by the Barzas. However, the Barzas' failure to question the last reappraisal of the improvements constituted inaction on their part, for which they should bear its consequences.WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED subject to the modification that the petitioners shall be REIMBURSED the amount of P9,514.33 (inclusive of the consigned amount of P1,789.18) with legal interest from December 12, 1962 until fully paid. Upon payment of said reimbursement, the Bautistas shall SURRENDER possession of the 14.85 hectares, including the improvements thereon, for which the Barzas had been granted the right to operate as fishpond. This decision is immediately executory. No costs.SO ORDERED.Gutierrez, Jr., Feliciano and Davide, Jr., JJ., concur.Bidin, J., took no part.


ManilaSECOND DIVISION

G.R. No. L-69002 June 30, 1988REPUBLIC OF THE PHILIPPINES, petitioner, vs.AMANDA LAT VDA. DE CASTILLO, FLORENCIO T. CASTILLO, SOLEDAD LOTA CASTILLO, CARLOS L.

CASTILLO, NIEVES KATIGBAK CASTILLO, MARIANO L. CASTILLO, HIPOLITA DYTIAPCO CASTILLO, AIDA CASTILLO HERRERA, HERMITO HERRERA, JOSE L. CASTILLO, LILIA MACEDA CASTILLO, TERESITA L. CASTILLO, REGISTER OF DEEDS OF BATANGAS and THE INTERMEDIATE APPELLATE COURT, respondents. Castro, Nardo, Quintanilla, Gonzales & Macatangay Law Office for respondents. PARAS, J.:This is a petition for review on certiorari of the April 26, 1984 Decision of the then Intermediate Appellate Court * reversing the February 6, 1976 Decision of the then Court of First Instance of Batangas, Branch VI, in Civil Case No. 2044.

The antecedental facts of this case, as found by the then Intermediate Appellate Court, are as follows: Sometime in 1951, the late Modesto Castillo applied for the registration of two parcels of land, Lots 1 and 2, located in Banadero, Tanauan, Batangas, described in Plan Psu-119166, with a total area of 39,755 square meters. In a decision dated August 31, 1951, the said Modesto Castillo, married to Amanda Lat, was declared the true and absolute owner of the land with the improvements thereon, for which Original Certificate of Title No. 0-665 was, issued to him by the Register of Deeds at Batangas, Batangas, on February 7, 1952. By virtue of an instrument dated March 18, 1960, the said Lots 1 and 2 covered by Original Certificate of Title No. 0-665, together with Lot No. 12374 covered by Transfer Certificate of Title No. 3254-A and Lot No. 12377 covered by Transfer Certificate of Title No. 3251-A, were consolidated and sub-divided into Lots 1 to 9 under Pcs-1046. After the death of Modesto Castillo, or on August 31, 1960, Amanda Lat Vda. de Castillo, et al., executed a deed of partition and assumption of mortgage in favor of Florencio L. Castillo, et al., as a result of which Original Certificate of Title No. D-665 was cancelled, and in lieu thereof, new transfer cerfificates of title were issued to Florencio Castillo, et al., to wit: Transfer Certificate of Title No. 21703 (Lot 4) (and) Transfer Certificate of Title No. 21704 to Florencio Castillo (Lot 5); Transfer Certificate of Title No. T-21708 to Carlos L. Castillo (Lot 7); Transfer Certificate of Title No. T-21712 to Mariano L. Castillo (Lot 6); Transfer Certificate of Title No. T-21713 to Jose L. Castillo (Lot 9); Transfer Certificate of Title No. T-21718 to Aida C. Herrera (Lot 2); and Transfer Certificate of Title No. T-21727 to Teresita L. Castillo (Lot 8). The Republic of the Philippines filed Civil Case No. 2044 with the lower court for the annulment of the certificates of title issued to defendants Amanda Lat Vda. de Castillo, et al., as heirs/successors of Modesto Castillo, and for the reversion of the lands covered thereby (Lots 1 and 2, Psu-119166) to the State. It was alleged that said lands had always formed part of the Taal Lake, washed and inundated by the waters thereof, and being of public ownership, it could not be the subject of registration as private property. Appellants herein, defendants below, alleged in their answer that the Government's action was already barred by the decision of the registration court; that the action has prescribed; and that the government was estopped from questioning the ownership and possession of appellants.

After trial, the then Court of First Instance of Batangas, Branch VI, presided over by Honorable Benjamin Relova, in a Decision dated February 6, 1976 (Record on Appeal, pp. 62-69), ruled in favor of herein petitioner Republic of the Philippines. The decretal portion of the said decision, reads:

WHEREFORE, the Register of Deeds of Batangas is hereby ordered to cancel Original Certificate of Title No. 0-665 in the name of Modesto Castillo and the subsequent Transfer of Certificates of Title issued over the property in the names of the defendants. Lots Nos. 1 and 2 of Plan Psu-19166 are hereby declared public lands belonging to the state. Without pronouncement as to costs.

The Court of Appeals, on appeal, in a Decision promulgated on April 26,1984, reversed and set aside the appealed decision, and dismissed the complaint (Record, pp. 31-41). Herein petitioner filed a Motion for Reconsideration (Record, pp. 42-51), but the same was denied in a Resolution promulgated on October 12,1984 (Record, p. 52). Hence, the instant petition. The sole issue raised in this case is whether or not the decision of the Land Registration Court involving shore lands constitutes res adjudicata. There is no question that one of the requisites of res judicata is that the court rendering the final judgment must have jurisdiction over the subject matter (Ramos v. Pablo, 146 SCRA 24 [1986]; that shores are properties of the public domain intended for public use (Article 420, Civil Code) and, therefore, not registrable. Thus, it has long been settled that portions of the foreshore or of the territorial waters and beaches cannot be registered. Their inclusion in a certificate of title does not convert the same into properties of private ownership or confer title upon the registrant (Republic v. Ayala y Cia, 14 SCRA, 259 [1965], citing the cases of Dizon, et al. v. Bayona, et al., 98 Phil. 943; and Dizon, et al. v. Rodriguez, et al., 13 SCRA 704).But an important bone of contention is the nature of the lands involved in this case. Petitioner contends "that "Lots 1 and 2, PSU-119166 had always formed part of the Taal Lake, washed and inundated by the waters thereof. Consequently, the same were not subject to registration, being outside the commerce of men; and that since the lots in litigation are of public domain (Art. 502), par. 4 Civil Code) the registration court (of 1951) did not have jurisdiction to adjudicate said lands as private property, hence, res judicata does not apply. (Rollo, pp. 37-38). The Government presented both oral and documentary evidence.

As summarized by the Intermediate Appelate Court (now Court of Appeals), the testimonies of the witnesses for the petitioner are as follows:

1. Rosendo Arcenas, a Geodetic Engineer connected with the Bureau of Lands since 1961, testified to the effect that Lots 1 and 2, Psu-119166, which are the lots in question, adjoin the cadastral survey of Tanauan, Batangas (Cad. 168); that the original boundary of the original cadastral survey was foreshore land as indicated on the plan; that the cadastral survey of Tanauan was executed sometime in 1923; that the first survey executed of the land after 1923 was the one executed in 1948 under Plan Psu-119166 that in the relocation survey of the disputed lots in 1962 under SWO-40601, said lots were annotated on the plan as claimed by the Republic of the Philippines in the same manner that it was so annotated in Plan Psu-119166; thus showing that the Government was the only claimant of the land during the survey in 1948; that during the relocation survey made in 1962, old points cannot be Identified or located because they were under water by about forty centimeters; that during the ocular inspection of the premises on November 23, 1970, he found that 2 monuments of the lots in question were washed out by the waters of the Baloyboy Creek; that he also found duck pens along the lots in question; that there are houses in the premises as well as some camotes and bananas; and that he found also some shells ('suso') along the banks of the Taal lake (Tsn, Nov. 16, 1970, pp. 13-21; Feb. 16, 1971, pp. 4-36). 2. Braulio Almendral testified to the effect that he is a resident of Tanauan, Batangas, near the Taal lake; that like himself there are other occupants of the land among whom are Atanacio Tironas, Gavino Mendoza, Juliano Tirones, Agapito Llarena, etc.; that it was they who filled up the area to make it habitable; that they filled up the area with shells and sand; that their occupation is duck raising; and that the Castillos never stayed in or occupied the premises (Tsn, Nov. 16, 1970, pp. 32-50). 3. Arsenio Ibay, a Geodetic Engineer connected with the Bureau of Lands since 1968, also testified to the effect that in accordance with the cadastral plan of Tanauan, the only private claim of Sixto Castillo referred to Lots 1006 to 1008; that the Castillos never asserted any private claim to the lots in question during the cadastral survey;' that in the preparation of plan Psu-119166, Lots 12374 and 12377 were made as reference to conform to previously approved plans; that lot 12374 is a portion of cadastral lot 10107, SWO-86738 while Lot 22377 is a portion of Lot 10108 of the same plan (Tsn, Nov. 25, 1970, pp. 115-137). 4. Jose Isidro, a Land Investigator of the Bureau of Lands, testified to the effect that pursuant to the order of the Director of Lands, he, together with Engineer Rufino Santiago and the barrio captain of Tanauan, Batangas, conducted an investigation of the land in question; that he submitted a report of investigation, dated October 19, 1970 (Exh. H-1); that portions of the lot in question were covered by public land applications filed by the occupants thereof; that Engineer Santiago also submitted a report (Exh. H-8); that he had notified Dr. Mariano Castillo before conducting the investigation (Tsn, Nov. 25,1970, pp. 137-162). 5. Rufino Santiago, another Geodetic Engineer connected with the Bureau of Lands, testified to the effect that on October 19,1970, he submitted a report of investigation regarding the land in question; that he noted on the plan Exhibit H-9 the areas on which the houses of Severo Alcantara and others were built; that he found that the land was planted to coconuts which are about 15 years old; that the land is likewise improved with rice paddies; that the occupants thereof are duck raisers; that the area had been elevated because of the waste matters and duck feeds that have accumulated on the ground through the years (Tsn, Nov. 26,1970, pp. 163-196). 6. Pablo Tapia, Barrio Captain of Tanauan, Batangas, since 1957, testified to the effect that the actual occupants of Lots I and 2 are Atanacio Tirones,tc.; that during the war the water line reached up to a point marked Exhibit A-9 and at present the water has receded to a point up to Exhibit A-12; that the reasons why the waters of Taal lake have receded to the present level is because of the fillings made by the people living in Lots 1 and 2; that there are several duck pens all over the place; that the composition of the soil is a mixture of mud and duck feeds; that improvements consist of bananas, bamboos and palay; that the shoreline is not even in shape because of the Baloyboy Creek; that the people in the area never came to know about the registration case in which the lots in question were registered; that the people living in the area, even without any government aid, helped one another in the construction of irrigated rice paddies; that he helped them file their public land applications for the portions occupied by them; that the Castillos have never been in possession of the premises; that the people depend upon duck raising as their means of their livelihood; that Lots 1 and 2 were yet inexistent during the Japanese occupation; and that the people started improving the area only during liberation and began to build their houses thereon. (Tsn, Nov. 26,1970, pp. 197-234).

Among the exhibits formally offered by the Government are: the Original Plan of Tanauan, Batangas, particularly the Banader Estate, the Original Plan of PSU-119166, Relocation Verification Survey Plan, maps, and reports of Geodetic Engineers, all showing the original shoreline of the disputed areas and the fact that the properties in question were under water at the time and are still under water especially during the rainy season (Hearing, March 17,1971, TSN, pp. 46-47). On the other hand, private respondents maintain that Lots 1 and 2 have always been in the possession of the Castillo family for more than 76 years and that their possession was public, peaceful, continuous, and adverse against the whole world and that said lots were not titled during the cadastral survey of Tanauan, because they were still under water as a result of the

eruption of Taal Volcano on May 5, 1911 and that the inundation of the land in question by the waters of Taal Lake was merely accidental and does not affect private respondents' ownership and possession thereof pursuant to Article 778 of the Law of Waters. They finally insisted that this issue of facts had been squarely raised at the hearing of the land registration case and, therefore, res judicata (Record on Appeal, pp. 63-64). They submitted oral and documentary evidence in support of their claim. Also summarized by respondent Appellate Court, the testimonies of the witnesses of private respondents are as follows:

1. Silvano Reano, testified to the effect that he was the overseer of the property of the late Modesto Castillo located at Banadero,Tanauan, Batangas since 1944 to 1965; that he also knows Lots 1 and 2, the parcels of land in question, since he was managing said property; that the occupants of said Lots 1 and 2 were engaged in duck raising; that those occupants were paying the Castillos certain amount of money because their animals used to get inside the lots in question; that he was present during the survey of the land in 1948; and that aside from the duck pens which are built in the premises, the land is planted to rice (Tsn, April 14, 1971, pp. 62-88). 2. Dr. Mariano Castillo, testified to the effect that the late Modesto Castillo was a government official who held high positions in the Government; and that upon his death the land was subdivided among his legal heirs. (Appellee's Brief, pp. 4-9).

As above-stated, the trial court decided the case in favor of the government but the decision was reversed on appeal by the Court of Appeals. A careful study of the merits of their varied contentions readily shows that the evidence for the government has far outweighed the evidence for the private respondents. Otherwise stated, it has been satisfactorily established as found by the trial court, that the properties in question were the shorelands of Taal Lake during the cadastral survey of 1923. Explaining the first survey of 1923, which showed that Lots 1 and 2 are parts of the Taal Lake, Engineer Rosendo Arcenas testified as follows:

ATTY. AGCAOILI: Q Now, you mentioned Engineer that a subject matter of that plan which appears to be Lots 1 and 2 are adjoining cadastral lots of the Tanauan Cadastre, now, will you please state to the Court what is the basis of that statement of yours? A The basis of that statement is the plan itself, because there is here an annotation that the boundary on the northeastern side is Tanauan Cadastre 168 which indicates that the boundary of the original cadastral survey of Tanauan Cadastre way back in the year 1923 adjoins a foreshore land which is also indicated in this plan as foreshore lands of Taal lake, sir.

xxx xxx xxxQ Now, on this plan Exhibit "A-2", there are two lots indicated namely, Lots 12374 and 12377, what do these lots represent? A This is the cadastral lot executed in favor of a certain Modesto Castillo that corresponds to Lots 12374 and another Lot 12377, sir. Q At the time this survey plan Psu-119166 and marked as Exhibit "A-2" was executed in 1948, were these lots 1 and 2 already in existence as part of the cadastral survey? A No, sir, because there is already a foreshore boundary. Q Do I understand from you Mr. Witness at the time of the survey of this land these two lots form part of this portion? A Yes, sir. Q When again was the cadastral survey of Tanauan, Batangas, executed if you know? A In the year 1923, sir. (Hearing of Nov. 16, 1970, TSN pp. 15-17).

Such fact was further verified in the Verification-Relocation Survey of 1948 by Engineer Arcenas who conducted said survey himself and reported the following:

That as per original plan Psu-119166, it appears that Lot 1 and Lot 2, Psu-119166 surveyed and approved in the name of Modesto Castillo is a portion of Taal Lake and as such it appears to be under water during the survey of cadastral Lot No. 12374 and Lot No. 12377, which was surveyed and approved in the name of Modesto Castillo under Cad. 168. To support this theory is the annotation appearing and printed along lines 2-3-4-5 of Lot 1, Psu-119166 and along lines 4-5-6 of Lot 2, Psu-119166 which notations clearly indicates that such boundary of property was a former shorelines of Taal Lake, in other words, it was the extent of cultivation being the shorelines and the rest of the area going to the southwestern direction are already covered by water level. Another theory to bolster and support this Idea is the actual location now in the verification-relocation survey of a known geographic point were Barrio Boundary Monument (BBM N. 22) is under water level quite for sometimes as evidence by earthworks (collection of mud) that amount over its surface by eighty (80) centimeters below the ground, see notation appearing on verification-relocation plan previously submitted. (Re-Verification-Relocation Survey Exhibits, pp. 64-65).

Said surveys were further confirmed by the testimonies of witnesses to the effect that from 1950 to 1969, during rainy

season, the water of Taal lake even went beyond the questioned lots; and that the water, which was about one (1) foot, stayed up to more or less two (2) to three (3) months (Testimonies of Braulio Almendral and Anastacio Tirones both residents of Banadero, Tanauan, Batangas (Hearing of Nov. 16, 1970, TSN, pp. 41-42 and Hearing of Nov. 23, 1970, TSN, pp. 93, 98-99, respectively). In the Relocation Survey of 1962, there were no definite boundary or area of Lots 1 and 2 because a certain point is existing which was under water by 40 centimeters (Testimony of Engineer Arcena, Hearing of Nov. 16,1970, TSN, p. 20). Lakeshore land or lands adjacent to the lake, like the lands in question must be differentiated from foreshore land or that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides (Castillo, Law on Natural Resources, Fifth Edition, 1954, p. 67). Such distinction draws importance from the fact that accretions on the bank of a lake, like Laguna de Bay, belong to the owners of the estate to which they have been added (Gov't. v. Colegio de San Jose, 53 Phil. 423) while accretion on a sea bank still belongs to the public domain, and is not available for private ownership until formally declared by the government to be no longer needed for public use (Ignacio v. Director of Lands, 108 Phil. 335 [1960]). But said distinction will not help private respondents because there is no accretion shown to exist in the case at bar. On the contrary, it was established that the occupants of the lots who were engaged in duck raising filled up the area with shells and sand to make it habitable. The defense of long possession is likewise not available in this case because, as already ruled by this Court, mere possession of land does not by itself automatically divest the land of its public character (Cuevas v. Pineda, 143 SCRA 674 [1968]). PREMISES CONSIDERED, the April 26,1984 Decision of the then Intermediate Appellate Court is hereby SET ASIDE and REVERSED and the February 6,1976 Decision of the then Court of First Instance of Batangas is hereby AFFIRMED and REINSTATED. SO ORDERED. Yap, C.J., Padilla and Sarmiento, JJ., concur. Footnotes

* Fourth Civil Cases Division. Decision penned by Associate Justice Marcelino & Veloso and concurred in by Associate Justices Porfiro V. Sison (Chairman), Abdulwahid A. Bidin, and Desiderio P. Jurado.


Manila

THIRD DIVISION

G.R. No. 82531, 1992 Sep 30,DOMINGO T. MENDOZA, petitioner,vs.MARIA MENDOZA NAVARETTE, EMETERIO NAVARETTE, BENEDICTA NAVARETTE and GEMINIANO NAVARETTE and COURT OF APPEALS, respondents.,

D E C I S I O N

DAVIDE, JR., J.:

The threshold issue in this case is whether or not respondent Court of Appeals committed a reversible error in setting aside the trial court's denial of a motion to dismiss and in ordering the dismissal of the complaint on the ground of prescription.

The material operative facts and procedural antecedents as disclosed by the pleadings are not disputed.On 25 July 1985, petitioner filed a complaint 1 for Annulment of Title, Partition and Damages against private respondents with Branch 15 of the Regional Trial Court (RTC) of Bulacan. The case was docketed as Civil Case No. 8307-M. Petitioner alleges therein:

xxx xxx xxx"2. That the plaintiff and defendant Maria Mendoza-Navarette are the only legitimate children of Spouses Tedoro (sic) Mendoza of Sto. Rosario, Paombong, Bulacan;3. That, after the death of the said mother, Narcisa Jumaquio, the said Teodoro Mendoza contracted a second marriage with Eugenio (sic) Aquino, and they were blesses (sic) with two (2) children, but both of them died before they became of age;4. That Teodoro Mendoza died intestate and without any debt whatsoever in Paombong, Bulacan on March 19, 1952, leaving a parcel of land more particularly described as follows, together with the improvement thereon, to wit:'A parcel of residential Lot (unregistered) located in Sto. Rosario, Paombong, Bulacan. Bounded in the N., by Calsada del Barrio; on the E , by Daniel delos Santos and Fortunato Dionisio; on the S., by Sapang Camachile; and on the W., by Carmen Crisostomo . . . Containing an area of (1,288) Square meters, more or less, and assessed at P520 00 according to Tax Declaration No. 2941 of the land records of Bulacan', a certified true copy of which is hereto attached as Annex "A".This parcel of land was surveyed during the Cadastral survey of Paombong (Paombong Cad-297) as Lot 668 with an actual area of (934) square meters and Lot 1024 (Road widening) with an area of 45 square meters, or a total of 979 square meters, and not 1,288 square meters as stated in its tax declaration (Annex "A").5. That the surviving legal heirs of the said Teodoro Mendoza at the time of his death are his wife, Eugenia Aquino, and his two (2) children; the herein plaintiff Domingo Mendoza and defendant Maria Mendoza, married to Leoncio Navarette;6. That, on or about April 18, 1963, the aforementioned legal heirs of Teodoro Mendoza executed on (sic) Extra-Judicial Settlement of the Estate of the deceased Teodoro Mendoza where they had agreed to inherit and partition the property left by him and described above as follows: three fourths (3/4) to herein Domingo Mendoza, plaintiff, (966 Sq. Mtrs. per document but only 734 sq. meters if based on actual survey), and the remaining one-fourth (1/4) to surviving wife Eugenia Aquino (322 square meters per document but only 245 sq. meters if based on actual survey), with the herein Maria Mendoza, defendants, 'fully renouncing and waiving her right to any share or shares that she may be entitled in (sic) the said property', xerox copy of which document is hereto attached as Annex "B" and hereby made an integral part of this complaint;7. That, in accordance with the said extrajudicial settlement, the old tax declaration of the late Teodoro Mendoza (Annex "A") was cancelled and two (2) new ones were issued, namely, Tax Declaration No. 4728 for 966 square meters in favor of plaintiff Domingo Mendoza and Tax Declaration No. 4729 for 322 square meters in favor of Eugenia Aquino, certified true copies of which are hereto attached as Annex "C" and "D", respectively;8. That, it appears that on May 27, 1963 the said Eugenia Aquino, before she died, had sold her said one-fourth share in the lot in question which she inherited under Annex "B" and declared in her name for Taxation purposes under Annex "D", consisting of 322 square meters per document (but only 245 square meters if based on actual survey), to the herein defendant Maria Mendoza and his (sic) husband Leoncio Navarette, certified xerox copy of which document is hereto attached as Annex "E";9. That, subsequently thereto, the said Leoncio Navarette and defendant Maria Mendoza caused the transfer and declaration of the said one-fourth (1/4) they acquired from Eugenia Aquino in their names, certified true copy of which tax declaration (No. 4738) is hereto attached as Annex "F";10. That Leoncio Navarette died and is survived by his wife, defendant Maria Mendoza-Navarette, and three (3) children; namely, Emeterio, Benedicta and Geminiano, all surnamed Navarette, who are the defendants named in this complaint;11. That it was recently discovered early this year by the plaintiff that the late Leoncio Navarette and herein defendant Maria Mendoza-Navarette, knowingly (sic) well that they are not the owners of the whole lot in question (Lot No. 668, Case I, Paombong Cad-297), consisting of 934 square meters, but only one-fourth (1/4) portion thereof consisting of 245 square meters, based on the actual survey, and the (sic) plaintiff is the owner of the three-fourths thereof consisting of 734 square meters, illegally, fraudulently and evident (sic) show of bad faith, filed an application for Free Patent (No. III-6-000886) with the Bureau (sic) of Lands and caused the said whole lot to be titled and declared in the name of Leoncio Navarette, married to Maria Mendoza, as evidenced by O.C.T. NO. P-93-45 of the Registry of Deeds for the Province of Bulacan and Tax Declaration No. 3157, certified true copies of which application, title and tax declaration are hereto attached as Annexes "G", "H" and "I", respectively;12. That the said title and tax declaration (Annexes "H" and "I") are null and void ab initio and should be annulled or cancelled, for the said registered owners are not the real owners of the land covered by them, and the plaintiff has been in the open, public, adverse and exclusive possession, in the concept of an owner, of the three-fourths (3/4) portion thereof consisting of 734 square meters since the death of his father in 1952 continuously (sic) and publicly up to the present." 2 and prays for judgment:

"1. Ordering the annulment (sic) or cancellation of O.C.T. NO. P-9345 and Tax Declaration No. 3157 in the name of Leoncio Navarette, married to Maria Mendoza;

2. Ordering the partition of the lot in question (Lot No. 668 and No. 1024 (road widening) in the following manner; three-fourths (3/4) thereof to plaintiff Domingo Mendoza, married to Regina Santos, and one-fourth (1/4) thereof to the defendants;3. Ordering the defendants, jointly and severally, to pay plaintiff actual, moral and exemplary damages in such amount or amounts hereby left to the sound discretion of the Court; and4. Ordering the defendants, jointly and severally, to pay attorney's fees in the stipulated amount of P10,000.00, plus P300.00 for every day of hearing.Plaintiff prays for such other relied (sic) consistent with law and equity under the premises, including cost of suit." 3

On 15 November 1975, private respondents filed a motion to dismiss 4 the case on the ground that the plaintiff's cause of action, if any, is barred by the statute of limitations because the application for Free Patent and the Original Certificate of Title, copies of which are annexed to the complaint, are dated 18 March 1974 and 6 May 1974, respectively more than ten (10) years prior to the filing of the complaint. It is contended that an action for annulment of title and/or reconveyance of real property resulting from fraud must be filed within four (4) years from the discovery of the fraud, pursuant to Gerona vs. De Guzman, 5 Balbin vs. Medalla, 6 and Cordova vs. Cordova. 7 Such discovery is deemed to take place at the time an Original Certificate of Title, through either a homestead or free patent, is awarded, because the registration of said patents constitutes constructive notice to the whole world. Accordingly, the four-year period during which the petitioner could bring the said action expired in 1978.On 21 November 1985, petitioner filed his opposition to the motion to dismiss 8 alleging therein that (a) as clearly alleged in paragraph 11 of the complaint, since the fraud was discovered in the early part of 1985, the four-year period had not yet expired when the complaint was filed; (b) as alleged in paragraph 12 thereof, since private respondents are not the owners of the three-fourths (3/4) portion of the parcel of land covered by both the Free Patent and Original Certificate of Title, they do not have just title thereto; for purposes of prescription, just title must be proved; there should then be a hearing on the merits for them to prove just title; and (c) as also alleged in said paragraph 12, the petitioner is in the open, public, adverse and exclusive possession, in the concept of an owner, of the said three-fourths (3/4) portion; private respondents could not have acquired ownership over the entire lot.-The trial court set the motion to dismiss for hearing on 23 July 1986. 9 On 14 July 1986, private respondents filed a Manifestation and Motion alleging, inter alia, that the Motion to Dismiss can be resolved and decided by the court on the basis of the pleadings of the parties. 10 Thereupon, the trial court issued an order stating that the "'Motion to Dismiss', 'Opposition', and 'Rejoinder' filed by the parties are deemed submitted for resolution." 11 On 1 September 1986, the trial court, per Judge Eugenio S. Labitoria, issued an Order 12 denying for lack of merit the motion to dismiss. The denial is based on the principle that prescription does not run against co-owners in a co-ownership. The order states:

"The plaintiff in opposition to the motion to dismiss argued that the cases cited by the defendants are not applicable in the present case. First, the parties are co-owners. As a general rule prescription does not lie between the parties. Article 494, par. 5, New Civil Code provides:

'No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership.'

To further buttress the legal basis for the denial by the court of the motion to dismiss, plaintiff cited the case of Santos vs. Heirs of Crisostomo, 41 Phil. 342, Bargayo versus Camunof (sic), 40 Phil. 857. Three conditions must be present in order that a co-owner becomes an exclusive owner of the others' share by prescription. These conditions are: (1) He must make known to the other co-owners that he is definitely repudiating the co-ownership and that he is claiming complete ownership over the entire property; (2) The evidence of repudiation and knowledge on the part of the others must be clear and convincing; and (3) Continuous, open, public, adverse possession.The defendants in their motion to dismiss never alleged that they are in open, continuous, public and adverse possession of the property in question as against the plaintiff. Likewise, in their manifestation and motion dated July 14, 1986 after they received the opposition to the motion to dismiss filed by the plaintiff never (sic) denied their participation in the extra-judicial participation (sic), Annex "P" of the complaint.From the foregoing, it is clear that the doctrine laid down by the Supreme Court in the cases of Balbin and Gerona (supra) is the general rule on prescription with respect to the four years (sic) period to file action based on fraud which is not applicable to co-owners and co-heirs in the absence of the three conditions laid down in cases (sic) of Santos and Camunof (sic) (supra.)."Private respondents filed a motion to set aside this order, which the trial court denied in its Order 13 of 1 October 1986, thus:

"The principal ground for setting aside the order of this Court denying the motion to dismiss is the misapplication of the law and jurisprudence on the matter. Defendants contend that Article 494, par. 5 of the New Civil Code is not

applicable considering that there was an open repudiation of the co-ownership by the defendants way back on (sic) March 18, 1974 when they filed an application for free -patent over the entire property. This was further confirmed on May 6, 1974 when OCT NO. P-9345 was issued in the name of Leoncio Navarette married to Maria Mendoza by the Register of Deeds of Bulacan.

The plaintiff, from his complaint clearly stated that he is in open, adverse, public and exclusive possession in the concept of an owner of the three-fourth (sic) (3/4) portion of the questioned property . . .The other grounds raised by the defendants as errors of the court is (sic) not granting the motion to dismiss are factual issues which are better resolve (sic) in a full blown trial on the merit (sic).The defendants must prove their just title for it is never presumed if they contend that they derive title thereto by virtue of prescription (Art. 1131, New Civil Code).

xxx xxx xxxThere is no compelling legal basis for this Court to reconsider its order dated September 1, 1986."On 24 October 1986, private respondents filed with the Court of Appeals a Petition for certiorari, prohibition and mandamus 14 seeking the nullification and the setting aside of both the 1 September and 1 October 1986 orders of the trial court. The petition was docketed as C.A.-G.R. SP No. 10389. As grounds therefor, they allege that:

"1. The cause of action of the plaintiff, if any, is barred by the Statute of Limitations and res adjudicata and as a consequence thereof, the complaint in Civil Case No. 8307-M states no cause of action, and private respondent has no cause of action against the petitioners.2. Prescription runs against a co-owner where there is a definite and open repudiation of the co-ownership, there is clear and convincing evidence of the said repudiation, and there is continuous, open, public and adverse possession by the one repudiating the co-ownership. 3. Respondent Judge committed grave abuse of discretion amounting to want or excess of jurisdiction in not dismissing the complaint in Civil Case No. 8307-M." 15

In its Decision 16 promulgated on 27 July 1987, the respondent Court set aside the abovementioned orders and directed the respondent trial judge to dismiss the complaint on the principal ground that since the action is based on fraud, it should have been filed within four (4) years from the issuance of the title on 6 May 1974. Thus, it declared:"1. There is no controversion from respondents against the petitioners' assertion that on March 18, 1974, the late Leoncio Navarette (Maria Mendoza's late husband) filed an application for Free Patent over the disputed property (Lot 668, Case I, Paombong Cad. 297) and that on May 6, 1974 Original Certificate of Title No. T-9345 was issued in the name of 'Leoncio Navarette, married to Maria Mendoza . . .' (p. 9, rec.)Eleven years after the issuance and registration of the above title, the private respondent, Domingo J. Mendoza, filed his above complaint, for the annulment of title and partition of the above property. The title ought to be annulled was issued May 6, 1974 (sic), while the complaint to annul the same and for partition of the property covered by the said title, was filed July 24, 1985 (sic).The titling of the property by the petitioners is denounced by the private respondents as having been done 'illegally, fraudulently and in evident bad faith.' (p. 37, rec.) The action for nullification of title and for partition of the property is based on fraud. The private respondent's theory is that Article 494, paragraph 5 of the Civil Code of the Philippines controls (sic) the situation. Article 494 reads, as follows:

xxx xxx xxx'No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership. (400a)'The private respondent's theory is without foundation.Prescription can, and thus, run (sic) against a co-owner, particularly, where the property has been brought under the operation of the Land Registration Act. The Land Registration Act declares the title over a registered land to be incontrovertible. (Sec. 38. 'Gerona, et al. vs. De Guzman, et al.,' 11 SCRA 153, gives the reason why prescription can run against co-owner (sic) where one of them asserts title against the former, . . .).

xxx xxx xxxIt is clear then that not having brought the action for partition of the property within the reglementary period, the private respondents' cause of action has been barred by prescription.The ground for the dismissal of the private respondents' complaint for annulment and partition is, therefore, indubitable and in line with jurisprudence, must be dismissed.

xxx xxx xxxThe statute of limitations commenced to run against the private respondent when the petitioners applied for free (sic) patent, secured the same, and then obtained a certificate of title over the property on May 6, 1974. From this date, which is a notice in rem of the repudiation of the co-ownership among the parties, by the petitioners, prescription commenced to run. The private respondents had four years from May 6, 1974 within which to file their action based on fraud. Their action, filed July 24, 1985 (sic), came seven years too late." 17

Hence, this petition which was filed on 30 March 1988. Petitioner raises the following issues:

"WHETHER OR NOT THE PATENT AND THE CORRESPONDING OCT ISSUED COVERING THE LOT IN CONTROVERSY ARE VALID.

WHETHER OR NOT PRESCRIPTION AS A MEANS OF ACQUIRING THE PROPERTY HAS ALREADY SET IN UNDER THE FACTUAL CIRCUMSTANCES OF THE CASE AT BAR." 18

After the filing of the Comment, the Reply thereto and the Rejoinder to the Reply, this Court gave due course to the petition and required the parties to submit their respective Memoranda, 19 which they subsequently complied with.As shown earlier, the trial court denied the motion to dismiss upon the theory that the general rule is that prescription does not run among co-owners and that the requisites for the application of the exception thereto, among which is the need for continuous, open, public and adverse possession of the property on the part of the party who claims prescription, are not apparent from a reading of the complaint; on the contrary, said complaint alleges that the petitioner is in such possession over three-fourths (3/4) thereof. Upon the other hand, respondent Court of Appeal's exposition is premised on the assumption that the complaint is based on fraud; therefore, the same should have been filed within four (4) years from the issuance of the original certificate of title. Anent the issue of prescription among co-owners, the respondent Court ruled that the filing of the application for a Free Patent amounted to a renunciation of the co-ownership.The issue of prescription among co-owners is totally irrelevant; hence, the discussions thereon by both courts are exercises in futility which proceed from a misreading of the complaint. Co-ownership is not at all involved in this case. This is very clear from the allegations in the complaint which unmistakably show that whatever co-ownership existed among the heirs of Teodoro Mendoza over the estate he left behind was terminated on 11 April 1963 when said heirs executed the deed of extrajudicial settlement, with private respondent Maria Mendoza Navarette waiving all her rights to the said estate. As a consequence thereof, three-fourths (3/4) of the property was adjudicated to the petitioner while the remaining one-fourth (1/4) share went to the surviving spouse, Eugenia Aquino, both of whom secured separate tax declarations for their respective lots.The complaint likewise suggests that the lot subject of the application for a Free Patent by Leoncio Navarette is private land and the three-fourths (3/4) portion thereof, which petitioner has been openly, publicly, adversely and exclusively possessing in the concept of owner, was included illegally, fraudulently and with evident bad faith by Leoncio in said application as he is not the real owner of said portion. Petitioner thus asks, inter alia, for the annulment or cancellation of the original Certificate of Title over the lot covered by the Free Patent.What the lower court should have done then was to defer its resolution on the motion to dismiss for the reason that the ground invoked therein is not indubitable. This is one of the options a trial court may -avail of whenever confronted with a motion to dismiss. The other options are (a) to grant the motion, (b) to deny it, and (c) to allow the amendment of the pleading. Section 3, Rule 16 of the Rules of Court provides:

"SEC. 3. Hearing and order. After hearing the court may deny or grant the motion or allow amendment of pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable." 20

Be that as it may, the end result was the same - private respondents failed in their attempt to obtain a dismissal of the case. But whether such a rebuff resulted from an outright denial or a mere deferment, respondent Court of Appeals should have rejected private respondents petition for certiorari because the trial court committed no grave abuse of discretion in aborting and frustrating the latter's move. Such petition merely formed part of a dilatory strategy which cleverly incorporated res judicata and lack of cause of action as additional grounds for the dismissal of the complaint. The latter, however, is based on the argument that since prescription has set in, petitioner cannot have a valid cause of action. As grounds for a motion to dismiss or as affirmative defenses, prescription and lack of cause of action are distinct and separate concepts. Since res judicata was not invoked in the motion to dismiss, it is deemed waived pursuant to Section 2, Rule 9 of the Rules of Court.The averments in the complaint to the effect that (a) the lot in question being private land originally inherited from Teodoro Mendoza and subsequently adjudicated among his heirs by the deed of extrajudicial settlement, it cannot be awarded to Leoncio Navarette by Free Patent, (b) petitioner is in open, public, adverse and exclusive possession of the three-fourths (3/4) portion adjudicated to him and (c) said three-fourth (3/4) portion was included illegally, fraudulently and in bad faith by Leoncio Navarette in his application for a Free Patent because he and his wife, private respondent Maria, knew all along that petitioner is the owner and actual possessor thereof, were deemed hypothetically admitted by private respondents for purposes of the motion to dismiss. 21 Granting ex gratia that the above theory of petitioner embodied in the first averment is correct and he can thus support it with evidence which would necessarily call for a trial on the merits the Free Patent issued to Leoncio Navarette would be void as to petitioner's property which, as he had also alleged in the complaint, is possessed by him openly, publicly, adversely and exclusively in the concept of owner. Thus, he can recover it even beyond the expiration ten (10) years after the issuance of the Original Certificate of Title based on the Free Patent. A Free Patent issued over a private land is null and void. In the 1952 case of Vital vs. Anore, 22 this Court, speaking thru Mr. Justice Sabino Padilla, held:

"Whether a Torrens title, based on a free patent granted by the Government under the provisions of the Public Land Act (Act 2874) and issued under the provisions of the Land Registration Act (Act 496), has the validity and effect of a Torrens title issued as a result of judicial proceedings need not be passed upon. The rule laid down in Ramoso vs. Obligado et al., 70 Phil 86, that 'a homestead patent, once registered under the Registration Act, becomes as indefeasible as a Torrens Title, . . .' is only true and correct if the parcel of agricultural land patented or granted as homestead by the Government, after the requirements of the law had been complied with, was a part of the public domain. If it was not but a -private land, the patent granted and the Torrens title issued upon the patent or homestead grant are a nullity. 23 A Torrens title issued upon a free patent may not be cancelled after the lapse of ten years from the date of its registration because the statute of limitations bars such cancellation. But if the registered owner, be he the patentee or his successor-in-interest to whom the free patent was transferred or conveyed, knew that the parcel of land described in the patent and in the Torrens title belonged to another who together with his predecessors-in-interest has been in possession thereof, and if the patentee and his successor-in-interest were never in possession thereof, then the statute barring an action to cancel a Torrens title issued upon a free patent does not apply, and the true owner may bring an action to have the ownership or title to the land judicially settled, and if the allegations of the plaintiff that he is the true owner of the parcel of land granted as free patent and described in the Torrens title and that the defendant and his predecessor-in-interest were never in possession of the parcel of land and knew that the plaintiff and his predecessors-in-interest have been in possession thereof be established, then the court in the exercise of its equity jurisdiction, without ordering the cancellation of the Torrens title issued upon the patent, may direct the defendant, the registered owner, to reconvey the parcel of land to the plaintiff who has been found to be the true owner thereof.The plaintiff in this case avers that he and his predecessors-in-interest have been in possession of the parcel of land from time immemorial to the date of the filing of the complaint, that the patentee, from whom the defendant Francisco Anore derived his title, had never been in possession of the parcel of land granted to him as free patent; and that the defendant Francisco Anore knew that his predecessor-in-interest had never been in possession of the parcel of land. If the averments be established, the defendant, as successor-in-interest of the patentee, could not claim to be a purchaser in good faith and for value to protect his title to the parcel of land acquired by him from the patentee. Justice and equity require that he should reconvey the parcel of land to the plaintiff. The prayer of the plaintiff in his complaint that he be declared the owner of the parcel of land described in the transfer certificate of title issued in the name of the defendant Francisco Anore, which had been granted as free patent to the late Ambrosio Arabit, together with the general prayer that he be granted such further relief and remedy as equity and justice warrant, would justify a judgment directing the defendant to reconvey the parcel of land to the plaintiff. The statute of limitations which would bar an action by the plaintiff could not be availed of by the defendant, because a motion for dismissal being an admission of all the material allegations of the plaintiff's complaint the same role a demurrer in the old Code of Civil Procedure, Act 190, played in judicial proceedings the plaintiff's allegation that the defendant and his predecessor-in-interest have never been in possession of the parcel of land and knew that the plaintiff and his predecessors-in-interest have been in possession thereof since time immemorial is deemed admitted. If at the trial the defendant should prove that he and his predecessors-in-interest have been in possession of the parcel of land for 10 years or more, then the plaintiff's cause of action would be groundless and the complaint would have to be dismissed. The admitted allegations of the complaint constitute a cause of action."Then, in the fairly recent case of Agne vs. Director of Lands, 24 this Court, per Mr. Justice Florenz D. Regalado, ruled:-"We reiterate that private ownership of land is not affected by the issuance of a free patent over the same land because the Public Land Act applies only to lands of the public domain. 25 Only public land may be disposed of by the Director of Lands. 26 Since as early as 1920, the land in dispute was already under the private ownership of herein petitioners and no longer a part of the lands of the public domain, the same could not have been the subject matter of a free patent. The patentee and his successors in interest acquired no right or title to the said land. Necessarily, Free Patent No. 23263 issued to Herminigildo Agpoon is null and void and the subsequent titles issued pursuant thereto cannot become final and indefeasible. Hence, we ruled in Director of Lands vs. Sisican, et al. 27 that if at the time the free patents were issued in 1953 the land covered therein were (sic) already private property of another and, therefore, not part of the disposable land of the public domain, then applicants-patentees acquired no right or title to the land. Now, a certificate of title fraudulently secured is null and void ab initio if the fraud consisted in misrepresenting that the land is part of the public domain, although it is not. As earlier stated, the nullity arises, not from the fraud or deceit but, from the fact that the land is not under the jurisdiction of the Bureau of Lands. 28 Being null and void, the free patent granted and the subsequent titles produce no legal effects whatsoever. Quod nullum est, nullum producit effectum. 29 A free patent which purports to convey land to which the Government did not have any title at the time of its issuance does not vest any title in the patentee as against the true owner. 30 The Court has previously held that the Land Registration Act and the Cadastral Act do not give anybody who resorts to the provisions thereof a better title than what he really and lawfully has.'. . . The Land Registration Act as well as the Cadastral Act protects only the holders of a title in good faith and does not permit its provisions to be used as a shield for the commission of fraud, or that one should enrich himself at the expense of

another (Gustilo vs. Maravilla, 48 Phil. 838). The above-stated Acts do not give anybody, who resorts to the provisions thereof, a better title than he really and lawfully has. If he happened to obtain it by mistake or to secure; to the prejudice of his neighbor, more land than he really owns, with or without bad faith on his part, the certificate of title, which may have been issued to him under the circumstances, may and should be cancelled or corrected (Legarda and Prieto vs. Saleeby, 31 Phil. 590) . . .' 31 We have, therefore, to arrive at the unavoidable conclusion that the title of herein petitioners over the land in dispute is superior to the title of the registered owner which is a total nullity. The long and continued possession of petitioners under a valid claim of title cannot be defeated by the claim of a registered owner whose title is defective from the beginning.The quality of conclusiveness of a Torrens title is not available for use to perpetrate fraud and chicanery. To paraphrase from Angeles vs. Samia, supra, the Land Registration Act does not create or vest title. It only confirms and records title already existing and vested. It does not protect a usurper from the true owner. It cannot be a shield for the commission of fraud. It does not permit one to enrich himself at the expense of another. Stated elsewise, the Torrens system was not established as a means for the acquisition of title to private land. It is intended merely to confirm and register the title which one may already have on the land. Where the applicant possesses no title or ownership over the parcel of land, he cannot acquire one under the Torrens system of registration. 32 Resort to the provisions of the Land Registration Act does not give one a better title than he really and lawfully has. 33 Registration does not vest title. It is not a mode of acquiring property. It is merely evidence of such title over a particular property. It does not give the holder any better title than what he actually has, especially if the registration was done in bad faith. The effect is that it is as if no registration was made at all." 34 Besides, the petitioner's open, public, adverse and exclusive possession of the three-fourths (3/4) portion of the property and its illegal inclusion in the Free Patent and Original Certificate of Title issued to Leoncio Navarette give the former a cause of action for quieting of title, which is imprescriptible in favor of a person in possession of the property. The allegations in his complaint before the trial court are sufficient for such a cause of action. In Caragay-Layno vs. Court of Appeals, 35 this Court, per Madame Justice Ameurfina Melencio-Herrera, ruled:"Prescription cannot be invoked against JULIANA for the reason that as lawful possessor and owner of the Disputed Portion, her cause of action for reconveyance which, in effect, seeks to quiet title to the property, falls within settled jurisprudence that an action to quiet title to property in one's possession is imprescriptible. 36 Her undisturbed possession over a period of fifty two (52) years gave her a continuing right to seek the aid of a Court of equity to determine the nature of the adverse claim of a third party and the effect on her own title. 37 Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance, and to annul OCT No. 63 accrued only in 1966 when she was made aware of a claim adverse to her own. It was only then that the statutory period of prescription may be said to have commenced to run against her, following the pronouncement in Faja vs. Court of Appeals, supra, a case almost identical to this one."In Coronel vs. Intermediate Appellate Court, 38 this Court, through Mr. Justice Hugo E. Gutierrez, Jr., held: "The counterclaim of the private respondents which was in effect a reconveyance to them of their 1/3 undivided share over Lot No. 1950-A has not prescribed. As lawful possessors and owners of the lot in question their cause of action falls within the settled jurisprudence that an action to quiet title to property in one's possession is imprescriptible. Their undisturbed possession over a period of more than 25 years gave them a continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and the effect of his own title. If at all, the private respondents right to quiet title, to seek reconveyance and to annul Transfer Certificate of Title No. T-75543 accrued only in 1975 when they were made aware of a claim adverse to their own. It was only at that time that the statutory period of prescription may be said to have commenced to run against them. (Sapto et al. v. Fabiana, 103 Phil 683; Faja v. Court of Appeals, 75 SCRA 441; Caragay-Layno v. Court of Appeals, 133 SCRA 718)."In light of the foregoing, We fail to see how respondent Court of Appeals can justify its conclusion that petitioner's cause of action has prescribed.WHEREFORE, the Decision of the respondent Court of Appeals 27 July 1987 and its Resolution of 15 March 1988 in C.A.-G.R. SP No. 10389 are hereby SET ASIDE. The Orders of 1 September 1986 and 1 -October 1986 of Branch 15 of the Regional Trial Court of Bulacan in Civil Case No. 8307-M are REINSTATED subject to the modification that the determination of the motion to dismiss shall only be considered as deferred for the reason that the ground invoked therein is not indubitable.Costs against private respondents.SO ORDERED.

Bidin, Romero and Melo, JJ., concur.Gutierrez, Jr., J., is on leave.


ManilaTHIRD DIVISION

G.R. No. L-66575 May 24, 1988ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES, TEODORO and MYRNA, all surnamed MANECLANG, petitioners,vs.THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO CASTRO, SALOME RODRIGUEZ, EDUCARDO CUISON, FERNANDO ZARCILLA, MARIANO GABRIEL, NICOMEDES CORDERO, CLETO PEDROZO, FELIX SALARY and JOSE PANLILIO, respondents. Loreto Novisteros for petitioners. Corleto R. Castro for respondents. R E S O L U T I O N FERNAN, J.:Petitioners Adriano Maneclang, et al. filed before the then Court of First Instance of Pangasinan, Branch XI a complaint for quieting of title over a certain fishpond located within the four [4] parcels of land belonging to them situated in Barrio Salomague, Bugallon, Pangasinan, and the annulment of Resolutions Nos. 38 and 95 of the Municipal Council of Bugallon, Pangasinan. The trial court dismmissed the complaint in a decision dated August 15, 1975 upon a finding that the body of water traversing the titled properties of petitioners is a creek constituting a tributary of the Agno River; therefore public in nature and not subject to private appropriation. The lower court likewise held that Resolution No. 38, ordering an ocular inspection of the Cayangan Creek situated between Barrios Salomague Sur and Salomague Norte, and Resolution No. 95 authorizing public bidding for the lease of all municipal ferries and fisheries, including the fishpond under consideration, were passed by respondents herein as members of the Municipal Council of Bugallon, Pangasinan in the exercise of their legislative powers. Petitioners appealed said decision to the Intermediate Appellate Court, which affirmed the same on April 29,1983. Hence, this petition for review on certiorari. Acting on the petition, the Court required the respondents to comment thereon. However, before respondents could do so, petitioners manifested that for lack of interest on the part of respondent Alfredo Maza, the awardee in the public bidding of

the fishpond, the parties desire to amicably settle the case by submitting to the Court a Compromise Agreement praying that judgment be rendered recognizing the ownership of petitioners over the land the body of water found within their titled properties, stating therein, among other things, that "to pursue the case, the same will not amount to any benefit of the parties, on the other hand it is to the advantage and benefit of the municipality if the ownership of the land and the water found therein belonging to petitioners be recognized in their favor as it is now clear that after the National Irrigation Administration [NIA] had built the dike around the land, no water gets in or out of the land. 1 The stipulations contained in the Compromise Agreement partake of the nature of an adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which, as clearly found by the lower and appellate courts, was originally a creek forming a txibutary of the Agno River. Considering that as held in the case of Mercado vs. Municipal President of Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm extending from a river and participating in the ebb and flow of the sea, is a property belonging to the public domain which is not susceptible to private appropriation and acquisitive prescription, and as a public water, it cannot be registered under the Torrens System in the name of any individual [Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil. 455]; and considering further that neither the mere construction of irrigation dikes by the National Irrigation Administration which prevented the water from flowing in and out of the subject fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a property of the public domain, the Court finds the Compromise Agreement null and void and of no legal effect, the same being contrary to law and public policy. The finding that the subject body of water is a creek belonging to the public domain is a factual determination binding upon this Court. The Municipality of Bugallon, acting thru its duly-constituted municipal council is clothed with authority to pass, as it did the two resolutions dealing with its municipal waters, and it cannot be said that petitioners were deprived of their right to due process as mere publication of the notice of the public bidding suffices as a constructive notice to the whole world. IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise Agreement and declare the same null and void for being contrary to law and public policy. The Court further resolved to DISMISS the instant petition for lack of merit. SO ORDERED.


ManilaEN BANC

G.R. No. L-15829 December 4, 1967

ROMAN R. SANTOS, petitioner-appellee, vs.HON. FLORENCIO MORENO, as Secretary of Public Works and Communications and JULIAN C. CARGULLO, respondents-appellants.

Gil R. Carlos and Associates for petitioner-appellee.Office of the Solicitor General for respondents-appellants.

BENGZON, J.P., J.:

THE APPEAL

The Honorable Secretary of Public Works & Communications appeals from the decision of the Court of First Instance of Manila declaring of private ownership certain creeks situated in barrio San Esteban, Macabebe, Pampanga.

THE BACKGROUND

The Zobel family of Spain formerly owned vast track of marshland in the municipality of Macabebe, Pampanga province. Called Hacienda San Esteban, it was administered and managed by the Ayala y Cia. From the year 1860 to about the year 1924 Ayala y Cia., devoted the hacienda to the planting and cultivation of nipa palms from which it gathered nipa sap or "tuba." It operated a distillery plant in barrio San Esteban to turn nipa tuba into potable alcohol which was in turn manufactured into liquor.

Accessibility through the nipa palms deep into the hacienda posed as a problem. Ayala y Cia., therefore dug canals leading towards the hacienda's interior where most of them interlinked with each other. The canals facilitated the gathering of tuba and the guarding and patrolling of the hacienda by security guards called "arundines." By the gradual process of erosion these canals acquired the characteristics and dimensions of rivers.

In 1924 Ayala y Cia shifted from the business of alcohol production to bangus culture. It converted Hacienda San Esteban from a forest of nipa groves to a web of fishponds. To do so, it cut down the nipa palm, constructed dikes and closed the canals criss-crossing the hacienda.

Sometime in 1925 or 1926 Ayala y Cia., sold a portion of Hacienda San Esteban to Roman Santos who also transformed the swamp land into a fishpond. In so doing, he closed and built dikes across Sapang Malauling Maragul, Quiñorang Silab, Pepangebunan, Bulacus, Nigui and Nasi.

The closing of the man-made canals in Hacienda San Esteban drew complaints from residents of the surrounding communities. Claiming that the closing of the canals caused floods during the rainy season, and that it deprived them of their means of transportation and fishing grounds, said residents demanded re-opening of those canals. Subsequently, Mayor Lazaro Yambao of Macabebe, accompanied by policemen and some residents went to Hacienda San Esteban and opened the closure dikes at Sapang Malauling Maragul Nigui and Quiñorang Silab. Whereupon, Roman Santos filed Civil Case No. 4488 in the Court of First Instance of Pampanga which preliminarily enjoined Mayor Yambao and others from demolishing the dikes across the canals. The municipal officials of Macabebe countered by filing a complaint (docketed as Civil Case No. 4527) in the same court. The Pampanga Court of First Instance rendered judgment in both cases against Roman Santos who immediately elevated the case to the Supreme Court.

In the meantime, the Secretary of Commerce and Communications1 conducted his own investigation and found that the aforementioned six streams closed by Roman Santos were natural, floatable and navigable and were utilized by the public for transportation since time immemorial. He consequently ordered Roman Santos on November 3, 1930 to demolish the dikes across said six streams. However, on May 8, 1931 the said official revoked his decision of November 3, 1930 and declared the streams in question privately owned because they were artificially constructed. Subsequently, upon authority granted under Act 3982 the Secretary of Commerce and Communications entered into a contract with Roman Santos whereby the former recognized the private ownership of Sapang Malauling Maragul, Quiñorang Silab, Pepangebunan, Bulacus, Nigui and Nasi and the latter turned over for public use two artificial canals and bound himself to maintain them in navigable state. The Provincial Board of Pampanga and the municipal councils of Macabebe and Masantol objected to the contract. However, the Secretary of Justice, in his opinion dated March 6, 1934, upheld its legality. Roman Santos withdraw his appeals in the Supreme Court.

With respect to the portion of Hacienda San Esteban still owned by the Zobel family, the municipal authorities of Macabebe filed in 1930 an administrative complaint, in the Bureau of Public Works praying for the opening of the dikes and dams across certain streams in Hacienda San Esteban. Whereupon, the district engineer of Pampanga and a representative of the Bureau of Public Works conducted investigations. In the meantime, the Attorney General, upon a query from the Secretary of Commerce and Communications, rendered an opinion dated October 11, 1930 sustaining the latter's power to declare streams as publicly owned under Sec. 4 of Act 2152, as amended by Act 3208.

On September 29, 1930 the investigator of the Bureau of Public Works, Eliseo Panopio, submitted his report recommending the removal of the dikes and dams in question. And on the basis of said report, the Secretary of Commerce and Communications rendered his decision on November 3, 1930 ordering Ayala y Cia., to demolish the dikes and dams across the streams named therein situated in Hacienda San Esteban. Ayala y Cia., moved for reconsideration, questioning the power of the Secretary of Commerce and Communications to order the demolition of said dikes.

Days before the Secretary of Commerce and Communications rendered his aforementioned decision, Ayala y Cia., thru counsel, made representations with the Director of Public Works for a compromise agreement. In its letter dated October 11, 1930, Ayala y Cia., offered to admit public ownership of the following creeks:

Antipolo, Batasan Teracan, Biuas or Batasan, Capiz, Carbon, Cutut, Dalayap, Enrique, Iba, Inaun, Margarita, Malauli or Budbud, Matalaba Palapat, Palipit Maisao, Panlovenas, Panquitan, Quinapati, Quiñorang, Bubong or Malauli Malati, Salop, Sinubli and Vitas.

provided the rest of the streams were declared private. Acting on said offer, the Director of Public Works instructed the surveyor in his office, Eliseo Panopio, to proceed to Pampanga and conduct another investigation.

On January 23, 1931 Panopio submitted his report to the Director of Public Works recommending that some streams enumerated therein be declared public and some private on the ground that they were originally dug by the hacienda owners. The private streams were:

Agape, Atlong, Cruz, Balanga, Batasan, Batasan Matlaue, Balibago, Baliti, Bato, Buengco Malati, Bungalin, Bungo Malati, Bungo Maragui, Buta-buta, Camastiles, Catlu, Cauayan or Biabas, Cela, Dampalit, Danlimpu, Dilinquente, Fabian, Laguzan, Lalap Maburac, Mabutol, Macabacle, Maragul or Macanduli, Macabacle or Mababo, Maisac, Malande, Malati, Magasawa, Maniup, Manulit, Mapanlao, Maisac, Maragul Mariablus Malate, Masamaral, Mitulid, Nasi, Nigui or Bulacus, Palipit, Maragul, Pangebonan, Paumbong, Pasco or Culali, Pilapil, Pinac Malati, Pinac, Maragul or Macabacle, Quiñorang Silab or Malauli Maragul, Raymundo, Salamin, Salop Maisac, Salop Maragul, Sermon and Sinca or Mabulog.

He therefore recommended revocation of the decision already mentioned above, dated November 3, 1930 of the Secretary

of Commerce and Communications ordering the demolition of the dikes closing Malauling Maragul, Quiñorang, Silab, Pepangebonan, Nigui, Bulacus, Nasi, and Pinac. On February 13, 1931 the Director of Public Works concurred in Panopio's report and forwarded the same the Secretary of Commerce and Communications.

On February 25, 1935 the municipality of Macabebe and the Zobel family executed an agreement whereby they recognized the nature of the streams mentioned in Panopio's report as public or private, depending on the findings in said report. This agreement was approved by the Secretary of Public Works and Communications on February 27, 1935 and confirmed the next day by the municipal council of Macabebe under Resolution No. 36.

A few months later, that is, on June 12, 1935, the then Secretary of Justice issued an opinion holding that the contract executed by the Zobel family and the municipality of Macabebe has no validity for two reasons, namely, (1) the streams although originally dug by Ayala y Cia., lost their private nature by prescription inasmuch as the public was allowed to use them for navigation and fishing, citing Mercado vs. Municipality of Macabebe, 59 Phil. 592; and (2) at the time the Secretary of Commerce and Communications approved the said contract, he had no more power so to do, because such power under Sec. 2 of Act 2152 was revoked by the amending Act 4175 which took effect on December 7, 1934.

Despite the above ruling of the Secretary of Justice, the streams in question remained closed.

In 1939 administrative investigations were again conducted by various agencies of the Executive branch of our government culminating in an order of President Manuel Quezon immediately before the national elections in 1941 requiring the opening of Sapang Macanduling, Maragul Macabacle, Balbaro and Cansusu. Said streams were again closed in 1942 allegedly upon order of President Quezon.

THE CASE

Roman Santos acquired in 1940 from the Zobel family a larger portion of Hacienda San Esteban wherein are located 25 streams which were closed by Ayala y Cia., and are now the subject matter in the instant controversy.

Eighteen years later, that is in 1958, Congress enacted Republic Act No. 20562 following a congressional inquiry which was kindled by a speech delivered by Senator Rogelio de la Rosa in the Senate. On August 15, 1958 Senator de la Rosa requested in writing the Secretary of Public Works and communications to proceed in pursuance of Republic Act No. 2056 against fishpond owners in the province of Pampanga who have closed rivers and appropriated them as fishponds without color of title. On the same day, Benigno Musni and other residents in the vicinity of Hacienda San Esteban petitioned the Secretary of Public Works and Communications to open the following streams:

Balbaro, Batasan Matua, Bunga, Cansusu, Macabacle, Macanduling, Maragul, Mariablus, Malate, Matalabang, Maisac, Nigui, Quiñorang Silab, Sapang Maragul and Sepung Bato.

Thereupon, the Secretary of Public Works and Communications instructed Julian C. Cargullo to conduct an investigation on the above named streams.

On October 20, 1958 Musni and his co-petitioners amended their petition to include other streams. The amended petition therefore covered the following streams:

Balbaro, Balili, Banawa, Batasan Matua Bato, Bengco, Bunga, Buta-buta, Camastiles, Cansusu, Cela, Don Timpo, Mabalanga, Mabutol, Macabacle, Macabacle qng. Iba, Macanduling, Maragul, Malauli, Magasawa, Mariablus

Malate Masamaral, Matalabang Maisa, Mariablus,3 Nigui, Pita, Quiñorang, Silab, Sapang Maragul, Sepung Bato, Sinag and Tumbong.

On March 2, 4, 10, 30 and 31, and April 1, 1959, the Secretary of Public Works and Communications rendered his decisions ordering the opening and restoration of the channel of all the streams in controversy except Sapang Malauling, Maragul, Quiñorang, Silab, Nigui Pepangebonan, Nasi and Bulacus, within 30 days on the ground that said streams belong to the public domain.

On April 29, 1959, that is, after receipt of the Secretary's decision dated March 4, 1959, Roman Santos filed a motion with the Court of First Instance of Man for junction against the Secretary of Public Works and Communications and Julian C. Cargullo. As prayed for preliminary injunction was granted on May 8, 1959. The Secretary of Public Work and Communications answered and alleged as defense that venue was improperly laid; that Roman Santos failed to exhaust administrative remedies; that the contract between Ayala y Cia., and the Municipality of Macabebe is null and void; and, that Section 39 of Act 496 excludes public streams from the operation of the Torrens System.

On April 29 and June 12, 1969, Roman Santos received the decision of the Secretary of Public Works and Communications dated March 10 and March 30, March 31, and April 1, 1959. Consequently, on June 24, 1959 he asked the court to cite in contempt Secretary Florendo Moreno, Undersecretary M.D. Bautista and Julian Cargullo for issuing and serving upon him

the said decisions despite the existence of the preliminary injunction. The Solicitor General opposed the motion alleging that the decisions in question had long been issued when the petition for injunction was filed, that they were received after preliminary injunction issued because they were transmitted through the District Engineer of Pampanga to Roman Santos; that their issuance was for Roman Santos' information and guidance; and, that the motion did not allege that respondents took steps to enforce the decision. Acting upon said motion, on July 17, 1959, the trial court considered unsatisfactory the explanation of the Solicitor General but ruled that Secretary Florencio Moreno, Undersecretary M.D. Bautista and Julian Cargullo acted in good faith. Hence, they were merely "admonished to desist from any and further action in this case, observe the preliminary injunction issued by this Court, with the stern warning, however, that a repetition of the acts complained of shall be dealt with severely."

On July 18, 1959 the trial court declared all the streams under litigation private, and rendered the following judgment:

The Writ of preliminary injunction restraining the respondent Secretary of Public Works & Communications from enforcing the decisions of March 2 And 4, 1959 and all other similar decisions is hereby made permanent.

The Secretary of Public Works and Communication and Julian Cargullo appealed to this Court from the order of July 17, 1959 issued in connection with Roman Santos' motion for contempt and from the decision of the lower court on the merits of the case.

ISSUES

The issues are: (1) Did Roman Santos exhaust administrative remedies? (2) Was venue properly laid? (3) Did the lower court err in conducting a trial de novo of the case and in admitting evidence not presented during the administrative proceeding? (4) Do the streams involved in this case belong to the public domain or to the owner of Hacienda San Esteban according to law and the evidence submitted to the Department of Public Works and Communications?

DISCUSSION OF THE ISSUES

1. Respondents maintain that Roman Santos resorted to the courts without first exhausting administrative remedies available to him, namely, (a) motion for reconsideration of the decisions of the Secretary of Public Works and Communications; and, (b) appeal to the President of the Philippines.

Whether a litigant, in exhausting available administrative remedies, need move for the reconsideration of an administrative

decision before he can turn to the courts for relief, would largely depend upon the pertinent law,4 the rules of procedure and

the usual practice followed in a particular office.5

Republic Act No. 2056 does not require the filing of a motion for reconsideration as a condition precedent to judicial relief. From the context of the law, the intention of the legislators to forego a motion for reconsideration manifests itself clearly.1awphil.net Republic Act No. 2056 underscores the urgency and summary nature of the proceedings authorized thereunder. Thus in Section 2 thereof the Secretary of Public Works and Communications under pain of criminal liability is duty bound to terminate the proceedings and render his decision within a period not exceeding 90 days from the filing of the complaint. Under the same section, the party respondent concerned is given not than 30 days within which to comply with the decision of the Secretary of Public Works and Communications, otherwise the removal of the dams would be done by the Government at the expense of said party. Congress has precisely provided for a speedy and a most expeditious proceeding for the removal of illegal obstructions to rivers and on the basis of such a provision it would be preposterous to conclude that it had in mind to require a party to file a motion for reconsideration — an additional proceeding which would certainly lengthen the time towards the final settlement of existing controversies. The logical conclusion is that Congress intended the decision of the Secretary of Public Works and Communications to be final and executory subject to a timely review by the courts without going through formal and time consuming preliminaries.

Moreover, the issues raised during the administrative proceedings of this case are the same ones submitted to court for resolution. No new matter was introduced during the proceeding in the court below which the Secretary of Public Works and Communications had no opportunity to correct under his authority.

Furthermore, Roman Santos assailed the constitutionality of Republic Act No. 2056 and the jurisdiction of the Secretary of Public Works and Communications to order the demolition of dams across rivers or streams. Those questions are not within the competence of said Secretary to decide upon a motion for reconsideration.itc-alf They are purely legal questions, not administrative in nature, and should properly be aired before a competent court as was rightly done by petitioner Roman Santos .

At any rate, there is no showing in the records of this case that the Secretary of Public Works and Communications adopted rule of procedure in investigations authorized under Republic Act No. 2056 which require a party litigant to file a motion for the reconsideration of the Secretary's decision before he can appeal to the courts. Roman Santos however stated in his brief

that the practice is not to entertain motions for reconsideration for the reason that Republic Act No. 2056 does not expressly or impliedly allow the Secretary to grant the same. Roman Santos' statement is supported by Opinion No. 61, Series of 1959, dated April 14, 1959 of the Secretary of Justice.

As to the failure of Roman Santos to appeal from the decision of the Secretary of Public Works and Communications to the President of the Philippines, suffice it to state that such appeal could be dispensed with because said Secretary is the alter

ego of the President.itc-alf The actions of the former are presumed to have the implied sanction of the latter.6

2. It is contended that if this case were considered as an ordinary civil action, venue was improperly laid when the same was instituted in the Court of First Instance of Manila for the reason that the case affects the title of a real property. In fine, the proposition is that since the controversy dwells on the ownership of or title to the streams located in Hacienda San Esteban, the case is real action which, pursuant to Sec. 3 of Rule 5 of the Rules of Court should have been filed in the Court of First Instance of Pampanga.

The mere fact that the resolution of the controversy in this case would wholly rest on the ownership of the streams involved herein would not necessarily classify it as a real action. The purpose of this suit is to review the decision of the Secretary of Public Works and Communications to enjoin him from enforcing them and to prevent him from making and issuing similar decisions concerning the stream in Hacienda San Esteban. The acts of the Secretary of Public Works and Communications are the object of the litigation, that is, petitioner Roman Santos seeks to control them, hence, the suit ought to be filed in the Court of First Instance whose territorial jurisdiction encompasses the place where the respondent Secretary is found or is

holding office. For the rule is that outside its territorial limits, the court has no power to enforce its order.7

Section 3 of Rule 5 of the Rules of Court does not apply to determine venue of this action. Applicable is Sec. 1 the same rule, which states:

Sec. 1. General rule. — Civil actions in Courts of First Instance may be commenced and tried where the defendant any of the defendants residents or may be found or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff.

Accordingly, the Petition for injunction who correctly filed in the Court of First Instance of Manila. Respondents Secretary of Public Works and Communications and Julian Cargullo are found and hold office in the City of Manila.

3. The lower court tried this case de novo. Against this procedure respondents objected and maintained that the action, although captioned as an injunction is really a petition for certiorari to review the decision of the Secretary of Public Works and Communications. Therefore they now contend that the court should have confined itself to reviewing the decisions of the respondent Secretary of Public Works and Communications only on the basis of the evidence presented in the administrative proceedings. On the other hand, Roman Santos now, submits that the action is a proceeding independent and distinct from the administrative investigation; that, accordingly, the lower court correctly acted in trying the case anew and rendering judgment upon evidence adduced during the trial.

Whether the action instituted in the Court of First Instance be for mandamus, injunction or certiorari is not very material. In reviewing the decision of the Secretary of Public Works and Communications, the Court of First Instance shall confine its inquiry to the evidence presented during, the administrative proceedings. Evidence not presented therein shall not be admitted, and considered by the trial court. As aptly by this Court speaking through Mr. Justice J.B.L. Reyes, in a similar case:

The findings of the Secretary can not be enervated by new evidence not laid before him, for that would be tantamount to holding a new investigation, and to substitute for the discretion and judgment of the Secretary the discretion and judgment of the court, to whom the statute had not entrusted the case. It is immaterial that the present action should be one for prohibition or injunction and not one for certiorari; in either event the case must be resolved upon the evidence submitted to the Secretary, since a judicial review of executive decisions does not import a trial de novo, but only an ascertainment of whether the "executive findings are not in violation of the Constitution or of the laws, and are free from fraud or imposition, and whether they find reasonable support in the

evidence. . . .8

The case at bar, no matter what the parties call it, is in reality a review of several administrative decisions of the Secretary of Public Works and Communications. Being so, it was error for the lower court to conduct a trial de novo. Accordingly, for purposes of this review, only the evidence presented and admitted in the administrative investigation will be considered in our determination of whether on the basis thereof the decisions of the Secretary of Public Works and Communications were correct.

4. We come to the question whether the streams involved in this case belong to the public domain or to the owner of

Hacienda San Esteban. If said streams are public, then Republic Act 2056 applies, if private, then the Secretary of Public Works and Communications cannot order demolition of the dikes and dams across them pursuant to his authority granted by said law.

First, we come to the question of the constitutionality of Republic Act No. 2056. The lower court held Republic Act No. 2056 constitutional but ruled that it was applied by respondents unconstitutionally. That is, it held that Roman Santos was being deprived of his property without due process of law, for the dikes of his fishponds were ordered demolished through an administrative, instead of a judicial, proceeding. This conclusion and rationalization of the lower court amount in effect to declaring the law unconstitutional, stated inversely. Note that the law provides for an expeditious administrative process to determine whether or not a dam or dike should be declare a public nuisance and ordered demolished. And to say that such an administrative process, when put to operation, is unconstitutional is tantamount to saying that the law itself violates the Constitution. In Lovina vs. Moreno, supra, We held said law constitutional. We see no reason here to hold otherwise.

Discussing now the applicability of Republic Act 2056, the same applies to two types of bodies of water, namely (1) public navigable rivers, streams, coastal waters, or waterways and (b) areas declared as communal fishing grounds, as provided for in Section 1 thereof:

Sec. 1. . . . the construction or building of dams, dikes or any other works which encroaches into any public navigable river, stream, coastal waters and any other navigable public waters or waterways as well as the construction or building of dams, dikes or any other works in areas declared as communal fishing grounds, shall be ordered removed as public nuisances or as prohibited constructions as herein provided: . . .

We are not concerned with communal fishing grounds because the streams here involved have not been so declared, but with public navigable streams. The question therefore is: Are the streams in Hacienda San Esteban which are mentioned in the petition of Benigno Musni and others, public and navigable?

Respondents contend that said streams are public on the following grounds:

(1) Hacienda San Esteban was formerly a marshland and being so, it is not susceptible to appropriation. It therefore belongs to the State. Respondents rely on Montano vs. Insular Government, 12 Phil. 572.

(2) The streams in question are natural streams. They are tributaries of public streams. Cited are the cases of Samson vs. Dionisio, et al., 11 Phil. 538 and Bautista vs. Alarcon, 23 Phil. 636.

(3) The streams have for their source public rivers, therefore they cannot be classified as canals.

(4) Assuming the streams were artificially made by Ayala y Cia., said titleholder lost ownership over them by prescription when it allowed the public to use them for navigation for a long time. Respondents cite Mercado vs. Municipal President of Macabebe, 59 Phil. 592.

(5) Assuming the streams in question are not mentioned as public in the certificates of title held by Ayala y Cia., over Hacienda San Esteban, still they cannot be considered as privately owned for Section 39 of Act 496 expressly excepts public streams from private ownership.

(6) The Panopio Report, which found the streams in question of private ownership was nullified by the Secretary of Justice in his opinion dated June 12, 1935.1awphil.net And, the contract between Ayala y Cia., and the Secretary of Commerce and Communications agreeing on the ownership of the streams in question is ultra vires.

The doctrine in Montano vs. Insular Government, supra, that a marshland which is inundated by the rise of the tides belongs to the State and is not susceptible to appropriation by occupation — has no application here inasmuch as in said case the land subject matter of the litigation was not yet titled and precisely Isabelo Montano sought title thereon on the strength of ten years' occupation pursuant to paragraph 6, section 54 of Act 926 of the Philippine Commission. Whereas, the subject matter in this case — Hacienda San Esteban — is titled land and private ownership thereof by Ayala y Cia., has been recognized by the King of Spain and later by the Philippine Government when the same was registered under Act 496.

Respondents further cite Bautista vs. Alarcon, 23 Phil. 631, where the plaintiff sought injunction against the defendants who allegedly constructed a dam across a public canal which conveyed water from the Obando River to fishponds belonging to several persons. The canal was situated within a public land. In sustaining the injunction granted by the Court of First Instance, this Court said:

No private persons has right to usurp possession of a watercourse, branch of a river, or lake of the public domain and use, unless it shall have been proved that he constructed the same within in property of his exclusive ownership, and such usurpation constitutes a violation of the legal provisions which explicity exclude such waterways from the exclusive use or possession of a private party. (Emphasis supplied)

As indicated in the above-cited case, a private person may take possession of a watercourse if he constructed the same within his property.itc-alf This puts Us into inquiry whether the streams in question are natural or artificial. In so doing, We shall examine only the evidence presented before the Department of Public Works and Communications and disregard that which was presented for the first time before the lower court, following our ruling in Lovina vs. Moreno, supra.

(1) Sapang Macanduling Maragul or Macanduli is presently enclosed in Fishpond No. 12 of Roman Santos. Its banks cannot anymore be seen but some traces of them could be noted by a row of isolated nipa palms. Its water is subject to the rise and fall of the tides coming from Guagua and Antipolo Rivers and it is navigable by light watercrafts. Its inlet is

Antipolo River; another dike at its outlet along the Palapat River.9 It is closed by four dikes: One dike at its inlet along the Antipolo River; another dike at its cutlet along the Palatpat River; and, two dikes in between. Then exist channel at the Palapat River where the fishpond gate lies has been filled up with dredge spoils from the Pampanga River Control Project.

(2) Sapang Macabacle is found in Fishpond No. 13. Its banks are still evident. This stream is about 30 meters wide, two meters deep and one and one-half to two kilometers long. Its source is Rio Cansusu. Like Macanduli, its channel is obstructed by four dikes. One of them was constructed by the engineers of the Pampanga River Control Project.

(3) Sapang Balbaro which is found in Fishpond No. 13, runs from Canal Enrique near Rio Cansusu to Sapang Macabacle, a distance of about one-half kilometer. It is passable by banca. The closures of this stream consist of two dikes located at each ends on Canal Enrique and Sapang Macabacle.

(4) Sapang Cansusu is a continuation of the Cansusu River. The Cansusu River opens at the Guagua River and allegedly ends at the Palanas River in front of Barrio San Esteban. At a point near the mouth of Sapang Balbaro, the owners of Hacienda San Esteban built a canal leading straight to one end of Barrio San Esteban. They called this canal "Canal Enrique." And at the point where Canal Enrique joins Cansusu they built a dike across Cansusu, thus closing this very portion of the river which extends up to Palanas River where they built another closure dike. This closed portion, called "Sapang Cansusu," is now part of Fishpond No. 1.

Sapang Cansusu is half a kilometer long and navigable by banca.

Appellant's witnesses, Beligno Musni, 41, Macario Quiambao, 96, Roman Manansala, 55 and Castor Quiambao, 76, all residents of Barrio San Esteban, testified that prior to their closure, Sapang Macaduli, Macabacle, Balbaro and Cansusu

were used as passageway and as fishing grounds; that people transported through them tuba,10 wood and sasa,11 and that the tuba was brought to the distillery in Barrio San Esteban. Macario Quiambao testified also that said four streams "were created by God for the town people"; and that if any digging was done it was only to deepen the shallow parts to make passage easier. According to witness Anastacio Quiambao said streams were navigable, even Yangco's ship "Cababayan" could pass through. Simplicio Quiambao, 36, and Marcelino Ocampo, 55, stated on direct examination that before closure of the above named four streams, people from the surrounding towns of Guagua, Bacolor, Macabebe, Masantol and Sexmoan fished and navigated in them.

Against the aforementioned, testimonial evidence Roman Santos presented the testimony of Nicanor Donarber, 80, Mariano

Guinto, 71, and his own. Donarber, who started working as an arundin12 testified that Ayala y Cia., dug Sapang Macanduli, Balbaro and Macabacle; that he worked also in the construction together with other workers; and, that as an overseer he inspected their work. Mariano Guinto testified that he worked for Ayala y Cia., as a tuba gatherer; that in order to reach remote nipa groves by banca, they made canals; and, that he was one of the who worked in the construction of those canals. Roman Santos also testified that Sapang Macanduli, Macabacle, Balbaro and Cansusu are artificial canals excavated as far back as 1850 and due to erosion coupled with the spongy nature of the land, they acquired the proportion of rivers; that he joined Sapang Balbaro to Sapang Macabacle because the former was a dying canal; and that Cansusu River is different from Sapang Cansusu Witness Domingo Yumang likewise testified that Sapang Balbaro man-made.

We observe that witnesses positively stated that Sapang Macanduli, Macabacle and Balbaro were made by the owners of Hacienda San Esteban. With respect to Sapang Cansusu none, except Roman Santos himself, testified that Sapang Cansusu is an artificial canal. It is not one of the streams found and recommended to be declared private in the Panopio Report. Sapang Cansusu follows a winding course different and, distinct from that of a canal such as that of Canal Enrique which is straight. Moreover, Sapang Cansusu is a part of Cansusu River, admittedly a public stream.

(5) Sapang Maragul, Mabalanga and Don Timpo are all part of Fishpond No. 1. Maragul is 600 meters long and 30 to 35 meters wide. Mabalanga is 250 meters in length and 50 meters in width. Don Timpo is 220 meters long and 20 meters wide. All of them are navigable by banca. Maragul and Mabalanga open at Guagua River and join each other inside the hacienda to form one single stream, Sapang Don Timpo, which leads to the Matalaba River. Maragul, Mabalanga and Don Timpo, formerly ended inside the hacienda but later Mabalanga was connected to Don Timpo. Maragul was connected to Mabalanga and Sapang Cela was extended to join Maragul.

Witnesses Nicanor Donarber, Mariano Ocampo and Mariano Guinto testified that Maragul, Mabalanga and Don Timpo are

artificial canals dug by Ayala y Cia., and that they (Donarber and Mariano Guinto) worked in said excavations.13 Witness Mariano Guinto clarified that Don Timpo was originally dug but Mabalanga and Maragul were formerly small non-

navigable streams which were deepened into artificial navigable canals by Ayala y Cia.14

Exhibit F, which is a map showing the streams and rivers in Hacienda San Esteban, shows that Maragul, Mabalanga and Don Timpo are more or less straight. From the big rivers (Guagua and Matalaba Rivers) they lead deep into the interior of the hacienda, thus confirming the testimony that they were built precisely as a means of reaching the interior of the estate by banca. The weight of evidence, therefore, indicate that said streams are manmade.

(6) Sapang Bunga, now part of Bunga fishpond, gets its water from Sapanga Iba and empties at Sta. Cruz River. It is about 300-400 meters long, 5-6 meters wide and 1-1.60 meters deep.

(7) Sapang Batu is found in Capiz Fishpond. About 300-400 meters long, 4-5 meters wide and 1.50-2.20 meters deep, it starts at Capiz River and ends at Malauling Maragul. From Capiz River until it intersects Sapang Nigui the stream is called Sapang Batu Commencing from Sapang Nigui and up to its end at Sapang Malauling Maragul, the stream is called Sapang Batu. Commencing from Sapang Nigui and up to its end at Sapang Malauling Maragul, the stream is called Sepong Batu. Sepong Batu is not among those streams declared in the Panopio Report as private.

(8) Sapang Banawa has one end at Palanas River and the other at Sapang Macabacle. It is about 300 meters long, 3-4 meters wide and 1.30-1.40 meters deep. Its whole length is within Fishpond No. 13 of Roman Santos.

(9) Sapang Mabutol is a dead-end stream, that is, it ends inside the hacienda. It opens along Guagua river. Since its closure, it has become part of Fishpond No. 1.

(10) Sapang Buta-buta, like Mabutol, dies inside the hacienda. It connects with Cansusu River and is about 100 meters long, 3-4 meters wide and 1.2-1.5 meters deep. It is now a part of Fishpond No. 13.

(11) Sapang Masamaral, another stream which opens at Cansusu River And ends inside the hacienda., is 100-200 meters long, 3-4 meters wide and 1.50-2 meters deep. It now forms part of Fishpond No. 13.

The uncontradicted testimony of Marcos Guinto is that Sapang Bunga, Batu, Sepong Batu, Banawa, Mabutol, Buta-Buta and Masamaral were constructed by Ayala y Cia., to gain access to the nipa the, interior of the hacienda. This testimony tallies with the findings in the Panopio Report which will be discussed herein later. The evidence adduced in the administrative proceeding conducted before a representative of the Secretary of Public Works and Communications supports the contention that said streams are merely canals built by Ayala y Cia., for easy passage into the hinterland of its hacienda.

(12) Sapang Magasawa consists of two streams running parallel to each other commencing from Matalaba River and terminating at Mariablus Rivers. About 600-700 meters long, 4-5 meters wide and 1.5-2 meters deep, these two streams are navigable by banca. They are enclosed within Fishpond No. 1.

(13) Sapang Mariablus Malate, about 3-4 meters wide and 250 meters long, is another stream that ends inside the hacienda and gets its water from Guagua River. It is no part of Fishpond No. 1.

(14) Sapang Matalabang Malate or Maisac opens at Guagua River and ends at Sapang Cela and Matalabang Maragul. This stream, which is about 800 meters long and 18 meters wide, forms part of Fishpond No. 1 of Roman Santos.

(15) Sapang Batasan Matua about 600 meters long, three meters wide and .80 meters deep at low tide and 1.90 meters deep at high tide crosses the hacienda from Mariablus River to Cansusu River. It is at present a part of Fishpond No. 1-A.

(16) Sapang Camastiles, a dead end stream of about 200 to 300 meters in length, gets its water from Biuas River. It is within Fishpond No. 1.

(17) Sapang Cela is within Fishpond No. 1. Its whole length situated inside the hacienda, it opens at Sapang Matalabang Malate or Maisac and ends at Sapang Malungkot. Latter Cela was extended to connect with Sapang Maragul. It is about 200 meters long and four meters wide.

Mariano Guinto, 71, testified without contradiction that Sapang Mariablus Malate and Matalabang Malate were formerly

small and non-navigable streams which were dug by Ayala y Cia.,15 while Batasan Matua Camastiles, Magasawa and Cela

are original canals made by Ayala y Cia.,16 that he was one of those who worked in the construction of said canals; and that it took years to construct them. All these streams were recommended in the Panopio Report for declaration as private streams.

(18) Sapang Sinag, 200 meters long, four to five meters wide, one meter and one and one-half meters deep at low and high tides, respectively, gets its water from Cutod River and leads inside the hacienda to connect with Sapang Atlong Cruz, a

stream declared private in the Panopio Report. It is now inside Fishpond No. 14.

(19) Sapang Balili, also found inside Fishpond No. 14, is about 200 meters long, three to four meters wide and one meter

deep at low tide. From its mouth at Cutod River it drifts into the interior of the hacienda and joins Sapang Bengco.17

(20) Sapang Pita is within Fishpond Capiz. It takes water from Capiz River but dies 250 meters inside the hacienda. It is about four to five meters wide, and one meter deep at low tide and 1.50 meters deep at high tide.

(21) Sapang Tumbong, situated inside Capiz Fishpond, derives its water from Sapang Quiñorang Silab, a stream declared

private by the Secretary of Public Works and Communications, and ends inside the hacienda.18

(22) Sapang Bengco is found within Fishpond No. 14.1awphil.net Two hundred meters long, five meters wide, and one meter deep at low tide and 1.50 meters deep at high tide it gets water from Sapang Biabas and connects with Baliling

Maisac.19

According to Marcos Guinto, a witness for Roman Santos, Sapang Sinag, Balili, Pita Tumbong and Bengco were excavated a long time ago by Ayala y Cia.; and that they have a winding course because when they were made the workers followed

the location of the nipa palms.20 On the other hand, Marcelo Quiambao, testified that Sapang Tumbong is a natural stream and that the reason he said so is because the stream was already there as far back as 1910 when he reached the age of ten. No other oral evidence was presented to contradict the testimony of Marcos Guinto that the said five streams were artificially made by Ayala y Cia.

To show that the streams involved in this case were used exclusively by the hacienda personnel and occasionally by members of their families, Roman Santos introduced the testimony of Eliseo Panopio, Nicanor Donarber, Blas Gaddi, Mariano Ocampo, Mariano Guinto, Alejandro Manansala and himself. The witnesses categorically testified that the public was prohibited from using the streams as a means of navigation and that the prohibition was enforced by guards called arundines.

One and all, the evidence, oral and documentary, presented by Roman Santos in the administrative proceedings supports the conclusion of the lower court that the streams involved in this case were originally man-made canals constructed by the former owners of Hacienda San Esteban and that said streams were not held open for public use. This same conclusion was reached 27 years earlier by an investigator of the Bureau of Public Works whose report and recommendations were approved by the Director of Public Works and submitted to the Secretary of Commerce and Communications.

As stated, pursuant to Act 2152, as amended by Act 3208, the Bureau of Public Works and the Department of Commerce and Communications locked into and settled the question of whether or not the streams situated within Hacienda San Esteban are publicly or privately owned. We refer to the so-called Panopio Report which contains the findings and recommendations of Eliseo Panopio, a surveyor in the Bureau of Public Works, who was designated to conduct formal hearings and investigation. Said report found the following streams, among others, of private ownership:

Camastiles, Cela Balanga, Bato, Batasan, Bengco, Buta-buta, Don Timpo, Mabutol, Macabacle, Macanduli, Malande Malate (Bunga), Magasawa, Masamaral, Maragul, Mariablus Malate, Matalaba Malate, Nasi, Nigui, Pangebonan and Quiñorang Silab

on the ground that —

The preponderance of the probatory facts, . . ., shows that the rivers, creeks, esteros and canals listed in (1) have originally been constructed, deepened, widened, and lengthened by the owners of the Hacienda San Esteban. That they have been used as means of communication from one place to another and to the inner most of the nipales, exclusively for the employees, colonos and laborers of the said Hacienda San Esteban. That they have never been

used by the public for navigation without the express consent of the owners of the said Hacienda.21

Bases for the above-quoted conclusion were "the reliable informations gathered from old residents of the locality, from outsiders, the sworn statements obtained from different persons not interested in this case and the comparison of the three

plans prepared in 1880, 1906 and 1930.22 The persons referred to are Martin Isip, Hilarion Lobo, Emigdio Ignacio, Castor Quiambao, Matias Sunga facio Cruz, Inocencio Dayrit, Gabriel Manansala, Lope Quiambao, Marcelino Bustos and Juan Lara .

On February 13, 1931 the Director of Public Works transmitted the Panopio Report to the Secretary of Commerce and Communications recommending approval thereof. Later, on February 27, 1935, Secretary of Public Works and Communications De las Alas approved the agreement of Ayala y Cia., and the Municipality of Macabebe, concerning the ownership of the streams in Hacienda San Esteban, for being in conformity with said Panopio Report.

This agreement of Ayala y Cia and the Municipality of Macabebe which was approved by the Secretary of Public Works and Communications only on February 27, 1935, could not however bind the Government because the power of the Secretary of Public Works and Communication to enter thereto had been suppressed by the Philppine Legislature when it enacted Act 4175 which effect on December 7, 1934.

Nullity of the aforesaid contract would not of course affect the findings of fact contained in the Panopio Report.

In weighing the evidence presented before the administrative investigation which culminated in this appeal, respondent Secretary seemed to have ignored the Panopio Report and other documentary evidence as well as the testimony of witnesses presented by petitioner but instead gave credence only to the witnesses of Benigno Musni, et al. Upon review, however, the lower court, taking into account all the evidence adduced in the administrative hearing, including the Panopio Report, as well as those presented for the first time before it, sustained petitioner's averment that the streams in question were artificially made, hence of private ownership. As stated, this conclusion of the lower court which is in accord with the findings of Panopio as contained in his report, finds ample support from the evidence presented and admitted in the administrative investigation. Accordingly, we see no merit in disturbing the lower court's findings fact.

We next consider the issue of whether under pertinent laws, the streams in question are public or private.

We quote Articles 339, 407 and 408 of the Spanish Civil Code of 1889:

Art. 339. Property of public ownerships is —

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

Art. 407. The following are of public ownership:

1. Rivers and their natural channels;

2. Continuous or intermittent waters from springs or brooks running in their natural channels and the channels themselves.

3. Waters rising continuously or intermittently on lands of public ownership;

4. Lakes and ponds formed by nature, on public lands, and their beds;

5. Rain waters running through ravines or sand beds, the channels of which are of public ownership;

6. Subterranean waters on public lands;

7. Waters found within the zone of operation of public works, even though constructed under contract;

8. Waters which flow continuously or intermittently from lands belonging to private persons, to the State, to provinces, or to towns, from the moment they leave such lands;

9. The waste waters of fountains, sewers, and public institutions.

Art. 408. The following are of private ownership:

1. Waters, either continuous or intermittent rising on private etates, while they run through them;

2. Lakes and ponds and their beds when formed by nature on such estates;

3. Subterranean waters found therein;

4. Rain water falling thereon as long as their bounderies.

5. The channels of flowing streams, continuous or intermittent, formed by rain water, and those of brooks crossing estates which are not of public ownership.

The water, bed, banks, and floodgates of a ditch or aqueduct are deemed to be an integral part of the estate or building for which the waters are intended. The owners of estates through or along the boundaries of which the aqueduct passes can assert no ownership over it, nor any right to make use. of it beds or banks, unless they base their claims on title deed which specify the right or the ownership claimed.

Articles 71 and 72 of the Spanish Law of Waters of August 3, 1866 state:

Art. 71. The water-beds of all creeks belong to the owners of the estates or lands over which they flow.

Art. 72. The water-beds on public land, of creeks through which spring waters run, are a part of the public domain.

The natural water-beds or channels of rivers are also part of the public domain.

Pursuant to Article 71 of the Spanish Law of Waters of August 3, 1866, and Article 408(5) of the Spanish Civil Code, channels of creeks and brooks belong to the owners of estates over which they flow. The channels, therefore, of the streams in question which may be classified creeks, belong to the owners of Hacienda San Esteban.

The said streams, considered as canals, of which they originally were, are of private ownership in contemplation of Article 339(l) of the Spanish Civil Code. Under Article 339, canals constructed by the State and devoted to public use are of public ownership. Conversely, canals constructed by private persons within private lands and devoted exclusively for private use must be of private ownership.

Our attention has been called to the case of Mercado v. Municipal President of Macabebe, 59 Phil. 592. There the creek (Batasan-Limasan) involved was originally dug by the estate's owner who, subsequently allowed said creek to be used by the public for navigation and fishing purposes for a period of 22 years. Said this Court through Mr. Justice Diaz:

And even granting that the Batasan-Limasan creek acquired the proportions which it had, before it was closed, as a result of excavations made by laborers of the appellant's predecesor in interest, it being a fact that, since the time it was opened as a water route between the Nasi River and Limasan creek, the owners thereof as well as strangers, that is, both the residents of the hacienda and those of other nearby barrios and municipalities, had been using it not only for their bancas to pass through but also for fishing purposes, and it being also a fact that such was the condition of the creek at least since 1906 until it was closed in 1928, if the appellant and her predecessors in interest had acquired any right to the creek in question by virtue of excavations which they had made thereon, they had such right through prescription, inasmuch as they failed to obtain, and in fact they have not obtained, the necessary authorization to devote it to their own use to the exclusion of all others. The use and enjoyment of a creek, as any other property simceptible of appropriation, may be acquired or lost through prescription, and the appellant and her predecessors in interest certainly lost such right through the said cause, and they cannot now claim it exclusively for themselves after the general public had been openly using the same from 1906 to 1928. . . .

In the cited case, the creek could have been of private ownership had not its builder lost it by prescription. Applying the principle therein enunciated to the case at bar, the conclusion would be inevitably in favor of private ownership, considering that the owners of Hacienda San Esteban held them for their exclusive use and prohibited the public from using them.

It may be noted that in the opinion, mentioned earlier, issued on June 12, 1935, the Secretary of Justice answered in the negative the query of the Secretary of Public Works and Communications whether the latter can declare of private ownership those streams which "were dug up artificially", because it was assumed that the streams were used "by the public as fishing ground and in transporting their commerce in bancas or in small crafts without the objection of the parties who dug" them. Precisely, Mercado v. Municipality of Macabebe was given application therein. However, the facts, as then found by the Bureau of Public Works, do not support the factual premise that the streams in question were used by the public "without the objection of the parties who dug" them. We cannot therefore take as controlling in determining the merits of this the factual premises and the legal conclusion contained in said opinion.

The case at bar should be differentiated from those cases where We held illegal the closing and/or appropriation of rivers or

streams by owners of estates through which they flow for purposes of converting them into fishponds or other works.23 In those cases, the watercourses which were dammed were natural navigable streams and used habitually by the public for a long time as a means of navigation. Consequently, they belong to the public domain either as rivers pursuant to Article 407 (1) of the Spanish Civil Code of 1889 or as property devoted to public use under Article 339 of the same code. Whereas, the streams involved in this case were artificially made and devoted to the exclusive use of the hacienda owner.

Finally, Sapang Cansusu, being a natural stream and a continuation of the Cansusu River, admittedly a public stream, belongs to the public domain. Its closure therefore by the predecessors of Roman Santos was illegal.

The petition for the opening of Sapang Malauling Maragul, Quiñorang Silab, Nigui, Pepangebunan, Nasi and Bulacus was dismissed by the Secretary of Public Works and Communications and the case considered closed. The said administrative decision has not been questioned in this appeal by either party. Hence, they are deemed excluded herein.

All the other streams, being artificial and devoted exclusively for the use of the hacienda owner and his personnel, are declared of private ownership. Hence, the dams across them should not he ordered demolished as public nuisances.

With respect to the issue of contempt of court on the part of the Secretary of Public Works and Communications and Julian Cargullo for the alleged issuance of a administrative decisions ordering demolition of dikes involved in this case after the writ of injunction was granted and served, suffice it to state that the lower court made no finding of contempt of court. Necessarily, there is no conviction for contempt reviewable by this Court and any discussion on the matter would be academic.

WHEREFORE, the decision appealed from is affirmed, except as to Sapang Cansusu which is hereby declared public and as to which the judgment of the lower court is reversed. No costs. So ordered.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-19570 September 14, 1967

JOSE V. HILARIO, JR., plaintiff-appellant, vs.THE CITY OF MANILA, defendant-appellee, DIRECTOR OF PUBLIC WORKS, CITY ENGINEER OF MANILA, FERNANDO BUSUEGO and EUGENIO SESE, defendants-appellants, MAXIMO CALALANG, intervenor and DIRECTOR OF MINES, intervenors.

Calalang, Cruz & Carag for plaintiff-appellant.Office of the Solicitor General for defendants-appellants.City Fiscal of Manila for defendant-appellee.

R E S O L U T I O N

BENGZON, J.P., J.:

This case is before Us anew on a motion for reconsideration filed by plaintiff-appellant Hilario. In the decision promulgated on April 27, 1967, We absolved defendants City of Manila and the Director of Public Works from liability to plaintiff for the materials taken from the gravel pit but declared all that portion of the said area to the west, starting from a line 20 meters east of the camachile tree, as still part of plaintiff's property.

In support of his motion, plaintiff submits the following grounds: (1) the Supreme Court cannot make new findings of fact unless those made by the lower court were in abuse of discretion or were manifestly mistaken, absurd or impossible; (2) the area where defendants extracted gravel and sand is plaintiff's property, and (3) there is no "secondary bank" above (to the west of) the New Accretion Area.

It is only when the issues raised in the appeal are purely questions of law that the Supreme Court is bound to respect the findings of fact of the lower court, in the absence of abuse of discretion, or patent mistake, absurdity or impossibility. But the appeal here involved questions of fact which required Us to review the entire evidence on record and state the facts

as established thereby.* Plaintiff himself questioned and assailed the lower court's finding that only the northern 2/5 of the

area in question remained as his property,1 and asserted that defendants extracted materials from within his property and not from the riverbed and/or riverbank. The latter controverted this. So, We had to determine precisely where the peripheries of plaintiff's property were, vis-a-vis those of the moving western bank, and where defendants extracted materials from 1945 to 1955. The findings of fact We stated in the decision sought to be reconsidered were all based on the evidence on record, with the necessary references and citations thereto. We could not simply review the facts found by the lower court unfavorable to the plaintiff and accept those favorable to him especially because the defendants also appealed from the decision.

Withal, a new finding of fact had to be made when a review of the entire evidence on record showed (1) that there was nothing to support the lower court's conclusion that the site where rice and corn were found in the ocular inspection of June 15, 1951 was on the northern 2/5 portion and, furthermore, not being properly delineated, such determination would be impossible of proper execution; (2) that defendants did not cause the unnatural widening of the River, contrary to the lower court's holding; and (3) that defendants did not extract indiscriminately from the area in question during the entire period of their operations, but confined themselves to definite areas during particular periods of time. The lower court failed to make a finding in conformity with this established fact.

On the second ground, plaintiff argues that even as early as 1945, the gravel pit was already high since it was not reached by the ordinary floods and, hence, it could not be considered a part of the west riverbank. Plaintiff relies, however, on Cruz' report (Exh. 1-Calalang) stating that from 1950 to 1951, the higher portions of the gravel pit "which used to be submerged", were no longer inundated. This is undeniable proof that before 1950, even the higher portions which plaintiff is referring to were covered by the ordinary floods accompanying the swelling of the river. Moreover, the non-inundation of

the higher areas during the period 1950-1951 was partly due to the movement of the river to the east. 2 It was this eastward movement that caused the periphery of the west bank to recede eastward also until it was located at 20 meters west of the camachile tree during this period.

Plaintiff would also refer Us to a portion of Suiza's testimony3 purportedly showing that this witness did not see the River flooded from 1946 to 1949, in contradiction to Our finding that Suiza stated that from 1947 to 1949, the disputed area

was always inundated. In the portion alluded to, however, Suiza stated that it was perhaps three years after 1945 (when he started working in the plant) — or in 1948 — when he first saw the River flooded, and the second time was on the following year, or in 1949. Anyway, the assumption sought to be drawn — erroneous as it is — based on what Suiza did not see, cannot overcome the positive statements of witnesses Ross and Villafuerte, and Exh. 1-Calalang.

Regarding the last point: First of all, We stated in the decision sought to be reconsidered, that the phrase "secondary bank line" was a mere convenient designation only, for identification purposes. It was used to refer to a lateral zone west of the New Accretion Area. We also made it clear that the periphery of the west bank was more or less in that portion where the "secondary bank line" was indicated only from 1945 to 1949, when the River was itself along the New Accretion Area site. Afterwards, this periphery receded eastward, together with the River.

Secondly, We emphasized the point that the reason defendants were being absolved from liability was due to the absence of sufficient evidence showing that they extracted materials beyond the receding periphery of the west bank. It was they who followed the eastward movement of the river and its western bank, not vice-versa. In fact, what the evidence on record reveals is that defendants were prevented from conducting operations beyond the outer borders of the western bank. In the present motion, plaintiff has not pointed to any evidence on record to show the contrary.

Thirdly, the evidence pointed to in support of this ground, had already been passed upon and considered by Us and no new matter of substantial significance is being brought forth. We already stated that defendants' witnesses were more qualified and acquainted with the sites of the disputed area. Witnesses Lorenzo, Angeles and Santamaria are not geologists and it has not been shown that they were always in the disputed area while defendants' operations were going on. The

portion of Ross' testimony4 on the extent reached by the ordinary floods refers to the year 1954 only. The height of the

gravel pit as agreed upon in the ocular inspection of June 15, 1951 can not be considered conclusive since Exh. 1-Calalang reports that after the typhoons of 1952, the level of the pit increased again.1awphîl.nèt

WHEREFORE, the motion to reconsider is hereby denied. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.


ManilaFIRST DIVISION

G.R. No. L-31271 April 29, 1974ROMEO MARTINEZ and LEONOR SUAREZ, spouses, petitioners-appellants, vs.HON. COURT OF APPEALS, SECRETARY and UNDERSECRETARY OF PUBLIC WORKS & COMMUNICATIONS, respondents-appellees. Flores Macapagal, Ocampo and Balbastro for petitioners-appellants. Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General Dominador L. Quiroz and Solicitor Concepcion T. Agapinan for respondents-appellees. ESGUERRA, J.:pPetition for review by certiorari of the judgment of the Court of Appeals dated November 17, 1969 in its CA-G.R. 27655-R which reverses the judgment of the Court of First Instance of Pampanga in favor of petitioners-appellants against the Secretary and Undersecretary of Public Works & Communications in the case instituted to annul the order of November 25, 1958 of respondent Secretary of Public Works & Communications directing the removal by the petitioners of the dikes they had constructed on Lot No. 15856 of the Register of Deeds of Pampanga, which order was issued pursuant to the provisions of Republic Act No. 2056. The dispositive portion of the judgment of reversal of the Court of Appeals reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is hereby reversed, and another entered: [1] upholding the validity of the decision reached by the respondent officials in the administrative case; [2] dissolving the injunction issued by the Court below; and [3] cancelling the registration of Lot No. 2, the disputed area, and ordering its reconveyance to the public domain. No costs in this instance.The background facts are stated by the Court of Appeals as follows:The spouses Romeo Martinez and Leonor Suarez, now petitioners-appellees, are the registered owners of two (2) parcels of land located in Lubao, Pampanga, covered by transfer certificate of title No. 15856 of the Register of Deeds of the said province. Both parcels of land are fishponds. The property involved in the instant case is the second parcel mentioned in the above-named transfer certificate of title. The disputed property was originally owned by one Paulino Montemayor, who secured a "titulo real" over it way back in 1883. After the death of Paulino Montemayor the said property passed to his successors-in-interest, Maria Montemayor and Donata Montemayor, who in turn, sold it, as well as the first parcel, to a certain Potenciano Garcia.Because Potenciano Garcia was prevented by the then municipal president of Lubao, Pedro Beltran, from restoring the dikes constructed on the contested property, the former, on June 22, 1914, filed Civil Case No. 1407 with the Court of First Instance against the said Pedro Beltran to restrain the latter in his official capacity from molesting him in the possession of said second parcel, and on even date, applied for a writ of preliminary injunction, which was issued against said municipal president. The Court, by decision promulgated June 12, 1916, declared permanent the preliminary injunction, which, decision, on appeal, was affirmed by the Supreme Court on August 21, 1918. From June 22, 1914, the dikes around the property in question remained closed until a portion thereof was again opened just before the outbreak of the Pacific War.On April 17, 1925. Potenciano Garcia applied for the registration of both parcels of land in his name, and the Court of First Instance of Pampanga, sitting as land registration court, granted the registration over and against the opposition of the Attorney-General and the Director of Forestry. Pursuant to the Court's decision, original certificate of title No. 14318, covering said parcels 1 and 2 was issued to the spouses Potenciano Garcia and Lorenza Sioson.These parcels of land were subsequently bought by Emilio Cruz de Dios in whose name transfer certificate of title No. 1421 was first issued on November 9, 1925.Thereafter, the ownership of these properties changed hands until eventually they were acquired by the herein appellee spouses who hold them by virtue of transfer certificate of title No. 15856.To avoid any untoward incident, the disputants agreed to refer the matter to the Committee on Rivers and Streams, by then composed of the Honorable Pedro Tuason, at that time Secretary of Justice, as chairman, and the Honorable Salvador Araneta and Vicente Orosa, Secretary of Agriculture and National Resources and Secretary of Public Works and Communications, respectively, as members. This committee thereafter appointed a Sub-Committee to investigate the case and to conduct an ocular inspection of the contested property, and on March 11, 1954, said Sub-Committee submitted its report to the Committee on Rivers and Streams to the effect that Parcel No. 2 of transfer certificate of title No. 15856 was not a public river but a private fishpond owned by the herein spouses.On July 7, 1954, the Committee on Rivers and Streams rendered its decision the dispositive part of which reads:"In view of the foregoing considerations, the spouses Romeo Martinez and Leonor Suarez should be restored to the exclusive possession, use and enjoyment of the creek in question which forms part of their registered property and the decision of the courts on the matter be given full force and effect."The municipal officials of Lubao, led by Acting Mayor Mariano Zagad, apparently refused to recognize the above decision, because on September 1, 1954, the spouses Romeo Martinez and Leonor Suarez instituted Civil Case No.

751 before the Court of First Instance of Pampanga against said Mayor Zagad, praying that the latter be enjoined from molesting them in their possession of their property and in the construction of the dikes therein. The writ of preliminary injunction applied for was issued against the respondent municipal Mayor, who immediately elevated the injunction suit for review to the Supreme Court, which dismissed Mayor Zagad's petition on September 7, 1953. With this dismissal order herein appellee spouses proceeded to construct the dikes in the disputed parcel of land.Some four (4) years later, and while Civil Case No. 751 was still pending the Honorable Florencio Moreno, then Secretary of Public Works and Communications, ordered another investigation of the said parcel of land, directing the appellees herein to remove the dikes they had constructed, on the strength of the authority vested in him by Republic Act No. 2056, approved on June 13, 1958, entitled "An Act To Prohibit, Remove and/or Demolish the Construction of Dams. Dikes, Or Any Other Walls In Public Navigable Waters, Or Waterways and In Communal Fishing Grounds, To Regulate Works in Such Waters or Waterways And In Communal Fishing Grounds, And To Provide Penalties For Its Violation, And For Other Purposes. 1 The said order which gave rise to the instant proceedings, embodied a threat that the dikes would be demolished should the herein appellees fail to comply therewith within thirty (30) days.The spouses Martinez replied to the order by commencing on January 2, 1959 the present case, which was decided in their favor by the lower Court in a decision dated August 10, 1959, the dispositive part of which reads:

"WHEREFORE, in view of the foregoing considerations, the Court hereby declares the decision, Exhibit S, rendered by the Undersecretary of Public Works and Communications null and void; declares the preliminary injunction, hereto for issued, permanent, and forever enjoining both respondents from molesting the spouses Romeo Martinez and Leonor Suarez in their possession, use and enjoyment of their property described in Plan Psu-9992 and referred to in their petition.""Without pronouncement as to costs.""SO ORDERED."

As against this judgment respondent officials of the Department of Public Works and Communications took the instant appeal, contending that the lower Court erred:1. In holding that then Senator Rogelio de la Rosa, complainant in the administrative case, is not an interested party and his letter-complaint dated August 15, 1958 did not confer jurisdiction upon the respondent Undersecretary of Public Works and Communications to investigate the said administrative case;2. In holding that the duty to investigate encroachments upon public rivers conferred upon the respondent Secretary under Republic Act No. 7056 cannot be lawfully delegated by him to his subordinates;3. In holding that the investigation ordered by the respondent Secretary in this case is illegal on the ground that the said respondent Secretary has arrogated unto himself the power, which he does not possess, of reversing, making nugatory, and setting aside the two lawful decisions of the Court Exhibits K and I, and even annulling thereby, the one rendered by the highest Tribunal of the land;4. In not sustaining respondent's claim that petitioners have no cause of action because the property in dispute is a public river and in holding that the said claim has no basis in fact and in law;5. In not passing upon and disposing of respondent's counterclaim; 6. In not sustaining respondent's claim that the petition should not have been entertained on the ground that the petitioners have not exhausted administrative remedies; and7. In holding that the decision of the respondents is illegal on the ground that it violates the principles that laws shall have no retroactive effect unless the contrary is provided and in holding that the said Republic Act No. 2056 is unconstitutional on the ground that respondents' threat of prosecuting petitioners under Section 3 thereof for acts done four years before its enactment renders the said law ex post facto.

The Court of Appeals sustained the above-mentioned assignment of errors committed by the Court of First Instance of Pampanga and, as previously stated, reversed the judgment of the latter court. From this reversal this appeal by certiorari was taken, and before this Court, petitioners-appellants assigned the following errors allegedly committed by the Court of Appeals:

1. THE COURT OF APPEALS ERRED IN DECLARING IN THE INSTANT CASE THAT PARCEL NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856 IS A PUBLIC RIVER AND ORDERING THE CANCELLATION OF ITS REGISTRATION BECAUSE THIS CONSTITUTES A COLLATERAL ATTACK ON A TORRENS TITLE IN VIOLATION OF THE LAW AND THE WELL-SETTLED JURISPRUDENCE ON THE MATTER. 2. THE COURT OF APPEALS ERRED IN REOPENING AND RE-LITIGATING THE ISSUE AS TO WHETHER OR NOT LOT NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856 REGISTER OF DEEDS OF PAMPANGA, IS A PUBLIC RIVER NOTWITHSTANDING THE FACT THAT THIS ISSUE HAS BEEN LONG RESOLVED AND SETTLED BY THE LAND REGISTRATION COURT OF PAMPANGA IN LAND REGISTRATION PROCEEDING NO. 692 AND IS NOW RES JUDICATA. 3. THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION OF THE REGISTRATION OF LOT NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856 NOTWITHSTANDING THE FACT THAT

THE TORRENS TITLE COVERING IT HAS BEEN VESTED IN THE PETITIONERS WHO ARE THE SEVENTH OF THE SUCCESSIVE INNOCENT PURCHASERS THEREOF AND WHO IN PURCHASING THE SAME RELIED ON THE PRINCIPLE THAT THE PERSONS DEALING WITH REGISTERED LAND NEED NOT GO BEHIND THE REGISTER TO DETERMINE THE CONDITION OF THE PROPERTY.

The 1st and 2nd assignment of errors, being closely related, will be taken up together.The ruling of the Court of Appeals that Lot No. 2 covered by Transfer Certificate of Title No. 15856 of the petitioners-appellants is a public stream and that said title should be cancelled and the river covered reverted to public domain, is assailed by the petitioners-appellants as being a collateral attack on the indefeasibility of the torrens title originally issued in 1925 in favor of the petitioners-appellants' predecessor-in-interest, Potenciano Garcia, which is violative of the rule of res judicata. It is argued that as the decree of registration issued by the Land Registration Court was not re-opened through a petition for review filed within one (1) year from the entry of the decree of title, the certificate of title issued pursuant thereto in favor of the appellants for the land covered thereby is no longer open to attack under Section 38 of the Land Registration Act (Act 496) and the jurisprudence on the matter established by this Tribunal. Section 38 of the Land Registration Act cited by appellants expressly makes a decree of registration, which ordinarily makes the title absolute and indefeasible, subject to the exemption stated in Section 39 of the said Act among which are: "liens, claims or rights arising or existing under the laws or Constitution of the United States or of the Philippine Islands which the statute of the Philippine Islands cannot require to appear of record in the registry."At the time of the enactment of Section 496, one right recognized or existing under the law is that provided for in Article 339 of the old Civil Code which reads as follows:

Property of public ownership is:1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and banks shores, roadsteads, and that of a similar character. (Par. 1)

The above-mentioned properties are parts of the public domain intended for public use, are outside the commerce of men and, therefore, not subject to private appropriation. ( 3 Manresa, 6th ed. 101-104.)In Ledesma v. Municipality of Iloilo, 49 Phil. 769, this Court held:

A simple possession of a certificate of title under the Torrens system does not necessarily make the possessor a true owner of all the property described therein. If a person obtains title under the Torrens system which includes by mistake or oversight, lands which cannot be registered under the Torrens system, he does not by virtue of said certificate alone become the owner of the land illegally included.

In Mercado v. Municipal President of Macabebe, 59 Phil. 592, it was also said:It is useless for the appellant now to allege that she has obtained certificate of title No. 329 in her favor because the said certificate does not confer upon her any right to the creek in question, inasmuch as the said creek, being of the public domain, is included among the various exceptions enumerated in Section 39 of Act 496 to which the said certificate is subject by express provision of the law.

The same ruling was laid down in Director of Lands v. Roman Catholic Bishop of Zamboanga, 61 Phil. 644, as regards public plaza. In Dizon, et al. v. Rodriguez, et al., G.R. No. L-20300-01 and G.R. No. L-20355-56, April 30, 1965, 20 SCRA 704, it was held that the incontestable and indefeasible character of a Torrens certificate of title does not operate when the land covered thereby is not capable of registration.It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness and incontestability of a Torrens certificate of title do not apply here. The Land Registration Court has no jurisdiction over non-registerable properties, such as public navigable rivers which are parts of the public domain, and cannot validly adjudge the registration of title in favor of a private applicant. Hence, the judgment of the Court of First Instance of Pampanga as regards the Lot No. 2 of Certificate of Title No. 15856 in the name of petitioners-appellants may be attacked at any time, either directly or collaterally, by the State which is not bound by any prescriptive period provided for by the Statute of Limitations (Article 1108, par. 4, new Civil Code). The right of reversion or reconveyance to the State of the public properties fraudulently registered and which are not capable of private appropriation or private acquisition does not prescribe. (Republic v. Ramona Ruiz, et al., G.R. No. L-23712, April 29, 1968, 23 SCRA 348; Republic v. Ramos, G.R. No. L-15484, January 31, 1963, 7 SCRA 47.)When it comes to registered properties, the jurisdiction of the Secretary of Public Works & Communications under Republic Act 2056 to order the removal or obstruction to navigation along a public and navigable creek or river included therein, has been definitely settled and is no longer open to question (Lovina v. Moreno, G.R. No L-17821, November 29, 1963, 9 SCRA 557; Taleon v. Secretary of Public Works & Communications G.R. No. L-24281, May 16, 1961, 20 SCRA 69, 74). The evidence submitted before the trial court which was passed upon by the respondent Court of Appeals shows that Lot No. 2 (Plan Psu 992) of Transfer Certificate of Title No. 15856, is a river of the public domain. The technical description of both Lots Nos. 1 and 2 appearing in Original Certificate of Title No. 14318 of the Register of Deeds of Pampanga, from which the present Transfer Certificate of Title No. 15856 was derived, confirms the fact that Lot No. 2 embraced in said title is bounded practically on all sides by rivers. As held by the Court of First Instance of Pampanga in Civil Case No. 1247 for

injunction filed by the petitioners' predecessors-in-interest against the Municipal Mayor of Lubao and decided in 1916 (Exh. "L"), Lot No. 2 is a branch of the main river that has been covered with water since time immemorial and, therefore, part of the public domain. This finding having been affirmed by the Supreme Court, there is no longer any doubt that Lot No. 2 of Transfer Certificate of Title No. 15856 of petitioners is a river which is not capable of private appropriation or acquisition by prescription. (Palanca v. Com. of the Philippines, 69 Phil. 449; Meneses v. Com. of the Philippines, 69 Phil. 647). Consequently, appellants' title does not include said river. IIAs regards the 3rd assignment of error, there is no weight in the appellants' argument that, being a purchaser for value and in good faith of Lot No. 2, the nullification of its registration would be contrary to the law and to the applicable decisions of the Supreme Court as it would destroy the stability of the title which is the core of the system of registration. Appellants cannot be deemed purchasers for value and in good faith as in the deed of absolute conveyance executed in their favor, the following appears:

6. Que la segunda parcela arriba descrita y mencionada esta actualmente abierta, sin malecones y excluida de la primera parcela en virtud de la Orden Administrative No. 103, tal como fue enmendada, del pasado regimen o Gobierno. 7. Que los citados compradores Romeo Martinez y Leonor Suarez se encargan de gestionar de las autoridades correspondientes para que la citada segunda parcela pueda ser convertida de nuevo en pesqueria, corriendo a cuenta y cargo de los mismos todos los gastos. 8. Que en el caso de que dichos compradores no pudiesen conseguir sus propositos de convertir de nuevo en pesquera la citada segunda parcela, los aqui vendedores no devolveran ninguna cantidad de dinero a los referidos compradores; este es, no se disminuiriat el precio de esta venta. (Exh. 13-a, p. 52, respondents record of exhibits)

These stipulations were accepted by the petitioners-appellants in the same conveyance in the following terms:Romeo Martinez y Leonor Suarez, mayores de edad, filipinos y residentes en al Barrio de Julo Municipio de Malabon, Provincia de Rizal, por la presente, declaran que estan enterados del contenido de este documento y lo aceptan en los precisos terminos en que arriba uedan consignados. (Exh. 13-a, ibid)

Before purchasing a parcel of land, it cannot be contended that the appellants who were the vendees did not know exactly the condition of the land that they were buying and the obstacles or restrictions thereon that may be put up by the government in connection with their project of converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily assumed the risks attendant to the sale of said lot. One who buys something with knowledge of defect or lack of title in his vendor cannot claim that he acquired it in good faith (Leung Lee v. Strong Machinery Co., et al., 37 Phil. 664). The ruling that a purchaser of a registered property cannot go beyond the record to make inquiries as to the legality of the title of the registered owner, but may rely on the registry to determine if there is no lien or encumbrances over the same, cannot be availed of as against the law and the accepted principle that rivers are parts of the public domain for public use and not capable of private appropriation or acquisition by prescription. FOR ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is in accordance with law, and the same is hereby affirmed with costs against the petitioners-appellants.Makalintal, C.J., Castro, Teehankee and Muñoz Palma, JJ., concur. Makasiar, J., is on leave.


Manila

EN BANC

G.R. No. L-9069 March 31, 1915

THE MUNICIPALITY OF CAVITE, plaintiff-appellant, vs.HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-appellees.

Attorney-General Villamor for appellant.J. Y. Pinzon for appellees.

TORRES, J.:

Appeal filed through bill of exceptions by the Attorney-General, representing the plaintiff municipality of Cavite, from the judgment of March 27, 1913, whereby the Honorable Herbert D. Gale, judge, dismissed the complaint with costs against the plaintiff party, declaring that the said municipality had no right to require that the defendants vacate the land in question.

By an instrument dated December 5, 1911, afterwards amended on March 14, 1912, the provincial fiscal of Cavite, representing the municipality of that name, filed a complaint in the Court of First Instance of said province alleging that the plaintiff municipal corporation, duly organized and constituted in accordance with Act No. 82, and as the successor to the rights s aid entity had under the late Spanish government, and by virtue of Act No. 1039, had exclusive right, control and administration over the streets, lanes, plazas, and public places of the municipality of Cavite; that the defendants, by virtue of a lease secured from the plaintiff municipality, occupy a parcel of land 93 square meters in area that forms part o the public plaza known under the name of Soledad, belonging to the municipality of Cavite, the defendants having constructed thereon a house, through payment to the plaintiff for occupation thereof of a rental of P5,58 a quarter in advance, said defendants being furthermore obligated to vacate the leased land within sixty days subsequent to plaintiff's demand to that effect; that the defendants have been required by the municipality to vacate and deliver possession of the said land, but more than the sixty days within which they having done so to date; that the lease secured from the municipality of Cavite, by virtue whereof the defendants occupy the land that is the subject matter of the complaint, is ultra vires and therefore ipso facto null and void and of no force or effect, for the said land is an integral portion of a public plaza of public domain and use, and the municipal council of Cavite has never at any time had any power or authority to withdraw it from public use, and to lease it to a private party for his own use, and so the defendants have never had any right or occupy or to retain the said land under leasehold, or in any other way, their occupation of the parcel being furthermore illegal; and therefore prayed that judgment be rendered declaring that possession of the sad land lies with the plaintiff and ordering the defendants to vacate the land and deliver possession thereof to said plaintiff, with the costs against the defendants.

The demurrer filed to the foregoing complaint having been overruled, with exception on the part of the defendants, in their answer of April 10, 1912, they admitted some of the allegations contained in the complaint but denied that the parcel of land which they occupy and to which the complaint refers forms and integral part of Plaza Soledad, or that the lease secured by them from the municipality of Cavite was null and void and ultra vires, stating if they refused to vacate said land it was because they had acquired the right of possession thereof. As a special defense they alleged that, according to the lease, they could only be ordered to vacate the land leased when the plaintiff municipality might need it for decoration or other public use, which does not apply in the present case; and in a cross-complaint they alleged that on the land which is the subject matter of the complaint the defendants have erected a house of strong materials, assessed at P3,000, which was constructed under a license secured from the plaintiff municipality; that if they should be ordered to vacate the said land they would suffer damages to the extent of P3,000, wherefore they prayed that they be absolved from the complaint, or in the contrary case that the plaintiff be sentenced to indemnify them in the sum of P3,000 as damages, and to pay the costs.

After hearing of the case, wherein both parties submitted parol and documentary evidence, the court rendered the judgment that he been mentioned, whereto counsel for the municipality excepted and in writing asked for a reopening of the case and the holding of a new trial. This motion was denied, with exception on the part of the appellant, and the forwarded to the clerk of this court.

It is duly proven in the record that, upon presentation of an application by Hilaria Rojas, he municipal council of Cavite by resolution No. 10, dated July 3, 107, Exhibit C, leased to the said Rojas some 70 or 80 square meters of Plaza Soledad, on condition that she pay rent quarterly in advance according to the schedule fixed in Ordinance No. 43, land within sixty days subsequent to notification to that effect. The record shows (receipts, Exhibit 1) that she has paid the land tax on the house erected on the lot.

The boundary line between the properties of the municipality of Cavite and the naval reservation, as fixed in Act No. 1039 of the Philippine Commission, appears in the plan prepared by a naval engineer and submitted as evidence by the plaintiff, Exhibit C of civil case No. 274 of the Cavite court and registered in this court as No. 9071. According to said plan, defendant's house is erected on a plat of ground that forms part of the promenade called Plaza Soledad, and this was also so proven by the testimony of the plaintiff's witnesses.

By section 3 of the said Act No. 1039, passed January 12, 1904, the Philippine Commission granted to the municipality of Cavite all the land included in the tract called Plaza Soledad. In the case of Nicolas vs. Jose (6 Phil. Rep., 589), wherein the municipality of Cavite, represented by its president Catalino Nicolas, sought inscription in its name of the land comprised in the said Palza Soledad, with objection on the part of Maria Jose et al. who is sought that inscription be decreed in their name of the parcels of land in this plaza occupied by them, this court decided that neither the municipality nor the objectors were entitled to inscription, for with respect to the objectors said plaza belonged to the municipality of Cavite and with respect to the latter the said Plaza Soledad was not transferable property of that municipality to be inscribed in its name, because he intention of Act No. 1039 was that the said plaza and other places therein enumerated should be kept open for public transit;

herefore there can be no doubt that the defendant has no right to continue to occupy the land of the municipality leased by her, for it is an integral portion of Plaza Soledad, which if for public use and is reserved for the common benefit.

According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces."

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, articles 1271, prescribes that everything which is not outside he commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 195, which says: "Communal things that cannot be soud because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc."

Therefore, it must be concluded that the contract, Exhibit C, whereby he municipality of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and of no force or effect, because it is contrary to the law and the thing leased cannot be the object of a contract. On the hyphotesis that the said lease is null and void in accordance with the provisions of article 1303 of the Civil Code, the defendant must restore and deliver possession of the land described in the complaint to the municipality of Cavite, which in its turn must restore to the said defendant all the sums it may have received from her in the nature of rentals just as soon as she restores the land improperly leased. For the same reasons as have been set forth, and as said contract is null and void in its origin, it can produce no effect and consequently the defendant is not entitled to claim that the plaintiff municipality indemnity her for the damages she may suffer by the removal of her house from the said land.

For all the foregoing reasons we must reverse the judgment appealed from and declare, as we do declare, that the land occupied by Hilaria Rojas forms part of the public plaza called Soledad, and as the lease of said parcel of land is null and void, we order the defendant to vacate it and release the land in question within thirty days, leaving it cleared as it was before hr occupation. There is no ground for the indemnity sought in the nature of damages, but the municipality must in its turn to the defendant the rentals collected; without finding as to the costs. So ordered.

Arellano, C.J., Johnson and Araullo, JJ., concur. Moreland, J., concurs in the result.

Commonwealth vs Meneses 38 OG 123, p.2389



G.R. No. L-36610 June 18, 1976REPUBLIC OF THE PHILIPPINES and DIRECTOR OF LANDS, petitioners, vs.HON. AMADO B. REYES, as Judge of the Court of First Instance of Bataan, Branch II, and ELISEO PALATINO, respondents. Solicitor General Estelito P. Mendoza, Assistant Solicitor General Bernardo P. Pardo and Solicitor Leonardo I. Cruz for petitioners. Filoteo T. Banzon for respondents. ESGUERRA, J.:This is an appeal via certiorari seeking to reverse the final order (decision) of the Court of First Instance of Bataan, Branch II, approving the registration of a parcel of land applied for by the herein private respondent and the setting aside of the order denying petitioners' motion for reconsideration of said decision. Petitioners registered two assignments of error allegedly committed by the trial court, to wit: I THE LOWER COURT ERRED IN RULING THAT THE APPLICANT POSSESSED AN IMPERFECT AND INCOMPLETE TITLE THAT IS REGISTERABLE; II THE LOWER COURT ERRED IN NOT GRANTING THE OPPOSITOR GOVERNMENT THE OPPORTUNITY TO PROVE THAT THE LAND APPLIED FOR WAS INALIENABLE. 1 Arguing on these alleged errors, petitioners, in the first error averred that "By the decision of the Cadastral Court rendered before the last world war, Lot 622 of the Mariveles Cadastre was declared public land ... Such being the case, the lower Court is without jurisdiction over the subject matter of the application for voluntary registration under Act 496 filed by respondent Eliseo Palatino. The land subject thereof having been subjected to compulsory registration proceedings under the

Cadastral Act and declared public land per decision of the Cadastral Court, the same land can no longer be the subject of registration by voluntary proceedings under Act 496 ... The ruling (of the court below) is plainly erroneous. It ignores the conclusiveness of said judgment constituting res judicata. The previous cadastral proceeding was in rem, binding on the whole world." 2 As to the second error, petitioners argued: "... the lower court ruled that 'not the whole of Mariveles was declared a U.S. Military Reservation and there is no evidence to show that the area in question, which is part of Lot 626 of the cadastral survey of Mariveles, is within the U.S. Military Reservation." Precisely, the lower Court deprived the oppositor Government of the opportunity to adduce evidence on the point by denying its motion for reconsideration. True that the Solicitor General was given notice of the initial hearing set on December 21, 1972, but as the record was not forwarded to him pursuant to law (Sections 50, 51, CA 141, as amended), he could not file a timely opposition to the application on or before the initial date of hearing. 3 For his part, private respondent Eliseo Palatino answers that the aforecited assignment of errors alleged by the petitioners "... hinges upon the determination of the following issues ... :

1. Whether the failure on the part of the petitioners to file a notice of appeal with the lower court and to serve copy of the same to the respondent, as the original record, the petition, the motion to dismiss and the brief of the petitioners show, the judgment or order becomes final, and as a consequence, this Honorable Court has no jurisdiction to alter the same; 2. Whether this Honorable Court can consider petitioners' evidence in support of their assignment of errors, which evidence was not formally offered during the trial as the petitioners were declared in default and did not introduce any evidence and they continue to be in default since they did not appeal from the order declaring them in default; and, 3. Since the appeal raises questions of facts or even mixed questions of facts and law, whether under Section 2, Republic Act No. 5440, approved on September 9, 1968, amending Section 171, Judiciary Act, the petitioners must appeal to the Court of Appeals and not to the Supreme Court. 4

To understand these issues, We shall examine the facts of this case as they appear in the records, to wit: 1. On September 6, 1972, the herein private respondent Eliseo Palatino filed with the respondent court an application for registration of title under Act No. 496, the Land Registration Law, of a parcel of land situated in Bo. Cabcaben, Municipality of Mariveles, Bataan Province, containing an area of 22,744 sq. meters, more or less; 5 2. On October 20, 1972, notice of initial hearing was duly issued by the Commissioner of Land Registration; 6 3. On December 21, 1972, respondent trial court issued an order of general default against all persons, including herein petitioner the Director of Lands, for the failure of anyone, including the said Director of Lands or his representative, to appear and oppose the application; 7 4. Notice of this order of general default was received by petitioners on January 17, 1973; 8 5. On January 5, 1973, respondent court issued its order (decision) granting the application for registration, the dispositive portion of which reads as follows:

WHEREFORE, finding that the applicant is entitled to the registration of this parcel of land known as Lot No. 622-portion of the Mariveles Cadastre, the Court hereby adjudicates said parcel of land subject matter of this application described on plan Sgs-4377-D and its technical description in favor of Eliseo Palatino, of legal age, Filipino, married to Beinvenida M. Palatino and a resident of 13 San Vicente Street, San Francisco del Monte, Quezon City. Once the decision becomes final, let corresponding decree of registration issue.

xxx xxx xxx 9 6. Notice of the order (decision) was received by herein petitioners on January 17, 1973; 10 7. On February 14, 1973, petitioners filed with the trial court a motion to life order of general default and for reconsideration of the order (decision) on the ground that ... contrary to the specific provisions of Sections 50 and 51 of C.A. No. 141 the original record of the case was not forwarded to the Office of the Solicitor General, which thus prevented him from investigating all the facts alleged in the application or otherwise brought to his attention ... and that the order (decision) adjudicating the lot applied for by the applicant, respondent Palatino, is without basis in fact because the applicant could not have possessed the land applied for at least thirty years immediately preceding the application for the reason that the land was originally part of the United States Military Reservation reserved by the then Governor General under Proclamation No. 10 dated February 16, 1925 and it was only on June 10, 1967 that the President of the Philippines by Proclamation No. 210-B revoked Proclamation No. 10 and declared such portion of the area therein embraced including the land applied for, as are classified as alienable and disposable, opened for disposition under the provisions of the Public Land Act." 11 8. In an order dated March 26, 1973, the trial court denied the petitioners' motion to lift the order of general default and for reconsideration of the order (decision) on the ground that the same was without merit; 12 9. On April 5, 1973, the present appeal by certiorari was filed with this Court. Of the points and/or issues raised by both parties herein those registered by the respondents appear to be in need of Our

prior attention and resolution because they involve jurisdictional questions. They are: a) The appeal was filed outside the reglementary 30-day period from receipt of the order or decision; b) The appeal was filed direct to the Supreme Court without riling a notice of appeal with the trial court; c) Respondent had not been served copy of the appeal. 13

This Court had reviewed the records of this case and it is convinced that certain essential requisites of procedural law were not complied with by the herein petitioners. There was a failure to perfect an appeal and consequently this failure had the effect of rendering final and executory the judgment or final order of the trial court. This fact certainly deprives the appellate court, this Court, of jurisdiction to entertain the appeal. In view of the consistent stand of this Tribunal that the perfection of an appeal in accordance with law is the only legal basis for an appellate court to acquire jurisdiction and enter the appeal, this Court finds that the only issue to be resolved in this case, relegating all other questions raised by both parties herein to the background, is the issue of whether or not an appeal had been perfected on time by the herein petitioners. This is a jurisdictional question. Since the rules in ordinary civil actions and those applied in land registration proceedings are the same, 14 Section 3 of Rule 41 of the new Rules of Court, in relation with Section 17 of the same Rule 41, appear to be pertinent to the matter at hand. Said Section 3 reads:

Section 3. How appeal is taken. — Appeal may be taken by serving upon the adverse party and filing with the trial court within thirty (30) days from notice of order or judgment, a notice of appeal, an appeal bond, and a record on appeal ...

On the other hand, Section 17 of the aforementioned Rule, dealing with appeal in certiorari, provides: Section 17. Appeal in certiorari, prohibition, mandamus, quo warranto, and employers liability cases. — In appeals in certiorari, prohibition, mandamus, quo warranto, workmen's compensation and employers' liability cases, the original record of th case shall be transmitted to the appellate court in lieu of the record on appeal. The clerk of the trial court shall observe the provisions of Section 11 of this rule as far as practicable.

Section 17 of Rule 41 has not substantially changed the requirements of Section 3 of the same Rule in matters of appeals. The reglementary period of 30 days from notice of the order or judgment for perfecting an appeal and the filing of the notice of appeal with the trial court, two essential and jurisdictional requisites enjoined by the latter Section, have not been dispensed with even in Section 17 of said Rule. The records fail to show that the herein petitioners have complied with these requisites for perfecting an appeal. As had repeatedly been declared by this Court, perfection of an appeal in the manner and within the period laid down by law is not only mandatory but jurisdictional. Failure to perfect an appeal as legally required renders final and executory the judgment of the court below, and deprives the appellate court of jurisdiction to entertain the appeal. 15 Although it is true that the herein petitioners have filed a motion on February 14, 1973, to lift the order of general default and for reconsideration of the order (decision) of the trial court, and, applying this Court's rule that where a motion for reconsideration is filed, the period for appeal should be deemed suspended, 16 still by actual reckoning of time, it will be seen that the period for filing and perfecting an appeal had been past overdue. Commencing on January 17, 1973, the day petitioners had notice of the final order (decision) of the trial court to the day the running of the period for appeal was suspended by the filing of the motion for reconsideration 17 on February 14, 1973 and started running once again on April 3, 1973, the day the petitioners received the order denying their motion for reconsideration, 18 up to May 2, 1973, when the Deputy Clerk of the Court of First Instance of Bataan, Branch II certified that as of said day petitioners have not filed notice of appeal or done any other act tending to show their intention to appeal, 19 is a stretch of time far beyond the 30-day period allowed by law for perfecting an appeal. Petitioners herein have procrastinated too long on their rights and on the duties imposed on them that this Court is now prevented from extending to them the relief they are now seeking. As We have observed in a similar case, 20 it is truly unfortunate that through inexcusable neglect and laches, the Government lost its case, as it is once again losing this case now for the same avoidable cause. Section 13 of the aforecited Rule 41 of the Rules of Court is crystal clear in its language and tenor: Where the notice of appeal, appeal bond or record on appeal is not filed within the period so prescribed, the appeal shall be dismissed. For all legal purposes, the State in this case has already lost its cause. As clearly and unambiguously declared by this Court in the past, the judgment rendered in a land registration case becomes final upon the expiration of 30 days to be counted from the date on which the interested party has received notice of the decision. 21 The decision or final order granting the registration of the parcel of land applied for by herein private respondent Eliseo Palatino, having become final and executory, there now remains only the issuance of the decree and the certificate of title over the property. Thus, this Court declares, following its time-honored dictum: After a decision has become final, the prevailing party becomes entitled as a matter of right to its execution; 22 that it becomes merely the ministerial duty of the court to issue the writ of execution. 23 Despite, however, this harsh stricture of our law which had, in many instances, worked against the State and had caused the loss of portions of the national patrimony to those who may not in equity be entitled to a grant thereof, the State is not without remedy in recovering or seeking the reversion of inalienable public lands unduly ordered registered. This is based on the premise that our Torrens system of land registration is a system for the registration of title to land only.

It was not established as a means for the acquisition of title to private land, much less title to lands of the public domain. It is intended merely to confirm and register the title which one may already have over the land. Where the applicant possesses no title or ownership over the parcel of land, he cannot acquire one under the Torrens System of registration. In such action for reversion, petitioners may perhaps be permitted to raise the question belatedly sought to be raised herein that the private respondent was not possessed of registerable title, on the strength of their allegation that Lot No. 622 of the Mariveles Cadastre, alleged to be the same lot finally awarded by the lower court to the herein respondent, is part of the Mariveles Military Reservation established by then Governor General Leonard Wood under Proclamation No. 10 issued in 1925 and that it was only on June 10, 1967 that this Military Reservation area had been declared as disposable and alienable land of the public domain by Presidential Proclamation No. 210-B. Should petitioners duly establish by competent evidence these allegations, they may then raise the crucial question whether the private respondent and his predecessors-in-interest may be deemed to have validly and legally commenced occupation of the land and physically occupied the same en concepto de dueño for thirty years or more to entitle them to registration under section 48(b) of the Public Land Act a question which we cannot resolve now in view of our finding that we are without jurisdiction to entertain the appeal since the decision or final order granting registrations has long become final and executory besides the fact that petitioners' evidence has not been duly presented and admitted. Such questions as may be raised by the petitioners in a separate case of reversion are of course understood to be subject to such counter-evidence and defenses as the private respondent may properly put up including res judicata where applicable. WHEREFORE, the petition for certiorari to review the decision or order of the Court of First Instance of Bataan, and seeking to nullify all proceedings had in connection with the application for registration of respondent Eliseo Palatino; to make the preliminary injunction granted earlier by this Court permanent, and/or to grant new trial to the herein petitioners, is hereby denied. This is without prejudice, however, to whatever separate action petitioners may take in the proper court for the annulment of the decision and/or reversion of the land involved to the public domain and the proper defenses thereto in turn of the private respondent as indicated in the Court's opinion. This is further without prejudice to the Solicitor General's institution of appropriate proceedings against those whose inexcusable neglect has prejudiced the State and for indemnification of any consequent loss or damages incurred by the State. SO ORDERED.



G.R. No. L-37682 March 29, 1974REPUBLIC OF THE PHILIPPINES, Represented by the DIRECTOR OF LANDS, petitioner, vs.HON. PEDRO SAMSON ANIMAS, in his capacity as Judge of CFI South Cotabato, Branch I, General Santos City, ISAGANI DU TIMBOL and the REGISTER OF DEEDS OF GENERAL SANTOS CITY, respondent.Office of the Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M. Kapunan and Solicitor Patricio M. Patajo for petitioner.Quitain Law Office for private respondent. ESGUERRA, J.:pPetition to review the order of the Court of First Instance of South Cotabato, Branch I, General Santos City, dated June 22, 1973, dismissing the complaint in its Civil Case No. 1253, entitled "Republic of the Philippines, Plaintiff, vs. Isagani Du Timbol and the Register of Deeds of General Santos City, Defendants", instituted by the plaintiff to declare null and void Free Patent No. V-466102 and Original Certificate of Title (O.C.T.) No. P-2508 based thereon issued in the name of defendant Isagani Du Timbol; to order the aforesaid defendant to surrender the owner's duplicate of O.C.T. No. P-2508 and the defendant Register of Deeds to cancel the same; to decree the reversion of the land in question to the mass of public domain, and granting such further relief as may be just and equitable in the premises.The land covered by the free patent and title in question was originally applied for by Precila Soria, who on February 23, 1966, transferred her rights to the land and its improvements to defendant Isagani Du Timbol who filed his application therefor on February 3, 1969, as a transferee from Precila Soria.On December 12, 1969, free Patent No. V-466102 was issued by the President of the Philippines for the land in question, and on July 20, 1970, after transmittal of the patent to the Register of Deeds of General Santos City, Original Certificate of Title (O.C.T.) No. P-2508 was issued in the name of defendant Isagani Du Timbol.On August 5, 1971, the Republic of the Philippines, at the instance of the Bureau of Forestry, filed a complaint in the Court of First Instance of Cotabato, Branch I, General Santos City (Civil Case No. 1253), to declare free patent No. V-466102 and Original Certificate of Title No. P-2508 in the name of defendant Isagani Du Timbol null and void ab initio and to order the

reversion of the land in question to the mass of public domain. The action is based on the ground that the land covered thereby is a forest or timber land which is not disposable under the Public Land Act; that in a reclassification of the public lands in the vicinity where the land in question is situated made by the Bureau of Forestry on March 7, 1958, the said land was plotted on Bureau of Forestry map L.C. 700 to be inside the area which was reverted to the category of public forest, whereas the application for free patent by Isagani Du Timbol was filed on June 3, 1969, or more than eleven years thereafter; that the said patent and title were obtained fraudulently as private respondent Isagani Du Timbol never occupied and cultivated the land applied for.Invoking the case of Ramirez vs. Court of Appeals (G.R. No. L-28591, 30 SCRA 207-301), holding that a certificate of title fraudulently secured is not null and void ab initio, unless the fraud consisted in misrepresenting that the land covered by the application is part of the public domain when it is not, the respondent court dismissed the complaint on the ground that Certificate of Title based on the patent had became indefeasible in view of the lapse of the one-year period prescribed under Section 38 of the Land Registration Act for review of a decree of title on the ground of fraud. From this order of June 22, 1973, dismissing the complaint, plaintiff Republic of the Philippines has appealed to this Court for review.After careful deliberation, this Court grants the petition on the ground that the area covered by the patent and title is not disposable public land, it being a part of the forest zone and, hence the patent and title thereto are null and void.The defense of indefeasibility of a certificate of title issued pursuant to a free patent does not lie against the state in an action for reversion of the land covered thereby when such land is a part of a public forest or of a forest reservation. As a general rule, timber or forest lands are not alienable or disposable under either the Constitution of 1935 or the Constitution of 1973. Although the Director of Lands has jurisdiction over public lands classified as agricultural under the constitution, or alienable or disposable under the Public Land Act, and is charged with the administration of all laws relative thereto, mineral and timber lands are beyond his jurisdiction. It is the Bureau of Forestry that has jurisdiction and authority over the demarcation, protection, management, reproduction, occupancy and use of all public forests and forest reservations and over the granting of licenses for the taking of products therefrom, including stone and earth (Section 1816 of the Revised Administrative Code). That the area in question is a forest or timber land is clearly established by the certification made by the Bureau of Forest Development that it is within the portion of the area which was reverted to the category of forest land, approved by the President on March 7, 1958. When the defendant Isagani Du Timbol filed his application for free patent over the land in question on June 3, 1969, the area in question was not a disposable or alienable public land but a public forest. Titles issued to private parties by the Bureau of Lands when the land covered thereby is not disposable public land but forest land are void ab initio. In Gatchalian vs. Pavilen, et al., L-17619, Oct. 31, 1962, 6 SCRA p. 508, 512, this Court said:

And if it be true that the Bureau of Lands had no jurisdiction to issue a patent because the land involved was still inalienable forest land when granted, then it may be plausibly contended that the patent title would be ab initio void, subject to attack at any time by any party adversely affected. (Gatchalian vs. Pavilen, et al., L-17619, Oct. 31, 1962, supra, citing Civil Code Arts. 1409 and 1421; Vaño vs. Insular Gov't., 41 Phil. 161; Aderable vs. Director of Forestry, L-13663, March 25, 1960).

A patent is void at law if the officer who issued the patent had no authority to do so (Knight vs. Land Ass., 142 U.S. 161, 12 Sup. Ct., 258, 35L ED. 974; emphasis supplied). If a person obtains a title under the Public Land Act which includes, by mistake or oversight, lands which cannot be registered under the Torrens System, or when the Director of Lands did not have jurisdiction over the same because it is a public forest, the grantee does not, by virtue of said certificate of title alone, become the owner of the land illegally included. (See Ledesma vs. Municipality of Iloilo, 49 Phil. 769)The case of Ramirez vs. Court of Appeals, G. R. No. L-28591, Oct. 31, 1969, 30 SCRA 297, relied upon by respondent Court in dismissing this case, is not controlling. In that case no forest land was involved but agricultural public land which was first covered by a patent issued to one party and later registered under the Torrens System by the other party. The litigation was between private parties where the party who registered it under Act No. 496 sought the nullity of the title of the patentee under the Public Land Act. In the case at bar the party seeking the nullity of the title and reversion of the land is the state itself which is specifically authorized under Section 101 of the Public Land Act to initiate such proceedings as an attribute of sovereignty, a remedy not available to a private individual.The complaint alleges in its paragraph 8 that applicant Isagani Du Timbol was never in possession of the property prior to his filing the application, contrary to the provisions of law that the applicant must have been in possession or cultivation thereof for at least 30 years; that the applicant, after diligent search by the Acting Chief of the Survey-Party, Francisco R. Alcones, in South Cotabato, could not be contacted because he is a resident of Davao City; that there are no existing signs of improvements found in the area in question as it is not under cultivation but covered with grasses, bushes and small trees; that it is being used as ranch for grazing cows by the heirs of Hermogenes Chilsot; that no monuments were placed on the area surveyed which goes to show that there was no actual survey thereof; that the property in question is inside the ranch of the heirs of Hermogenes Chilsot under Pasture Lease Agreement No. 1244 and, therefore, inside the forest zone; and that said ranch has a fence around it to show that other persons could not enter and cultivate the same, and that the signature of then Acting District Land Officer Elias de Castro of South Cotabato has been forged to facilitate the issuance of patent in favor of Isagani Du Timbol.

The above alleged circumstances are indicative of fraud in the filing of the application and obtaining title to the land, and if proven would override respondent Judge's order dismissing the case without hearing. The misrepresentations of the applicant that he had been occupying and cultivating the land and residing thereon are sufficient grounds to nullify the grant of the patent and title under Section 91 of the Public Land Law which provides as follows:

That statements made in the application shall be considered as essential conditions or parts of any concession, title or permit issued on the basis of such application, and any false statement thereon or omission of facts, changing, or modifying the consideration of the facts set forth in such statement, and any subsequent modification, alteration, or change of the material facts set forth in the application shall ipso facto produce the cancellation of the concession, title or permit granted. ...

A certificate of title that is void may be ordered cancelled. A title will be considered void if it is procured through fraud, as when a person applies for registration of the land under his name although the property belongs to another. In the case of disposable public lands, failure on the part of the grantee to comply with the conditions imposed by law is a ground for holding such title void (Director of Lands vs. Court of Appeals, et al., G.R. No. L-17696, May 19, 1966, 17 SCRA, 71, 79-80; emphasis supplied). The lapse of the one year period within which a decree of title may be reopened for fraud would not prevent the cancellation thereof, for to hold that a title may become indefeasible by registration, even if such title had been secured through fraud or in violation of the law, would be the height of absurdity. Registration should not be a shield of fraud in securing title. (J. M. Tuason & Co., Inc. vs. Macalindog, L-15398, December 29, 1962, 6 SCRA 938, page 38).Considering that it is the state is seeking the cancellation of the title of respondent Isagani Du Timbol, said title has not become indefeasible for prescription cannot be invoked against the state. A title founded on fraud may be cancelled, notwithstanding the lapse of one year from the issuance thereof, through a petition filed in court by the Solicitor General, (Sumail vs. Court of First Instance of Cotabato, 51 O.G. p. 2414 Phil. L-8278. 96 Phil. 946: Eugenio, et al., vs. Perdido, et al., G. R. No. L-7083, May 19, 1955; De los Santos vs. Roman Catholic Church of Midsayap G.R. No. L-6088, Feb. 24, 1954, 94 Phil. 405).Public land fraudulently included in patents or certificates of title may be recovered or reverted to the state in accordance with Section 101 of the Public Land Act (Director of Lands vs. Jugado et al., G.R. No. L-14707, May 23, 1961). Prescription does not lie against the state in such cases for the Statute of Limitations does not run against the state (Article 1108, paragraph 4 of the New Civil Code). The right of reversion or reconveyance to the state is not barred prescription (Republic of the Philippines vs. Ramona Ruiz, et al., G.R. No. L-23712, April 29, 1968, 23 SCRA 348. People vs. Ramos, G.R. No. L-15484, Jan. 31, 1963, 47 SCRA 12; Government of the Philippines vs. Monte de Piedad 35 Phil. 728; 751-753).Even granting that the title of private respondent Isagani Du Timbol can no longer be reopened under the Land Registration Act, the land covered thereby may be reconveyed to the state in an action for reconveyance under Section 101 of Commonwealth Act 141 (Public Land Act), for the remedy of reconveyance is adequately covered by the prayer of the complaint for the grant of such other relief as may be just and equitable in the premises.FOR ALL THE FOREGOING, the order of the respondent court, dated June 22, 1973, dismissing the complaint, and that of September 29, 1973, denying the motion for its reconsideration, both issued in Civil Case No. 1253 of the respondent court, are hereby annulled and set aside. The respondent court shall proceed to hear said Civil Case and render judgment thereon accordingly.Costs against respondent Isagani Du Timbol.Makalintal, C.J., Castro, Makasiar, Muñoz Palma, JJ., concur. Separate Opinions TEEHANKEE, J., concurring:I concur in the judgment setting aside respondent court's orders which erroneously dismissed petitioner's complaint on the ground of purported indefeasibility of private respondent's torrens certificate of title under section 38 of Act 496 and ordering the remand of the case for trial and disposition on the merits. Petitioner's complaint is not barred by the cited Act since it duly alleges that respondent's torrens title was issued pursuant to a free patent covering forest or timber land which is not disposable under the Public Land Act and if these factual allegations are duly established at the trial, petitioner would be entitled to a judgment that the patent and title of respondent, being part of the forest zone, are null and void.


Manila

EN BANC

G.R. No. L-9865 December 24, 1915

VERGO D. TUFEXIS, plaintiff-appellant, vs.FRANCISCO OLAGUERA and THE MUNICIPAL COUNCIL OF GUINOBATAN, represented by its president, Agapito Paulate, defendants-appellees.Rafael de la Sierra for appellant.Attorney-General Avanceña for appellee Municipal Council of Guinobatan.No appearance for the other appellee. TORRES, J.:

Counsel for plaintiff, in his written petition of May 13, 1913, prayed the Court of First Instance of Albay to declare that his client was entitled to the possession and use of the land referred to in the complaint in conformity with the terms of the Government concession (Exhibit A), of which he claimed to be the sole and lawful owner; that the defendants be ordered to remove from the said land all the stores, sheds, billiard tables, and other obstructions thereon, so that plaintiff might reconstruct the public market building on the said land in accordance with the provisions of the said concession, and that they be ordered to pay jointly and severally to the plaintiff, as damages, the sum of P250 per month from March 1, 1912, until the date on which the land be vacated, and to pay the legal costs and expenses of the suit.

After the complaint had been answered by counsel for the defendant Francisco Olaguera, who prayed that his client be absolved therefrom, with the costs against the plaintiff, the provincial fiscal, in the name and representation of the municipality of Guinobatan, demurred on the ground that plaintiff lacked the personality to institute the action and further alleged that the complaint did not set forth sufficient facts to constitute a cause of action.1awphil.net

By an order of August 25, 1913, the court sustained the demurrer filed by the defendant municipality of Guinobatan, allowed plaintiff ten days in which to amend his complaint, and notified him that unless he did so within that period the action would be dismissed.

Counsel for plaintiff, by a writing of the 27th of the said month, set forth: That he objected to the above ruling as he believed it erroneous and contrary to law; that he did not desire to amend his complaint, wherefore, in accordance with the provisions of section 101 of the Code of Civil Procedure, the court should render such judgment in the case as the law might warrant, and his exception to the said ruling should be entered on the record. By an order of September 1, 1913, the court, overruling the motion made by the defendant Olaguera, dismissed the complaint filed by the plaintiff, Vergo D. Tufexis, against the municipal council of Guinobatan on the ground that plaintiff had not amended his complaint. Plaintiff's counsel, when notified of this ruling, excepted thereto and moved for a rehearing and a new trial. This motion was overruled,

whereupon the plaintiff excepted and filed the proper bill of exceptions.

In the complaint filed by counsel for Vergo D. Tufexis, it was alleged that on September 30, 1911, plaintiff acquired at a public sale held in execution of a judgment rendered against Ricardo Pardo y Pujol, a piece of property situated in the municipality of Guinobatan, consisting of a frame building of strong materials with a galvanized-iron roof, erected on a parcel of land belonging to that municipality and intended for a public market; that plaintiff also acquired at the sale all the right, interest, title, and participation in the said property that appertained or might appertain to Pardo y Pujol; that the said building was constructed by virtue of a concession granted by the former Spanish government to Ricardo Pardo y Cabañas, father of the judgment debtor, who, by a public instrument of July 31, 1912, renounced his right to redeem the said property and conveyed it to plaintiff, together with all his rights therein, the instrument of grant, Exhibit A, being attached to the complaint as a part thereof; that on January 2, 1912, the said building was totally destroyed by an accidental fire; that subsequent to the date just mentioned and for several months thereafter the municipal council of Guinobatan carried on negotiations with plaintiff for the purchase of his rights in the said concession; that these negotiations could not be brought to a conclusion because the municipal council had acted therein deceitfully, fraudulently, and in bad faith and for the sole purpose of beguiling, deceiving, and prejudicing plaintiff in order to prevent him from exercising his right to reconstruct the burned market building and utilize it in accordance with the terms of the said concession; that the defendant municipal council, without plaintiff's consent and in connivance with the other defendant, Francisco Olaguera, had authorized the latter unlawfully to take possession of all the land from March 1, 1912, in violation of plaintiff's rights; that the said Olaguera occupied the same with booths or stores for the sale of groceries and other merchandise, for billiard tables, and other analogous uses and derived unlawful gain from the revenues and rents produced by the said buildings; that plaintiff was entitled to the possession of the said land in accordance with the concession, which was in full force and effect and belonged to plaintiff; that plaintiff proposed to construct another public market building on the same land, but that the defendants had prevented him from using the land and reconstructing thereon the said public market building, and refused to recognize plaintiff's right and to vacate the land that had been occupied by the burned edifice.

The provincial fiscal alleged as a ground for the demurrer that in no part of the instrument of concession did it appear that the privilege granted to Ricardo Pardo y Cabañas had likewise been granted to his successors or assignees, and that therefore such rights and actions as might have appertained to the assignee, Pardo y Cabañas, could not be conveyed to nor could they be acquired by any other person; that it was alleged in the complaint that the building was completely destroyed by fire on January 2, 1912, and that if plaintiff's right to the possession of the land was conditioned by the existence thereon of the said market building, such right had terminated by the disappearance of the building, inasmuch as plaintiff's right of action for the possession of the land was a corollary of the existence or nonexistence of the market building, and upon the disappearance of the latter the eland had reverted to the control of its owner; that pursuant to the terms of the said concession, the land belonging to the municipality was granted for the purpose of constructing thereon a market, and as this market had disappeared plaintiff would need a new concession, if it could be obtained, in order to be entitled to the possession of the land and to construct a new building; that by plaintiff's acquiring the right, title and interest of Ricardo Pardo y Pujol in the land he could not be understood to have also acquired such right and interest in the building intended for a public market, for the purchase of the building refers only to the edifice itself and it never could be understood that plaintiff acquired any right in the concession, which was never sold to him, as the complaint contains no allegation whatever that he purchased or acquired such right; that a personal privilege like the said concession is only temporary and is extinguished at the death of the grantee, unless otherwise provided in the grant; and that, from the lack of an allegation in the complaint that plaintiff legally purchased or acquired the right in the said concession, it was evident that the complaint did not allege sufficient facts to constitute a cause of action and was fatally defective.

The question presented in the case at bar consists of whether a building of strong materials, erected by the said debtor's father, Ricardo Pardo y Cabañas, on land belonging to the municipality of Guinobatan and intended for a public market, by virtue of a concession granted on August 4, 1884, under the conditions therein imposed upon the grantee, could be attached and sold for the payment of a certain debt owed by Ricardo Pardo y Pujol to a third person who had obtained a final judgment.

In deciding this question it is indispensable to determine what rights were acquired by Pardo y Pujol's father by virtue of the said concession granted to him by the Spanish Government, in the building erected by him on a parcel of land belonging to the municipality of Guinobatan. The concession referred to contains, among other provisions, the following:itc-a1f

ARTICLE 1. There is hereby granted to Mr. Ricardo Pardo y Cabañas the parcel of land in the pueblo of Guinobatan, a prolongation of another parcel belonging to him, situated between the store and house of the Chinaman Valentin Garcia and that of Mr. Roco, following the line of Calle Real or Calzada de Albay and that of Calle del Carmen, up to and as far as the square that is to be laid out in the said pueblo.

ART. 2. On the said land the petitioner shall construct a public market building, with a galvanized-iron roof, in accordance with the plan submitted to this office on the 13th of last May and which was approved by his

Excellency the Governor-General in conformity with the changes recommended by the advisory board of the consulting board of public works; and these changes are those hereinafter specified.

ART. 3. The said Mr. Pardo is granted the right to enjoy the revenue derived from the floor space of the market for the period of forty years, since the revenue from such floor space appertains to the grantee of the said service. By floor space is meant the right to shelter or retail merchandise in the market belonging to the grantee.

ART. 4. On the expiration of the said period both the land aforementioned and the building thereon constructed shall be the property of the Government and the building shall be delivered to it in good condition.

ART. 5. It shall be obligatory for every vendor to sell his goods in the said market, which shall be the only one in the said pueblo.

ART. 7. The said authority shall put Mr. Pardo in possession of the land affected by this concession, and the proper proceedings in connection therewith shall be had in the presence of the chief engineer of public works of the said district and the headmen of the pueblo.

ART. 8. Mr. Pardo shall inform this office of the date of the commencement of the work of construction, and the work shall be inspected by the public works officials residing in Albay; the building when completed shall be examined and accepted by the chief engineer of the district of Nueva Caceres or by the deputy to whom the latter may delegate this duty: all with the knowledge of the office of the inspector of public works.

The land on which the building was erected and which is referred to in the foregoing articles, contained in the franchise granted by the Government of the former sovereignty, belongs to the municipality of Guinobatan. Although the building was constructed at the expense and with the money of the grantee, Ricardo Pardo y Cabañas, it is, nevertheless, the property of the state or of the said municipality, and was temporarily transferred to the grantee, Pardo y Cabañas, in order that he might enjoy the usufruct of its floor space for forty years, but on the termination of this period the said right of usufruct was to cease and the building was to belong finally and absolutely to the state or the municipality in representation thereof.

For these reasons, then, there is no question that the building and the land on which it was erected, since they did not belong to the grantee, Pardo y Cabañas, nor do they belong to his son and heir, Ricardo Pardo y Pujol, could not be attached or sold for the payment of a debt contracted by the latter.

The concession granted by the former Spanish Government is personal and transferable only by inheritance, and in no manner could it be conveyed as a special personal privilege to another and a third person unless were an hereditary successor of the grantee, Pardo y Cabañas, without knowledge and consent of the administrative authorities under whose control the special right of usufruct in the floor space of the said market building was enjoyed and exercised.

Even though it is unquestionable that the creditor has a right to collect the money due him, out of his debtor's property, yet when among such property is included the right of usufruct in a public-service building and this right is closely related to a service of a public character, the right that lies in behalf of the creditor for the collection of a debt from the person who enjoys the said special privilege of right of usufruct in the floor space of a building intended for a public market is not absolute and may be exercised only through the action of a court of justice with respect to the profits or revenues obtained under the special right of usufruct granted to the debtor.

Ricardo Pardo y Pujol, as the successor and heir of the grantee, Pardo y Cabañas, is bound to pay his debts and his property can be attached on petition of his creditors. However, his personal privilege of usufruct in the floor space of the public market building of Guinobatan cannot be attached like any ordinary right, because that would mean that a person who has contracted with the state or with the Governmental authorities to furnish a service of a public character would be substituted, for another person who took no part in the contract, and that the regular course of a public service would be disturbed by the more or less legal action of the creditors of a grantee, to the prejudice of the state and the public interests.

It is indeed true that the building, which for many years served as a public market in the pueblo of Guinobatan, was erected out of the private funds of the grantee, Pardo y Cabañas, and at first sight it seems natural that the latter, who paid the cost of the construction of the building, should be its owner. However, judging from the agreement between him and the Government authorities, he was granted the right to usufruct in the floor space of the said building in order that, during the period of forty years, he might reimburse himself for and collect the value of the building constructed by him; and it must be believed that Pardo y Cabañas, before executing the contract with the Government for the purpose of obtaining the right of usufruct granted to him and before accepting the contract, thought over its conditions deliberately and maturely and felt sure that he would profit thereby, that is, that he would reimburse himself for the value of the building he erected, and obtain interest on the investment and other advantages by enjoying the usufruct for the space of forty long years, as in fact even after his death this right continued to be enjoyed by his son, Ricardo Pardo y Pujol. Therefore, the said privilege conferred on the grantee by the Spanish Government on August 4, 1884, was neither onerous nor prejudicial to him or his heir, but on the contrary was beneficial to them.

So, if neither the land nor the building in question belongs to Pardo y Pujol, it is evident that they could not be attached or sold at public auction to satisfy his debt and, consequently, the attachment and sale of the said Government property executed on petition of the creditor of the said Pardo y Pujol are notoriously illegal, null and void, and the acquisition of the property by plaintiff confers upon him no right whatever based on the said concession.

In the decision in the case of Lopez vs. Alvarez (9 Phil. Rep., 28) the principle was asserted that:

In attachments of all kinds it is an essential condition that the thing which is attached shall be the property of the debtor, and from no provision of the Mortgage Law can any conclusion be drawn which shall be contrary to this principle.

This same principle was set up in the decision of the case of Alvaran vs. Marquez (11 Phil. Rep., 263).

It having been demonstrated by the foregoing reasons that the building constructed on land of the municipality of Guinobatan for a public market could not be attached and sold as the result of a debt contracted by Ricardo Pardo y Pujol in favor of a third person, we shall now proceed to examine whether an attachment would lie of the special right, granted by the former Spanish Government to the said debtor's father, of usufruct in the floor space of the said market and right to collect the revenues therefrom for the period of forty years, counted from the date of the granting of the said right.

Without the consent of the proper administrative official, a grantee, or one charged with conducting a public service such as a market of the municipality of Guinobatan, cannot be permitted to be substituted by any other person, though this latter be a creditor of the usufructuary grantee. Hence, we hold that the attachment of the right of usufruct in the said building and of collecting the revenue obtained from the floor space of the said public market of Guinobatan, was illegal, because, were this right susceptible of attachment, a third person, as a creditor or a purchaser, might exercise such right, notwithstanding his personal status, instead of the grantee contractor. This theory does not bar the creditor from collecting the money owed him by the grantee, inasmuch as he has the right to petition the courts to allow him through proper legal proceedings to collect his money out of the revenues produced by the usufruct conferred by the Government on the grantee of the said service.

The concession obtained by Ricardo Pardo y Pujol's father on August 4, 1884, is a true sovereignty and the grantee, Pardo y Cabañas, and therefore the stipulations made by and between the contracting parties, the obligation to which that contract may have given rise, and the consequences that may have been entailed by the contract, all come within the scope of the civil law which guarantees the rights of the contracting parties.

Although in our opinion the said concession is somewhat of the nature of a franchise, yet we do not think that the provisions of sections 56 to 61 of Act No. 1459 are applicable to the case at bar, for these sections refer to a franchise granted to a corporation, while the concession given by the former Spanish Government was granted to a private party and not to a corporation or judicial entity. Therefore, though under the said Act a franchise is subject to attachment, the Act contains no express provision whatever which authorizes the attachment and sale of a right or franchise especially granted to a private party under the conditions in which the concession in question was granted. The substitution of a third person instead of the one who obtained such an administrative concession must be explicitly authorized by the proper official of the administrative branch of the Government in order that the substitute may exercise the right so granted.

In the case of Ricardo y Pujol, the grantee of the usufruct on the floor space in the said market building in Guinobatan, his creditor, in order to obtain the payment of his credit, could have applied to the courts for an attachment of the revenues or proceeds collected by his said debtor by virtue of the said concession; but it was in no wise proper to attach and sell the right granted by the public administration to operate and enjoy the usufruct of the floor space of the said public market.

Although there is no similarity between the management of a public market and that of a railroad company, yet for the reason that the operation of the one as well as the other is of public interest, when a creditor of such a company sues to collect a debt it would be improper to attach the stationary equipment and rolling stock of the railroad — only the gross receipts of the business over and above the amount required for its operation could be touched. This same legal principle holds in the case where the grantee of a market is a debtor and his property is attached on petition of his creditor. The receipts of the market may be attached, but not the right to operate and conduct the service, which is of a public character.

In fact, article 1448 of the Ley de Enjuiciamiento Civil, cited in this decision, not as a law now in force, but for the purpose of setting out a principle of law, prohibits the levy of attachments on railroads opened to public service, and on the stations, stores, shops, lands, works and buildings necessary for their operation, or on the locomotives, rails and other material intended for the operation of the line. When execution is levied on such railroad companies, the proceedings are governed by the provisions of the Law of November 12, 1869, extended by a royal order of August 3, 1886, to the overseas provinces. This law prescribes among other things that attachments may be levied and executed only on the gross receipts remaining after the necessary operating expenses have been deducted.

In harmony with this legal provision, the supreme court of the State of Nebraska, in which State there is no law whatever that authorizes the attachment and sale of a bridge belonging to a corporation, in the case of the Overton Bridge co. vs. Means (33 Neb., 857) laid down the principle that such a bridge and the rights of the corporation therein could not be sold to

satisfy a judgment against the corporation for the reason that:

The property of corporations which are closed as public agencies, such as railroad and bridge companies, which is essential to the exercise of their corporate franchise, and the discharge of the duties they have assumed toward the general public, cannot, without statutory authority, be sold to satisfy a common law judgment.

It cites decisions of several states, and also, in the decision referred to, cited Morawetz on Private Corporations, section 1125, and held that after attachment of the property not necessary to enable the corporation to perform its duties to the public, the only remedy remaining to a judgment creditor was to obtain the appointment of a receiver and a sequestration of the company's earnings.

The supreme court of Alabama, in deciding a similar case (Gardner vs. Mobile & Northwestern R.R. Co., 102 Ala., 635, 645), affirmed the same principle and said:

The only remedy of a judgment creditor is to obtain the appointment of a receiver and the sequestration of its income or earnings.

It is to be noted that section 56 of Act No. 1459, which permits the sale under execution of a corporation's franchise, is in no wise applicable to the case at bar, for the reason that, since this Act was promulgated on March 1, 1906, it could not and cannot affect the laws, decrees, and orders of the Spanish government in conformity with which the administrative concession, Exhibit A, was granted to Pardo y Cabañas.

The operation of a railroad is of public interest, and concerns both the public and the state, even though the superintendent and management thereof be conducted by a private company. Therefore, the property of a railroad, either its rolling stock or permanent equipment, is not subject to attachment and sale, and the rights of the creditors of the operating company may be exercised for the collection of their credit only of the gross receipts after the operation of the railroad is insured from its own income.

This decision is based on the provisions of the aforecited law and the premise that the usufruct of the floor space of the public market of Guinobatan, granted to Ricardo Pardo y Pujol's father was not subject to attachment on account of its being of a public character, but still the latter's creditor could have applied for a writ of execution and laid an attachment on the proceeds obtained from the operation of the market, which proceeds or income could have been collected by a receiver and intervenor.

This, however, was not done, but on the creditor's petition the public market building, which was not his debtor's property, together with all the right, interest, title and participation which the latter had or might have had therein, was attached and sold; and as plaintiff was unable to acquire any right or title in such property illegally sold and illegally acquired by him at public auction or in the usufruct of the floor space of the building, it is unquestionable that he lacks the personality to claim possession of the land that belongs to the municipality or the enjoyment and exercise of the right conferred by the aforesaid administrative concession, which was and is inalienable on account of its being a personal right. For the same reason, plaintiff has no right to reconstruct the burned building on the land where it formerly stood.

The only right to which the creditor was entitled was to petition for the attachment of the income and proceeds obtained from the use of the floor space of the market; but he did not avail himself of this right, nor were the receipts therefrom attached, nor were they adjudicated either to the creditor or to the plaintiff Tufexis. Therefore, the order of dismissal appealed is in accordance with law and the merits of the case, and likewise the errors assigned thereto have been duly refuted by the reasons set forth herein.

For the foregoing considerations, we hereby affirm the said order of dismissal, with the costs against the appellant. So ordered.

Arellano, C.J., Moreland, and Araullo, JJ., concur.

Johnson, J., concurs in the result.


ManilaEN BANC

G.R. No. L-6098 August 12, 1911THE INSULAR GOVERNMENT, plaintiff-appellee, vs.ALDECOA AND COMPANY, defendant-appellant.Emilio Pineda for appellant.Attorney-General Villamor for appellee.TORRES, J.:On April 20, 1907, the Attorney-General filed a written complaint in the Court of First Instance of Surigao against the firm of Aldecoa & Co., alleging that the defendant, a mercantile copartnership company organized under the laws in force in these Islands and domiciled in this city of Manila with a branch office in Surigao, continues to operate as such mercantile copartnership company under the name of Aldecoa & Co.,; that the said defendant, knowing that it had no title or right whatever to two adjoining parcels of land, which belong to the domain of the Government of the United States and were placed under the administration and control of the Government of these Islands, has been occupying them illegally for the past seventeen years, more or less, having constructed on the land a wharf, located along the railroad, and built warehouses of light material for the storage of coal — all for its exclusive use and benefit; that of the said two parcels of land, the parcel B has an area of 11 centares, approximately, and the parcel A, 84 centares, more or less, and their situation, metes and bounds, together with other details thereunto pertaining, are set out in the judgment of the court; that these lands, situated in Bilang-bilang, in the pueblo of Surigao and the province of the same name, belonged to the late Spanish Government in the Philippines and are now the property of the Government of the United States and were placed under the control of the Insular Government, which, by virtue of the treaty of Paris, has succeeded the former in all its rights; that, since the year 1901, the defendant has been requested repeatedly by the Attorney-General, in representation of the Insular Government, to recognize the latter's right of dominion over the same and to deliver to it the said property, and that, by reason of such demands, Aldecoa & Co., on February 25, 1903, recognizing the Insular Government's ownership, agreed to return the land, but that later, after several delays, it concluded by persisting in its attempt illegally to continue occupying the said land and refused to return it to the Insular Government; wherefore the Attorney-General asked the court to enter judgment declaring the Insular Government to be the owner of the land claimed, and to order that the plaintiff be placed in possession of the same, together with the fruits collected by the defendants since it took such possession, and those awaiting collection, and to sentence the defendant to pay the costs.Counsel for the defendant, Aldecoa & Co., in liquidation, answering the preceding complaint, set forth that it denied each and all of the allegations of the complaint, with the exception of those which it expressly admitted in its answer; and that it admitted paragraph 2 of the complaint, that is, the fact of the defendant's being a mercantile copartnership company, organized under the laws in force in these Islands. As a special defense, it alleged that it held and possessed, as owner, and had full and absolute dominion over, the lands claimed by the plaintiff in paragraph 1 of the complaint. The defendant therefore prayed that judgment be rendered in its favor, by absolving it from the complaint, with the costs against the plaintiff, together with the other relief solicited.The provincial fiscal of Surigao presented a motion on November 3, 1908, for the purpose of amending the preceding complaint, with the permission of the court, by inserting, between paragraphs 4 and 5 of the complaint, a separate paragraph, as follows: "that Aldecoa and Company's possession of the lands here in question, was in fact interrupted during the years 1900, 1901, and 1902;" but, in view of the ruling of the court by an order of November 5, 1908, directing the plaintiff, within three days to specify the facts that constituted the alleged interruption of the defendant's possession of the lands in question, the provincial fiscal presented, on the 6th of the same month, a new written motion whereby be requested permission to amend the previous complaint by inserting between the said paragraphs 4 and 5 of the original complaint, a separate paragraph, as follows. "That the municipality of Surigao, in the year 1900, and through the mediation of Captain Kendrick, removed the posts and wire which enclosed the property here in question, the sole sign of possession that the defendant then had to the said lands." Inasmuch as no objection whatever was raised to the amendment requested, the court granted the same by an order of December 7, 1908.The case came up for hearing on the 1st of December of that year and, after the presentation of testimony by both parties, the documents exhibited being attached to the record, the court, on December 10, 1909, rendered judgment and found that the land in question was public land and belonged to the State, and ordered the defendant to return it to the plaintiff might

have the crops and the buildings on the land, upon the payment of an indemnity therefor, or might compel the defendant to pay him the value of the land, as provided by article 361 of the Civil Code. Counsel for the defendant excepted to this judgment, and by a written motion of the 4th of January asked for a rehearing of the case on the grounds that the said judgment was unwarranted by the evidence and was contrary to law. This motion was disallowed, exception thereto was taken by the appellant and, the required bill of exceptions being filed, in which was set out, at the request of the provincial fiscal, the latter's exception to the order issued by the judge on January 24, while in Cagayan, Province of Misamis, granting an extension of time for the presentation of the bill of exceptions, it was certified and transmitted to the clerk of this court.The demand of the representative of the Government is for the recovery of possession of two united parcels of land, belonging to the public use and domain, which are at present occupied by the defendant Aldecoa & Co. The latter claims to have the full and absolute ownership of the said land and to have held it as owner since 1889, by virtue of a verbal permit from the politico-military governor of Surigao.From the proceedings had and by the testimony of a large number of competent witnesses, one of whom was introduced by the defendant party itself, it was clearly proved that, in 1889, the land in litigation, as well as Bates Avenue, was, during the extraordinary high tides, usually covered by sea water that would extend to the other side of the said avenue, as far as the warehouse of Aldecoa & Co. that was erected there, and, at the ordinary low tides, as far as the wall built along the shore by the aforesaid firm and designated by the numbers 5, 6, and 7 in the plan, Exhibit A. This plan, according to the agreement between the parties, exactly represents the land in litigation.It was likewise proved that nearly all the land in question was low land and swampy in certain places, with aquatic bushes growing upon it; that it had been gradually raised by the action of the sea, which in its ebb and flow left sand and other sediment on the low ground; that the retaining wall erected to prevent the sea water from reaching the said warehouse, that is on the opposite side of Bates Avenue, contributed in a large measure toward raising the level of the land; and that, furthermore, between the years 1889 and 1890, there were two piers on the said land, one named Carloto, alongside of which the vessels used to lie that called at Surigao during their voyages.It is, then, incontrovertible that the land in question is of the public domain and belongs to the State, inasmuch as at the present time it is partly shore land and in part, was such formerly, and now is land formed by the action of the sea.Treating of the sea coasts and shores as property of the public use and domain, partida 3, title 28, law 3, says:

The things which belong in common to all the living creatures of this world, are; The air, rain water, the sea and its shores; for every living creature may use them, according to its needs, etc.

Law 4 of the same title and partida says, among other things:And by the seashore is understood all that space of ground covered by the waters of the sea, in their highest annual tides, whether in winter or summer.

The Law of Waters of August 3, 1866, extended to these Islands by the royal decree of the 8th of the same month and year and, together with the decree ordering its enforcement, issued by the Gobierno General on September 21, 1871, was published in the Official Gazette of the 24th of the same month, which law was not substituted nor repealed by that of June 13, 1879, promulgated in Spain and not extended to these Islands, provides, in article 1, that:The following are part of the national domain open to public use:xxx xxx xxx

2. The coast sea, that is, the maritime zone encircling the coasts, to the full width recognized by international law. . . .3. The shores. By the shore is understood that space alternately covered and uncovered by the movement of the tide. Its interior or terrestial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable, the shore begins on the land side at the line reached by the sea during ordinary storms or tempests.ART. 4. Lands added to the shores by accretions and alluvium deposits caused by the action of the sea, form part of the public domain. When they are no longer washed by the waters of the sea, and are not necessary for the purposes of public utility, or for the establishment of special industries, or for the coast-guard service, the Government shall declare them to be the property of the owners of the estates adjacent thereto and as increment thereof.ART. 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos, pr 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.ART. 17. The use of the shores also belongs to the public under the police supervision of the civil authorities; all persons may fish thereon, wash, bathe, embark and disembark on pleasure trips, spread and dry clothes and nets bathe cattle, remove sand, and collect stones, shells, plants, shellfish, and other products of the sea, and do other things of a like nature. these rights may be restricted by virtue of the regulations necessary for the coast defense or police supervision, or in the interest of public utility or decency.ART. 18. In no place on the coasts, shores, ports, or entrances of rivers, nor on the islands referred to in article 3, shall new works of any kind whatever be constructed, nor any building be erected, without proper permission, in accordance with the provisions of this law and with those of the law regarding ports.

On the supposition that Aldecoa & Co. commenced to occupy the land and shore herein concerned, prior to the enforcement

of the Civil Code in these Islands, it is unquestionable that the issue pending decision must be determined in accordance with the provisions of the said Law of Waters of August 3, 1866, inasmuch as the shores, as well as the lands united thereto by the accretions and alluvium deposits produced by the action of the sea, are of the public use and domain.Excluding the space occupied by Bates Avenue, that lies between the defendant's buildings and the shore and the lands added to the latter by the action of the sea in the sitio called Bilang-bilang, all this said land, together with the adjacent shore, belongs to the public domain and is intended for public uses. So that the defendant, in construction on the two aforementioned parcels of land a retaining wall, a pier or wharf, a railway, and warehouses for the storage of coal, for its exclusive use and benefit, did all this without due and competent authority and has been illegally occupying the land since 1901 by the representative of the Insular Government, Aldecoa & Co., by a letter of February 25, 1903, acknowledged that the land belonged to the Government and consented to vacate it, although it afterwards persisted in its claim that it was the owner of the land and refused to vacate and place it at the disposal of the Insular Government, whose representative, in view of the defendant's changed attitude in the matter, was forced to bring this action to recover its possession.Aldecoa & Co. endeavored to prove that the land, consisting of the two united parcels A and B, belonged to them in fee simple, on account of their having begun to occupy it through a verbal permit from the then politico-military governor of Surigao. Although the record does not show the nature of the permit obtained, yet it is inferred from the document Exhibit C I that the said permit was a verbal authorization to occupy the land on condition that the defendant should later on prepare title deeds thereto, and that this authorization was granted for the purpose of furnishing facilities to, and benefiting the merchants of Surigao, in view of the backward condition of things in those regions at the time. It is certain, however, that Aldecoa & Co. did not obtain or solicit permission from the Government to establish themselves there and erect thereon their buildings and works, nor did they endeavor to obtain any title of ownership to the said land, as one of their witnesses, Juan Y. Aldecoa, testified. Furthermore, in the said letter or document Exhibit C I, the attorney then representing the defendant prayed that in case of sale or total or partial lease thereof Aldecoa & Co. should be given preference to any other party, on account of the important improvements they had made on the land.It is true that, notwithstanding the fact that the lands which become an adjacent part of the shores through the accretions occasioned by the action of the sea, when they are no longer covered by such waters, or are not necessary for the purposes of public utility, for the establishment of special industries, or for the coast-guard service, may be declared by the Government to be the property of the owners of the estates adjacent thereto; but the defendant has not proven that it obtained for itself, in conformity with the provisions of article 4 of the said Law of Waters, such declaration of ownership, and competent authorization obtained from the Insular Government is indispensible in order that private person may construct works on the seashore and thereby secure lands for his profit and benefit, pursuant to article 5 of the same law, inasmuch as article 18 strictly prohibits the construction of any works or the erection of any building at any place on the coasts and shores, without proper authorization.Aside from the verbal permission alleged, but not duly proven, and leaving aside the fact that the same is not admissible in official and administrative proceedings, it has in no wise been proved that Aldecoa & Co. obtained from the Insular Government any authorization whatever to erect a retaining wall, to construct a pier and warehouses, and to lay a railway wall, to construct a pier and warehouses, and to lay a railway on the land in question, which belonged to the state and was destined to public uses, as the defendant must have very well known; nor could any right whatever be created in its favor, and to the prejudice of the State, by its having filled in, without the proper permission, the aforementioned land for the purpose of raising the level thereof.The Civil Code, which went into effect in these Islands on December 7, 1889, the twentieth day of its publication in the Gaceta de Manila of the 17th of November of the same year, confirms the provisions of the said Law of Waters, since, in its article 339, it prescribes that:

Property of public ownership is —1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and banks, shores, roadsteads, and that of a similar character.

Article 341 of the same code provides:Property of public ownership, when no longer devoted to general uses or to the requirement of the defense of the territory, shall become a part of the State property.

The shores and the lands reclaimed from the sea, while they continue to be devoted to public uses and no grant whatever has been made of any portion of them to private persons, remain a part of the public domain and are for public uses, and, until they are converted into patrimonial property of the State, such lands, thrown up by the action of the sea, and the shores adjacent thereto, are not susceptible of prescription, inasmuch as, being dedicated to the public uses, they are not subject of commerce among men, in accordance with the provision of article 1936 of the Civil Code.The occupation or material possession of any land formed upon the shore by accretions and alluvium deposits occasioned by the sea, where the occupant or possessor is a private person and holds without previous permission or authorization from the Government, granted in due form, although he may have had the intention to hold it for the purpose of making it his own, is illegal possession on his part and amounts to nothing more than a mere detainer of the land, which is out of the sphere of the commerce of men, as belonging to the public domain and being allotted to public uses and for the use of all

persons who live at the place where it is situated.The record does not disclose that Aldecoa & Co. had obtained from the Spanish Government of the Philippines the requisite authorization legally to occupy the said two parcels of land of which they now claim to be the owners; wherefore, the occupation or possession which the allege they hold is a mere detainer that can merit from the law no protection such as is afforded only to the person legally in possession.The politico-military governor of Surigao having had no authority or power to grant the possession or ownership of the said two parcels of land, could not have authorized their occupancy under a title of ownership. At the most, he may have, as alleged, verbally authorized the defendant to construct a pier, to fill in with earth the passageway necessary to enable the same to be reached from Bates Avenue, to erect a retaining wall to prevent the sea water, which used to inundate the said avenue, from flowing inward as far as the defendant's warehouses, and to build warehouses on the high land, raised by the action of the water near the shore; but such verbal authorization, even admitting that it was actually given, and the material occupation enjoyed by the defendant during more than ten years, have not created rights such as could legitimize a detention to the prejudice of the public, and of the State which represents the community, the sole entity entitled to the use and enjoyment of the land and shore usurped, for the very reason that such shores and lands belong to the national domain, are intended for public uses and are not susceptible of prescription, as they do not pertain to the commerce of men.The subject of this suit, as has been seen, is a tract of land that is a continuation of the shore at the sitio of Bilang-bilang and was formed on that shore by alluvium deposits occasioned by the action of the waters of the sea, that is, was land reclaimed from the sea, as fully proven by the record in this case; therefore the present issue is identical with that decided in the case of Ker & Co. vs. Cauden (6 Phil. Rep., 732) relative to a tract of land formed by the action of the sea and which has become a part of the so-called Sangley Point, in the Province of Cavite, and consequently the findings and doctrine established in that decision are properly applicable to this action, as may be seen by a perusal of that case.The land in question, together with the shore of which it forms a part, is not, considering its conditions, comprised within the provisions of section 54 of Act No. 926, for the reason that it can not be deemed to be agricultural public lands, nor mangrove-swamp land, inasmuch as it is unquestionable, as the record shows it to have been proven, that the disputed property is land which was reclaimed from the sea through accretions produced by the action of the water upon a high part of the shore, and is, therefore, land intended for public uses. This classification loses none of its force from the fact that a part of the land is swampy, because this circumstance does not divest it of its true character as land gained from the sea by accretion.Mangrove-swamp land, which is generally situated inland at a certain distance from the seashore, although it is usually inundated by the waters of the sea, especially at high tide, can not be confounded with the land formed by the action of the sea and which forms the shore line thereof; and for this reason, the decisions rendered in the cases of Montano vs. Insular Government (12 Phil. Rep., 572), and Mapa vs. Insular Government (10 Phil. Rep., 175), wherein due consideration was given to the provisions of section 54 of Act No. 926, have no application to the present action, which solely concerns land formed by the action of the sea, and the shore that is a part of it, both intended for public uses, while the references made by the appellant party apply to building lots, fisheries and nipa lands that were inundated by sea water and which, though covered with a good deal of water, could not be said to be navigable ways. The land in question, on the contrary, together with its adjacent shore, borders on water of great depth, the Pacific Ocean, for, besides the pier constructed at the place by the defendant and appellant, there were two others, and all intended for the service of the steamships that plied the high seas and were accustomed to enter the said port and there anchor alongside of these piers.Under no consideration could the land herein concerned, together with the shore upon which it is formed, be classed as agricultural land susceptible of appropriation, and as such form the basis for the allegation of the possession of an imperfect or prescriptive title thereto, because, as aforestated, so long as the land in litigation belongs to the national domain and is reserved for public uses, it is not capable of being appropriated by any private person, except through express authorization granted in due form by a competent authority — a requisite which the defendant and appellant was unable to prove for the purpose of legalizing his possession.However, on the supposition that the defendant, Aldecoa & Co., began to occupy the said land and shore after first obtaining verbal permission from a politico-military governor, constructing thereon a pier, warehouse, and retaining wall, it is right to hold, as did the lower court in his judgment, that it acted in good faith, and under such a supposition, the provisions of article 361 of the Civil Code must be complied with.For the foregoing reasons, in the course of the explanation of which the errors attributed to the judgment appealed from have been disposed of, it is our opinion that such judgment should be fully affirmed, as it is in accordance with the law. The costs shall be assessed against the appellant. So ordered.Mapa and Johnson, JJ., concur.Moreland and Carson, JJ., concur in the result.


Manila

EN BANCG.R. No. L-28379 March 27, 1929THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-appellant, vs.CONSORCIA CABANGIS, ET AL., claimants-appellees.Attorney-General Jaranilla for appellant.Abad Santos, Camus & Delgado for appellees.VILLA-REAL, J.:The Government of the Philippine Islands appeals to this court from the judgment of the Court of First Instance of Manila in cadastral proceeding No. 373 of the Court of First Instance of Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the title and decreeing the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of Manila in favor of Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts, and dismissing the claims presented by the Government of the Philippine Islands and the City of Manila. In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its judgment, to wit:

1. The lower court erred in not holding that the lots in question are of the public domain, the same having been gained from the sea (Manila Bay) by accession, by fillings made by the Bureau of Public Works and by the construction of the break-water (built by the Bureau of Navigation) near the mouth of Vitas Estero. 2. The lower court erred in holding that the lots in question formed part of the big parcel of land belonging to the spouses Maximo Cabangis and Tita Andres, and in holding that these spouses and their successors in interest have been in continuous, public, peaceful and uninterrupted possession of said lots up to the time this case came up. 3. The lower court erred in holding that said lots existed before, but that due to the current of the Pasig River and to the action of the big waves in Manila Bay during the south-west monsoons, the same disappeared. 4. The lower court erred in adjudicating the registration of the lands in question in the name of the appellees, and in denying the appellant's motion for a new trial.

A preponderance of the evidence in the record which may properly be taken into consideration in deciding the case, proves the following facts:Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R. O. Record No. 373, were formerly a part of a large parcel of land belonging to the predecessor of the herein claimants and appellees. From the year 1896 said land began to wear away, due to the action of the waves of Manila Bay, until the year 1901 when the said lots became completely submerged in water in ordinary tides, and remained in such a state until 1912 when the Government undertook the dredging of Vitas Estuary in order to facilitate navigation, depositing all the sand and silt taken from the bed of the estuary on the low lands which were completely covered with water, surrounding that belonging to the Philippine Manufacturing Company, thereby slowly and gradually forming the lots, the subject matter of this proceeding. Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation, and it was only in the year 1926 that Dr. Pedro Gil, in behalf of the claimants and appellees, declared lot No. 40 for such purpose. In view of the facts just stated, as proved by a preponderance of the evidence, the question arises: Who owns lots 36, 39 and 40 in question?The claimants-appellees contend that inasmuch as the said lots once formed a part of a large parcel of land belonging to their predecessors, whom they succeeded, and their immediate predecessor in interest, Tomas Cabangis, having taken possession thereof as soon as they were reclaimed, giving his permission to some fishermen to dry their fishing nets and deposit their bancas thereon, said lots belong to them. Article 339, subsection 1, of the Civil Code, reads:

Article 339. Property of public ownership is —1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shorts, roadsteads, and that of a similar character.x x x x x x x x x

Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:ARTICLE 1. The following are part of the national domain open to public use:x x x x x x x x x3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its interior or terrestrial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable, the shore begins on the land side at the line reached by the sea during ordinary storms or tempests.

In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of the Civil Code just quoted, this court said:We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb and flow of the tide, private property may not become 'property of public ownership,' as defined in article 339 of the code, where it appears that the owner has to all intents and purposes abandoned it and permitted it to be totally destroyed, so as to become

a part of the 'playa' (shore of the seas), 'rada' (roadstead), or the like. . . .In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:

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

Now then , when said land was reclaimed, did the claimants-appellees or their predecessors recover it as their original property?As we have seen, the land belonging to the predecessors of the herein claimants-appellees began to wear way in 1896, owing to the gradual erosion caused by the ebb and flow of the tide, until the year 1901, when the waters of Manila Bay completely submerged a portion of it, included within lots 36, 39 and 40 here in question, remaining thus under water until reclaimed as a result of certain work done by the Government in 1912. According to the above-cited authorities said portion of land, that is, lots 36, 39 and 40, which was private property, became a part of the public domain. The predecessors of the herein claimants-appellees could have protected their land by building a retaining wall, with the consent of competent authority, in 1896 when the waters of the sea began to wear it away, in accordance with the provisions of Article 29 of the aforecited Law of Waters of August 3, 1866, and their failure to do so until 1901, when a portion of the same became completely covered by said waters, remaining thus submerged until 1912, constitutes abandonment. Now then: The lots under discussion having been reclaimed from the seas as a result of certain work done by the Government, to whom do they belong?The answer to this question is found in article 5 of the aforementioned Law of Waters, which is as follows:

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

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

If we heed the parol evidence, we find that the seashore was formerly about one hundred brazas distant from the land in question; that, in the course of time, and by the removal of a considerable quantity of sand from the shore at the back of the land for the use of the street car company in filling in Calle Cervantes, the sea water in ordinary tides now covers part of the land described in the petition. The fact that certain land, not the bed of a river or of the sea, is covered by sea water during the period of ordinary high tide, is not a reason established by any law to cause the loss thereof, especially when, as in the present case, it becomes covered by water owing to circumstances entirely independent of the will of the owner.

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

The contention of the claimants Cabangis is to the effect that said lots are a part of the adjoining land adjudicated to their deceased father, Don Tomas Cabangis, which, for over fifty years had belonged to their deceased grandmother, Tita Andres, and that, due to certain improvements made in Manila Bay, the waters of the sea covered a large part of the lots herein claimed. The Government of the Philippine Islands also claims the ownership of said lots, because, at ordinary high tide, they are covered by the sea.Upon petition of the parties, the lower court made an ocular inspection of said lots on September 12, 1923, and on said inspection found some light material houses built thereon, and that on that occasion the waters of the sea did not reach the aforesaid lots. From the evidence adduced at the trial of this cause, it may be inferred that Tita Andres, during her lifetime was the owner of a rather large parcel of land which was adjudicated by a decree to her son Tomas Cabangis; the lots now in question are contiguous to that land and are covered by the waters of the sea at extraordinary high tide; some 50 years before the sea did not reach said strip of land, and on it were constructed, for the most part, light material houses, occupied by the tenants of Tita Andres, to whom they paid rent. Upon her death, her son Tomas Cabangis succeeded to the possession, and his children succeeded him, they being the present claimants, Consuelo, Jesus, Tomas, and Consorcia Cabangis. The Government of the Philippine Islands did not adduce any evidence in support of its contention, with the exception of registry record No. 8147, to show that the lots here in question were not excluded from the application presented in said proceeding.

It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited above, the rise of the waters of the

sea that covered the lands there in dispute, was due not to the action of the tide but to the fact that a large quantity of sand was taken from the sea at the side of said land in order to fill in Cervantes Street, and this court properly held that because of this act, entirely independent of the will of the owner of said land, the latter could not lose the ownership thereof, and the mere fact that the waters of the sea covered it as a result of said act, is not sufficient to convert it into public land, especially, as the land was high and appropriate for building purposes. In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the Insular Government did not present any evidence in support of its contention, thus leaving uncontradicted the evidence adduced by the claimants Aguilar et al., as to the ownership, possession and occupation of said lots. In the instant case the evidence shows that from 1896, the waves of Manila Bay had been gradually and constantly washing away the sand that formed the lots here in question, until 1901, when the sea water completely covered them, and thus they remained until the year 1912. In the latter year they were reclaimed from the sea by filling in with sand and silt extracted from the bed of Vitas Estuary when the Government dredged said estuary in order to facilitate navigation. Neither the herein claimants-appellees nor their predecessors did anything to prevent their destruction. In conclusion, then, we hold that the lots in question having disappeared on account of the gradual erosion due to the ebb and flow of the tide, and having remained in such a state until they were reclaimed from the sea by the filling in done by the Government, they are public land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs. Government of the Philippine Islands, 28 Phil., 505).By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of cadastral proceeding No. 373 of the City of Manila are held to be public land belonging to the Government of the United States under the administration and control of the Government of the Philippine Islands. So ordered. Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.


ManilaEN BANC

G.R. No. L-37986 March 1, 1934EUFEMIA MERCADO, plaintiff-appellant, vs.THE MUNICIPAL PRESIDENT OF MACABEBE, PAMPANGA, and THE SECRETARY OF COMMERCE AND COMMUNICATIONS, defendants-appellee.

Eusebio Orense and Nicolas Belmonte for appellant.Provincial Fiscal Daza for appellees.DIAZ, J.:This is an appeal taken by Eufemia Mercado from a judgment rendered by the Court of First Instance of Pampanga dismissing her appeal from an order of the Secretary of Commerce and Communications wherein said official directed Romulo Mercado, the appellant's predecessor in interest, to remove the two dikes which he had constructed at both ends of the creek named Batasan-Limasan or Pinac Buñgalun, which traverses part of the hacienda described in certificate of Title No. 329 of the registry of deeds of Pampanga, and formerly belonging to said Romulo Mercado, but which now belongs to the appellant by virtue of a formal donation made to her by said Romulo Mercado, after the institution of this action.After due trial, the court a quo held that the creek in question is property of the public domain.The contention of the appellant's predecessor in interest in the record of the investigation conducted by the Secretary of Commerce and Communications, through his agents, and that of the appellant, both in the court a quo and in this court, is that the said Batasan-Limasan or Pinac Buñgalun creek is not a natural but an artificial creek which had been developed on his hacienda by means of excavations made by his men on two different occasions, the former before the revolution or during the Spanish regime, and the latter after the revolution.The appellees, in turn, contend that the creek in question is a natural navigable creek which already existed on the said hacienda of the appellant not only long before the revolution but also from the time immemorial.The evidence presented by the appellant shows that formerly when her so-called hacienda still belonged to her grandfather Mariano Mercado, the portion of the said creek, indicated on the plan Exhibit 2 by two parallel lines in black ink drawn from the point marked 3 towards the center until it turns northwards, was but a recess or arm then called Buñgalun, of the Nasi River, which arm was lost in the hacienda. It extended close to a small creek called Batasan-Limasan which derived its waters, particularly during high tide, from the large creek called Limasan indicated on the aforesaid plan.Mariano Mercado, the original owner of the hacienda, in order to facilitate the cutting and transportation of firewood and other products, produced on the said hacienda, towards the Nasi River on the east or towards Limasan creek on the west, connected the two recesses or bodies of water in question by means of excavations and, after having so connected them, made other excavations at both ends towards the said river and creek, thus constructing a sort of canal directly connecting both bodies of water, and which later became known as the Batasan-Limasan or Pinac Buñgalun creek.The said Batasan-Limasan or Pinac Buñgalun creek or canal already existed at the time of the institution of the registration proceedings wherein judgment was rendered resulting in the issuance of certificate of title No. 329 in favor of Romulo Mercado. On the plan of the land, which was presented in the said case, the aforesaid creek appears; and at the time the case was tried as well as when the certificate of title was issued in favor of the applicant Romulo Mercado, none of the herein defendants nor the Insular Government filed opposition or objection thereto.Once the said Batasan-Limasan or Pinac Buñgalun creek or canal was opened from the Nasi River to Limasan creek, not only the residents of the hacienda and those who visited it but also some of the residents of the nearby barrios and municipalities began to use it as a means of communication in attending to their needs, sometimes with the permission of the owners of the hacienda, and at other times without even the latter's knowledge. It was then that Romulo Mercado, the appellant's predecessor in interest, decided to convert the said creek into a fish pond and with that object in view, in 1928 he closed the two opening thereof towards the Nasi River on one side and Limasan creek on the other side.The appellant's witnesses, Romulo Mercado, Maximo dela Peña and Andres Limin testified that the creek in question became navigable only from the time Mariano Mercado had excavated both ends and the junction of the former two recesses from which said creek had been formed; that the former owners of the hacienda had employed about 60 men for a period of two weeks in order to perform such task, and that during the revolution and for about ten years, in view of the fact that many people entered the hacienda to cut or carry away firewood without permission, Romulo Mercado ordered the creek closed in order to prevent the entrance into and passage of strangers through it.On the other hand, the appellee's tried to prove by means of their witnesses Castor Quiambao, Maximino Guintu and Lorenzo Magat, that the creek in question has existed on the appellant's hacienda from time immemorial, and that they had been passing through and fishing in it, as others had done, as often as they wished, long before the revolution until it was closed by the appellant's predecessor in interest in 1928. To that effect, they presented resolution No. 6 of the municipal council of Macabebe, Pampanga, placing at public auction the privilege of fishing in the Batasan-Limasan creek (Exhibit 6), among other rivers and creeks. However, they failed to establish that anybody had ever obtained such privilege, for which reason said evidence cannot be given any weight, there being no doubt, as there can be no doubt, that a mere notice, as Exhibit 6, does not constitute sufficient evidence that the creek in question is the property of the public domain.1ªvvphi1.ne+The testimony of the said witnesses for the appellees seems insufficient to overcome that of the witnesses for the appellant on the ground that Castor Quiambao is relatively young and he himself admitted that in his youth, as he remembered, he used to pass through the creek in question only once or twice a month. The other witnesses, not being residents of the place, were in no better position to know what the appellant's witnesses knew as to the true nature, conditions and changes which the said creek had undergone, inasmuch as the latter witnesses had lived and worked in that same place for many years.

However, considering that the evidence of both parties is equiponderant, could not the question be decided by taking into consideration only, or mainly, the undisputed fact that the creek in question, both during the first years of its existence, when it was but a small creek formed by the channels or recesses called Batasan-Limasan and Buñgalun by some witnesses, and after it had been converted into said creek, whether naturally or artificially, that it, by means of man's labor, with openings toward the Nasi River and toward the Limasan creek, derived its waters from the aforesaid river and creek, which unquestionably belong to the public domain?The lower court, invoking the provisions of articles 339, 407 and 408 of the Civil Code, decided the question mainly by taking said fact into consideration.The pertinent parts of the aforesaid three articles provide as follows:

Property of public ownership is —1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shores, roadsteads, and that of a similar character. (Art. 339.)The following are of public ownership:1. Rivers and their natural channels;2. Continuous or intermittent waters from springs or brooks running in their natural channels and the channels themselves;3. Waters rising continuously or intermittently on lands of public ownership;x x x x x x x x x8. Waters which flow continuous or intermittently from lands belonging to private parties, to the State, to provinces, or to towns, from the moment they leave such lands. (Art. 407.)The following are of private ownership:1. Waters, either continuous or intermittent rising on private estates, while they run through them;2. Lakes and ponds and their beds when formed by nature on said estates;3. Subterranean waters found on the same;4. Rain waters falling thereon as long as they remain within their boundaries;5. The channels of flowing streams, continuous or intermittent, formed by rain water, and those of brooks crossing estates which are not of public ownership.The water, bed, banks, and floodgates of a ditch or aqueduct are deemed to be an integral part of the estate or building for which the waters are intended. The owners of estates through or along the boundaries of which the aqueduct passes can assert no ownership over it, nor any right to make use of its beds or banks, unless they base their claim on title deeds which specify the right or the ownership claimed. (Art, 408.)

It will be noted that the appellant cannot invoke in her favor the article last quoted on the ground that although it is true that the Batasan-Limasan or Pinac Buñgalun creek passes through her hacienda, it is none the less true that it is not included in any of the kinds of private property therein enumerated. The appellant and her predecessors in interest, in closing the two openings of the said creek and converting it into a fish pond, not only appropriated for themselves the channel of the said creek but also the creek itself; and a creek is not a brook because the latter is but a short, almost continuous stream of water (Diccionario de la Real Academia Española), while the former is a recess or arm extending from a river, which participates in the ebb and flow of the sea. (15 Enciclopedia Juridica Española, 216.)On the other hand, the aforecited article 339 provides that canals, rivers, torrents, . . . and those of a similar character are property of public ownership, and the similarity between rivers, canals, and creeks is undoubtedly obvious on the ground that, as has been stated, a creek is no other than an arm extending from a river. Furthermore, under article 407, the Batasan-Limasan or Pinac Buñgalun creek may be considered as belonging to the class of property enumerated in paragraph 8 thereof. And, in addition to the foregoing, the Contentious Court of Spain (Tribunal Contencioso de España) in a decision dated June 25, 1890, laid down the doctrine that creeks are property of the public domain (15 Enciclopedia Juridica Española, 216).And even granting that the Batasan-Limasan creek acquired the proportions which it had, before it was closed, as a result of excavations made by laborers of the appellant's predecessor in interest, it being a fact that, since the time it was opened as a water route between the Nasi River and Limasan creek, the owners thereof as well as strangers, that is, both the residents of the hacienda and those of other nearby barrios and municipalities, had been using it not only for their bancas to pass through but also for fishing purposes, and it being also a fact that such was the condition of the creek at least since 1906 until it was closed in 1928, if the appellant and her predecessors in interest had acquired any right to the creek in question by virtue of excavations which they had made thereon, they had lost such right through prescription inasmuch as they failed to obtain, and in fact they have not obtained, the necessary authorization to devote it to their own use to the exclusion of all others. The use and enjoyment of a creek, as any other property susceptible of appropriation, may be acquired or lost through prescription, and the appellant and her predecessors in interest certainly lost such right through the said cause, and they cannot now claim it exclusively for themselves after the general public had been openly using the same from 1906 to 1928. When two different interests, one being private and the other public, are in conflict with one another, the former should yield to the latter.

It is useless for the appellant now to allege that she has obtained certificate of title No. 396 in her favor because the said certificate does not confer upon her any right to the creek in question, inasmuch as the creek, being of the public domain, is included among the various exceptions enumerated in section 39 of Act No. 496 to which the said certificate is subject by express provision of the law, and furthermore, because it so appears in the certificate itself.The doctrine laid down in the case of the Government of the Philippine Islands vs. Santos (G. R. No. 27202, promulgated September 2, 1927, not reported), which the appellant invokes in her favor, is not applicable herein because the subject matter in that case is not of the same nature as the Batasan-Limasan or Pinac Buñgalun creek. The thing involved therein was simply a date or, in the words of the trial court, a low depression on the defendant's land where there was a waterway passable by bancas at high tide, but which completely dried up at low tide and during the dry season. From what has been hereinbefore stated, it may be inferred that the Batasan-Limasan creek is perfectly navigable by bancas throughout the year, inasmuch as at the time it was measured in November by employees and agents of the Bureau of Lands, it was more than two meters deep at its mouth and around a meter and a half deep at its shallow parts. Furthermore, in the case of Urbano Santos, the creek in question was closed a few years after excavations had been made in the land under consideration.Wherefore, the judgment appealed from is hereby affirmed, with costs against the appellant. So ordered.Street, Malcolm, Abad Santos, and Butte, JJ., concur.


ManilaEN BANC

G.R. No. L-17240 January 31, 1962CLEMENCIA B. VDA. DE VILLONGCO, ET AL., petitioners-appellees, vs.HON. FLORENCIO MORENO, in his capacity as Secretary, Department of Public Works and Communications and BENIGNO MUSNI, respondents-appellants.E. Voltaire Garcia for petitioners-appellees.Office of the Solicitor General for respondents-appellants.LABRADOR, J.:The above-entitled case involves the application and interpretation of Republic Act. No. 2056, entitled "An Act to prohibit, remove and/or demolish the construction of dams, dikes or any works in public navigable waters or waterways and in communal fishing grounds, to regulate works in such waters or waterways and in communal fishing grounds, and to provide penalties for its violation, and for other purposes." The pertinent provisions thereof in issue are Section 1 and the first part of

Section 2, which read as follows: Sec. 2. — When it is found by the secretary of Public Works and Communications, after due notice and hearing, that any dam, dike or any other works now existing or may hereinafter be constructed encroaches into any public navigable river, stream, coastal waters and any other public navigable waters or waterways, or that they are contructed in areas declared as communal fishing grounds, he shall have the authority to order the removal of any such works and give the party concerned a period not to exceed thirty days for the removal of the same; Provide, That fishpond constructions or works on communal fishing grounds introduced in good faith before the areas were proclaimed as fishing grounds shall be exempted from the provisions of this Act, provided such constructions or works do not obstruct or impede the free passage of any navigable river, stream, or would not cause inundations of agricultural areas....".

The facts involved in the case may be briefly stated as follows: On August 15, 1958, Senator Rogelio de la Rosa complained with the Secretary of Public Works and Communications against several fishpond owners in Macabebe, Pampanga, among whom is petitioner herein Clemencia B. Vda. de Villongco. The complaint charges that has appropriated a portion of the coastal waters of Pampanga, locally known as "Pantion", converting portions of the coastal areas into fishponds. Investigations were conducted under the authority of the Secretary, who thereafter rendered the following decision: .

Complainants allege that the conversion of this area into a fishpond by the respondents deprived them of the uses of the area as a fishing ground and for navigation. On the other hand, the respondents contend that this area is owned by them as shown by the title above-adverted to.A relocation survey, based on the title, was made on the area in question to determine whether the fishpond constructions and/or works of the respondents are within the titled property. Said survey shows that a portion of Manila Bay covering an area of approximately 24,860 square meters was included as part of the fishpond by the respondents.The defense of respondents that the area in question being a private property, is not subject to the provisions of Republic Act 2056, deserves consideration. The area being covered by a Torrens Certificate of Title, the respondent's title thereon is indefeasible and imprescriptible. As sufficiently established, the area in question is a foreshore land and is disposable under Section 59 of the Public Land Law. However, of the enclosed portion, the area of 24,860 square meters has been conclusively shown by the relocation survey as not within the boundaries of the titled property. Be that as it may, this portion is still of public ownership and the complainants should, therefore, not be deprived of its uses as a fishing ground and passageway.PREMISES CONSIDERED, it is hereby ordered that the respondents remove their fishpond works and/or constructions insofar as it encroaches upon that portion of Manila Bay covering the area of approximately 24,860 square meters and restore the original condition of said coastal water within thirty (30) days from receipt of this decision: otherwise, this Office or its duly authorized representative shall remove the same at the expense of the respondents within ten (10) days following the expiration of the thirty-day period, without prejudice to instituting judicial action against them under the provisions of Section 3 of R. A. 2056." (Annex "C", pp. 20-21) .

Clemencia B. Vda. de Villongco filed a motion to reconsider the decision, but the same was denied by the Undersecretary in a resolution dated August 5, 1959. Thereupon, on August 20, 1959, petitioner herein filed the present suit in the Court of First Instance of Rizal, calling attention to the above proceedings, especially the decision of the Secretary and the resolution of the Undersecretary denying the motion for reconsideration, and arguing that Republic Act. No. 2056, under which the Secretary issued the order above-quoted, is null and void as to conferring upon the Secretary power to decide as to whether or not the dikes and other constructions encroach upon coastal waters, public streams, communal fishing grounds, etc.; that the Undersecretary acted without or in he excess of jurisdiction in delegating reception of evidence, in causing resurvey of the premises by a person who is not a duly licensed surveyor, in violation of the agreement to that effect, in the absence of petitioner Villongco; that the Secretary's order of demolition of the fishponds was beyond the jurisdiction of said Secretary and is unconstitutional as an encroachment upon the private rights of the petitioners, etc. Upon the presentation of the petition, the court below issued a writ of preliminary injunction against the enforcement of the Secretary's disputed order. Trial of the case was had, with the submission of a stipulation of facts, with exhibits, entered into between the parties, after which the court, through Hon. Andres Reyes, rendered a decision declaring that the Secretary of Public Works and Communications was in error in ordering the demolition of the dikes and other constructions of the petitioner Vda. de Villongco, on the ground that said dikes and other constructions fall under the exception mentioned in Section 2 of Republic Act. No. 2056. We quote the order herein:.

Without the necessity of resolving the various incidental issues raised by the parties, the Court is of the opinion that the case at bar hinges on only one vital issue-that is whether the petitioners properly fall within the benefits of the exemption expressly provided for under section 2 of Republic Act 2056, to wit:.

PROVIDED, That fishpond constructions on communal fishing grounds introduced in good faith before the areas were proclaimed as fishing grounds shall be exempted from the provisions of this Act, provided such constructions or works do not obstruct or impede the free passage of any navigable river, stream, or would not cause inundations of agricultural areas..

AND PROVIDED, FINALLY, that the removal of any such works shall not impair fishponds completed or about to be completed which do not encroach or obstruct any public navigable river or stream and/or which would not cause inundations of agricultural areas and which have been constructed in good faith before the area was declared communal fishing grounds.' .A perusal of the above provisions reveals that the petitioners herein would be entitled to the benefits of said exemptions provided the following requisites are present: first, that the constructions or works in question were constructed in good faith before the areas were declared communal fishing grounds; second, that said constructions or works would not impede the free passage of any navigable river or stream; and lastly, that the same would not cause inundations of agricultural areas.There is no question that the constructions of petitioners would not cause inundations of agricultural areas. This was admitted in the answer of respondent Secretary and later included in the stipulation of facts. There is also no dispute as to the fact that the same were constructed in good faith before June 13, 1958 when Republic Act No. 2056 took effect and therefore before any fishing ground could have been declared communal." (pp. 2-3, of the decision).

The respondent Secretary has appealed from the above decision, alleging the following errors: .I

THE LOWER COURT ERRED IN GIVING DUE COURSE TO THE INSTANT CASE FOR CERTIORARI AND PROHIBITION AND IN DECIDING THE SAME WITHOUT CONSIDERING THE ISSUES INVOLVED THEREIN.

IITHE LOWER COURT ERRED IN INTERPRETING THE PROVISIONS OF REPUBLIC ACT NO. 2056 WHICH, OTHERWISE, IS CLEAR AND UNAMBIGUOUS, AND IN CONSTRUING THE EXEMPTING CLAUSE PROVIDED IN SEC. 2 THEREOF TO INCLUDE FISHPOND CONSTRUCTIONS OR WORK OUTSIDE THE AREAS DECLARED AS COMMUNAL FISHING GROUNDS.

III THE LOWER COURT ERRED IN HOLDING THAT THE APPELLEES FAIL WITHIN SAID EXEMPTING PROVISION OF SECTION 2 OF REPUBLIC ACT NO. 2056.

IVTHE LOWER COURT ERRED IN ISSUING EX-PARTE THE WRIT OF PRELIMINARY INJUNCTION, AND LATER MAKING IT PERMANENT..

VTHE LOWER COURT ERRED IN GRANTING THE INSTANT PETITION FOR CERTIORARI AND PROHIBITION. An examination of the facts adduced at the trial shows that petitioner Vda. de Villongco is the owner of a fishpond situated in Macabebe, Pampanga, covered by Transfer Certificate of Title No. 7087 dated January 28, 1952, containing an area of 90 hectares, 26 ares and 54 centares, bounded on the SW and W by the Manila Bay and on the NW by the Manila Bay and the Supang Maruginas (Annex B-Stipulation). A competent surveyor in the person of the Dredge Operation Supervisor of the Department of Public Works conducted an investigation and submitted a report (Annex E of the Stipulation of Facts), with an accompanying sketch of the fishpond showing the disputed portion, included within the dike of the petitioner. The existing dike of the petitioner is a straight line from point A of Annex E-1 to point D, and it includes a portion of public land indicated in red (portion B-c in said Annex E-1, containing an area of 2 hectares, 48 ares and 60 centares (24,860 square meters). The surveyor found the following:

It seems that the average depth along the sea side of the dike A-D as shown in the attached plan may be about one (1) foot M. L. L. W.1äwphï1.ñëtThat section B-C of the dike is along the prolongation of section A-B towards point C and that no part of dike B-C protruding towards the sea.That navigation along dike A-D during low tide is limited to vessels with a draft of about one foot.That section B-C of the dike will obstruct navigation towards a public domain (shaded red in the attached plan) with an indicated area of about 24,880 square meters.In my opinion, section B-C of the dike will not obstruct navigation along or parallel to it." (Annex E - Stipulation) .

The court below held that said portion falls under the exception of Section 2 of Republic Act No. 2056, because it does not interfere with navigation and does not produce inundation and the dikes were constructed before the area was a fishing ground. (The parties have stipulated that there is yet no order declaring the area as a fishing ground.) A study of the provisions of Republic Act No. 2056, especially the sections we quote above disclose that the authority granted the Secretary of Public Works and Communications is to declare that the construction or building of dams, dikes or any other works encroaching on navigable rivers, streams, or any other navigable public waters or waterways is prohibited and to order their removal or demolition. The area included in the dikes of the petitioner, indicated in the red shaded portion in the Stipulation, Exh. E-1, was not a part of the land titled in the name of the petitioner, as shown by the fact that the titled land bounds on the W by a line from point 1 to point 19, point 19 to point 20 and point 20 to point 21 of Lot No. 2 indicated in the plan of the land. Said red shaded portion, which contains an area of 24,860 square meters, is clearly, therefore, a

portion of the Manila Bay area or coastal area, which the petitioner has evidently included within her dikes, perhaps to straighten the same. As the shaded portion has a depth of 1 foot and low tide, it is evidently navigable at high tide for vessels of deeper draft of 1 foot and at low tide navigable to those of 1 foot draft. It is, therefore, a part of the water ways, taking into account that the Manila Bay area, especially those bordering the fishponds in the provinces of Pampanga, Bulacan and Rizal are waterways, especially used by fishermen and fishpond owners to bring in their catch to market. The shaded area, therefore, is a public property, not susceptible to appropriation by any private individual, not only because it belongs to the State but also because it belongs to the State but also because it is used as a waterway..

Article 1. — The following are part of the National domain open to public use:x x x x x x x x x2. The coast sea, that is, the maritime zone encircling the coasts, to the full width recognized by international law. ...." (Art. 1, paragraphs 1 and 2, Spanish Law of Waters; see also Insular Government v. Aldecoa, 19 Phil. 505. 510.) .

The error of the court below lies in the fact that it considered the coast sea as falling under the exception of Section 2. But an examination of Section 2 shows that coastal waters or public waterways are not included in the exception. Only those works constructed on communal fishing grounds are exempted; constructions on coastal waters or public waterways are not subject to the exception. Aside from that fact, no inundation or free passage of any navigable river can take place on the coastal waters or waterways, so coastal waters are not subject to the exception. The exception, apparently, applies only to constructions on navigable rivers, when these constructions do not impede or obstruct the passage of the river and when they do not cause inundation of agricultural areas. Coastal waters are not within the contemplation of the exception because there is no navigable river or stream in coastal waters and neither may there be an inundation therein.We, therefore, find that the court below erred in its decision that the constructions of the petitioner, subject matter of the case at bar, fall within the exception mentioned in Sec. 2 of the Act and its order in issuing the prohibition is therefore, unwarranted.The other error is the failure of the petitioner to avail of the administrative remedy, which consists in appealing from the decision of the Secretary of Public Works and Communications to the President of the Philippines. We find this assignment of error also to be well taken. We have, however, chosen to consider the merits of the issue involved for the more prompt determination of the case and for a proper understanding of the provisions of Republic Act 2056.WHEREFORE, the decision and the injunction issued by the court below are hereby set aside, and the petition against the Secretary of Public Works and Communications, dismissed, with costs against the petitioner.Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Paredes, Dizon and De Leon, JJ., concur.


ManilaEN BANC

G.R. No. L-26053 February 21, 1967CITY OF MANILA, plaintiff-appellee, vs.GERARDO GARCIA — CARMENCITA VILLANUEVA, MODESTA PARAYNO — NARCISO PARAYNO, JUAN ASPERAS, MARIA TABIA — SIMEON DILIMAN, AQUILINO BARRIOS — LEONORA RUIZ, LAUREANO DIZO, BERNABE AYUDA — LEOGARDA DE LOS SANTOS, ISABELO OBAOB — ANDREA RIPARIP, JOSE BARRIENTOS, URBANO RAMOS,1 ELENA RAMOS, ESTEFANIA NEPACINA, MODESTA SANCHEZ, MARCIAL LAZARO, MARCIANA ALANO, HONORIO BERIÑO — SEDORA ORAYLE, GLORIA VELASCO, WILARICO RICAMATA, BENEDICTO DIAZ, ANA DEQUIZ — (MRS.) ALUNAN, LORENZO CARANDANG, JUAN PECAYO, FELICIDAD MIRANDA — EMIGDIO EGIPTO, defendants-appellants.Mauricio Z. Alunan for defendants-appellants.City Fiscal's Office for plaintiff-appellee.SANCHEZ, J.:Plaintiff City of Manila is owner of parcels of land, forming one compact area, bordering Kansas, Vermont and Singalong streets in Malate, Manila, and covered by Torrens Titles Nos. 49763, 37082 and 37558. Shortly after liberation from 1945 to 1947, defendants entered upon these premises without plaintiff's knowledge and consent. They built houses of second-class materials, again without plaintiff's knowledge and consent, and without the necessary building permits from the city. There they lived thru the years to the present.In November, 1947, the presence of defendants having previously been discovered, defendants Felicidad Miranda (Emigdio

Egipto), Modesta C. Parayno, Benedicto Diaz, Laureano Dizo, Jose Barrientos, Elena Ramos, Estefania Nepacina, Modesta Sanchez, Honorio Beriño, Gloria Velasco, Ana Dequis Alunan and Benedicto Ofiaza (predecessor of defendant Carandang) were given by Mayor Valeriano E. Fugoso written permits — each labeled "lease contract" — to occupy specific areas in the property upon conditions therein set forth. Defendants Isabelo Obaob and Gerardo Garcia (in the name of Marta A. Villanueva) received their permits from Mayor Manuel de la Fuente on January 29 and March 18, respectively, both of 1948. The rest of the 23 defendants exhibited none.For their occupancy, defendants were charged nominal rentals.1äwphï1.ñëtFollowing are the rentals due as of February, 1962:

NAMEArea in sq.m.

Monthly Rental

Amt. due from date of delinquency to Feb. 1962

1. Gerardo Garcia 66.00 P7.92 P1,628.97

2. Modesta C. Parayno 87.75 10.53 379.08

3. Juan Asperas 39.00 4.68 9.36

4. Maria Tabia 35.20 5.76 570.24

5. Aquilino Barrios(Leonora Ruiz)

54.00 4.32 99.36

6. Laureano Dizo 35.00 2.80 22.40

7. Bernabe Ayuda 39.60 3.17 323.34

8. Isabelo Obaob 75.52 9.06 208.38

9. Jose Barrientos 39.53 4.74 744.18

10. Cecilia Manzano inlieu of Urbano Ramos (deceased) 46.65 5.60

Paid up to Feb. 1962.

11. Elena Ramos 34.80 2.78 186.26

12. Estefania Nepacina 41.80 3.34 504.34

13. Modesta Sanchez 33.48 2.68 444.88

14. Marcial Lazaro 22.40 1.79 688.32

15. Marciana Alano 25.80 2.06 255.44

16. Honorio Beriño 24.00 1.92 188.16

17. Gloria Velasco 32.40 2.59 56.98

18. Wilarico Ricamata 45.83 3.67 739.68

19. Benedicto Diaz 40.20 4.82Paid up toMarch 1962.

20. Ana Dequis Alunan 64.26 7.71 30.84

21. Lorenzo Carandang 45.03 5.40 437.40

22. Juan N. Pecayo 25.52 3.06 30.60

23. Felicidad Miranda 48.02 5.76 132.48

P7,580.69

Epifanio de los Santos Elementary School is close, though not contiguous, to the property. Came the need for this school's expansion; it became pressing. On September 14, 1961, plaintiff's City Engineer, pursuant to the Mayor's directive to clear squatters' houses on city property, gave each of defendants thirty (30) days to vacate and remove his construction or improvement on the premises. This was followed by the City Treasurer's demand on each defendant, made in February and March, 1962, for the payment of the amount due by reason of the occupancy and to vacate in fifteen (15) days. Defendants refused. Hence, this suit to recover possession.2The judgment below directed defendants to vacate the premises; to pay the amounts heretofore indicated opposite their respective names; and to pay their monthly rentals from March, 1962, until they vacate the said premises, and the costs. Defendants appealed.

1. We are called upon to rule on the forefront question of whether the trial court properly found that the city needs the premises for school purposes.The city's evidence on this point is Exhibit E, the certification of the Chairman, Committee on Appropriations of the Municipal Board. That document recites that the amount of P100,000.00 had been set aside in Ordinance 4566, the 1962-1963 Manila City Budget, for the construction of an additional building of the Epifanio de los Santos Elementary School. It is indeed correct to say that the court below, at the hearing, ruled out the admissibility of said document. But then, in the decision under review, the trial judge obviously revised his views. He there declared that there was need for defendants to vacate the premises for school expansion; he cited the very document, Exhibit E, aforesaid.It is beyond debate that a court of justice may alter its ruling while the case is within its power, to make it conformable to law and justice.3 Such was done here. Defendants' remedy was to bring to the attention of the court its contradictory stance. Not having done so, this Court will not reopen the case solely for this purpose.4Anyway, elimination of the certification, Exhibit E, as evidence, would not profit defendants. For, in reversing his stand, the trial judge could well have taken — because the was duty bound to take — judicial notice5 of Ordinance 4566. The reason being that the city charter of Manila requires all courts sitting therein to take judicial notice of all ordinances passed by the municipal board of Manila.6 And, Ordinance 4566 itself confirms the certification aforesaid that an appropriation of P100,000.00 was set aside for the "construction of additional building" of the Epifanio de los Santos Elementary School.Furthermore, defendants' position is vulnerable to assault from a third direction. Defendants have absolutely no right to remain in the premises. The excuse that they have permits from the mayor is at best flimsy. The permits to occupy are recoverable on thirty days' notice. They have been asked to leave; they refused to heed. It is in this factual background that we say that the city's need for the premises is unimportant. The city's right to throw defendants out of the area cannot be gainsaid. The city's dominical right to possession is paramount. If error there was in the finding that the city needs the land, such error is harmless and will not justify reversal of the judgment below.72. But defendants insist that they have acquired the legal status of tenants. They are wrong.They entered the land, built houses of second-class materials thereon without the knowledge and consent of the city. Their homes were erected without city permits.These constructions are illegal. In a language familiar to all, defendants are squatters:Since the last global war, squatting on another's property in this country has become a widespread vice. It was and is a blight. Squatters' areas pose problems of health, sanitation. They are breeding places for crime. They constitute proof that respect for the law and the rights of others, even those of the government, are being flouted. Knowingly, squatters have embarked on the pernicious act of occupying property whenever and wherever convenient to their interests — without as much as leave, and even against the will, of the owner. They are emboldened seemingly because of their belief that they could violate the law with impunity. The pugnaciousness of some of them has tied up the hands of legitimate owners. The latter are thus prevented from recovering possession by peaceful means. Government lands have not been spared by them. They know, of course, that intrusion into property, government or private, is wrong. But, then, the mills of justice grind slow, mainly because of lawyers who, by means, fair or foul, are quite often successful in procuring delay of the day of reckoning. Rampancy of forcible entry into government lands particularly, is abetted by the apathy of some public officials to enforce the government's rights. Obstinacy of these squatters is difficult to explain unless it is spawned by official tolerance, if not outright encouragement or protection. Said squatters have become insensible to the difference between right and wrong. To them, violation of law means nothing. With the result that squatting still exists, much to the detriment of public interest. It is high time that, in this aspect, sanity and the rule of law be restored. It is in this environment that we look into the validity of the permits granted defendants herein.These permits, erroneously labeled "lease" contracts, were issued by the mayors in 1947 and 1948 when the effects of the war had simmered down and when these defendants could have very well adjusted themselves. Two decades have now elapsed since the unlawful entry. Defendants could have, if they wanted to, located permanent premises for their abode. And yet, usurpers that they are, they preferred to remain on city property.Defendants' entry as aforesaid was illegal. Their constructions are as illegal, without permits.8 The city charter enjoins the mayor to "safeguard all the lands" of the City of Manila.9Surely enough, the permits granted did not "safeguard" the city's land in question. It is our considered view that the Mayor of the City of Manila cannot legalize forcible entry into public property by the simple expedient of giving permits, or, for that matter, executing leases.Squatting is unlawful and no amount of acquiescence on the part of the city officials will elevate it into a lawful act. In principle, a compound of illegal entry and official permit to stay is obnoxious to our concept of proper official norm of conduct. Because, such permit does not serve social justice; it fosters moral decadence. It does not promote public welfare; it abets disrespect for the law. It has its roots in vice; so it is an infected bargain. Official

approval of squatting should not, therefore, be permitted to obtain in this country where there is an orderly form of government.We, accordingly, rule that the Manila mayors did not have authority to give permits, written or oral, to defendants, and that the permits herein granted are null and void.3. Let us look into the houses and constructions planted by defendants on the premises. They clearly hinder and impair the use of that property for school purposes. The courts may well take judicial notice of the fact that housing school children in the elementary grades has been and still is a perennial problem in the city. The selfish interests of defendants must have to yield to the general good. The public purpose of constructing the school building annex is paramount.10In the situation thus obtaining, the houses and constructions aforesaid constitute public nuisance per se. And this, for the reason that they hinder and impair the use of the property for a badly needed school building, to the prejudice of the education of the youth of the land.11 They shackle the hands of the government and thus obstruct performance of its constitutionally ordained obligation to establish and maintain a complete and adequate system of public education, and more, to "provide at least free public primary instruction".12Reason dictates that no further delay should be countenanced. The public nuisance could well have been summarily abated by the city authorities themselves, even without the aid of the courts.134. Defendants challenge the jurisdiction of the Court of First Instance of Manila. They say that the case should have been started in the municipal court. They prop up their position by the averment that notice for them to vacate was only served in September, 1961, and suit was started in July, 1962. Their legal ground is Section 1, Rule 70 of the Rules of Court. We have reached the conclusion that their forcible entry dates back to the period from 1945 to 1947. That entry was not legalized by the permits. Their possession continued to remain illegal from incipiency. Suit was filed long after the one-year limitation set forth in Section 1 of Rule 70. And the Manila Court of First Instance has jurisdiction.14

Upon the premises, we vote to affirm the judgment under review. Costs against defendants-appellants. So ordered.Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Castro, JJ., concur.



G.R. No. L-37995 August 31, 1987BUREAU OF FORESTRY, BUREAU OF LANDS and PHILIPPINE FISHERIES COMMISSION, petitioners, vs.COURT OF APPEALS and FILOMENO GALLO, respondents. PARAS, J.:Before Us is a petition for review on certiorari, which seeks to annul and set aside the Decision 1 (promulgated on April 11, 1973) of the respondent court in CA-G.R. No. 38163-R, affirming the decision 2 (dated April 6, 1966) of the then Court of First Instance of Iloilo in Land Registration Case No. N-506, G.L.R.O. Record No. N-20783 entitled "Filomeno Gallo, Applicant vs. Bureau of Forestry, Bureau of Lands, and Philippine Fisheries Commission, oppositors. " The dispositive portion of the trial court's decision reads as follows:

WHEREFORE, the court Orders the registration of Lots Nos. 2, 3, and 4 and the bigger portion of Lot No. 1 after excluding the portion Identified as Lot 1-A together with the improvements thereon in the name of Filomeno Gallo, of legal age, widower, Filipino citizen, and resident of 155 Fuentes Street, Iloilo City, Philippines. Lots Nos. 1, 2 and 3 are subject to the road right-of-way of 15 meters wide which is presently known as Sto. Rosario Rizal Montpiller provincial Road and Buenavista-Daraga provincial Road they being properties of the Province of Iloilo and should be registered in the name of said province. The oppositions of the Director of Lands, Director of Forestry and the Philippine Fisheries Commission are dismissed. Lot 1-A with an area of 2.6864 hectares which is enclosed in red pencil and is found inside Lot No. 1 in the plan Exhibit is hereby declared public land. After the decision has become final let the corresponding decree be issued.

SO ORDERED. (p. 38, Joint Record on Appeal Annex "A." p. 25, Rollo) This appeal also seeks to annul and set aside respondent court's resolution dated December 14, 1973 denying for lack of merit, herein petitioners' motion for reconsideration. The basic issue which petitioners raise in this appeal is —

Whether or not the classification of lands of the public domain by the Executive Branch of the Government into

agricultural, forest or mineral can be changed or varied by the court depending upon the evidence adduced before it. (p. 9, Brief for the Petitioners, p. 105, Rollo)

The antecedent facts of the case are as follows: On July 11, 1961, four (4) parcels of land situated in Buenavista, Iloilo described in Plan Psu-150727, containing an approximate area of 30.5943 hectares were the subject of an application for registration by Mercedes Diago who alleged among others that she herself occupied said parcels of land having bought them from the testate estate of the late Jose Ma. Nava who, in his lifetime, had bought the lands in turn from Canuto Gustilo on June 21, 1934. The Director of Lands opposed said application on the ground that neither the applicant nor her predecessors-in-interest have sufficient title over the lands applied for, which could be registered under the Torrens systems, and that they have never been in open, continuous and exclusive possession of the said lands for at least 30 years prior to the filing of the application. The Director of Forestry on the other hand anchored his opposition principally on the ground that certain specific portions of the lands subject matter of the application, with an area of approximately 194,080 square meters are mangrove swamps and are within Timberland Block "B " L.C. Project No. 38, L.C. Map No. 1971 of Buenavista, Iloilo. On June 30, 1965, respondent Filomeno Gallo, having purchased the subject parcels of land from Mercedes Diago on April 27, 1965, moved to be substituted in place of the latter, attaching to his motion an Amended Application for Registration of Title substantially reproducing the allegations in the application of Mercedes Diago. Petitioner Philippine Fisheries Commission also moved on August 30, 1965 to be substituted in place of petitioner Bureau of Forestry as oppositor over a portion of the land sought to be registered, supervision and control of said portion having been transferred from the Bureau of Forestry to the Philippine Fisheries Commission. On April 6, 1966, the trial court rendered its decision ordering the registration of the four (4) parcels of land in the name of respondent Filomeno Gallo after excluding a portion Identified as Lot "1-A" which is the site of the municipal hall of Buenavista town, and subjecting Lots Nos. 1, 2 and 3 to the road-of-way of 15 meters width. Petitioners appealed from said decision to the respondent Court of Appeals assigning the following errors in their brief:

THE TRIAL COURT ERRED IN ORDERING THE REGISTRATION OF THE SUBJECT LAND WHICH CONSISTS OF TIMBERLAND, FORESHORELAND AND LAND BELONGING TO THE PUBLIC DOMAIN HENCE UNREGISTERABLE. THE TRIAL COURT ERRED IN HOLDING THAT THE POSSESSION OF THE APPLICANT-APPELLEE AND HIS PREDECESSORS-IN-INTEREST HAD BEEN PEACEFUL, OPEN, CONTINUOUS, UNINTERRUPTED AND ADVERSE TO CLAIMANTS AND IN THE CONCEPT OF OWNER. (p. 6, Brief for the Petitioners, p. 105, Rollo)

Respondent court affirmed said decision and denied a motion for reconsideration of the same hence the present petition with two (2) assigned errors, basically the same issues raised with the respondent court:

RESPONDENT COURT ERRED IN NOT HOLDING THAT THE DETERMINATION OF WHETHER A PUBLIC LAND IS AGRICULTURAL OR STILL A FOREST LAND RESTS EXCLUSIVELY UPON THE DIRECTOR OF FORESTRY (NOW DIRECTOR OF FOREST DEVELOPMENT), THE SECRETARY OF NATURAL RESOURCES) AND THE PRESIDENT OF THE PHILIPPINES. RESPONDENT COURT ERRED IN NOT HOLDING THAT THE LAND IS PRESUMED TO BELONG TO THE PUBLIC DOMAIN AND PRIVATE RESPONDENT HEREIN HAS NOT CONVINCINGLY SHOWN THAT THE REMOTE PREDECESSOR-IN-INTEREST POSSESSED THE LAND IN QUESTION SINCE TIME IMMEMORIAL. (pp. 9 & 20, Brief for the Petitioners, p. 105, Rollo)

Out of the 30.5943 hectares applied for registration under the Torrens System, 11.1863 hectares are coconut lands and admittedly within the disposable portion of the public domain. These are more particularly Identified as parcels "B," B-1", "B-2" and "B-3" of the sketch plan Exh. "1-A." The rest, consisting of 19.4080 hectares and Identified as parcels A, A-1, A-2 and A-3 of the same plan Exh. "1-A," is now the center of controversy of the present appeal. Petitioners contend that respondent court completely ignored the undisputed facts that 1) the controverted area is within Timberland Block "B," L.C. Project No. 38, L.C. Map No. 1971 of Buenavista, Iloilo and that 2) the certification of February 18, 1956 of the then Director of Forestry to the effect that the area in question is needed for forest purposes. Respondent court in affirming the decision of the Iloilo trial court ruled that although the controverted portion of 19.4080 hectares are mangrove and nipa swamps within Timberland Block "B," L.C. Project No. 38, same cannot be considered part of the public forest not susceptible of private ownership since petitioners failed to submit convincing proof that these lands are more valuable for forestry than for agricultural purposes, and the presumption is that these are agricultural lands. Respondent court based its conclusion upon the premise that whether or not a controverted parcel of land is forest land, is a question of fact which should be settled by competent proofs, and if such a question be an issue in a land registration proceeding, it is incumbent upon the Director of Forestry to submit to the court convincing proofs that the land in dispute is not more valuable for agriculture than for forest purposes. It is the position of respondent that respondent court did "not hesitate to apply this presumption with full force particularly where, as in the case at bar, the lands applied for have been possessed and cultivated by the applicant and his predecessors-in-interest for a long number of years without the government taking any positive step to dislodge the occupants from their holdings which have passed from one to another

by inheritance or by purchase." (p. 9, Brief for private respondents) Otherwise stated, it is Our impression that private respondents claim the rule of prescription against the government. Such contentions of private respondents do not hold water. Admittedly the controversial area is within a timberland block as classification of the municipality and certified to by the Director of Forestry on February 18, 1956 as lands needed for forest purposes and hence they are portions of the public domain which cannot be the subject of registration proceedings. Clearly therefore the land is public land and there is no need for the Director of Forestry to submit to the court convincing proofs that the land in dispute is not more valuable for agriculture than for forest purposes, as there was no question of whether the land is forest land or not. Be it remembered that said forest land had been declared and certified as such by the Director of the Bureau of Forestry on February 18, 1956, several years before the original applicant of the lands for registration Mercedes Diago, filed it on July 11, 1961. In the case of Government of the Philippine Islands vs. Abella, 49 Phil. 49, cited by private respondents themselves in their brief, We held —

Following the decision of Ankon vs. Government of the Philippine Islands (40 Phil. 10), it is again held, that whether a particular parcel of land is more valuable for forestry purposes than for agricultural purposes, or vice versa, is a fact which must be established during the trial of the case. Whether the particular land is agricultural, forestry or mineral is a question to be settled in each particular case unless the Bureau of Forestry has, under the authority conferred upon it by law, prior to the intervention of private interest, set aside said land for forestry or mineral resources. (Italics for emphasis)

We also held in the case of Republic vs. Animas, 56 SCRA 499, 503 that- ... As a general rule, timber or forest lands are not alienable or disposable under either the Constitution of 1935 or the Constitution of 1973. ... It is the Bureau of Forestry that has jurisdiction and authority over the demarcation, protection, management, reproduction, occupancy and use of all public forests and forest reservations and over the granting of licenses for the taking of products therefrom, including stone and earth (Section 1816 of the Revised Administrative Code). That the area in question is a forest or timber land is clearly established by the certification made by the Bureau of Forest Development that it is within the portion of the area which was reverted to the category of forest land, approved by the President on March 7, 1958.

As provided for under Sec. 6 of Commonwealth Act No. 141, which was lifted from Act No. 2874, the classification or reclassification of public lands into alienable or disposable, mineral or forest lands is now a prerogative of the Executive Department of the government and not of the courts. With these rules, there should be no more room for doubt that it is not the court which determines the classification of lands of the public domain into agricultural, forest or mineral but the Executive Branch of the Government, through the Office of the President. Hence, it was grave error and/or abuse of discretion for the respondent court to ignore the uncontroverted facts that (1) the disputed area is within a timberland block and (2) as certified to by the then Director of Forestry, the area is needed for forest purposes. Furthermore, private respondents Cannot claim to have obtained their title by prescription inasmuch as the application filed by them necessarily implied an admission that the portions applied for are part of the public domain which cannot be acquired by prescription, unless the law expressly permits it. It is a rule of law that possession of forest lands, however long, cannot ripen into private ownership (Director of Forestry vs. Munoz, 23 SCRA 1184). WHEREFORE, in the light of the foregoing, the assailed decision is hereby SET ASIDE, and a new one is hereby rendered, declaring that: 1) Parcels "B," "B-1," "B-2 and "B-3" of the sketch plan Exhibit "1-A" consisting of 11.1863 hectares of coconut land and admittedly within the disposable portion of the public domain are hereby ordered registered in the name of the applicant Filomeno Gallo and/or his successors-in-interest as provided for by the Public Land Law; and 2) Parcels "A," "A-1," and "A-2," and "A-3" of the same plan Exh. "1-A," consisting of 19.4080 hectares, are forest lands or lands of the public domain of the Republic of the Philippines and are therefore inalienable. SO ORDERED. Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Republic vs. CA GR No.40402 16March 1987


Manila

EN BANC

G.R. No. L-17635 March 30, 1963

EDUARDO SANCHEZ, GREGORIO NUÑEZ, SULPICIO BANAAG, LINO BASA and RODOLPO FERNANDEZ, petitioners-appellants, vs.MUNICIPALITY OF ASINGAN, Province of Pangasinan, respondent-appellee.

Castillo, Diaz, Tayabas and Torres for petitioners-appellants.Guillermo, Navarro, Rame and Venture for respondent-appellee.

MAKALINTAL, J.:

This case is before us on appeal by the plaintiffs from the decision of the Court of First Instance of Pangasinan.

The facts as found by the trial court are as follows: The defendant municipality, appellee herein, is the owner of a triangular strip of land situated between the site of the municipal school building and the provincial road, measuring 42 x 26-1/2 x 46 meters. On that land appellants, with the knowledge and implied consent of the municipality, constructed temporary stores and buildings of light materials shortly after the end of the last war. Between 1952 and 1959 they paid rents to appellee. When a new local administration took over after the elections of November 1959 the municipal council passed a resolution notifying the occupants of the land that the same was needed for certain public purposes, such as parking space, expansion of school grounds, widening of the road and waiting area for pedestrians. Appellants were therefore advised to vacate on or before May 15, 1960, some five (5) months after the date of notice. Instead of moving, however, appellants filed a petition for prohibition with the court a quo on May 10, 1960 to prevent the municipality from ejecting them from the land, with the alternative prayer that should they be ejected, appellee be ordered to reimburse to them the rents which they had paid, in the total sum of P1,178.20. There was also a demand for damages and attorney's fees. After trial, the court dismissed the petition and ordered appellants to vacate the land, with costs.

Appellants' first contention here is that the land in question belongs to the Province of Pangasinan and therefore appellee has no right to order their ejectment. The premise of the contention is incorrect, for the clear and specific finding of the court a quo is that the said land is owned by the Municipality of Asingan. This is a factual conclusion that is no longer open to review in the present appeal. The additional statement by the court "that it is part of the broad shoulder of the provincial road" does not make the land provincial property, such statement being merely descriptive of its location and not indicative of its ownership..

The next issue raised by appellants is with reference to the sum of P1,178.20 paid by them as rents from 1952 to 1959. They claim the right to be reimbursed in case they should be ejected, and cite the case of Rojas v. Municipality of Cavite, 30 Phil. 607, where this Court, after declaring null and void the lease of a public plaza belonging to the said municipality and ordering the lessee to vacate the same, ordered the municipality to reimburse the rentals collected. It should be noted that while the property involved in that case was clearly devoted to public use, and therefore outside the commerce of man, and could not under any circumstance have been the object of a valid contract of lease, appellee's position herein is that the land in question is patrimonial character, not being included in any of the categories of municipal properties for public use

enumerated in Article 424 of the Civil Code, namely: "municipal streets, squares, fountains, public waters, promenades and public works for public service in said municipality." There is indeed nothing in the decision appealed from or in the briefs of the parties to show that the land was devoted to any of those purposes when appellants began their occupancy. Consequently, the implied agreement of lease with them was not null and void, although terminable upon the notice as appellee herein elected to terminate it. That being so, there is no ground on which reimbursement of the rents may be ordered.

In any event, even granting that the land in question is for public use and therefore the municipality of Asingan could not legally lease it to private parties, we see no justification for the stand maintained by appellants that after having occupied said land and derived benefits therefrom they should still be entitled to recover what they have paid as a condition for their ejectment. That would be to enrich them unduly to the prejudice of appellee. Besides, it may be said that when they built their temporary structures on the land with the latter's knowledge and implied consent they both treated it as municipal patrimonial property. Insofar as the rents already paid by them are concerned appellants are estopped from claiming otherwise in order to obtain a recovery.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts.

The judgment appealed from is affirmed, with cost against appellants.

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


Manila

EN BANC

G.R. No. L-2017 November 24, 1906

THE MUNICIPALITY OF OAS, plaintiff-appellee, vs.BARTOLOME ROA, defendant-appellant.

Del-Pan, Ortigas and Fisher, for appellant. Enrique Llopiz for appellee.

WILLARD, J.:

The plaintiff brought this action for the recovery of a tract of land in the pueblo of Oas, claiming that it was a part of the public square of said town. The defendant in his answer alleged that he was the owner of the property. Judgment was rendered in favor of the plaintiff and the defendant has brought the case here by bill of exceptions.

As we look at the case, the only question involved is one of fact. Was the property in question a part of the public square of the town of Oas? The testimony upon this point in favor of the plaintiff consisted of statements made by witnesses to the effect that this land had always been a part of the public square, and of certain resolutions adopted by the principalia of the pueblo reciting the same fact, the most important of these being the minutes of the meeting of the 27th of February, 1892. In that document it is expressly stated that this land was bought in 1832 by the then parish priest for the benefit of the pueblo. It recites various proceedings taken thereafter in connection with this ownership, including among them an order of the corregidor of Nueva Caceres prohibiting the erection of houses upon the land by reason of the fact above recited — namely, that the land belonged to the pueblo. This resolution terminated with an order to the occupant of the building then standing upon the property that he should not repair it. The defendant signed this resolution.

It further appears that the same building was almost entirely destroyed by a baguio on the 13th and 14th of May, 1893, and that the authorities of the puebo ordered the complete demolition thereof. The resolution of the 31st of May, 1893, declared that the then owner of the building, Jose Castillo, had no right to reconstruct it because it was situated upon land which did not belong to him. This resolution was also signed by the defendant.

The evidence on the part of the defendant tends to show that in 1876 Juana Ricarte and Juana Riquiza sold the land in question to Juan Roco, and that on the 17th day of December, 1894, Jose Castillo sold it to the defendant. No deed of conveyance from Juan Roco to Jose Castillo was presented in evidence, but Castillo, testifying as a witness, said that he had bought the property by verbal contract from Roco, his father-in-law. The defendant, after his purchase in 1894, procured a possessory of information which was allowed by an order of the justice of the peace of Oas on the 19th day of January, 1895, and recorded in the Registry of Property on the 28th of March of the same year.

In this state of the evidence, we can not say that the proof is plainly and manifestly against the decision of the court below. Unless it is so, the finding of fact made by that court can not be reversed. (De la Rama vs. De la Rama, 201 U. S., 303.)

The two statements signed by Roa, one in 1892 and the other in 1893, are competent evidence against him. They are admissions by him to the effect that at that time the pueblo was the owner of the property in question. They are, of course, not conclusive against him. He was entitled to, and did present evidence to overcome the effect of these admissions. The evidence does not make out a case of estoppel against him. (sec. 333, par. 1, Code of Civil Procedure.)

The admissibility of these statements made by Roa do not rest upon section 278 of the Code of Civil Procedure, which relates to declarations or admissions made by persons not a party to the suit, but it rests upon the principle that when the defendant in a suit has himself made an admission of any fact pertinent to issue involved, it can be received against him.

This action was commenced on the 17th of December, 1902. There is no evidence of any adverse occupation of this land for thirty years, consequently the extraordinary period of prescription does not apply. The defendant can not rely upon the ordinary period of prescription of ten years because he was not a holder in good faith. He knew at that time of his purchase in 1894, and had so stated in writing, that the pueblo was the owner of the property. So that, even if the statute of limitations ran against a municipality in reference to a public square, it could not avail the defendant in this case.

It appears that Roa has constructed upon the property, and that there now stands thereon, a substantial building. As early as 1852 this land had been used by the municipality constructed thereon buildings for the storage of property of the State, quarters for the cuadrilleros, and others of a like character. It therefore had ceased to be property used by the public and had become a part of the bienes patrimoniales of the pueblo. (Civil Code, arts. 341, 344.) To the case are applicable those provisions of the Civil Code which relate to the construction by one person of a building upon land belonging to another. Article 364 of the Civil Code is as follows:

Where there has been bad faith, not only on the part of the person who built, sowed, or planted on another's land, but also on the part of the owner of the latter, the rights of both shall be the same as if they had acted in good faith.

Bad faith on the part of the owner is understood whenever the act has been executed in his presence with his knowledge and tolerance and without objection.

The defendant constructed the building in bad faith for, as we have said, he had knowledge of the fact that his grantor was not the owner thereof. There was a bad faith also on the part of the plaintiff in accordance with the express provisions of article 364 since it allowed Roa to construct the building without any opposition on its part and to so occupy it for eight years. The rights of the parties must, therefore, be determined as if they both had acted in good faith. Their rights in such cases are governed by article 361 of the Civil Code, which is as follows:

The owner of the land on which the building, sowing, or planting is done in good faith shall have a right to appropriate as his own the work, sowing, or planting after the indemnity mentioned in articles 453 and 454, or, to oblige the person who has built or planted, to pay him the value of the land and to force the person who sowed to pay the proper rent.

The judgment of the court below is so modified as to declare that the plaintiff is the owner of the land and that it has the option of buying the building thereon, which is the property of the defendant, or of selling to him the land on which it stands. The plaintiff is entitled to recover the costs of both instances.1âwphil.net

After the expiration of twenty days let judgment be entered in accordance herewith and at the proper time thereafter let the record be remanded to the court below for proper action. So ordered.

Johnson, Carson and Tracey, JJ., concur.



G.R. No. L40474 August 29, 1975CEBU OXYGEN & ACETYLENE CO., INC., petitioner, vs.HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial District, and JOSE L. ESPELETA, Assistant Provincial Fiscal, Province of Cebu, representing the Solicitor General's Office and the Bureau of Lands, respondents.Jose Antonio R Conde for petitioner.Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General Octavio R. Ramirez and Trial Attorney David R. Hilario for respondents. .CONCEPCION, Jr., J.:This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioner's application for registration of title over a parcel of land situated in the City of Cebu.The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu City. On September 23, 1968, the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included in the City Development Plan. 1 Subsequently, on December 19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the Acting City Mayor to sell the land through a public bidding. 2 Pursuant thereto, the lot was awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a total consideration of P10,800.00. 3 By virtue of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of First instance of Cebu to have its title to the land registered. 4 On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground that the property sought to be registered being a public road intended for public use is considered part of the public domain and therefore outside the commerce of man. Consequently, it cannot be subject to registration by any private individual. 5 After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioner's application for registration of title. 6 Hence, the instant petition for review.For the resolution of this case, the petitioner poses the following questions:

(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph 34, give the City of Cebu the valid right to declare a road as abandoned? and(2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which may be the object of a common contract?

(1) The pertinent portions of the Revised Charter of Cebu City provides:Section 31. Legislative Powers. Any provision of law and executive order to the contrary notwithstanding, the City Council shall have the following legislative powers:xxx xxx xxx(34) ...; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed.

From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In the case of Favis vs. City of Baguio, 7 where the power of the city Council of Baguio City to close city streets and to vacate or withdraw the same from public use was similarly assailed, this court said:

5. So it is, that appellant may not challenge the city council's act of withdrawing a strip of Lapu-Lapu Street at its dead end from public use and converting the remainder thereof into an alley. These are acts well within the ambit of the power to close a city street. The city council, it would seem to us, is the authority competent to determine whether or not a certain property is still necessary for public use.Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust will be presumed. So the fact that some private interests may be served incidentally will not invalidate the vacation ordinance.

(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.Article 422 of the Civil Code expressly provides that "Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State."Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: "Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed."Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the petitioner has a registerable title over the lot in question.WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the petitioner's application for registration of title.SO ORDERED.Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur


Manila

EN BANC

G.R. No. L-7054 January 20, 1913

MUNICIPALITY OF HINUNANGAN, plaintiff-appellee, vs.THE DIRECTOR OF LANDS, defendant-appellant.

Attorney-General Villamor, for appellant. Provincial Fiscal De la Rama, for appellee.

MORELAND, J.:

This is an appeal from the judgment of the Court of Land Registration, ordering the registration of the title of the petitioner to the lands described in the petition. The appeal is taken by the Insular Government from the registration of the title of one of the parcels of land only. It is situated in the municipality of Hinunangan, Province of Leyte, and contains an area of 10,328.8 square meters. It is bounded on the northeast by the maritime zone; on the southeast by North America Street; on the southwest by Manilili Street, and on the northwest by San Isidro Labrador Street. Upon this lot is built a stone fort which has stood there from time immemorial and was in times past used as a defense against the invasion of the Moros.

Formerly, as now, the defense of the national territory against invasion by foreign enemies rested upon the state and not upon the towns and villages and for this reason all of the defenses were constructed by the National Government. In volume 2, book 3, title 7, law 1 of the Laws of the Indies appears the following:

We command that all the ground roundabout the castles and fortresses be clear and unoccupied, and if any building is erected within 300 paces of the wall or other building so strong that even at a greater distance it would prejudice the defenses, it shall be torn down, and the owner of the same shall be paid from the Royal Treasury for the damages caused him.

Book 4, title 7, law 12, reads as follows:

We order that, for the security and defense of the cities as is now assured by the castles and fortresses, no building shall be erected within 300 paces of the walls or stockades of the new cities.

Article 339 of the Civil Code is as follows, in part:

ART. 339. The following are public property:

xxx xxx xxx

2. That which belongs privately to the state, which is not for public use and which is destined for the public good or to increase the national riches, such as walls, fortresses and other constructions for the defense of the country, and the mines as long as no concession in regard to them is made.

Article 341 of the Civil Code provides:

ART. 341. Public property, when it ceases to be used for the public good or for the necessities of the defense of the country, becomes a part of the property of the state.

From these provisions it seems clear that the fortress in question was erected for the national defense and was a part of the property of the state destined and used for that purpose. As a necessary result, the land upon which it stands must also have been dedicated to that purpose.

The fact that said fortress may not have been used for many years for the purposes for which it was originally built does not of necessity deprive the state of its ownership therein. As we have seen, the Civil Code provides that, when the fortress ceases to be used for the purposes for which it was constructed, it becomes the property of the state in what may be called the private sense. That the municipality may have exercised within recent years acts of ownership over the land by permitting it to be occupied and consenting to the erection of private houses thereon does not determine necessarily that the land has become the property of the municipality. We have held in several cases that, where the municipality has occupied lands distinctly for public purposes, such as for the municipal court house, the public school, the public market, or other necessary municipal building, we will, in the absence of proof to the contrary, presume a grant from the state in favor of the municipality; but, as indicated by the wording, that rule may be invoked only as to property which is used distinctly for

public purposes. It cannot be applied against the state when occupied for any other purpose.

The evidence does not disclose that the municipality has used the land for purposes distinctly public.

The judgment in relation to the parcel of land heretofore described is reversed and the petition as to that parcel dismissed. In all other respects the judgment is affirmed. So ordered.

Arellano, C.J., Torres, Mapa, Johnson, and Trent, JJ., concur.


Manila

SECOND DIVISION G.R. No. L-33022 April 22, 1975CENTRAL BANK OF THE PHILIPPINES, petitioner, vs.COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE CORPORATION, respondents. F.E. Evangelista for petitioner. Cruz, Villarin & Laureta for private respondent. BARREDO, J.Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in CA-G.R. No. 43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No. Q-10919 sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation damages for breach contract in that after having formally and officially awarded, pursuant to the results of the usual bidding to Ablaza in December 1965 the "contract" for the construction of its San Fernando, La Union branch building and allowed said contractor to commence the work up to about May, 1966, albeit without any written formal contract having been executed, the Bank failed and refused to proceed with the project, unless the plans were revised and a lower price were agreed to by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced by the then new President of the Philippines on December 30, 1965 and the Memorandum Circular No. 1 dated December 31, 1965 of the same President. The factual background of this case is related in the following portions of the decision of the trial court, which the Court of Appeals affirmed without modification: têñ.£îhqwâ£

Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid and Instructions to Bidders for the purpose of receiving sealed proposals for the general construction of its various proposed regional offices, including the Central Bank regional office building in San Fernando, La Union. In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and Finance Corporation, which was one of the qualified bidders, submitted a bid proposal for the general construction of defendant's proposed regional office building in San Fernando, La Union at the public bidding held on November 3, 1965. The said proposal was, as required by the defendant accompanied by a cash bidder's bond in the sum of P275,000.00. On December 7, 1965, the Monetary Board of the defendant Central Bank of the Philippines, after evaluating all the bid proposals submitted during the above-mentioned bidding, unanimously voted and approved the award to the plaintiff of the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, for the sum of P3,749,000.00 under plaintiff's Proposal Item No. 2. Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the Governor and concurrently the Chairman of the Management Building Committee of the defendant Central Bank of the Philippines, set a telegram to the plaintiff, informing the latter that the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, had been awarded to the plaintiff. The said telegram was followed by a formal letter, also dated December 10, 1965, duly signed by said Mr. Rizalino L. Mendoza, confirming the approval of the award of the above-stated contract under plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00. Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award by means of a letter dated December 15, 1965, whereby plaintiff also requested permission for its workmen to enter the site of the project, build a temporary shelter and enclosure, and do some clearing job thereat. Accordingly, said permission was granted by the defendant as embodied in its letter dated January 4, 1966, addressed to the plaintiff..Within five (5) days from receipt by the plaintiff of the said notice of award, and several times thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff corporation, went personally to see Mr. Rizalino L. Mendoza at the latter's Central Bank office to follow up the signing of the corresponding contract. A performance bond in the total amount of P962,250.00 (P275,000.00 of which was in cash and P687,250.00 in the form of a surety bond) was subsequently posted by the plaintiff in compliance with the above-stated Instructions to Bidders, which bond was duly accepted by the defendant. Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced actual construction work on the project about the middle of January, 1966. On February 8, 1966, by means of a formal letter, defendant requested the plaintiff to submit a schedule of deliveries of materials which, according to plaintiff's accepted proposal, shall be furnished by the defendant. In compliance therewith, on February 16, 1966, plaintiff submitted to the defendant the schedule of deliveries requested for. During the period when the actual construction work on the project was in progress, Mr. Nicomedes G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the latter's office in the Central Bank. During those meetings, they discussed the progress of the construction work being then undertaken by the plaintiff of the projects of the defendant in San Fernando, La Union, including the progress of the excavation work. Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the construction site of the said

project. While he was there, he admitted having seen pile of soil in the premises. At that time, the excavation work being undertaken by the plaintiff was about 20% complete. On March 22, 1966, defendant again wrote the plaintiff, requesting the latter to submit the name of its representative authorized to sign the building contract with the defendant. In compliance with the said request, plaintiff submitted to the defendant the name of its duly authorized representative by means of a letter dated March 24, 1966. A meeting called by the defendant was held at the conference room of the Central Bank on May 20, 1966. At the said meeting, the defendant, thru Finance Secretary Eduardo Romualdez, announced, among other things, the reduction of the appropriations for the construction of the defendant's various proposed regional offices, including that of the proposed San Fernando, La Union regional office building, the construction of which had already been started by the plaintiff. He also stated that the Central Bank Associated Architects would be asked to prepare new plans and designs based on such reduced appropriations. The defendant, during that same meeting, also advised the plaintiff, thru Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff corporation at the said meeting), to stop its construction work on the Central Bank Regional office building in San Fernando, La Union. This was immediately complied with by the plaintiff, although its various construction equipment remained in the jobsite. The defendant likewise presented certain offer and proposals to the plaintiff, among which were: (a) the immediate return of plaintiff's cash bidder's bond of P275,000.00; (b) the payment of interest on said bidder's bond at 12% per annum; (c) the reimbursement to the plaintiff of the value of all the work accomplished at the site; (d) the entering into a negotiated contract with the plaintiff on the basis of the reduced appropriation for the project in question; and (e) the reimbursement of the premium on plaintiff's performance bond. Not one of these offers and proposals of the defendant, however, was accepted by the plaintiff during that meeting of May 20, 1966. On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal execution of the corresponding contract, without prejudice to its claim for damages. The defendant, thru its Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to the said letter of the plaintiff, whereby the defendant claimed that an agreement was reached between the plaintiff and the defendant during the meeting held on May 20, 1966. On the following day, however, in its letter dated June 16, 1966, the plaintiff, thru counsel, vehemently denied that said parties concluded any agreement during the meeting in question. On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the amount of P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept the return of the said cash bond, without prejudice, however, to its claims as contained in its letters to the defendant dated June 3, June 10, and June 16, 1966, and with further reservation regarding payment of the corresponding interest thereon. On July 7, 1966, the said sum of P275,000.00 was returned by the defendant to the plaintiff. On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated January 26, 1967, the construction equipment of the plaintiff were pulled out from the construction site, for which the plaintiff incurred hauling expenses. The negotiations of the parties for the settlement of plaintiff's claims out of court proved to be futile; hence, the present action was instituted by plaintiff against the defendant." (Pp. 249-256, Rec. on Appeal).

It may be added that the Instructions to Bidders on the basis of which the bid and award in question were submitted and made contained, among others, the following provisions: têñ.£îhqwâ£

IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon the parties only with its formal execution. xxx xxx xxxIB 114.1 The bidder whose proposal is accepted will be required to appear at the Office of the Owner in person, or, if a firm or corporation, a duly authorized representative shall so appear, and to execute that contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal. xxx xxx xxx IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed Contract, and he shall complete the work within the time specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.)

In the light of these facts, petitioner has made the following assignment of errors: têñ.£îhqwâ£I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE PHILIPPINES AND RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION FOR THE GENERAL CONSTRUCTION WORK OF PETITIONER'S REGIONAL OFFICE BUILDING AT SAN FERNANDO, LA UNION.II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS COMMITTED A BREACH

OF CONTRACT. III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD GIVEN ITS APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION.IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF ACTUAL AND COMPENSATORY DAMAGES, ATTORNEY'S FEES AND RETAINING FEE IS FAIR AND REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE FOR COSTS." (Pp. A & B, Petitioner-Appellant's Brief.)

Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its proposition that there could be no perfected contract in this case, (contrary to the conclusion of the courts below) because there is no showing of compliance, and in fact, there has been no compliance with the requirement that there must be a certification of the availability of funds by the Auditor General pursuant to Section 607 of the Revised Administrative Code which provides thus:

Section 607. Certificate showing appropriation to meet contract. — Except in the case of a contract for personal service or for supplies to be carried in stock, no contract involving an expenditure by the National Government of three thousand pesos or more shall be entered into or authorized until the Auditor General shall have certified to the officer entering into such obligation that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. When application is made to the Auditor General for the certificate herein required, a copy of the proposed contract or agreement shall be submitted to him accompanied by a statement in writing from the officer making the application showing all obligations not yet presented for audit which have been incurred against the appropriation to which the contract in question would be chargeable; and such certificate, when signed by the Auditor, shall be attached to and become a part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purposes until the Government is discharged from the contract in question. Except in the case of a contract for supplies to be carried in stock, no contract involving the expenditure by any province, municipality, chartered city, or municipal district of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. Such certificate, when signed by the said treasurer, shall be attached to and become part of the proposed contract and the sum so certified shall not thereafter be available for expenditure for any other purpose until the contract in question is lawfully abrogated or discharged. For the purpose of making the certificate hereinabove required ninety per centum of the estimated revenues and receipts which should accrue during the current fiscal year but which are yet uncollected, shall be deemed to be in the treasury of the particular branch of the Government against which the obligation in question would create a charge." (Pp. 23-25, Petitioner-Appellant's Brief.)

It is contended that in view of such omission and considering the provisions of Section 608 of the same code to the effect that "a purported contract entered into contrary to the requirements of the next preceding section hereof shall be wholly void", "no contract between the petitioner and respondent Ablaza Construction and Finance Corporation for the general construction of the proposed regional office building of the Central Bank in San Fernando, La Union, was ever perfected because only the first stage, that is the award of the contract to the lowest responsible bidder, respondent Ablaza Construction and Finance Corporation, was completed." (p. 29, Petitioner-Appellant's Brief.) And in support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs. Wright thus: têñ.£îhqwâ£

The aforesaid requirements of the Revised Administrative Code for the perfection of government contracts have been upheld by this Honorable Court in the case of Tan C. Tee Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the contract to the lowest bidder does not amount to entering into the contract because of the requirement of Section 607 of the Revised Administrative Code that a copy of the proposed contract shall be submitted to the Auditor General together with a request for the availability of funds to cover the proposed contract. Thus, this Honorable Court held:

'To award the contract to the lowest responsible bidder is not the equivalent of entering into the contract. Section 607 of the Administrative Code requires that a copy of the proposed contract shall be submitted along with the request for the certificate of availability of funds, but there could be no proposed contract to be submitted until after the award was made.'

And to guide government authorities in the letting of government contracts, this Honorable Court, in said case of Tan C. Tee vs. Wright, supra, laid down the procedure which should be followed, as follows:

`PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING OF CONTRACTS FOR INSULAR WORKS. — The procedure which should be followed in the letting of contracts for Insular works is the following: First, there is an award of the contract by the Director of Public Works to the lowest responsible bidder. Second, there is a certificate of availability of funds to be obtained from the Insular Auditor, and in some cases from the Insular Treasurer, to cover the proposed contract. And

third, there is a contract to be executed on behalf of the Government by the Director of Public Works with the approval of the department head.'" (Pp. 27-28, Petitioner-Appellant's Brief.)

The contention is without merit. To start with, the record reveals that it is more of an afterthought. Respondent never raised this question whether in its pleadings or at the hearings in the trial court. We have also read its brief in the appellate court and no mention is made therein of this point. Not even in its memorandum submitted to that court in lieu of oral argument is there any discussion thereof, even as it appears that emphasis was given therein to various portions of the Revised Manual of Instructions to Treasurers regarding the perfection and constitution of public contracts. In fact, reference was made therein to Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959, requiring "all contracts of whatever nature involving P10,000 or more to be entered into by all bureaus and offices, ... including the ... Central Bank ... shall be submitted to the Auditor General for examination and review before the same are perfected and/or consummated, etc.", without mentioning, however, that said administrative order was no longer in force, the same having been revoked on January 17, 1964 by President Macapagal under Administrative Order No. 81, s. 1964. Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the answer may not be raised for the first time on appeal, petitioner's position cannot be sustained. Indeed, in the Court of Appeals, petitioner could only bring up such questions as are related to the issues made by the parties in their pleadings, particularly where factual matters may be involved, because to permit a party to change his theory on appeal "would be unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule 51, the appellate court cannot consider any error of the lower court "unless stated in the assignment of errors and properly argued in the brief." Even prescinding from this consideration of belatedness, however, it is Our considered view that contracts entered into by petitioner Central Bank are not within the contemplation of Sections 607 and 608 cited by it. Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the National Government" and that the term "National Government" may not be deemed to include the Central Bank. Under the Administrative Code itself, the term "National Government" refers only to the central government, consisting of the legislative, executive and judicial departments of the government, as distinguished from local governments and other governmental entities and is not synonymous, therefore, with the terms "The Government of the Republic of the Philippines" or "Philippine Government", which are the expressions broad enough to include not only the central government but also the provincial and municipal governments, chartered cities and other government-controlled corporations or agencies, like the Central Bank. (I, Martin, Administrative Code, p. 15.) To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary and banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and use a corporate seal which shall be judicially noticed; to make contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of this Act. The Central Bank may acquire and hold such assets and incur such liabilities as result directly from operations authorized by the provisions of this Act, or as are essential to the proper conduct of such operations." (Sec. 4) It has capital of its own and operates under a budget prepared by its own Monetary Board and otherwise appropriates money for its operations and other expenditures independently of the national budget. It does not depend on the National Government for the financing of its operations; it is the National Government that occasionally resorts to it for needed budgetary accommodations. Under Section 14 of the Bank's charter, the Monetary Board may authorize such expenditures by the Central Bank as are in the interest of the effective administration and operation of the Bank." Its prerogative to incur such liabilities and expenditures is not subject to any prerequisite found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this case, it is not subject, like the Social Security Commission, to Section 1901 and related provisions of the Revised Administrative Code which require national government constructions to be done by or under the supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For these reasons, the provisions of the Revised Administrative Code invoked by the Bank do not apply to it. To Our knowledge, in no other instance has the Bank ever considered itself subject thereto. In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of the Administrative Code thus: The second question to be considered has reference to the applicability of section 607 of the Administrative Code to contracts made by the City of Manila. In the second paragraph of said section it is declared that no contract involving the expenditure by any province, municipality, township, or settlement of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. It is admitted that no such certificate was made by the treasurer of Manila at the time the contract now in question was made. We are of the opinion that the provision cited has no application to contracts of a chartered city, such as the City of Manila. Upon examining said provision (sec. 607) it will be found that the term chartered city, or other similar expression, such as would include the City of Manila, is not used; and it is quite manifest from the careful use of terms in said section that chartered cities were intended to be excluded. In this connection the definitions of "province," "municipality," and "chartered city," given in section 2 of the Administrative Code are

instructive. The circumstance that for certain purposes the City of Manila has the status both of a province and a municipality (as is true in the distribution of revenue) is not inconsistent with this conclusion." 1 We perceive no valid reason why the Court should not follow the same view now in respect to the first paragraph of the section by confirming its application only to the offices comprised within the term National Government as above defined, particularly insofar as government-owned or created corporations or entities having powers to make expenditures and to incur liabilities by virtue of their own corporate authority independently of the national or local legislative bodies, as in the case of the petitioner herein, are concerned. Whenever necessary, the Monetary Board, like any other corporate board, makes all required appropriations directly from the funds of the Bank and does not need any official statement of availability from its treasurer or auditor and without submitting any papers to, much less securing the approval of the Auditor General or any outside authority before doing so. Indeed, this is readily to be inferred from the repeal already mentioned earlier of Administrative Order No. 290, s. 1959, which petitioner tried to invoke, overlooking perhaps such repeal. In other words, by that repeal, the requirement that the Central Bank should submit to the Auditor General for examination and review before contracts involving P10,000 or more to be entered into by it "before the same are perfected and/or consummated" had already been eliminated at the time the transaction herein involved took place. Consequently, the point of invalidity pressed, belatedly at that, by petitioner has no leg to stand on. The other main contention of petitioner is that the purported or alleged contract being relied upon by respondent never reached the stage of perfection which would make it binding upon the parties and entitle either of them to sue for specific performance in case of breach thereof. In this connection, since the transaction herein involved arose from the award of a construction contract 2 by a government corporation and the attempt on its part to discontinue with the construction several months after such award had been accepted by the contractor and after the latter had already commenced the work without any objection on the part of the corporation, so much so that entry into the site for the purpose was upon express permission from it, but before any written contract has been executed, it is preferable that certain pertinent points be clarified for the proper resolution of the issue between the parties here and the general guidance of all who might be similarly situated. Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion of the Instruction to Bidders: têñ.£îhqwâ£

IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon the parties only with its formal execution.

xxx xxx xxxIB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed Contract, and he shall complete the work within the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.)

Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could become effective and binding only upon the execution of the formal contract, and since admittedly no formal contract has yet been signed by the parties herein, there is yet no perfected contract to speak of and respondent has, therefore, no cause of action against the Bank. And in refutation of respondent's argument that it had already started the work with some clearing job and foundation excavations, which has never been stopped by petitioner who had previously given express permission to respondent to enter the jobsite, build a temporary shelter and enclosures thereon, petitioner counters that under the above instructions, respondent is supposed to commence the work "within ten (10) calendar days from the date he receives a copy of the fully executed Contract," and for said respondent to have started actual construction work before any contract has been signed was unauthorized and was consequently undertaken at his own risk, all the above circumstances indicative of estoppel notwithstanding. We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was "required to appear in the office of the Owner (the Bank) in person, or, if a firm or corporation, a duly authorized representative (thereof), and to execute the contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal." There can be no other meaning of this provision than that the Bank's acceptance of the bid of respondent Ablaza effected an actionable agreement between them. We cannot read it in the unilateral sense suggested by petitioner that it bound only the contractor, without any corresponding responsibility or obligation at all on the part of the Bank. An agreement presupposes a meeting of minds and when that point is reached in the negotiations between two parties intending to enter into a contract, the purported contract is deemed perfected and none of them may thereafter disengage himself therefrom without being liable to the other in an action for specific performance. The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by petitioner have to be reconciled with the other paragraphs thereof to avoid lack of mutuality in the relation between the parties. This invoked paragraph stipulates that "the acceptance of (respondent's) Proposal shall bind said respondent to execute the Contract and to be responsible for liquidated damages as herein provided." And yet, even if the contractor is ready and willing to execute

the formal contract within the five (5) day period given to him, petitioner now claims that under the invoked provision, it could refuse to execute such contract and still be absolutely free from any liability to the contractor who, in the meantime, has to make necessary arrangements and incur expenditures in order to be able to commence work "within ten (10) days from the date he receives a copy of the fully executed Contract," or be responsible for damages for delay. The unfairness of such a view is too evident to be justified by the invocation of the principle that every party to a contract who is sui juris and who has entered into it voluntarily and with full knowledge of its unfavorable provisions may not subsequently complain about them when they are being enforced, if only because there are other portions of the Instruction to Bidders which indicate the contrary. Certainly, We cannot sanction that in the absence of unavoidable just reasons, the Bank could simply refuse to execute the contract and thereby avoid it entirely. Even a government owned corporation may not under the guise of protecting the public interest unceremoniously disregard contractual commitments to the prejudice of the other party. Otherwise, the door would be wide open to abuses and anomalies more detrimental to public interest. If there could be instances wherein a government corporation may justifiably withdraw from a commitment as a consequence of more paramount considerations, the case at bar is not, for the reasons already given, one of them. As We see it then, contrary to the contention of the Bank, the provision it is citing may not be considered as determinative of the perfection of the contract here in question. Said provision only means that as regards the violation of any particular term or condition to be contained in the formal contract, the corresponding action therefor cannot arise until after the writing has been fully executed. Thus, after the Proposal of respondent was accepted by the Bank thru its telegram and letter both dated December 10, 1965 and respondent in turn accepted the award by its letter of December 15, 1965, both parties became bound to proceed with the subsequent steps needed to formalize and consummate their agreement. Failure on the part of either of them to do so, entities the other to compensation for the resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103 Phil. 444. We held therein that the award of a contract to a bidder constitutes an acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect a contract, upon notice of the award to (the bidder)". (at p. 450) We further held therein that the bidder's "failure to (sign the corresponding contract) do not relieve him of the obligation arising from the unqualified acceptance of his offer. Much less did it affect the existence of a contract between him and respondent". (at p. 452) It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of the perfection of contracts in the sense that the acceptance of a bid by a duly authorized official of a government-owned corporation, financially and otherwise autonomous both from the National Government and the Bureau of Public Works, insofar as its construction contracts are concerned, binds only the bidder and not the corporation until the formal execution of the corresponding written contract. Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold petitioner's pose. Pertinently to the point under consideration, the trial court found as follows: To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual damages in the sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs. Ambrosio R. Flores and Ricardo Y. Mayuga, as contained in their separate reports (Exhs. "13" and "15"), in the amounts of P154,075.00 and P147,500.00, respectively, should be taken into account.There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation of the jobsite, construction of bodegas, fences field offices, working sheds, and workmen's quarters; that the value of the excavation work accomplished by the plaintiff at the site was P113,800.00; that the rental of the various construction equipment of the plaintiff from the stoppage of work until the removal thereof from the jobsite would amount to P78,540.00 (Exhs. "K" - "K-l"); that the interest on the cash bond of P275,000.00 from November 3, 1965 to July 7, 1966 at 12% per annum would be P22,000.00; that for removing said construction equipment from the jobsite to Manila, plaintiff paid a hauling fee of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff posted as required under its contract with the defendant, the former was obliged to pay a premium of P2,216.55; and that the plaintiff was likewise made to incur the sum of P32,406.50, representing the 3% contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these expenditures, totalling P298,433.35 is attached to the records of this case (Annex "B", Complaint) and forms part of the evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the witness for the plaintiff, properly identified said document and affirmed the contents thereof when he testified during the hearing. The same witness likewise explained in detail the various figures contained therein, and identified the corresponding supporting papers. It is noteworthy, in this connection, that there is nothing in the records that would show that the defendant assailed the accuracy and/or reasonableness of the figures presented by the plaintiff; neither does it appear that the defendant offered any evidence to refute said figures. While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00 according to the report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr. Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate. To cite only an instance, in estimating, the value of the excavation work, the defendant merely measured the depth, length and width of the excavated, area which was submerged in water, without ascertaining the volume of rock and the volume of earth actually excavated as was done by the plaintiff who prepared a detailed plan showing the profile of the excavation work performed in the site (Exh. "B"). Likewise, the unit measure adopted by the defendant was in cubic meter

while it should be in cubic yard. Also the unit price used by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic yard; and only P4.95 for earth excavation while it should be P5.50 per cubic yard as clearly indicated in plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer). The Court, therefore, can not give credence to defendant's, aforementioned estimates in view of their evident inaccuracies. The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of P298,433.35 is meritorious. The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of the contract in question by the defendant. As previously stated, the plaintiff seeks to recover the amount of P814,190.00 by way of unrealized expected profit. This figure represents 18% of P4,523,275.00 which is the estimated direct cost of the subject project. As it has been established by the evidence that the defendant in fact was guilty of breach of contract and, therefore, liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is entitled to recover from the defendant unrealized expected profit as part of the actual or compensatory damages. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain (Art. 2200, New Civil Code). Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the latter would have been able to make had the contract been performed (Paz P. Arrieta, et al., plaintiffs-appellees, vs. National Rice Corporation defendant-appellant, G.R. No. L-15645, promulgated on January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant-appellant, 38 Phil. 392). Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized expected profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to the whole amount of said expected profit although there was only partial performance of the contract? Would the 18% expected profit be based on the estimated direct cost of the subject in the amount of P4,523,275.00, or on plaintiff's bid proposal of P3,749,000.00? On the question of reasonableness of the 18% expected profit, the Court noted that according to defendant's own expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar in magnitude as the one involved in the present case would be ample and reasonable. Plaintiff's witness, Mr. Nicomedes G. Ablaza, an experienced civil engineer who has been actively engaged in the construction business, testified that 15% to 20% contractor's profit would be in accordance with the standard engineering practice. Considering the type of the project involved in this case, he stated, the contractor's profit was placed at 18%. Taking into consideration the fact that this percentage of profit is even lower than what defendant's witness considered to be ample and reasonable, the Court believes that the reasonable percentage should be 18% inasmuch as the actual work was not done completely and the plaintiff has not invested the whole amount of money called for by the project." (Pp. 263-268, Record on Appeal.) These findings have not been shown to Us to be erroneous. And additional and clarificatory details, which We find to be adequately supported by the record, are stated in Respondents' brief thus: têñ.£îhqwâ£

23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr. Mendoza, to this request of respondent Ablaza. (Annex "D-1" to the Partial Stipulation of Facts, R.A., p. 146). 24. Acting upon this written permission, respondent Ablaza immediately brought its men and equipment from Manila to the construction site in San Fernando, La Union, and promptly commenced construction work thereat. This work, consisted of the setting up of an enclosure around the site, the building of temporary shelter for its workmen, and the making of the necessary excavation works. (Commissioner's Report, R.A., p. 181). 25. Following the commencement of such construction work, petitioner Central Bank, through a letter dated February 8, 1966, formally requested respondent Ablaza to submit to petitioner the following:têñ.£îhqwâ£

(a) A schedule of deliveries of material which, under the terms of respondent Ablaza's approved proposal, were to be furnished by petitioner. (b) A time-table for the accomplishment of the construction work. In short, as early as February 8, 1966, or more than three months prior to petitioner's repudiation of the contract in question the latter (petitioner) already took the above positive steps it compliance with its own obligations under the contract.

26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966, respondent Ablaza submitted the schedule of deliveries requested by petitioner. (Commissioner's Report, R.A., p. 182; Decision id., 252; also Exhs. "D" to "D-7", inclusive.) 27. During the period of actual construction, respondent Ablaza, on several occasions, actually discussed the progress of the work with Mr. Mendoza. In addition, in March 1966, the latter (Mr. Mendoza) personally visited the construction site. There he saw the work which respondent had by that time already accomplished which consisted of the completion of approximately 20% of the necessary excavation works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252). 28. Following Mr. Mendoza's visit at the construction site, or more specifically on March 22, 1966, the

latter (Mendoza) wrote to respondent Ablaza, instructing the latter to formally designate the person to represent the corporation at the signing of the formal construction contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18, 1967). 29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the above request. (Exh. "I"; also t.s.n., pp 121-123, December 18, 1967). 30. Subsequently, respondent Ablaza posted the required performance guaranty bond in the total amount of P962,250.00, consisting of (a) a cash bond in the amount of P275,000.00, and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in the amount of P687,250.00. In this connection, it is important to note that the specific purpose of this bond was to guarantee "the faithful Performance of the Contract" by respondent Ablaza. (Partial Stipulation of Facts, par. 6, R.A., p. 141). This performance guaranty bond was duly accepted by petitioner.(Id.) 31. However, on May 20, 1966, petitioner Central Bank called for a meeting with representatives of respondent Ablaza and another contractor. This meeting was held at the Conference Room of the Central Bank Building. At this meeting, then Finance Secretary Eduardo Romualdez, who acted as the representative of petitioner, announced that the Monetary Board had decided to reduce the appropriations for the various proposed Central Bank regional office buildings, including the one for San Fernando, La Union. 32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new plans and designs for the proposed regional office building in San Fernando would have to be drawn up to take account of the reduction in appropriation. Secretary Romualdez then advised respondent to suspend work at the construction site in San Fernando in the meanwhile. (Decision, R.A., pp. 253-254). 33. After making the above announcements, Secretary Romualdez proposed that all existing contracts previously entered into between petitioner Central Bank and the several winning contractors (among them being respondent Ablaza) be considered set aside. 34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered the following concessions to respondent Ablaza: têñ.£îhqwâ£

(a) That its cash bond in the amount of P275,000.00 be released immediately, and that interest be paid thereon at the rate of 12% per annum. (b) That respondent Ablaza be reimbursed for expenses incurred for the premiums on the performance bond which it posted, and which petitioner had already accepted. (Decision, R.A., pp. 253-254).

35. In addition, Secretary Romualdez also proposed the conclusion of a new contract with respondent Ablaza for the construction of a more modest regional office building at San Fernando, La Union, on a negotiated basis. However, the sincerity and feasibility of this proposal was rendered dubious by a caveat attached to it, as follows: têñ.£îhqwâ£

'4. Where auditing regulations would permit, the Central Bank would enter into a negotiated contract with the said corporation (Ablaza) for the construction work on the building on the basis of the revised estimates.' (Annex "8" to Answer, R.A., p. 95).

36. The revised cost fixed for this proposed alternative regional office building was fixed at a maximum of P3,000,000.00 (compared to P3,749,000.00 under the contract originally awarded to respondent). (Annex "6-A" to Answer, R.A., p. 87). 37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34 and 35, supra.), and on June 3, 1966, through counsel, wrote to petitioner demanding the formal execution of the contract previously awarded to it, or in the alternative, to pay "all damages and expenses suffered by (it) in the total amount of P1,181,950.00 ... "(Annex "7" to Answer, R.A., pp. 89-91; Decision, id., p. 254). 38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor Amado R. Brinas, replied to respondent Ablaza's demand denying any liability on the basis of the following claim: têñ.£îhqwâ£

`(That, allegedly) in line with the agreement ... reached between the Central Bank and Ablaza Construction and Finance Corporation at a meeting held ... on May 20, 1966,' "whatever agreements might have been previously agreed upon between (petitioner and respondent) would be considered set aside." (Decision, R.A., p. 255; Annex "8" to Answer, id., pp. 93-96.)

39. The above claim was, however, promptly and peremptorily denied by respondent Ablaza, through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts, par. 9, R.A., p. 142, also Annex "G" thereof; Commissioner's Report, R.A., p. 185; Decision, id., p. 255.)" (Appellee's Brief, pars. 23 to 39, pp. 14-19.)

None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.

Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the execution of the formal contract comes a little too late to be believable. Even assuming arguendo that the Revised Manual of Instructions to Treasurers were applicable to the Central Bank, which is doubtful, considering that under the provisions of its charter already referred to earlier, disbursements and expenditures of the Bank are supposed to be governed by rules and regulations promulgated by the Monetary Board, in this particular case, the attitude and actuations then of the Bank in relation to the work being done by Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the actual execution of the written contract is a mere formality which could not materially affect their respective contractual rights and obligations. In legal effect, therefore, the Bank must be considered as having waived such requirement. To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in question, both parties were supposed to have seen to it that the formal contract were duly signed. Under the Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days from notice of the award, and so, he called on the Bank at various times for that purpose. The Bank never indicated until May, 1966 that it would not comply. On the contrary, on February 8, 1966, Ablaza was requested to submit a "schedule of deliveries of materials" which under the terms of the bid were to be furnished by the Bank. On March 22, 1966, Ablaza received a letter from the Bank inquiring as to who would be Ablaza's representative to sign the formal contract. In the meanwhile, no less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of the Central Bank who had been signing for the Bank all the communications regarding the project at issue, had visited the construction site in March, 1966, just before he wrote the request abovementioned of the 22nd of that month for the nomination of the representative to sign the formal contract, and actually saw the progress of the work and that it was being continued, but he never protested or had it stopped. All these despite the fact that the Memorandum Circular being invoked by the Bank was issued way back on December 31, 1965 yet. And when finally on May 20, 1966 the Bank met with the representatives of Ablaza regarding the idea of changing the plans to more economical ones, there was no mention of the non-execution of the contract as entitling the Bank to back out of it unconditionally. Rather, the talk, according to the findings of the lower courts, was about the possibility of setting aside whatever agreement there was already. Under these circumstances, it appears that respondent has been made to believe up to the time the Bank decided definitely not to honor any agreement at all that its execution was not indispensable to a contract to be considered as already operating and respondent could therefore proceed with the work, while the contract could be formalized later. Petitioner contends next that its withdrawal from the contract is justified by the policy of economic restraint ordained by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the contract here in question was perfected before the issuance of said Memorandum Circular, it is elementary that the same may not be enforced in such a manner as to result in the impairment of the obligations of the contract, for that is not constitutionally permissible. Not even by means of a statute, which is much more weighty than a mere declaration of policy, may the government issue any regulation relieving itself or any person from the binding effects of a contract. (Section 1 (10), Article III, Philippine Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the Philippines.) Specially in the case of the Central Bank, perhaps, it might not have been really imperative that it should have revised its plans, considering that it has its own resources independent of those of the national government and that the funds of the Central Bank are derived from its own operations, not from taxes. In any event, if the memorandum circular had to be implemented, the corresponding action in that direction should have been taken without loss of time and before the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing to honor its contract with respondent, petitioner has to suffer the consequences of its action. The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the trial court and found by the Court of Appeals to be "fair and reasonable." Again, after a review of the record, We do not find sufficient ground to disturb the appealed judgment even in this respect, except as to attorney's fees. There are three principal items of damages awarded by the courts below, namely: (1) compensation for actual work done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the contract price of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in addition to the P5,000 already paid as retaining fee. All of these items were the subject of evidence presented by the parties. According to the Court of Appeals: têñ.£îhqwâ£

As regard the accuracy and reasonableness of the award for damages, both actual and compensatory, it is to be noted that the trial court subjected the Commissioner's report and the evidence adduced therein to a careful scrutiny. Thus, when the appellant called the trial court's attention to the fact that the P814,190.00 unrealized expected profit being claimed by appellee represented 18% of P4,523,275.00 which was the estimated cost of the project, while the contract awarded to appellee was only in the amount of P3,749,000.00 as per its bid proposal, the Court made the necessary modification. It is further to be noted that the amount of 18% of the estimated cost considered in the said award is much less than that given by appellant's own expert witness, Ambrosio R. Flores. He testified that 25% as contractor's profit "would be fair, ample and reasonable." (T.s.n, p. 557, Batalla.)" (p. 17 A, Appellant's brief.)

Basically, these are factual conclusions which We are not generally at liberty to disregard. And We have not been shown that they are devoid of reasonable basis.There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it has incurred in performing its part of the contract.

Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits presents no difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court sustained as a matter of law the award of damages n the amount of U.S. $286,000, payable in Philippine Currency, measured in the rate of exchange prevailing at the time the obligation was incurred (August, 1952), comprising of unrealized profits of the plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation, the Naric failed to proceed with the purchase of imported rice after having accepted and approved the bid of Arrieta and after she had already closed her contract with her foreign sellers. Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code thus: têñ.£îhqwâ£

ART. 2200. Identification for damages shall comprehend not only the value of the loss suffered, but also that of the profits, which the obligee failed to obtain..ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have forseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non- performance of the obligation.

Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil. 392: têñ.£îhqwâ£.... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits may be recovered as damages, while article 1107 (now 2201) of the same Code provides that the damages recoverable for the breach of obligations not originating in fraud (dolo) are those which were or might have been foreseen at the time the contract was entered into. Applying these principles to the facts in this case, we think that it is unquestionable that defendant must be deemed to have foreseen at the time he made the contract that in the event of his failure to perform it, the plaintiff would be damaged by the loss of the profit he might reasonably have expected to derive from its use. When the existence of a loss is established, absolute certainty as to its amount is not required. The benefit to be derived from a contract which one of the parties has absolutely failed to perform is of necessity to some extent, a matter of speculation, but the injured party is not to be denied all remedy for that reason alone. He must produce the best evidence of which his case is susceptible and if that evidence warrants the inference that he has been damaged by the loss of profits which he might with reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled to recover. As stated in Sedgwick on Damages (Ninth Ed., par. 177):The general rule is, then, that a plaintiff may recover compensation for any gain which he can make it appear with reasonable certainty the defendant's wrongful act prevented him from acquiring, ...'. (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila Hotel Co., 28 Phil. Rep., 325.) (At pp. 398-399.)

Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the Civil Code was again applied as follows: têñ.£îhqwâ£

Regarding the actual damages awarded to appellee, appellant contends that they are unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate them even assuming arguendo that appellant has failed to supply the additional monthly 2,000,000 board feet for the remainder of the period agreed upon in the contract Exhibit A. Appellant maintains that for appellee to be entitled to demand payment of sales that were not effected it should have proved (1) that there are actual sales made of appellee's logs which were not fulfilled, (2) that it had obtained the best price for such sales, (3) that there are buyers ready to buy at such price stating the volume they are ready to buy, and (4) appellee could not cover the sales from the logs of other suppliers. Since these facts were not proven, appellee's right to unearned commissions must fail. This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil Code, indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the creditor fails to obtain. In other words, lucrum cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to make profits because of appellant's breach of contract, and in the affirmative, is there here basis for determining with reasonable certainty such unearned profits? Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question the following board feet of logs, Breareton Scale: têñ.£îhqwâ£

Months Board FeetFrom June to August 1959 3,007,435September, 1959 noneOctober, 1959 2,299,805November, 1959 801,021

December, 1959 1,297,510

Total 7,405,861 The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in less than six months' time appellee received by way of commission the amount of P117,859.54, while in its memorandum, appellant makes the following statement: `11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is P117,859.54. But, as there were always two prices — Invoice F.O.B price and F.O.B. price as per contract, because of the sales difference amounting to P31,920.18, and the same was deducted from the commission, actually paid to plaintiff General is only P79,580.82.' " It appears, therefore, that during the period of June to December, 1959, in spite of the short delivery incurred by appellant, appellee had been earning its commission whenever logs were delivered to it. But from January, 1960, appellee had ceased to earn any commission because appellant failed to deliver any log in violation of their agreement. Had appellant continued to deliver the logs as it was bound to pursuant to the agreement it is reasonable to expect that it would have continued earning its commission in much the same manner as it used to in connection with the previous shipments of logs, which clearly indicates that it failed to earn the commissions it should earn during this period of time. And this commission is not difficult to estimate. Thus, during the seventeen remaining months of the contract, at the rate of at least 2,000,000 board feet, appellant should have delivered thirty-four million board feet. If we take the number of board feet delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the commission received by appellee thereon, which amounts to P79,580.82, we would have that appellee received a commission of P.0107456 per board feet. Multiplying 34 million board feet by P.0107456, the product is P365,350.40, which represents the lucrum cessans that should accrue to appellee. The award therefore, made by the court a quo of the amount of P400,000.00 as compensatory damages is not speculative, but based on reasonable estimate.

In the light of these considerations, We cannot say that the Court of Appeals erred in making the aforementioned award of damages for unrealized profits to respondent Ablaza. With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga, supra., an award of ten per centum (10%) of the amount of the total recovery should be enough. PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the modification that the award for attorney's fees made therein is hereby reduced to ten per centum (10%) of the total recovery of respondent Ablaza. Costs against petitioner. Fernando (Chairman), Antonio, Aquino and Concepcion, JJ., concur.


ManilaEN BANC

G.R. No. 93654 May 6, 1992FRANCISCO U. DACANAY, petitioner, vs.MAYOR MACARIO ASISTIO, JR., CITY ENGR. LUCIANO SARNE, JR. of Kalookan City, Metro Manila, MILA PASTRANA AND/OR RODOLFO TEOFE, STALLHOLDERS AND REPRESENTING CO-STALLHOLDERS, respondents.David D. Advincula, Jr. for petitioner.Juan P. Banaga for private respondents.GRIÑO-AQUINO, J.:May public streets or thoroughfares be leased or licensed to market stallholders by virtue of a city ordinance or resolution of the Metro Manila Commission? This issue is posed by the petitioner, an aggrieved Caloocan City resident who filed a special civil action of mandamus against the incumbent city mayor and city engineer, to compel these city officials to remove the market stalls from certain city streets which the aforementioned city officials have designated as flea markets, and the private respondents (stallholders) to vacate the streets.On January 5, 1979, MMC Ordinance No. 79-02 was enacted by the Metropolitan Manila Commission, designating certain

city and municipal streets, roads and open spaces as sites for flea markets. Pursuant, thereto, the Caloocan City mayor opened up seven (7) flea markets in that city. One of those streets was the "Heroes del '96" where the petitioner lives. Upon application of vendors Rodolfo Teope, Mila Pastrana, Carmen Barbosa, Merle Castillo, Bienvenido Menes, Nancy Bugarin, Jose Manuel, Crisaldo Paguirigan, Alejandro Castron, Ruben Araneta, Juanita and Rafael Malibaran, and others, the respondents city mayor and city engineer, issued them licenses to conduct vending activities on said street.In 1987, Antonio Martinez, as OIC city mayor of Caloocan City, caused the demolition of the market stalls on Heroes del '96, V. Gozon and Gonzales streets. To stop Mayor Martinez' efforts to clear the city streets, Rodolfo Teope, Mila Pastrana and other stallowners filed an action for prohibition against the City of Caloocan, the OIC City Mayor and the City Engineer and/or their deputies (Civil Case No. C-12921) in the Regional Trial Court of Caloocan City, Branch 122, praying the court to issue a writ of preliminary injunction ordering these city officials to discontinue the demolition of their stalls during the pendency of the action.The court issued the writ prayed for. However, on December 20, 1987, it dismissed the petition and lifted the writ of preliminary injunction which it had earlier issued. The trial court observed that:

A perusal of Ordinance 2, series of 1979 of the Metropolitan Manila Commission will show on the title itself that it is an ordinance ––

Authorizing and regulating the use of certain city and/or municipal streets, roads and open spaces within Metropolitan Manila as sites for flea market and/or vending areas, under certain terms and conditions, subject to the approval of the Metropolitan Manila Commission, and for other purposes

which is further amplified in Section 2 of the said ordinance, quoted hereunder:Sec. 2. The streets, roads and open spaces to be used as sites for flea markets (tiangge) or vending areas; the design, measurement or specification of the structures, equipment and apparatuses to be used or put up; the allowable distances; the days and time allowed for the conduct of the businesses and/or activities herein authorized; the rates or fees or charges to be imposed, levied and collected; the kinds of merchandise, goods and commodities sold and services rendered; and other matters and activities related to the establishment, maintenance and management and operation of flea markets and vending areas, shall be determined and prescribed by the mayors of the cities and municipalities in the Metropolitan Manila where the same are located, subject to the approval of the Metropolitan Manila Commission and consistent with the guidelines hereby prescribed.Further, it is so provided in the guidelines under the said Ordinance No. 2 of the MMC that —Sec. 6. In the establishment, operation, maintenance and management of flea markets and vending areas, the following guidelines, among others, shall be observed:

xxx xxx xxx(m) That the permittee shall remove the equipment, facilities and other appurtenances used by him in the conduct of his business after the close or termination of business hours. (Emphasis ours; pp. 15-16, Rollo.)

The trial court found that Heroes del '96, Gozon and Gonzales streets are of public dominion, hence, outside the commerce of man:

The Heroes del '96 street, V. Gozon street and Gonzales street, being of public dominion must, therefore, be outside of the commerce of man. Considering the nature of the subject premises, the following jurisprudence co/principles are applicable on the matter:

1) They cannot be alienated or leased or otherwise be the subject matter of contracts. (Municipality of Cavite vs. Rojas, 30 Phil. 602);2) They cannot be acquired by prescription against the state (Insular Government vs. Aldecoa, 19 Phil. 505). Even municipalities can not acquire them for use as communal lands against the state (City of Manila vs. Insular Government, 10 Phil. 327);3) They are not subject to attachment and execution (Tan Toco vs. Municipal Council of Iloilo, 49 Phil. 52);4) They cannot be burdened by any voluntary easement (2-II Colin & Capitant 520) (Tolentino, Civil Code of the Phils., Vol. II, 1983 Ed. pp. 29-30).In the aforecited case of Municipality of Cavite vs. Rojas, it was held that properties for public use may not be leased to private individuals. Such a lease is null and void for the reason that a municipal council cannot withdraw part of the plaza from public use. If possession has already been given, the lessee must restore possession by vacating it and the municipality must thereupon restore to him any sums it may have collected as rent.In the case of City of Manila vs. Gerardo Garcia, 19 SCRA 413, the Supreme Court held:

The property being a public one, the Manila Mayors did not have the authority to give permits, written or oral, to the squatters, and that the permits granted are therefore considered null and void.This doctrine was reiterated in the case of Baguio Citizens Action Inc. vs. The City

Council, 121 SCRA 368, where it was held that:An ordinance legalizing the occupancy by squatters of public land is null and void.

The authority of respondent Municipality of Makati to demolish the shanties of the petitioner's members is mandated by P.D. 772, and Sec. 1 of Letter of Instruction No. 19 orders certain public officials, one of whom is the Municipal Mayor to remove all illegal constructions including buildings on and along esteros and river banks, those along railroad tracks and those built without permits on public or private property (Zansibarian Residents Association vs. Mun. of Makati, 135 SCRA 235). The City Engineer is also among those required to comply with said Letter of Instruction.The occupation and use of private individuals of sidewalks and other public places devoted for public use constitute both public and private nuisances and nuisance per se, and this applies to even case involving the use or lease of public places under permits and licenses issued by competent authority, upon the theory that such holders could not take advantage of their unlawful permits and license and claim that the land in question is a part of a public street or a public place devoted to public use, hence, beyond the commerce of man. (Padilla, Civil Code Annotated, Vol. II, p. 59, 6th Ed., citing Umali vs. Aquino, IC. A. Rep. 339.)

From the aforequoted jurisprudence/principles, the Court opines that defendants have the right to demolish the subject stalls of the plaintiffs, more so when Section 185, par. 4 of Batas Pambansa Blg. 337, otherwise known as the Local Government Code provides that the City Engineer shall:

(4) . . .(c) Prevent the encroachment of private buildings and fences on the streets and public places;xxx xxx xxx(j) Inspect and supervise the construction, repair, removal and safety of private buildings;xxx xxx xxx(k) With the previous approval of the City Mayor in each case, order the removal of materials employed in the construction or repair of any building or structures made in violation of law or ordinance, and cause buildings and structures dangerous to the public to made secure or torn down;xxx xxx xxx

Further, the Charter of the City of Caloocan, Republic Act No. 5502, Art. VII, Sec. 27, par. g, 1 and m, grants the City Engineer similar powers. (Emphasis supplied; pp. 17-20, Rollo.)

However, shortly after the decision came out, the city administration in Caloocan City changed hands. City Mayor Macario Asistio, Jr., as successor of Mayor Martinez, did not pursue the latter's policy of clearing and cleaning up the city streets.Invoking the trial court's decision in Civil Case No. C-12921, Francisco U. Dacanay, a concerned citizen, taxpayer and registered voter of Barangay 74, Zone 7, District II of Caloocan City, who resides on Heroes del '96 Street, one of the affected streets, wrote a letter dated March 7, 1988 to Mayor Asistio, Jr., calling his attention to the illegally-constructed stalls on Heroes del '96 Street and asked for their demolition.Dacanay followed up that letter with another one dated April 7, 1988 addressed to the mayor and the city engineer, Luciano Sarne, Jr. (who replaced Engineer Arturo Samonte), inviting their attention to the Regional Trial Court's decision in Civil Case No. 12921. There was still no response.Dacanay sought President Corazon C. Aquino's intervention by writing her a letter on the matter. His letter was referred to the city mayor for appropriate action. The acting Caloocan City secretary, Asuncion Manalo, in a letter dated August 1, 1988, informed the Presidential Staff Director that the city officials were still studying the issue of whether or not to proceed with the demolition of the market stalls.Dacanay filed a complaint against Mayor Asistio and Engineer Sarne (OMB-0-89-0146) in the Office of the OMBUDSMAN. In their letter-comment dated April 3, 1989, said city officials explained that in view of the huge number of stallholders involved, not to mention their dependents, it would be harsh and inhuman to eject them from the area in question, for their relocation would not be an easy task.In reply, Dacanay maintained that respondents have been derelict in the performance of their duties and through manifest partiality constituting a violation of Section 3(e) of R.A. 3019, have caused undue injury to the Government and given unwarranted benefits to the stallholders.After conducting a preliminary investigation, the OMBUDSMAN rendered a final evaluation and report on August 28, 1989, finding that the respondents' inaction is purely motivated by their perceived moral and social responsibility toward their constituents, but "the fact remains that there is an omission of an act which ought to be performed, in clear violation of Sections 3(e) and (f) of Republic Act 3019." (pp. 83-84, Rollo.) The OMBUDSMAN recommended the filing of the corresponding information in court.As the stallholders continued to occupy Heroes del '96 Street, through the tolerance of the public respondents, and in clear

violation of the decision it Civil Case No. C-12921, Dacanay filed the present petition for mandamus on June 19, 1990, praying that the public respondents be ordered to enforce the final decision in Civil Case No. C-12921 which upheld the city mayor's authority to order the demolition of market stalls on V. Gozon, Gonzales and Heroes del '96 Streets and to enforce P.D. No. 772 and other pertinent laws.On August 16, 1990, the public respondents, through the City Legal Officer, filed their Comment' on the petition. The Office of the Solicitor General asked to be excused from filing a separate Comment in behalf of the public respondents. The City Legal Officer alleged that the vending area was transferred to Heroes del '96 Street to decongest Malonzo Street, which is comparatively a busier thoroughfare; that the transfer was made by virtue of Barangay Resolution No. 30 s'78 dated January 15, 1978; that while the resolution was awaiting approval by the Metropolitan Manila Commission, the latter passed Ordinance No. 79-2, authorizing the use of certain streets and open spaces as sites for flea markets and/or vending areas; that pursuant thereto, Acting MMC Mayor Virgilio P. Robles issued Executive Order No. 135 dated January 10, 1979, ordering the establishment and operation of flea markets in specified areas and created the Caloocan City Flea Market Authority as a regulatory body; and that among the sites chosen and approved by the Metro Manila Commission, Heroes del '96 Street has considered "most viable and progressive, lessening unemployment in the city and servicing the residents with affordable basic necessities."The petition for mandamus is meritorious.There is no doubt that the disputed areas from which the private respondents' market stalls are sought to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A public street is property for public use hence outside the commerce of man (Arts. 420, 424, Civil Code). Being outside the commerce of man, it may not be the subject of lease or other contract (Villanueva et al. vs. Castañeda and Macalino, 15 SCRA 142, citing the Municipality of Cavite vs. Rojas, 30 SCRA 602; Espiritu vs. Municipal Council of Pozorrubio, 102 Phil. 869; and Muyot vs. De la Fuente, 48 O.G. 4860).As the stallholders pay fees to the City Government for the right to occupy portions of the public street, the City Government, contrary to law, has been leasing portions of the streets to them. Such leases or licenses are null and void for being contrary to law. The right of the public to use the city streets may not be bargained away through contract. The interests of a few should not prevail over the good of the greater number in the community whose health, peace, safety, good order and general welfare, the respondent city officials are under legal obligation to protect.The Executive Order issued by Acting Mayor Robles authorizing the use of Heroes del '96 Street as a vending area for stallholders who were granted licenses by the city government contravenes the general law that reserves city streets and roads for public use. Mayor Robles' Executive Order may not infringe upon the vested right of the public to use city streets for the purpose they were intended to serve: i.e., as arteries of travel for vehicles and pedestrians. As early as 1989, the public respondents bad started to look for feasible alternative sites for flea markets. They have had more than ample time to relocate the street vendors.WHEREFORE, it having been established that the petitioner and the general public have a legal right to the relief demanded and that the public respondents have the corresponding duty, arising from public office, to clear the city streets and restore them to their specific public purpose (Enriquez vs. Bidin, 47 SCRA 183; City of Manila vs. Garcia et al., 19 SCRA, 413 citing Unson vs. Lacson, 100 Phil. 695), the respondents City Mayor and City Engineer of Caloocan City or their successors in office are hereby ordered to immediately enforce and implement the decision in Civil Case No. C-1292 declaring that Heroes del '96, V. Gozon, and Gonzales Streets are public streets for public use, and they are ordered to remove or demolish, or cause to be removed or demolished, the market stalls occupying said city streets with utmost dispatch within thirty (30)days from notice of this decision. This decision is immediately executory.SO ORDERED.Narvasa, C.J., Melecio-Herrera, Gutierrez, Jr. Cruz, Paras, Feliciano, Padilla, Bidin, Medialdea, Regalado, Davide, Jr., Romero and Nocon, JJ., concur.Bellosillo, J., took no part.


Manila

EN BANC

G.R. No. L-24440 March 28, 1968

THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee, vs.CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, defendants-appellants.

Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.Office of the Solicitor General for defendants-appellants.

BENGZON, J.P., J.:

Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also provided that —

Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.

The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon, located in the City of Zamboanga and covered individually by Torrens certificates of title in the name of Zamboanga Province. As far as

can be gleaned from the records, 1 said properties were being utilized as follows —

No. of Lots Use

1 ................................................ Capitol Site

3 ................................................ School Site

3 ................................................ Hospital Site

3 ................................................ Leprosarium

1 ................................................ Curuan School

1 ................................................ Trade School

2 ................................................ Burleigh School

2 ................................................ High School Playground

9 ................................................ Burleighs

1 ................................................ Hydro-Electric Site (Magay)

1 ................................................ San Roque

23 ................................................ vacant

It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. 2 Subsequently, or on June 16, 1948, Republic Act 286 was approved creating the municipality of Molave and making it the capital of Zamboanga Province.

On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to Commonwealth Act 39, fixed

the value of the properties and buildings in question left by Zamboanga Province in Zamboanga City at P1,294,244.00. 3

On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided between the two new ones, Sec. 6 of that law provided:

Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the recommendation of the Auditor General.

Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations of the defunct Province of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte therefore became entitled to 54.39% of P1,294,244.00, the total value of the lots and buildings in question, or P704,220.05 payable by Zamboanga City.

On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding that Zamboanga del Norte had a vested right as owner (should be co-owner pro-indiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39, and is entitled to the price thereof, payable by Zamboanga City. This ruling revoked the previous Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and buildings thereon to Zamboanga City for P1.00, effective as of 1945, when the provincial capital of the then Zamboanga Province was transferred to Dipolog.

The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an amount equal to 25% of the regular internal revenue allotment for the City of Zamboanga for the quarter ending March 31, 1960, then for the quarter ending June 30, 1960, and again for the first quarter of the fiscal year 1960-1961. The deductions, all aggregating P57,373.46, was credited to the province of Zamboanga del Norte, in partial payment of the P764,220.05 due it.

However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing that —

All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga. (Stressed for emphasis).

Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal Revenue to stop from effecting further payments to Zamboanga del Norte and to return to Zamboanga City the sum of P57,373.46 taken from it out of the internal revenue allotment of Zamboanga del Norte. Zamboanga City admits that since the enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has already been returned to it.

This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the Court of First Instance of Zamboanga del Norte against defendants-appellants Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue. It was prayed that: (a) Republic Act 3039 be declared unconstitutional for depriving plaintiff province of property without due process and just compensation; (b) Plaintiff's rights and obligations under said law be declared; (c) The Secretary of Finance and the Internal Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to defendant City; and (d) The latter be ordered to continue paying the balance of P704,220.05 in quarterly installments of 25% of its internal revenue allotments.

On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After defendants filed their respective answers, trial was held. On August 12, 1963, judgment was rendered, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional insofar as it deprives plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of land and the improvements thereon under certificates of title (Exhibits "A" to "A-49") in the name of the defunct province of Zamboanga; ordering defendant City of Zamboanga to pay to the plaintiff the sum of P704,220.05 payment thereof to be deducted from its regular quarterly internal revenue allotment equivalent to 25% thereof every quarter until said amount shall have been fully paid; ordering defendant Secretary of Finance to direct defendant Commissioner of Internal Revenue to deduct 25% from the regular quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to plaintiff Zamboanga del Norte until said sum of P704,220.05 shall have been fully paid; ordering plaintiff Zamboanga del Norte to execute through its proper officials the corresponding public instrument deeding to defendant City of Zamboanga the 50 parcels of land and the improvements thereon under the certificates of title (Exhibits "A" to "A-49") upon payment by the latter of the aforesaid sum of P704,220.05 in full; dismissing the counterclaim of defendant City of Zamboanga; and declaring permanent the preliminary mandatory injunction issued on June 8, 1962, pursuant to the order of the Court dated June 4, 1962. No costs are assessed against the defendants.

It is SO ORDERED.

Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to reconsider praying that Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6% interest per annum. Over defendants' opposition, the lower court granted plaintiff province's motion.

The defendants then brought the case before Us on appeal.

Brushing aside the procedural point concerning the property of declaratory relief filed in the lower court on the assertion that the law had already been violated and that plaintiff sought to give it coercive effect, since assuming the same

to be true, the Rules anyway authorize the conversion of the proceedings to an ordinary action, 5 We proceed to the more important and principal question of the validity of Republic Act 3039.

The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the matter involved here is the extent of legislative control over the properties of a municipal corporation, of which a province is one. The principle itself is simple: If the property is owned by the municipality (meaning municipal corporation) in its public and governmental capacity, the property is public and Congress has absolute control over it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality

cannot be deprived of it without due process and payment of just compensation. 6

The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal Corporations, must be used in classifying the properties in question?

The Civil Code classification is embodied in its Arts. 423 and 424 which provide:1äwphï1.ñët

ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and patrimonial property.

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

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

Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could be considered as patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for public use. They would fall under the phrase "public works for public service" for it has been held that under the ejusdem generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceding enumerated properties in the first

paragraph of Art 424. 7 The playgrounds, however, would fit into this category.

This was the norm applied by the lower court. And it cannot be said that its actuation was without jurisprudential

precedent for in Municipality of Catbalogan v. Director of Lands, 8 and in Municipality of Tacloban v. Director of Lands, 9

it was held that the capitol site and the school sites in municipalities constitute their patrimonial properties. This result is understandable because, unlike in the classification regarding State properties, properties for public service in the municipalities are not classified as public. Assuming then the Civil Code classification to be the chosen norm, the lower court must be affirmed except with regard to the two (2) lots used as playgrounds.

On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all those of the 50 properties in question which are devoted to public service are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is enough that the property be held and, devoted for governmental purposes like

local administration, public education, public health, etc. 10

Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF LANDS, 11

where it was stated that "... where the municipality has occupied lands distinctly for public purposes, such as for the municipal court house, the public school, the public market, or other necessary municipal building, we will, in the absence of proof to the contrary, presume a grant from the States in favor of the municipality; but, as indicated by the wording, that rule may be invoked only as to property which is used distinctly for public purposes...." (2) VIUDA DE TANTOCO V.

MUNICIPAL COUNCIL OF ILOILO 12 held that municipal properties necessary for governmental purposes are public in nature. Thus, the auto trucks used by the municipality for street sprinkling, the police patrol automobile, police stations and concrete structures with the corresponding lots used as markets were declared exempt from execution and attachment since

they were not patrimonial properties. (3) MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a municipal lot which had always been devoted to school purposes is one dedicated to public use and is not patrimonial property of a municipality.

Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol site, school sites and its grounds, hospital and leprosarium sites and the high school playground sites — a total of 24 lots — since these were held by the former Zamboanga province in its governmental capacity and therefore are subject to the absolute control of Congress. Said lots considered as public property are the following:

TCT Number Lot Number U s e

2200 ...................................... 4-B ...................................... Capitol Site

2816 ...................................... 149 ...................................... School Site

3281 ...................................... 1224 ...................................... Hospital Site

3282 ...................................... 1226 ...................................... Hospital Site

3283 ...................................... 1225 ...................................... Hospital Site

3748 ...................................... 434-A-1 ...................................... School Site

5406 ...................................... 171 ...................................... School Site

5564 ...................................... 168 ...................................... High School Play-ground

5567 ...................................... 157 & 158 ...................................... Trade School

5583 ...................................... 167 ...................................... High School Play-ground

6181 ...................................... (O.C.T.) ...................................... Curuan School

11942 ...................................... 926 ...................................... Leprosarium

11943 ...................................... 927 ...................................... Leprosarium

11944 ...................................... 925 ...................................... Leprosarium

5557 ...................................... 170 ...................................... Burleigh School

5562 ...................................... 180 ...................................... Burleigh School

5565 ...................................... 172-B ...................................... Burleigh

5570 ...................................... 171-A ...................................... Burleigh

5571 ...................................... 172-C ...................................... Burleigh

5572 ...................................... 174 ...................................... Burleigh

5573 ...................................... 178 ...................................... Burleigh

5585 ...................................... 171-B ...................................... Burleigh

5586 ...................................... 173 ...................................... Burleigh

5587 ...................................... 172-A ...................................... Burleigh We noticed that the eight Burleigh lots above described are adjoining each other and in turn are between the two lots wherein the Burleigh schools are built, as per records appearing herein and in the Bureau of Lands. Hence, there is sufficient basis for holding that said eight lots constitute the appurtenant grounds of the Burleigh schools, and partake of the nature of the same.

Regarding the several buildings existing on the lots above-mentioned, the records do not disclose whether they were constructed at the expense of the former Province of Zamboanga. Considering however the fact that said buildings must have been erected even before 1936 when Commonwealth Act 39 was enacted and the further fact that provinces then had

no power to authorize construction of buildings such as those in the case at bar at their own expense, 14 it can be assumed that said buildings were erected by the National Government, using national funds. Hence, Congress could very well dispose of said buildings in the same manner that it did with the lots in question.

But even assuming that provincial funds were used, still the buildings constitute mere accessories to the lands, which are public in nature, and so, they follow the nature of said lands, i.e., public. Moreover, said buildings, though located in the city, will not be for the exclusive use and benefit of city residents for they could be availed of also by the provincial residents. The province then — and its successors-in-interest — are not really deprived of the benefits thereof.

But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value of the rest of the 26 remaining lots which are patrimonial properties since they are not being utilized for distinctly, governmental purposes. Said lots are:

TCT Number Lot Number U s e

5577 ...................................... 177 ...................................... Mydro, Magay

13198 ...................................... 127-0 ...................................... San Roque

5569 ...................................... 169 ...................................... Burleigh 15

5558 ...................................... 175 ...................................... Vacant

5559 ...................................... 188 ...................................... "

5560 ...................................... 183 ...................................... "

5561 ...................................... 186 ...................................... "

5563 ...................................... 191 ...................................... "

5566 ...................................... 176 ...................................... "

5568 ...................................... 179 ...................................... "

5574 ...................................... 196 ...................................... "

5575 ...................................... 181-A ...................................... "

5576 ...................................... 181-B ...................................... "

5578 ...................................... 182 ...................................... "

5579 ...................................... 197 ...................................... "

5580 ...................................... 195 ...................................... "

5581 ...................................... 159-B ...................................... "

5582 ...................................... 194 ...................................... "

5584 ...................................... 190 ...................................... "

5588 ...................................... 184 ...................................... "

5589 ...................................... 187 ...................................... "

5590 ...................................... 189 ...................................... "

5591 ...................................... 192 ...................................... "

5592 ...................................... 193 ...................................... "

5593 ...................................... 185 ...................................... "

7379 ...................................... 4147 ...................................... " Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly private in nature. On the other hand, that the 24 lots used for governmental purposes are also registered is of no significance since registration

cannot convert public property to private. 16

We are more inclined to uphold this latter view. The controversy here is more along the domains of the Law of Municipal Corporations — State vs. Province — than along that of Civil Law. Moreover, this Court is not inclined to hold that municipal property held and devoted to public service is in the same category as ordinary private property. The consequences are dire. As ordinary private properties, they can be levied upon and attached. They can even be acquired thru adverse possession — all these to the detriment of the local community. Lastly, the classification of properties other than those for public use in the municipalities as patrimonial under Art. 424 of the Civil Code — is "... without prejudice to the provisions of special laws." For purpose of this article, the principles, obtaining under the Law of Municipal Corporations can be considered as "special laws". Hence, the classification of municipal property devoted for distinctly governmental purposes as public should prevail over the Civil Code classification in this particular case.

Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without merit. Under Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province arose only in 1949 after the Auditor General fixed the value of the properties in question. While in 1951, the Cabinet resolved transfer said properties practically for free to Zamboanga City, a reconsideration thereof was seasonably sought. In 1952, the old province was dissolved. As successor-in-interest to more than half of the properties involved, Zamboanga del Norte was able to get a reconsideration of the Cabinet Resolution in 1959. In fact, partial payments were effected subsequently and it was only after the passage of Republic Act 3039 in 1961 that the present controversy arose. Plaintiff brought suit in 1962. All the foregoing, negative laches.

It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the former's 54.39% share in the 26 properties which are patrimonial in nature, said share to computed on the basis of the valuation of said 26 properties as contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed by the Auditor General.

Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already returned to defendant City. The return of said amount to defendant was without legal basis. Republic Act 3039 took effect only on June 17, 1961 after a partial payment of P57,373.46 had already been made. Since the law did not provide for retroactivity, it could not have validly affected a completed act. Hence, the amount of P43,030.11 should be immediately returned by defendant City to plaintiff province. The remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by defendant City in the same manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue, and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together with pars. 10 and 11 of the first

cause of action recited in the complaint 17 clearly shows that the relief sought was merely the continuance of the quarterly payments from the internal revenue allotments of defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify lump sum payment is inapplicable since there has been so far in legal contemplation no complete delivery of the lots in question. The titles to the registered lots are not yet in the name of defendant Zamboanga City.

WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.

(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the amount of P43,030.11 which the former took back from the latter out of the sum of P57,373.46 previously paid to the latter; and

(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiff's 54.39% share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of quarterly payments from the allotments of defendant City, in the manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No costs. So ordered.

Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.Concepcion, C.J., is on leave.


ManilaEN BANC

G.R. No. L-29788 August 30, 1972RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in his capacity as Governor of the Land Authority; and LORENZO GELLA, in his capacity as Register of Deeds of Manila, petitioners-appellants, vs.HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila; ANTONIO J. VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY OF MANILA, respondents-appellees.Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor-General Antonio A. Torres, Solicitor Raul I. Goco and Magno B. Pablo & Cipriano A. Tan, Legal Staff, Land Authority for petitioners-appellants.Gregorio A. Ejercito and Felix C. Chavez for respondents-appellees.ESGUERRA, J.:pThis is a petition for review of the decision of the Court of First Instance of Manila, Branch XXIII, in Civil Case No. 67946, dated September 23, 1968, the dispositive portion of which is as follows:

WHEREFORE, the Court renders judgment declaring Republic Act No. 4118 unconstitutional and invalid in that it deprived the City of Manila of its property without due process and payment of just compensation. Respondent Executive Secretary and Governor of the Land Authority are hereby restrained and enjoined from implementing the provisions of said law. Respondent Register of Deeds of the City of Manila is ordered to cancel Transfer Certificate of Title No. 80876 which he had issued in the name of the Land Tenure Administration and reinstate Transfer Certificate of Title No. 22547 in the name of the City of Manila which he cancelled, if that is feasible, or issue a new certificate of title for the same parcel of land in the name of the City of Manila. 1

The facts necessary for a clear understanding of this case are as follows:On February 24, 1919, the 4th Branch of the Court of First Instance of Manila, acting as a land registration court, rendered judgment in Case No. 18, G.L.R.O. Record No. 111, declaring the City of Manila the owner in fee simple of a parcel of land known as Lot No. 1, Block 557 of the Cadastral Survey of the City of Mani1a, containing an area of 9,689.8 square meters, more or less. Pursuant to said judgment the Register of Deeds of Manila on August 21, 1920, issued in favor of the City of Manila, Original Certificate of Title No. 4329 covering the aforementioned parcel of land. On various dates in 1924, the City of Manila sold portions of the aforementioned parcel of land in favor of Pura Villanueva. As a consequence of the transactions Original Certificate of Title No. 4329 was cancelled and transfer certificates of title were issued in favor of Pura Villanueva for the portions purchased by her. When the last sale to Pura Villanueva was effected on August 22, 1924, Transfer Certificate of Title No. 21974 in the name of the City of Manila was cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 22547 covering the residue thereof known as Lot 1-B-2-B of Block 557, with an area of 7,490.10 square meters, was issued in the name of the City of Manila.On September 21, 1960, the Municipal Board of Manila, presided by then Vice-Mayor Antono J. Villegas, adopted a resolution requesting His Excellency, the President of the Philippines to consider the feasibility of declaring the City

property bounded by Florida, San Andres, and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 22547, containing a total area of 7,450 square meters as a patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants thereof. 2 The said resolution of the Municipil Board of the City of Manila was officially transmitted to the President of the Philippines by then Vice-Mayor Antonio J. Villegas on September 21, 1960, with the information that the same resolution was, on the same date, transmitted to the Senate and House of Representatives of the Congress of the Philippines. 3 During the First Session of the Fifth Congress of the Philippines, House Bill No. 191 was filed in the House of Representatives by then Congressman Bartolome Cabangbang seeking to declare the property in question as patrimonial property of the City of Manila, and for other purposes. The explanatory note of the Bill gave the grounds for its enactment, to wit:

In the particular case of the property subject of this bill, the City of Manila does not seem to have use thereof as a public communal property. As a matter of fact, a resolution was adopted by the Municipal Board of Manila at its regular session held on September 21, 1960, to request the feasibility of declaring the city property bounded by Florida, San Andres and Nebraska Streets as a patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants thereof. Therefore, it will be to the best interest of society that the said property be used in one way or another. Since this property has been occupied for a long time by the present occupants thereof and since said occupants have expressed their willingness to buy the said property, it is but proper that the same be sold to them. 4

Subsequently, a revised version of the Bill was introduced in the House of Representatives by Congressmen Manuel Cases, Antonio Raquiza and Nicanor Yñiguez as House Bill No. 1453, with the following explanatory note:

The accompanying bill seeks to convert one (1) parcel of land in the district of Malate, which is reserved as communal property into a disposable or alienable property of the State and to provide its subdivision and sale to bona fide occupants or tenants.This parcel of land in question was originally an aggregate part of a piece of land with an area of 9,689.8 square meters, more or less. ... On September 21, 1960, the Municipal Board of Manila in its regular session unanimously adopted a resolution requesting the President of the Philippines and Congress of the Philippines the feasibility of declaring this property into disposable or alienable property of the State. There is therefore a precedent that this parcel of land could be subdivided and sold to bona fide occupants. This parcel of land will not serve any useful public project because it is bounded on all sides by private properties which were formerly parts of this lot in question.Approval of this bill will implement the policy of the Administration of land for the landless and the Fifth Declaration of Principles of the Constitution, which states that the promotion of Social Justice to insure the well-being and economic security of all people should be the concern of the State. We are ready and willing to enact legislation promoting the social and economic well-being of the people whenever an opportunity for enacting such kind of legislation arises.

In view of the foregoing consideration and to insure fairness and justice to the present bona fide occupants thereof, approval of this Bill is strongly urged. 5 The Bill having been passed by the House of Representatives, the same was thereafter sent to the Senate where it was thoroughly discussed, as evidenced by the Congressional Records for May 20, 1964, pertinent portion of which is as follows:

SENATOR FERNANDEZ: Mr. President, it will be re called that when the late Mayor Lacson was still alive, we approved a similar bill. But afterwards, the late Mayor Lacson came here and protested against the approval, and the approval was reconsidered. May I know whether the defect in the bill which we approved, has already been eliminated in this present bill?SENATOR TOLENTINO: I understand Mr. President, that that has already been eliminated and that is why the City of Manila has no more objection to this bill.SENATOR FERNANDEZ: Mr. President, in view of that manifestation and considering that Mayor Villegas and Congressman Albert of the Fourth District of Manila are in favor of the bill. I would not want to pretend to know more what is good for the City of Manila.SENATOR TOLENTINO: Mr. President, there being no objection, I move that we approve this bill on second reading.PRESIDENT PRO-TEMPORE: The biII is approved on second reading after several Senetors said aye and nobody said nay.

The bill was passed by the Senate, approved by the President on June 20, 1964, and became Republic Act No. 4118. It reads as follows:

Lot I-B-2-B of Block 557 of the cadastral survey of the City of Manila, situated in the District of Malate, City of Manila, which is reserved as communal property, is hereby converted into disposal or alienable land of the State, to be placed under the disposal of the Land Tenure Administration. The Land Tenure Administration shall subdivide

the property into small lots, none of which shall exceed one hundred and twenty square meters in area and sell the same on installment basis to the tenants or bona fide occupants thereof and to individuals, in the order mentioned: Provided, That no down payment shall be required of tenants or bona fide occupants who cannot afford to pay such down payment: Provided, further, That no person can purchase more than one lot: Provided, furthermore, That if the tenant or bona fide occupant of any given lot is not able to purchase the same, he shall be given a lease from month to month until such time that he is able to purchase the lot: Provided, still further, That in the event of lease the rentals which may be charged shall not exceed eight per cent per annum of the assessed value of the property leased: And provided, finally, That in fixing the price of each lot, which shall not exceed twenty pesos per square meter, the cost of subdivision and survey shall not be included.Sec. 2. Upon approval of this Act no ejectment proceedings against any tenant or bona fide occupant of the above lots shall be instituted and any ejectment proceedings pending in court against any such tenant or bona fide occupant shall be dismissed upon motion of the defendant: Provided, That any demolition order directed against any tenant or bona fide occupant shall be lifted.Sec. 3. Upon approval of this Act, if the tenant or bona fide occupant is in arrears in the payment of any rentals, the amount legally due shall be liquidated and shall be payable in twenty-four equal monthly installments from the date of liquidation.Sec. 4. No property acquired by virtue of this Act shall be transferred, sold, mortgaged, or otherwise disposed of within a period of five years from the date full ownership thereof has been vested in the purchaser without the consent of the Land Tenure Administration.Sec. 5. In the event of the death of the purchaser prior to the complete payment of the price of the lot purchased by him, his widow and children shall succeed in all his rights and obligations with respect to his lot.Sec. 6. The Chairman of the Land Tenure Administration shall implement and issue such rules and regulations as may be necessary to carry out the provisions of this Act.Sec. 7. The sum of one hundred fifty thousand pesos is appropriated out of any funds in the National Treasury not otherwise appropriated, to carry out the purposes of this Act.Sec. 8. All laws or parts of laws inconsistent with this Act are repealed or modified accordingly.Sec. 9. This Act shall take effect upon its approval.Approved, June 20, 1964.

To implement the provisions of Republic Act No. 4118, and pursuant to the request of the occupants of the property involved, then Deputy Governor Jose V. Yap of the Land Authority (which succeeded the Land Tenure Administration) addressed a letter, dated February 18, 1965, to Mayor Antonio Villegas, furnishing him with a copy of the proposed subdivision plan of said lot as prepared for the Republic of the Philippines for resale of the subdivision lots by the Land Authority to bona fide applicants. 6 On March 2, 1965, the City Mayor of Manila, through his Executive and Technical Adviser, acknowledged receipt of the proposed subdivision plan of the property in question and informed the Land Authority that his office would interpose no objection to the implementation of said law, provided that its provisions be strictly complied with. 7 With the above-mentioned written conformity of the City of Manila for the implementation of Republic Act No. 4118, the Land Authority, thru then Deputy Governor Jose V. Yap, requested the City Treasurer of Manila, thru the City Mayor, for the surrender and delivery to the former of the owner's duplicate of Transfer Certificate of Title No. 22547 in order to obtain title thereto in the name of the Land Authority. The request was duly granted with the knowledge and consent of the Office of the City Mayor. 8 With the presentation of Transfer Certificate of Title No. 22547, which had been yielded as above stated by the, City authorities to the Land Authority, Transfer Certificate of Title (T.C.T. No. 22547) was cancelled by the Register of Deeds of Manila and in lieu thereof Transfer Certificate of Title No. 80876 was issued in the name of the Land Tenure Administration (now Land Authority) pursuant to the provisions of Republic Act No. 4118. 9 But due to reasons which do not appear in the record, the City of Manila made a complete turn-about, for on December 20, 1966, Antonio J. Villegas, in his capacity as the City Mayor of Manila and the City of Manila as a duly organized public corporation, brought an action for injunction and/or prohibition with preliminary injunction to restrain, prohibit and enjoin the herein appellants, particularly the Governor of the Land Authority and the Register of Deeds of Manila, from further implementing Republic Act No. 4118, and praying for the declaration of Republic Act No. 4118 as unconstitutional.With the foregoing antecedent facts, which are all contained in the partial stipulation of facts submitted to the trial court and approved by respondent Judge, the parties waived the presentation of further evidence and submitted the case for decision. On September 23, 1968, judgment was rendered by the trial court declaring Republic Act No. 4118 unconstitutional and invalid on the ground that it deprived the City of Manila of its property without due process of law and payment of just compensation. The respondents were ordered to undo all that had been done to carry out the provisions of said Act and were restrained from further implementing the same.Two issues are presented for determination, on the resolution of which the decision in this case hinges, to wit:

I. Is the property involved private or patrimonial property of the City of Manila?

II. Is Republic Act No. 4118 valid and not repugnant to the Constitution?I.

As regards the first issue, appellants maintain that the land involved is a communal land or "legua comunal" which is a portion of the public domain owned by the State; that it came into existence as such when the City of Manila, or any pueblo or town in the Philippines for that matter, was founded under the laws of Spain, the former sovereign; that upon the establishment of a pueblo, the administrative authority was required to allot and set aside portions of the public domain for a public plaza, a church site, a site for public buildings, lands to serve as common pastures and for streets and roads; that in assigning these lands some lots were earmarked for strictly public purposes, and ownership of these lots (for public purposes) immediately passed to the new municipality; that in the case of common lands or "legua comunal", there was no such immediate acquisition of ownership by the pueblo, and the land though administered thereby, did not automatically become its property in the absence of an express grant from the Central Government, and that the reason for this arrangement is that this class of land was not absolutely needed for the discharge of the municipality's governmental functions.It is argued that the parcel of land involved herein has not been used by the City of Manila for any public purpose and had not been officially earmarked as a site for the erection of some public buildings; that this circumstance confirms the fact that it was originally "communal" land alloted to the City of Manila by the Central Government not because it was needed in connection with its organization as a municipality but simply for the common use of its inhabitants; that the present City of Manila as successor of the Ayuntamiento de Manila under the former Spanish sovereign merely enjoys the usufruct over said land, and its exercise of acts of ownership by selling parts thereof did not necessarily convert the land into a patrimonial property of the City of Manila nor divest the State of its paramount title.Appellants further argue that a municipal corporation, like a city is a governmental agent of the State with authority to govern a limited portion of its territory or to administer purely local affairs in a given political subdivision, and the extent of its authority is strictly delimited by the grant of power conferred by the State; that Congress has the exclusive power to create, change or destroy municipal corporations; that even if We admit that legislative control over municipal corporations is not absolute and even if it is true that the City of Manila has a registered title over the property in question, the mere transfer of such land by an act of the legislature from one class of public land to another, without compensation, does not invade the vested rights of the City.Appellants finally argue that Republic Act No. 4118 has treated the land involved as one reserved for communal use, and this classification is conclusive upon the courts; that if the City of Manila feels that this is wrong and its interests have been thereby prejudiced, the matter should be brought to the attention of Congress for correction; and that since Congress, in the exercise of its wide discretionary powers has seen fit to classify the land in question as communal, the Courts certainly owe it to a coordinate branch of the Government to respect such determination and should not interfere with the enforcement of the law.Upon the other hand, appellees argue by simply quoting portions of the appealed decision of the trial court, which read thus:

The respondents (petitioners-appellants herein) contend, among other defenses, that the property in question is communal property. This contention is, however, disproved by Original Certificate of Title No. 4329 issued on August 21, 1920 in favor of the City of Manila after the land in question was registered in the City's favor. The Torrens Title expressly states that the City of Manila was the owner in 'fee simple' of the said land. Under Sec. 38 of the Land Registration Act, as amended, the decree of confirmation and registration in favor of the City of Manila ... shall be conclusive upon and against all persons including the Insular Government and all the branches there ... There is nothing in the said certificate of title indicating that the land was 'communal' land as contended by the respondents. The erroneous assumption by the Municipal Board of Manila that the land in question was communal land did not make it so. The Municipal Board had no authority to do that.The respondents, however, contend that Congress had the power and authority to declare that the land in question was 'communal' land and the courts have no power or authority to make a contrary finding. This contention is not entirely correct or accurate. Congress has the power to classify 'land of the public domain', transfer them from one classification to another and declare them disposable or not. Such power does not, however, extend to properties which are owned by cities, provinces and municipalities in their 'patrimonial' capacity.Art. 324 of the Civil Code provides that properties of provinces, cities and municipalities are divided into properties for public use and patrimonial property. Art. 424 of the same code provides that properties for public use consist of provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades and public works for public service paid for by said province, cities or municipalities. All other property possessed by any of them is patrimonial. Tested by this criterion the Court finds and holds that the land in question is patrimonial property of the City of Manila.Respondents contend that Congress has declared the land in question to be 'communal' and, therefore, such designation is conclusive upon the courts. The Courts holds otherwise. When a statute is assailed as unconstitutional the Courts have the power and authority to inquire into the question and pass upon it. This has long ago been settled in Marbury vs. Madison, 2 L. ed. 60, when the United States Supreme Court speaking thru Chief

Justice Marshall held:... If an act of the legislature, repugnant to the constitution, is void, does it, notwithstanding its validity, bind the courts, and oblige them to give effect? It is emphatically the province and duty of the judicial department to say what the law is ... So if a law be in opposition to the constitution; if both the law and the constitution apply to a particular case, so that the court must either decide that case conformable to the constitution, disregarding the law, the court must determine which of these conflicting rules governs the case. This is of the very essence of unconstitutional judicial duty.

Appellees finally concluded that when the courts declare a law unconstitutional it does not mean that the judicial power is superior to the legislative power. It simply means that the power of the people is superior to both and that when the will of the legislature, declared in statutes, stands in opposition to that of the people, declared in the Constitution, the judges ought to be governed by the Constitution rather than by the statutes.There is one outstanding factor that should be borne in mind in resolving the character of the land involved, and it is that the City of Manila, although declared by the Cadastral Court as owner in fee simple, has not shown by any shred of evidence in what manner it acquired said land as its private or patrimonial property. It is true that the City of Manila as well as its predecessor, the Ayuntamiento de Manila, could validly acquire property in its corporate or private capacity, following the accepted doctrine on the dual character — public and private — of a municipal corporation. And when it acquires property in its private capacity, it acts like an ordinary person capable of entering into contracts or making transactions for the transmission of title or other real rights. When it comes to acquisition of land, it must have done so under any of the modes established by law for the acquisition of ownership and other real rights. In the absence of a title deed to any land claimed by the City of Manila as its own, showing that it was acquired with its private or corporate funds, the presumption is that such land came from the State upon the creation of the municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned no patrimonial property except those that were granted by the State not for its public but for private use. Other properties it owns are acquired in the course of the exercise of its corporate powers as a juridical entity to which category a municipal corporation pertains.Communal lands or "legua comunal" came into existence when a town or pueblo was established in this country under the laws of Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes de Indios). The municipalities of the Philippines were not entitled, as a matter of right, to any part of the public domain for use as communal lands. The Spanish law provided that the usufruct of a portion of the public domain adjoining municipal territory might be granted by the Government for communal purposes, upon proper petition, but, until granted, no rights therein passed to the municipalities, and, in any event, the ultimate title remained in the sovereign (City of Manila vs. Insular Government, 10 Phil. 327).

For the establishment, then, of new pueblos the administrative authority of the province, in representation of the Governor General, designated the territory for their location and extension and the metes and bounds of the same; and before alloting the lands among the new settlers, a special demarcation was made of the places which were to serve as the public square of the pueblo, for the erection of the church, and as sites for the public buildings, among others, the municipal building or the casa real, as well as of the lands whick were to constitute the common pastures, and propios of the municipality and the streets and roads which were to intersect the new town were laid out, ... . (Municipality of Catbalogan vs. Director of Lands, 17 Phil. 216, 220) (Emphasis supplied)

It may, therefore, be laid down as a general rule that regardless of the source or classification of land in the possession of a municipality, excepting those acquired with its own funds in its private or corporate capacity, such property is held in trust for the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds such lands subject to the paramount power of the legislature to dispose of the same, for after all it owes its creation to it as an agent for the performance of a part of its public work, the municipality being but a subdivision or instrumentality thereof for purposes of local administration. Accordingly, the legal situation is the same as if the State itself holds the property and puts it to a different use (2 McQuilin,Municipal Corporations, 3rd Ed., p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd 241).True it is that the legislative control over a municipal corporation is not absolute even when it comes to its property devoted to public use, for such control must not be exercised to the extent of depriving persons of their property or rights without due process of law, or in a manner impairing the obligations of contracts. Nevertheless, when it comes to property of the municipality which it did not acquire in its private or corporate capacity with its own funds, the legislature can transfer its administration and disposition to an agency of the National Government to be disposed of according to its discretion. Here it did so in obedience to the constitutional mandate of promoting social justice to insure the well-being and economic security of the people.It has been held that a statute authorizing the transfer of a Municipal airport to an Airport Commission created by the legislature, even without compensation to the city, was not violative of the due process clause of the American Federal Constitution. The Supreme Court of Minnessota in Monagham vs. Armatage, supra, said:

... The case is controlled by the further rule that the legislature, having plenary control of the local municipality, of its creation and of all its affairs, has the right to authorize or direct the expenditures of money in its treasury, though raised, for a particular purpose, for any legitimate municipal purpose, or to order and direct a distribution

thereof upon a division of the territory into separate municipalities ... . The local municipality has no such vested right in or to its public funds, like that which the Constitution protects in the individual as precludes legislative interferences. People vs. Power, 25 Ill. 187; State Board (of Education) vs. City, 56 Miss. 518. As remarked by the supreme court of Maryland in Mayor vs. Sehner, 37 Md. 180: "It is of the essence of such a corporation, that the government has the sole right as trustee of the public interest, at its own good will and pleasure, to inspect, regulate, control, and direct the corporation, its funds, and franchises."We therefore hold that c.500, in authorizing the transfer of the use and possession of the municipal airport to the commission without compensation to the city or to the park board, does not violate the Fourteenth Amendment to the Constitution of the United States.

The Congress has dealt with the land involved as one reserved for communal use (terreno comunal). The act of classifying State property calls for the exercise of wide discretionary legislative power and it should not be interfered with by the courts.This brings Us to the second question as regards the validity of Republic Act No. 4118, viewed in the light of Article III, Sections 1, subsection (1) and (2) of the Constitution which ordain that no person shall be deprived of his property without due process of law and that no private property shall be taken for public use without just compensation.

II .The trial court declared Republic Act No. 4118 unconstitutional for allegedly depriving the City of Manila of its property without due process of law and without payment of just compensation. It is now well established that the presumption is always in favor of the constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go Ching, et al. vs. Dinglasan, et al., 45 O.G. No. 2, pp. 703, 705). To declare a law unconstitutional, the repugnancy of that law to the Constitution must be clear and unequivocal, for even if a law is aimed at the attainment of some public good, no infringement of constitutional rights is allowed. To strike down a law there must be a clear showing that what the fundamental law condemns or prohibits, the statute allows it to be done (Morfe vs. Mutuc, et al., G.R. No. L-20387, Jan. 31, 1968; 22 SCRA 424). That situation does not obtain in this case as the law assailed does not in any manner trench upon the constitution as will hereafter be shown. Republic Act No. 4118 was intended to implement the social justice policy of the Constitution and the Government program of "Land for the Landless". The explanatory note of House Bill No. 1453 which became Republic Act No. 4118, reads in part as follows:

Approval of this bill will implement the policy of the administration of "land for the landless" and the Fifth Declaration of Principles of the Constitution which states that "the promotion of social justice to insure the well-being and economic security of all people should be the concern of the State." We are ready and willing to enact legislation promoting the social and economic well-being of the people whenever an opportunity for enacting such kind of legislation arises.

The respondent Court held that Republic Act No. 4118, "by converting the land in question — which is the patrimonial property of the City of Manila into disposable alienable land of the State and placing it under the disposal of the Land Tenure Administration — violates the provisions of Article III (Secs. 1 and 2) of the Constitution which ordain that "private property shall not be taken for public use without just compensation, and that no person shall be deprived of life, liberty or property without due process of law". In support thereof reliance is placed on the ruling in Province of Zamboanga del Norte vs. City of Zamboanga, G.R. No. 2440, March 28, 1968; 22 SCRA 1334, which holds that Congress cannot deprive a municipality of its private or patrimonial property without due process of law and without payment of just compensation since it has no absolute control thereof. There is no quarrel over this rule if it is undisputed that the property sought to be taken is in reality a private or patrimonial property of the municipality or city. But it would be simply begging the question to classify the land in question as such. The property, as has been previously shown, was not acquired by the City of Manila with its own funds in its private or proprietary capacity. That it has in its name a registered title is not questioned, but this title should be deemed to be held in trust for the State as the land covered thereby was part of the territory of the City of Manila granted by the sovereign upon its creation. That the National Government, through the Director of Lands, represented by the Solicitor General, in the cadastral proceedings did not contest the claim of the City of Manila that the land is its property, does not detract from its character as State property and in no way divests the legislature of its power to deal with it as such, the state not being bound by the mistakes and/or negligence of its officers.One decisive fact that should be noted is that the City of Manila expressly recognized the paramount title of the State over said land when by its resolution of September 20, 1960, the Municipal Board, presided by then Vice-Mayor Antonio Villegas, requested "His Excellency the President of the Philippines to consider the feasibility of declaring the city property bounded by Florida, San Andres and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 25547, containing an area of 7,450 square meters, as patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants thereof." (See Annex E, Partial Stipulation of Facts, Civil Case No. 67945, CFI, Manila, p. 121, Record of the Case) [Emphasis Supplied]The alleged patrimonial character of the land under the ownership of the City of Manila is totally belied by the City's own official act, which is fatal to its claim since the Congress did not do as bidden. If it were its patrimonial property why should the City of Manila be requesting the President to make representation to the legislature to declare it as such so it can be

disposed of in favor of the actual occupants? There could be no more blatant recognition of the fact that said land belongs to the State and was simply granted in usufruct to the City of Manila for municipal purposes. But since the City did not actually use said land for any recognized public purpose and allowed it to remain idle and unoccupied for a long time until it was overrun by squatters, no presumption of State grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim that it is its own private or patrimonial property (Municipality of Tigbauan vs. Director of Lands, 35 Phil. 798; City of Manila vs. Insular Government, 10 Phil. 327; Municipality of Luzuriaga vs. Director of Lands, 24 Phil. 193). The conclusion of the respondent court that Republic Act No. 4118 converted a patrimonial property of the City of Manila into a parcel of disposable land of the State and took it away from the City without compensation is, therefore, unfounded. In the last analysis the land in question pertains to the State and the City of Manila merely acted as trustee for the benefit of the people therein for whom the State can legislate in the exercise of its legitimate powers.Republic Act No. 4118 was never intended to expropriate the property involved but merely to confirm its character as communal land of the State and to make it available for disposition by the National Government: And this was done at the instance or upon the request of the City of Manila itself. The subdivision of the land and conveyance of the resulting subdivision lots to the occupants by Congressional authorization does not operate as an exercise of the power of eminent domain without just compensation in violation of Section 1, subsection (2), Article III of the Constitution, but simply as a manifestation of its right and power to deal with state property.It should be emphasized that the law assailed was enacted upon formal written petition of the Municipal Board of Manila in the form of a legally approved resolution. The certificate of title over the property in the name of the City of Manila was accordingly cancelled and another issued to the Land Tenure Administration after the voluntary surrender of the City's duplicate certificate of title by the City Treasurer with the knowledge and consent of the City Mayor. To implement the provisions of Republic Act No. 4118, the then Deputy Governor of the Land Authority sent a letter, dated February 18, 1965, to the City Mayor furnishing him with a copy of the "proposed subdivision plan of the said lot as prepared for the Republic of the Philippines for subdivision and resale by the Land Authority to bona fide applicants." On March 2, 1965, the Mayor of Manila, through his Executive and Technical Adviser, acknowledged receipt of the subdivision plan and informed the Land Authority that his Office "will interpose no objection to the implementation of said law provided that its provisions are strictly complied with." The foregoing sequence of events, clearly indicate a pattern of regularity and observance of due process in the reversion of the property to the National Government. All such acts were done in recognition by the City of Manila of the right and power of the Congress to dispose of the land involved.Consequently, the City of Manila was not deprived of anything it owns, either under the due process clause or under the eminent domain provisions of the Constitution. If it failed to get from the Congress the concession it sought of having the land involved given to it as its patrimonial property, the Courts possess no power to grant that relief. Republic Act No. 4118 does not, therefore, suffer from any constitutional infirmity.WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with the free and untrammeled implementation of Republic Act No. 4118 without any obstacle from the respondents. Without costs.Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee and Antonio, JJ., concur.Barredo and Makasiar, JJ., took no part.


Manila

EN BANC

G.R. No. L-24950 March 25, 1926

VIUDA DE TAN TOCO, plaintiff-appellant, vs.THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.

Arroyo & Evangelista for appellant.Provincial Fiscal Borromeo Veloso for appelle.

VILLAMOR, J.:

It appears from the record that the widow of Tan Toco had sued the municipal council of Iloilo for the amount of P42,966.40, being the purchase price of two strips of land, one on Calle J. M. Basa consisting of 592 square meters, and the other on Calle Aldiguer consisting of 59 square meters, which the municipality of Iloilo had appropriated for widening said street. The Court of First Instance of Iloilo sentenced the said municipality to pay the plaintiff the amount so claimed, plus

the interest, and the said judgment was on appeal affirmed by this court.1

On account of lack of funds the municipality of Iloilo was unable to pay the said judgment, wherefore plaintiff had a writ of execution issue against the property of the said municipality, by virtue of which the sheriff attached two auto trucks used for street sprinkling, one police patrol automobile, the police stations on Mabini street, and in Molo and Mandurriao and the concrete structures, with the corresponding lots, used as markets by Iloilo, Molo, and Mandurriao.

After notice of the sale of said property had been made, and a few days before the sale, the provincial fiscal of Iloilo filed a motion which the Court of First Instance praying that the attachment on the said property be dissolved, that the said attachment be declared null and void as being illegal and violative of the rights of the defendant municipality.

Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12, 1925, declared the attachment levied upon the aforementioned property of the defendant municipality null and void, thereby dissolving the said attachment.

From this order the plaintiff has appealed by bill of exceptions. The fundamental question raised by appellant in her four assignments of error is whether or not the property levied upon is exempt from execution.

The municipal law, section 2165 of the Administrative Code, provides that:

Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal corporations, to be exercised by and through their respective municipal government in conformity with law.

It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be contracted with, to acquire and hold real and personal property for municipal purposes, and generally to exercise the powers hereinafter specified or otherwise conferred upon them by law.

For the purposes of the matter here in question, the Administrative Code does not specify the kind of property that a municipality may acquire. However, article 343 of the Civil Code divides the property of provinces and towns (municipalities) into property for public use and patrimonial property. According to article 344 of the same Code, provincial roads and foot-path, squares, streets, fountains and public waters, drives and public improvements of general benefit built at the expense of the said towns or provinces, are property for public use.

All other property possessed by the said towns and provinces is patrimonial and shall be subject to the provisions of the Civil Code except as provided by special laws.

Commenting upon article 344, Mr. Manresa says that "In accordance with administrative legislation" (Spanish) we must distinguish, as to the patrimonial property of the towns, "between that a common benefit and that which is private property of the town. The first differs from property for public use in that generally its enjoyment is less, as it is limited to neighbors

or to a group or class thereof; and, furthermore, such use, more or less general, is not intrinsic with this kind of property, for by its very nature it may be enjoyed as though it were private property. The third group, that is, private property, is used in the name of the town or province by the entities representing it and, like and private property, giving a source of revenue."

Such distinction, however, is of little practical importance in this jurisdiction in view of the different principles underlying the functions of a municipality under the American rule. Notwithstanding this, we believe that the principle governing property of the public domain of the State is applicable to property for public use of the municipalities as said municipal is similar in character. The principle is that the property for public use of the State is not within the commerce of man and, consequently, is inalienable and not subject to prescription. Likewise, property for public of the municipality is not within the commerce of man so long as it is used by the public and, consequently, said property is also inalienable.

The American Law is more explicit about this matter as expounded by Mcquilin in Municipal Corporations, volume 3, paragraph 1160, where he says that:

States statutes often provide the court houses, jails and other buildings owned by municipalities and the lots on which they stand shall be exempt from attachment and execution. But independent of express statutory exemption, as a general proposition, property, real and personal, held by municipal corporations, in trust for the benefit of their inhabitants, and used for public purposes, is exempt.

For example, public buildings, school houses, streets, squares, parks, wharves, engines and engine houses, and the like, are not subject to execution. So city waterworks, and a stock of liquors carried in a town dispensary, are exempt. The reason for the exemption is obvious. Municipal corporations are created for public purposes and for the good of the citizens in their aggregate or public capacity. That they may properly discharge such public functions corporate property and revenues are essential, and to deny them these means the very purpose of their creation would be materially impeded, and in some instances practically destroy it. Respecting this subject the Supreme Court of Louisiana remarked: "On the first view of this question there is something very repugnant to the moral sense in the idea that a municipal corporation should contract debts, and that, having no resources but the taxes which are due to it, these should not be subjected by legal process to the satisfaction of its creditors. This consideration, deduced from the principles of moral equity has only given way to the more enlarged contemplation of the great and paramount interests of public order and the principles of government."

It is generally held that property owned by a municipality, where not used for a public purpose but for quasi private purposes, is subject to execution on a judgment against the municipality, and may be sold. This rule applies to shares of stock owned by a municipal corporation, and the like. But the mere fact that corporate property held for public uses is being temporarily used for private purposes does not make it subject execution.

If municipal property exempt from execution is destroyed, the insurance money stands in lieu thereof and is also exempt.

The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the municipality, except that in the New England States the individual liability of the inhabitant is generally maintained.

In Corpus Juris, vol 23, page 355, the following is found:

Where property of a municipal or other public corporation is sough to be subjected to execution to satisfy judgments recovered against such corporation, the question as to whether such property is leviable or not is to be determined by the usage and purposes for which it is held. The rule is that property held for public uses, such as public buildings, streets, squares parks, promenades, wharves, landing places fire engines, hose and hose carriages, engine houses, public markets, hospitals, cemeteries, and generally everything held for governmental purposes, is not subject to levy and sale under execution against such corporation. The rule also applies to funds in the hands of a public officer. Likewise it has been held that taxes due to a municipal corporation or country cannot be seized under execution by a creditor of such corporation. But where a municipal corporation or country owns in its proprietary, as distinguished from its public or governmental capacity, property not useful or used for a public purpose but for quasi private purposes, the general rule is that such property may be seized and sold under execution against the corporation, precisely as similar property of individuals is seized and sold. But property held for public purposes is not subject to execution merely because it is temporarily used for private purposes, although if the public use is wholly abandoned it becomes subject to execution. Whether or not property held as public property is necessary for the public use is a political, rather than a judicial question.

In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it was held that a wharf for unloading sugar and molasses, open to the public, was property for the public use of the City of New Orleans and was not subject to attachment for the payment of the debts of the said city.

In that case it was proven that the said wharf was a parcel of land adjacent to the Mississippi River where all shipments of sugar and molasses taken to New Orleans were unloaded.

That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that it might erect warehouses so that the merchandise upon discharge might not be spoiled by the elements. The said company was given the privilege of charging certain fees for storing merchandise in the said warehouses and the public in general had the right to unload sugar and molasses there by paying the required fees, 10 per cent of which was turned over to the city treasury.

The United States Supreme Court on an appeal held that the wharf was public property, that it never ceased to be such in order to become private property of the city; wherefore the company could not levy execution upon the wharf in order to collect the amount of the judgment rendered in favor thereof.

In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the Supreme Court of the United States that a public wharf on the banks of the Mississippi River was public property and not subject to execution for the payment of a debt of the City of New Orleans where said wharf was located.

In this case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and which later enlarged itself by accession, was converted into a wharf by the city for public use, who charged a certain fee for its use.

It was held that the land was public property as necessary as a public street and was not subject to execution on account of the debts of the city. It was further held that the fees collected where also exempt from execution because they were a part of the income of the city.

In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654), the question raised was whether for the payment of a debt to a third person by the concessionaire of a public market, the said public market could be attached and sold at public auction. The Supreme Court held that:

Even though a creditor is unquestionably entitled to recover out of his debtor's property, yet when among such property there is included the special right granted by the Government of usufruct in a building intended for a public service, and when this privilege is closely related to a service of a public character, such right of the creditor to the collection of a debt owed him by the debtor who enjoys the said special privilege of usufruct in a public market is not absolute and may be exercised only through the action of court of justice with respect to the profits or revenue obtained under the special right of usufruct enjoyed by debtor.

The special concession of the right of usufruct in a public market cannot be attached like any ordinary right, because that would be to permit a person who has contracted with the state or with the administrative officials thereof to conduct and manage a service of a public character, to be substituted, without the knowledge and consent of the administrative authorities, by one who took no part in the contract, thus giving rise to the possibility of the regular course of a public service being disturbed by the more or less legal action of a grantee, to the prejudice of the state and the public interests.

The privilege or franchise granted to a private person to enjoy the usufruct of a public market cannot lawfully be attached and sold, and a creditor of such person can recover his debt only out of the income or revenue obtained by the debtor from the enjoyment or usufruct of the said privilege, in the same manner that the rights of such creditors of a railroad company can be exercised and their credit collected only out of the gross receipts remaining after deduction has been made therefrom of the operating expenses of the road. (Law of November 12, 1896, extended to the overseas provinces by the royal order of August 3, 1886.)

For the reasons contained in the authorities above quoted we believe that this court would have reached the same conclusion if the debtor had been municipality of Guinobatan and the public market had been levied upon by virtue of the execution.

It is evident that the movable and immovable property of a municipality, necessary for governmental purpose, may not be attached and sold for the payment of a judgment against the municipality. The supreme reason for this rule is the character of the public use to which such kind of property is devoted. The necessity for government service justifies that the property of public of the municipality be exempt from execution just as it is necessary to exempt certain property of private individuals in accordance with section 452 of the Code of Civil Procedure.

Even the municipal income, according to the above quoted authorities, is exempt from levy and execution. In volume 1, page 467, Municipal Corporations by Dillon we find that:

Municipal corporations are instituted by the supreme authority of a state for the public good. They exercise, by delegation from the legislature, a portion of the sovereign power. The main object of their creation is to act as administrative agencies for the state, and to provide for the police and local government of certain designated civil divisions of its territory. To this end they are invested with certain governmental powers and charged with civil, political, and municipal duties. To enable them beneficially to exercise these powers and discharge these duties,

they are clothed with the authority to raise revenues, chiefly by taxation, and subordinately by other modes as by licenses, fines, and penalties. The revenue of the public corporation is the essential means by which it is enabled to perform its appointed work. Deprived of its regular and adequate supply of revenue, such a corporation is practically destroyed and the ends of its erection thwarted. Based upon considerations of this character, it is the settled doctrine of the law that only the public property but also the taxes and public revenues of such corporations cannot be seized under execution against them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are not subject to execution unless so declared by statute. The doctrine of the inviolability of the public revenues by the creditor is maintained, although the corporation is in debt, and has no means of payment but the taxes which it is authorized to collect.

Another error assigned by counsel for appellant is the holding of the court a quo that the proper remedy for collecting the judgment in favor of the plaintiff was by way or mandamus.

While this question is not necessarily included in the one which is the subject of this appeal, yet we believe that the holding of the court, assigned as error by appellant's counsel, is true when, after a judgment is rendered against a municipality, it has no property subject to execution. This doctrine is maintained by Dillon (Municipal Corporations, vol. 4, par. 1507, 5th ed.) based upon the decisions of several States of the Union upholding the same principle and which are cited on page 2679 of the aforesaid work. In this sense this assignment of error, we believe, is groundless.

By virtue of all the foregoing, the judgment appealed from should be and is hereby affirmed with costs against the appellant. So ordered.

Avanceña, C. J., Street, Malcolm, Ostrand, Johns, Romualdez and Villa-Real., JJ., concur.


Manila

EN BANC

G.R. No. L-5013 March 11, 1909

JEREMIAH J. HARTY, Roman Catholic Archbishop of Manila, plaintiff-appellee, vs.THE MUNICIPALITY OF VICTORIA, Province of Tarlac, defendant-appellant.

F. Buencamino for appellant. Hartigan and Rohde for appellee.

TORRES, J.:

On January 17, 1908, the representative of Mgr. Jeremiah J. Harty, archbishop of the Roman Catholic Church, as the legal administrator of all the properties and rights of the Catholic Church within the archbishopric of Manila, filed a written complaint in the Court of First Instance of Tarlac against the municipality of Victoria, alleging that the parish of the said town had been and was then the owner of a parcel of land within the said municipality, known as the plaza of the church of Victoria; that it had acquired said parcel of land more than sixty years previously, and had continued to possess the same ever since up to 1901, in which year the defendant municipality unlawfully and forcibly seized the said property, claiming to be entitled thereto and retaining it to the present day. For the purposes of the complaint, a description of the meters and bounds of the land in question was set forth in the writing, and plaintiff prayed that, in view of what was therein set forth, judgment be entered holding that the said land was the property of the parish of Victoria, of the Roman Catholic Apostolic Church, and that the defendant be ordered to vacate the same and to pay the costs of the action.

The defendant municipality answered the complaint through its attorney and offered a general denial of all the facts stated therein, especially of those numbered 4, 5, 6, and 7; in special defense it alleged that the plaza described in No. 4 of the complaint was founded when the sitio denominated Canarum, a barrio of the town of Tarlac, was converted into a civil town in 1855; that the parish of Tarlac was established many years after the civil town, and that therefore, it neither had then, nor has now any title to the plaza claimed, and that the complaint injured the defendant, and for this reason it prayed that judgment be entered absolving the defendant of the complaint with costs and damages against the plaintiff.

Evidence was adduced by both parties, and the documents exhibited, to one of which the plaintiff objected, were made of record; the trial court rendered judgment on the 15th of June, 1908, holding that the parish of Victoria of the Roman Catholic Apostolic Church, had a better right to the possession of the land described in the complaint, and sentenced the defendant to vacate the same and to pay the costs. To said judgment the representative of the defendant excepted and moved for a new trial on the ground that it was contrary to the weight of the evidence, and he notified the court that, if his motion were overruled, he would appeal to the Supreme Court. The motion for a new trial was overruled; the defendant excepted, and presented the corresponding bill of exceptions which, after receipt of a copy had been acknowledged by the adverse party, was approved. On the 1st of September last, the appellant was ordered to furnish bond in the sum of P1,000 to insure the fulfillment of the judgment in the event that it should be totally or partially affirmed. To said order the defendant excepted, but furnished the bond as directed by the court.

In view of the nature of the action brought by the plaintiff against the municipality of Victoria, Province of Tarlac, the question that has arisen between the contending parties consists only in determining who is the owner and proprietor of the parcel of land that surrounds the parish church of the said town, and which is called the public plaza of the same.

Article 339 of the Civil Code reads:

Property of public ownership is:

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

Article 344 of said code also reads:

Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by the said towns or provinces.

From the evidence presented by both parties it appears that the town of Victoria, which was formerly only a barrio of the town of Tarlac and known as Canarum, was converted into a town in 1855, and named Victoria; to this end they must have laid out the streets and the plaza of the town, in the center of which were situated the church and parish house from the commencement, and at the expiration of about twelve years the parish of said town was constituted and the parish who was to perform the office of curate was appointed; that from the very beginning, the large tract of land that surrounds the church and the parish house was known as a public plaza, destined to the use of all the residents of the recently founded town;

public performances and religious processions were held thereon without hindrance either on the part of the local authorities or of the curate of said town.

It must be assumed that the principal residents of the old barrio, being interested in the conversion of the barrio into a civil town, arranged in such a way that the barrio, as the center of the future town which was subsequently called Victoria, should have streets and a public plaza with its church and parish house, and also a tribunal or building destined for the use of the municipality and the local official at that time called the gobernadorcillo and later on capitán municipal, as has occurred in the foundation of all the towns in these Islands, under the old administrative laws.

It may be true that the father of the witness Casimiro Tañedo, who owned the space of land where the church and parish house were erected, had voluntarily donated it to the Catholic Church, the only one known at the time, but proper proof is lacking that the donation affirmed by the said Tañedo comprehended the whole of the large tract which at the present time constitute the plaza of the town.

It was a custom observed by all the towns established administratively in these Islands under the old Laws of the Indies, that on their creation, a certain amount of land was always reserved for plazas, commons, and special and communal property, and as it is unquestionable that the said large space of land was left vacant in the center of the town of Victoria when it was constituted as a civil town, more than twelve years prior to the appointment of a permanent curate therein, there are good grounds to suppose that the late Vicente Tañedo donated the land now occupied by the church and the parish house in said municipality for religious purposes, or to the church, but not to the parish curate because at the time there was no curate at the new town of Victoria.

Even though all the remaining space of land which now forms the great plaza of the town of Victoria had been owned by the said Tañedo, it must be presumed that he waived his right thereto for the benefit of the townspeople, since from the creation or establishment of the town, down to the present day, all the residents, including the curate of said town, have enjoyed the free use of said plaza; it has not been satisfactorily shown that the municipality or the principales of the town of Victoria had donated the whole of said land to the curate of Victoria or to the Catholic Church, as alleged, nor could it have been so donated, it being a public plaza destined to public use and was not of private ownership, or patrimony of the town of Victoria, or of the Province of Tarlac.

It should be noted that, among other things, plazas destined to the public use are not subject to prescription. (Art. 1936, Civil Code.)

That both the curates and the gobernadorcillos of the said town procured fruit trees and plants to be set out in the plaza, does not constitute an act of private ownership, but evidences the public use thereof, or perhaps the intention to improve and embellish the said plaza for the benefit of the townspeople.

Certain it is that the plaintiff has not proven that the Catholic Church or the parish of Victoria was the owner or proprietor of the said extensive piece of land which now forms the public plaza of said town, nor that it was in possession thereof under the form and conditions required by law, inasmuch as it has been fully proven that said plaza has been used without let or hindrance by the public and the residents of the town of Victoria ever since its creation. For the above reasons it is our opinion that the judgment appealed from should be reversed, and that it should be held, as we do hereby hold, that the whole of the land not occupied by the church of the town of Victoria and its parish house, is a public plaza of the said town, of public use, and that in consequence thereof, the defendant is absolved of the complaint without any special ruling as to the costs of both instances.

Arellano, C. J., Mapa, Johnson, Carson, and Willard, JJ., concur.



G.R. No. L-39272 May 4, 1988EUGENIA SALAMAT VDA. DE MEDINA, petitioner, vs.HONORABLE ' FERNANDO A. CRUZ, as Presiding Judge of Branch XII, Court of First Instance of Rizal, and REMEDIOS MAGBANUA, respondents,

Fernando V. Domingo for petitioner.Ildefonso De Guzman-Mendiola for respondents. PARAS, J.:This is a petition for review on certiorari and injunction with prayer for restraining order, seeking to annul and to set aside the writ of demolition issued by order of the respondent judge of the Court of First Instance of Rizal, Branch XII, Caloocan City, in Civil Case No. C-120 entitled "Benedicta Mangahas, et al. vs. The Philippine Realty Corporation, et al.," dated April 4, 1974, with prayer for a restraining order "enjoining the enforcement of said writ of demolition." The aforementioned order reads:

Acting on the "Motion for Demolition/Removal of Improvements," filed by defendant on March 11, 1974, to which plaintiff filed no oppposition, the Court finds that the same should be as it is hereby granted, and plaintiff Mangahas is hereby given twenty (20) days from receipt of this order within which to remove the improvements introduced by her on the Lot in question and thereafter surrender possession of the premises to the defendant. Should the plaintiff fail to do so, let the corresponding writ of demolition be issued. SO ORDERED.

The antecedent facts of the case are as follows: This case stemmed from Civil Case No. C-120 of the court below. The questioned Lot 6, Grace Park Subdivision in Caloocan City had been brought since the year 1916 under the operation of the Land Registration Act No. 496, covered by Original Certificate of Title No. 868, G.L.R. Record No. 11267 which had been issued pursuant to Decree No. 20302 in the name of predecessor-in-interest of the Philippine Realty Corporation. In 1949 Benedicta Mangahas and Francisco Ramos occupied the said lot and built their houses without the consent of the Philippine Realty Corporation, the then registered ownerof the lot. On April 27, 1959, the owner, Philippine Realty Corporation executed a Contract to Sell of said lot in favor of Remedios Magbanua for P19,500.00 on installment. On February 3,1964, Mangahas and Ramos instituted Civil Case No. C-120 of the court below against the Philippine Realty Corporation and Remedios Magbanua for annulment of the sale and for execution of another in their favor. On July 18,1969, Civil Case No. C-120 was decided by the court below in favor of defendants Philippine Realty Corporation and Remedios Magbanua, dismissing the complaint and ordering Mangahas and Ramos "to vacate the lot and surrender possession thereof to Remedios Magbanua."On August 6, 1969, aforesaid decision was appealed by the plaintiffs to the Court of Appeals and docketed as G.R. CA No. 44769, which was later dismissed on March 2,1973. On March 24, 1973, the case was elevated to this Court by petition for review on certiorari and was docketed as SC-G.R. No. L-36542. The aforesaid petition was denied on April 26, 1973. Three motions for reconsideration filed by Mangahas and Ramos were all denied by this Court; the last motion for leave to file fourth motion for reconsideration was Malabanan EXPUNGED from the records of the case by resolution of this Court dated August 2, 1973. Final judgment was entered on May 28,1973 and on August 22, 1973, the records of the case were remanded to the court below for execution. Thus, on November 9, 1973 after all the installments had been fully paid, the Philippine Realty Corporation executed the Deed of Sale of Lot 6 in favor of Remedios Magbanua and TCT No. 52262 (Caloocan City) was issued in the name of the latter (Memo for Respondent, pp. 5-9; Rollo, pp. 309-313).On October 16, 1973, petitioner, Eugenia Salamat vda. de Medina purchased from the Heirs of Don Mariano San Pedro y Esteban, the same parcel of land described as Lot 6, Block No. 116, Grace Park Subdivision, Grace Park, Caloocan City. A deed of Absolute Sale was executed in her favor by the Heirs of the Estate of Don Mariano San Pedro y Esteban represented by its Administrator and Attorney-in-fact, Prudencio G. Falcis (Rollo, p. 13). On November 29, 1973, a petition for a writ of execution was filed in the court below by the defendant Remedios Magbanua (hereinafter referred to as private respondent), and the petition was granted in an Order dated December 14, 1973. The aforesaid writ of execution was issued on December 20, 1973, and was served by the sheriff on the plaintiff Mangahas and Ramos on January 14 and 15, 1979, respectively. The sheriff returned the writ to the court below upon plaintiffs' refusal to vacate the lot and to affix their signatures on the original copy of the writ (Rollo, p. 314),Meanwhile, on January 21,1974, petitioner purchased six (6) houses, standing on the land subject matter of the aforementioned sale for P 7,600.00 from Ricardo de Guzman and Eufrocinia de Guzman. A Deed of Absolute Sale was therefore issued in her behalf (Rollo, p. 15).But on January 22,1974, petitioner having received information that the houses purchased were involved in a litigation, docketed as Civil Case No. C-120, and entitled Benedicta Mangahas and Francisco Ramos (Plaintiffs in Civil Case No. C-120) versus the Philippine Realty Corporation and Remedios Magbanua in the Court of First Instance of Rizal, Branch XII, Caloocan City, filed an affidavit and notice of third party claim (Rollo, p. 17). Impeded by the refusal of Mangahas and Ramos to vacate the lot, Remedios Magbanua filed a motion for demolition and removal of improvements alleging that the questioned lot is a registered property in the name of defendant Remedios Magbanua, under Transfer Certificate of Title No. 52262 (Caloocan City Registry of Deeds) which was derived from Transfer Certificate of Title No. 22104 (of same Registry of Deeds) in the name of the Philippine Realty Corporation and from Original Certificate of Title No. 0-868. At the hearing Mangahas and Ramos moved for and were granted a period of five (5) days to file their opposition. On March 25, 1974, it was Eugenia Salamat vda. de Medina, herein petitioner who filed her opposition attaching thereto; (1) copy of the alleged Deed of Sale of Lot 6 in question; (2) Tax Declaration No.

19114; (3) Tax Declaration No. 19115; and (4) alleged Deed of Assignment of Rights to the houses existing on said lot. Petitioner alleged that she is the present owner of the questioned lot and the six houses sought to be demolished. On March 30,1974, private respondent Remedios Magbanua filed an answer to the opposition dated March 25, 1974 (Rollo, p. 150).<äre||anº•1àw> On April 5, 1974, the respondent Judge issued an Order granting the writ of demolition (Rollo, p. 24).On May 9,1974, petitioner filed a Motion for Reconsideration of the order (Rollo, p. 25) reiterating therein that she is the owner by purchase in good faith and for value of the six (6) houses on Lot 6, Block 116. On the same date, petitioner filed a complaint for recovery of ownership entitled Eugenia Salamat Vda. de Medina vs. The Philippine Realty Corporation and Remedios Magbanua before the Court of First Instance of Rizal, Branch XXXIII, Caloocan City docketed therein as Civil Case No. 3174 (Rollo, p. 29). The complaint alleged that by virtue of the intestacy of the late Don Mariano San Pedro y Esteban or upon his death in 1903, the abovenamed plaintiffs-heirs succeeded, inherited and became legal owners and the present assessors and actual occupants of his estate embraced in Titulo de Composicion Malabanan Con El Estado Number 4136, dated April 29, 1894 which has been described as a vast tract of agricultural lands, being a gratuitous composicion title granted to Don Mariano San Pedro y Esteban by the Spanish Government in the Philippines; that sometime in June, 1972, spouses Ricardo de Guzman and Eufrocinia de Guzman acquired by purchase the houses erected on said Lot 6, Block 116 from Benedicta Mangahas and Francisco Ramos, who in turn sold it to the plaintiff Eugenia Salamat Vda. de Medina and that sometime in October 1973, plaintiff s heirs sold to plaintiff Eugenia Salamat vda. de Medina the above mentioned Lot 6, Block 116, 8th Avenue, Grace Park, Caloocan City, evidenced by the deed of sale executed by the Heirs of the Estate of Don Mariano. A voluntary execution and/or vacation dated May 17, 1974, was executed by plaintiffs Benedicta Mangahas and Francisco Ramos (Plaintiff in Civil Case No. C-120) in favor of Eugenia Salamat vda. de Medina (Rollo, p. 165). A manifestation and ex parte motion dated June 3, 1974, was filed by the private respondent (defendant) informing the Court that despite the Order of April 4, 1974 Mangahas and Ramos have not removed their houses and improvements and praying that a writ of demolition be issued, followed by a memorandum dated June 26, 1974 in support of the aforesaid manifestation and ex parte petition (Rollo, p. 170) and an Opposition dated July 16, 1974 to Motion for Reconsideration dated May 9, 1974 (Rollo, p. 170). On July 17, 1974, an order was issued by respondent Judge, denying the Motion for Reconsideration dated May 9, 1974 for lack of merit (Rollo, p. 184). On July 29, 1974, respondent Judge an order directing the sheriff to demolish the improvements on the lot in question (Rollo, p. 39).The dispositive portion of the aforementioned Order reads:

WHEREAS, the plaintiffs are given 10 days from receipt thereof to remove the improvements on the lot in question and should they fail to do so, the sheriff is hereby ordered to demolish the same. SO ORDERED.

Oppositor movant, Eugenia Salamat Vda. de Medina (petitioner herein) filed a Second Motion to quash the writ of execution and order of demolition (dated April 4, 1974 and July 29, 1974), dated August 6, 1974 (Rollo, p. 150). The petitioner alleged that the court did not acquire jurisdiction over the herein petitioner, claiming that she is not a party to the original Action, and that consequently, she cannot be considered "a person claiming under" the plaintiff Francisco Ramos and Benedicta Mangahas."On August 12, 1974, a sheriffs return was executed by the Ex-Officio City Sheriff Emma C. Ona, declaring that the order dated July 29, 1974 was duly served, but unsatisfied (Rollo, p. 185). On the same date, respondent Remedios Magbanua filed an Ex-parte motion for the immediate issuance of the writ of demolition (Rollo, p. 40). Thereafter, on August 28,1974, the respondent Judge issued an order for the immediate issuance of the writ of demolition (Rollo, p. 43). Accordingly, on August 30, 1974, pursuant to the court order, the Branch Clerk of Court, Branch XII, of the Court of First Instance of Caloocan City issued a writ of demolition (Rollo, p. 44), and on August 31, 1974, a Notice of Demolition issued, addressed to Benedicta Mangahas and Francisco Ramos and other occupants of the houses Nos. 142 and 144 Maria Clara St., Grace Park, Caloocan City and directing them to vacate the land and remove the improvements or constructions on the premises, voluntarily within seven (7) days, otherwise they would be demolished (Rollo, pp. 43-45).<äre||anº•1àw> Hence, this petition.On September 16, 1974, this Court issued a temporary restraining order (Rollo. p. 47).Respondents filed their memorandum on October 21, 1975 (Rollo, p. 255) while petitioner filed her memorandum on November 10, 1975 (Rollo, p. 356). On December 3, 1975, this Court resolved to consider this case submitted for decision (Rollo, p. 350). In her memorandum petitioner raised the following issues, to wit: MAY THE DECISION IN CIVIL CASE NO. C-120 FOR CANCELLATION OF A SALE, NOT FOR EJECTMENT, "DISMISSING THE COMPLAINT AND ORDERING THE PLAINTTIFFS OR ANYBODY OCCUPYING THE LOT IN QUESTION IN PLAINTIFFS' BEHALF, TO VACATE THE SAME TO SURRENDER POSSESSION THEREOF TO THE

DEFENDANT ... " BE ENFORCED AGAINST THE PETITIONER WHO IS NOT A PARTY THEREIN AND WHO:a) PURCHASED THE IMPROVEMENTS SIX (6) HOUSES ON THE LOT IN GOOD FAITH, FOR VALUE AND WITHOUT NOTICE, FROM THE PLAINTIFFS.b) PURCHASED THE SAID LOT ALSO IN GOOD FAITH FOR VALUE AND WITHOUT NOTICE FROM A THIRD PERSON WHO CLAIMED OWNERSHIP OF THE LOT.

The crucial issue in this case is whether or not the decision in Civil Case No. C-120 which has long become final and executory, can be enforced against the petitioner who is not a party to the aforementioned case. Petitioner alleged in her memorandum that she is not affected by the decision rendered in Civil Case No. C-120 as persons who are not parties to a suit are not bound by the judgement and that she purchased the lot in good faith from an entirely different person — the Heirs of Don Mariano San Pedro y Esteban and not from either the plaintiffs or defendants in the aforesaid case. It is a generally accepted principle "that no man shall be affected by any proceeding to which he is a stranger" (Ed. A. Keller & Co. v. Edlerman & Buckmall Stratemship Co., 38 Phil. 514, 520 Gatchalian v. Arlegui, 75 SCRA 234 [1977], and strangers to a case are not bound by judgment rendered by the court (Bien v. Sunga, 117 SCRA 249 [1982]). In the same manner an execution case can be issued only against a party and not against one who did not have this day in court (Galang et al. v. Uytiepo, 92 Phil. 344; Castañeda v. de Leon, 55 O.G. 625; Martinez et al. v. Villacete, et al., G.R. No. L-18696, August 31, 1962. In the case of Lorenzana v. Cayetano, 78 SCRA 485 [1977]), this Court held that only real parties in interest in an action are bound by judgment therein and by writs of execution and demolition issued pursuant thereto. It will be noted, however, as contended by respondent, that the houses existing on Lot 6 in question were formerly owned by Benedicta Mangahas and Francisco Ramos who sold the same to the spouses Ricardo de Guzman and Eufrocina de Guzman who in turn finally sold them to the herein petitioner. Under the circumstances, there is no question that the petitioner is privy to the two judgment debtors Mangahas and Ramos, and being a privy, the petitioner can be reached by the order of execution and Writ of Demolition. Finally, Remedios Magbanua is the registered owner under the Torrens System of the questioned lot. Undeniably, a Torrens Title is generally a conclusive evidence of the ownership of the land referred to therein (Section 49, Act 496); and a strong presumption exists that Torrens Titles were regularly issued and that they are valid (Salao v. Salao, 70 SCRA 65 [1976]).<äre||anº•1àw> A Torrens Title is incontrovertible against any "informacion possessoria" or title existing prior to the issuance thereof not annotated on the title (J.M. Tuason and Co. Inc. v. Jurillo, 76 SCRA 346 [1977]). It is a well settled rule that all persons dealing with property covered by Torrens Certificate of Title are not required to go beyond what appears on the face of the title (Centeno v. C.A., 139 SCRA 545 [1985]). In the case at bar, petitioner further claims ownership of the lot in question because of the payment of taxes. It must be noted however, that payment of the land tax is not an evidence of ownership of a parcel of land for which payment is made (Reyes v. Sierra, 93 SCRA 472 [1979]; Director of Lands v. C.A., 133 SCRA 701 [1984]; Ferrer v. Lopez, 150 SCRA 393 [1987]) especially when the parcel of land is covered by a Torrens Title in the name of another (Masagana v. Malabanan Argamora, 109 SCRA 53 [198]). PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, and the assailed judgment of the Court of First Instance of Rizal, Branch XII, Caloocan City is hereby AFFIRMED. This decision is immediately executory, and the restraining order previously issued is hereby LIFTED. Let the demolition be carried out immediately. SO ORDERED. Yap, C.J., Melencio-Herrera and Sarmiento, JJ., concur. Padilla, J., took no part.



G.R. No. 126000 October 7, 1998METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), petitioner, vs.COURT OF APPEALS, HON. PERCIVAL LOPEZ, AYALA CORPORATION and AYALA LAND, INC ., respondents.

G.R. No. 128520 October 7, 1998METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs.HON. PERCIVAL MANDAP LOPEZ, CAPITOL HILLS GOLF AND COUNTRY CLUB INC., SILHOUETTE TRADING CORPORATION, and PABLO ROMAN JR., respondents.

MARTINEZ, J.:These are consolidated petitions for review emanating from Civil Case No. Q-93-15266 of the Regional Trial Court of Quezon City, Branch 78, entitled "Metropolitan Waterworks and Sewerage System (hereafter MWSS) vs. Capitol Hills Golf & Country Club Inc. (hereafter, CHGCCI), STC (hereafter, SILHOUETTE), Ayala Corporation, Ayala Land, Inc. (hereafter AYALA) Pablo Roman, Jr., Josefina A. Roxas, Jesus Hipolito, Alfredo Juinito, National Treasurer of the Philippines and the Register of Deeds of Quezon City."From the voluminous pleadings and other documents submitted by the parties and their divergent styles in the presentation of the facts, the basic antecedents attendant herein are as follows:Sometime in 1965, petitioner MWSS (then known as NAWASA) leased around one hundred twenty eight (128) hectares of its land (hereafter, subject property) to respondent CHGCCI (formerly the International Sports Development Corporation) for twenty five (25) years and renewable for another fifteen (15) years or until the year 2005, with the stipulation allowing the latter to exercise a right of first refusal should the subject property be made open for sale. The terms and conditions of respondent CHGCCI's purchase thereof shall nonetheless be subject to presidential approval.Pursuant to Letter of instruction (LOI) No. 440 issued on July 29,1976 by then President Ferdinand E. Marcos directing petitioner MWSS to negotiate the cancellation of the MWSS-CHGCCI lease agreement for the disposition of the subject property, Oscar Ilustre, then General Manager of petitioner MWSS, sometime in November of 1980 informed respondent CHGCCI, through its president herein respondent Pablo Roman, Jr., of its preferential right to buy the subject property which was up for sale. Valuation thereof was to be made by an appraisal company of petitioner MWSS' choice, the Asian Appraisal Co., Inc. which, on January 30, 1981, pegged a fair market value of P40.00 per square meter or a total of P53,800,000.00 for the subject property.Upon being informed that petitioner MWSS and respondent CHGCCI had already agreed in principle on the purchase of the subject property, President Marcos expressed his approval of the sale as shown in his marginal note on the letter sent by respondents Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.The Board of Trustees of petitioner MWSS thereafter passed Resolution 36-83, approving the sale of the subject property in favor of respondent SILHOUETTE, as assignee of respondent CHGCCI, at the appraised value given by Asian Appraisal Co., Inc. Said Board Resolution reads:

NOW, THEREFORE, BE IT RESOLVED, as it is hereby resolved, that in accordance with Section 3, Par. (g) of the MWSS Charter and subject to the approval of the President of the Philippines, the sale of a parcel of land located in Balara, Quezon City, covered by TCT No. 36069 of the Registry of Deeds of Quezon City, containing an area of ONE HUNDRED TWENTY SEVEN (127.313) hectares more or less, which is the remaining portion of the area under lease after segregating a BUFFER ZONE already surveyed along the undeveloped area near the treatment plant and the developed portion of the CHGCCI golf course, to SILHOUETTE TRADING CORPORATION as Assignee of Capitol Hills Golf & Country Club, Inc., at FORTY (P40.00) PESOS per square meter, be and is hereby approved.BE IT RESOLVED FURTHER, that the General Manager be authorized, as he is hereby authorized to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative thereto.

The MWSS-SILHOUETTE sales agreement eventually pushed through. Per the Agreement dated May 11, 1983 covering said purchase, the total price for the subject property is P50,925,200, P25 Million of which was to be paid upon President Marcos' approval of the contract and the balance to be paid within one (1) year from the transfer of the title to respondent SILHOUETTE as vendee with interest at 12% per annum. The balance was also secured by an irrevocable letter of credit. A Supplemental Agreement was forged between petitioner MWSS and respondent SILHOUETTE on August 11, 1983 to accurately identify the subject property.Subsequently, respondent SILHOUETTE, under a deed of sale dated July 26, 1984, sold to respondent AYALA about sixty-seven (67) hectares of the subject property at P110.00 per square meter. Of the total price of around P74 Million, P25 Million was to be paid by respondent AYALA directly to petitioner MWSS for respondent SILHOUETTE's account and P2 Million directly to respondent SILHOUETTE. P11,600,000 was to be paid upon the issuance of title in favor of respondent AYALA, and the remaining balance to be payable within one (1) year with 12% per annum interest.Respondent AYALA developed the land it purchased into a prime residential area now known as the Ayala Heights Subdivision.Almost a decade later, petitioner MWSS on March 26, 1993 filed an action against all herein named respondents before the Regional Trial Court of Quezon City seeking for the declaration of nullity of the MWSS-SILHOUETTE sales agreement and all subsequent conveyances involving the subject property, and for the recovery thereof with damages.Respondent AYALA filed its answer pleading the affirmative defenses of (1) prescription, (2) laches, (3) waiver/estoppel/ratification, (4) no cause of action, (5) non-joinder of indispensable parties, and (6) non-jurisdiction of the court for non-specification of amount of damages sought.On June 10, 1993; the trial court issued an Order dismissing the complaint of petitioner MWSS on grounds of prescription, laches, estoppel and non-joinder of indispensable parties.

Petitioner MWSS's motion for reconsideration of such Order was denied, forcing it to seek relief from the respondent Court where its appeal was docketed as CA-G.R. CV No. 50654. It assigned as errors the following:

I. The court a quo committed manifest serious error and gravely abused its discretion when it ruled that plaintiffs cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment.II. The lower court erred and exceeded its jurisdiction when, contrary to the rules of court and jurisprudence, it treated and considered the affirmative defenses of Ayalas — defenses not categorized by the rules as grounds for a motion to dismiss — as grounds of a motion to dismiss which justify the dismissal of the complaint.III. The lower court abused its discretion and exceeded its jurisdiction when it favorably acted on Ayala's motion for preliminary hearing of affirmative defenses (motion to dismiss) by dismissing the complaint without conducting a hearing or otherwise requiring the Ayalas to present evidence on the factual moorings of their motion.IV. The lower court acted without jurisdiction and committed manifest error when it resolved factual issues and made findings and conclusions of facts all in favor of the Ayalas in the absence of any evidence presented by the parties.V. The court a quo erred when, contrary to the rules and jurisprudence, it prematurely ruled that laches and estoppel bar the complaint as against Ayalas or that otherwise the alleged failure to implead indispensable parties dictates the dismissal of the complaint.

In the meantime, respondents CHGCCI and Roman filed their own motions to hear their affirmative defenses which were identical to those adduced by respondent AYALA. For its part, respondent SILHOUETTE filed a similarly grounded motion to dismiss.Ruling upon these motions, the trial court issued an order dated December 13, 1993 denying all of them. The motions for reconsideration of the respondents concerned met a similar fate in the May 9, 1994 Order of the trial court. They thus filed special civil actions for certiorari before the respondent Court which were docketed as CA-G.R. SP Nos. 34605, 34718 and 35065 and thereafter consolidated with CA-G.R. CV No. 50694 for disposition.Respondent court, on August 19, 1996, rendered the assailed decision, the dispositive portion of which reads:

WHEREFORE, judgment is rendered:1.) DENYING the petitions for writ of certiorari for lack of merit; and2.) AFFIRMING the order of the lower court dismissing the complaint against the appellees Ayalas.SO ORDERED.

Petitioner MWSS appealed to this Court that portion of the respondent Court's decision affirming the trial court's dismissal of its complaint against respondent AYALA, docketed as G.R. No. 126000. The portion dismissing the petition for certiorari (CA-GR Nos. 34605, 347718 and 35065) of respondents Roman, CHGCCI and SILHOUETTE, however, became final and executory for their failure to appeal therefrom. Nonetheless, these respondents were able to thereafter file before the trial court another motion to dismiss grounded, again, on prescription which the trial court in an Order of October 1996 granted.This prompted petitioner MWSS to file another petition for review of said trial court Order before this Court and docketed as G.R. No. 128520. On motion of petitioner MWSS, this Court in a Resolution dated December 3, 1997 directed the consolidation of G.R. Nos. 126000 and 128520.The errors assigned by petitioner MWSS in CA-GR No. 126000 are:

I.In holding, per the questioned Decision dated 19 August 1996, that plaintiffs cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment, and in effect affirming the dismissal by the respondent judge of the complaint against respondent Ayalas. This conclusion of respondent CH is, with due respect, manifestly mistaken and legally absurd.II.In failing to consider that the complaint recited six alternative causes of action, such that the insufficiency of one cause — assuming there is such insufficiency — does not render insufficient the other causes and the complaint itself. The contrary ruling in this regard by respondent CA is founded entirely on speculation and conjecture and is constitutive of grave abuse of discretion.

In G.R. No. 128520, petitioner MWSS avers that:I.

The court of origin erred in belatedly granting respondent's motions to dismiss which are but a rehash, a disqualification, of their earlier motion for preliminary hearing of affirmative defense / motion to dismiss. These previous motions were denied by the lower court, which denial the respondents raised to the Court of Appeals by way of perfection for certiorari, which petitions in turn were dismissed for lack of merit by the latter court. The correctness and validity of the lower court's previous orders denying movant's motion for preliminary hearing of

affirmative defense / motion to dismiss has accordingly been settled already with finality and cannot be disturbed or challenged anew at this instance of defendant's new but similarly anchored motions to dismiss, without committing procedural heresy causative of miscarriage of justice.

II.The lower court erred in not implementing correctly the decision of the Court of Appeal. After all, respondents' own petitions for certiorari questioning the earlier denial of their motion for preliminary hearing of affirmative defense / motion to dismiss were dismissed by the Court of Appeal, in the process of affirming the validity and legality of such denial by the court a quo. The dismissal of the respondents' petitions are embodied in the dispositive portion of the said decision of the Court of Appeals dated 19 August 1996. The lower court cannot choose to disregard such decretal aspect of the decision and instead implement an obiter dictum.

III.That part of the decision of the decision of the Court of Appeals resolving the issue of prescription attendant to the appeal of plaintiff against the Ayalas, has been appealed by plaintiff to the Supreme Court by way of a petition for review on certiorari. Not yet being final and executory, the lower court erred in making capital out of the same to dismiss the case against the other defendants, who are the respondents herein.

IV.The lower court erred in holding, per the questioned orders, that plaintiff's cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment. This conclusion of public respondent is manifestly mistaken and legally absurd.

V.The court a quo erred in failing to consider the complaint recites six alternative causes of action, such that the insufficiency of one cause — assuming there is such insufficiency — does not render insufficient the other cause and the complaint itself. The contrary ruling in this regard by public respondent is founded entirely on speculation and conjecture and is constitutive of grave abuse of discretion.

In disposing of the instant petition, this Court shall dwell on the more crucial grounds upon which the trial court and respondent based their respective rulings unfavorable to petitioner MWSS; i.e., prescription, laches, estoppel/ratification and non-joinder of indispensable parties.

RE: PrescriptionPetitioner MWSS claims as erroneous both the lower courts' uniform finding that the action has prescribed, arguing that its complaint is one to declare the MWSS-SILHOUETTE sale, and all subsequent conveyances of the subject property, void which is imprescriptible.We disagree.The very allegations in petitioner MWSS' complaint show that the subject property was sold through contracts which, at most, can be considered only as voidable, and not void. Paragraph 12 of the complaint reads in part:

12. . . . .The plaintiff has been in continuous, peaceful and public possession and ownership of the afore-described properties, the title (TCT No. [36069] 199170) thereto, including its derivative titles TCT Nos. 213872 and 307655, having been duly issued in its name. However, as a result of fraudulent and illegal acts of herein defendants, as described in the paragraphs hereinafter following, the original of said title/s were cancelled and in lieu thereof new titles were issued to corporate defendant/s covering subject 127.9271 hectares. . . . .

Paragraph 34 alleges:34. Sometime thereafter, clearly influenced by the premature if not questionable approval by Mr. Marcos of a non-existent agreement, and despite full knowledge that both the assessed and market value of subject property were much higher, the MWSS Board of Trusties illegally passed an undated resolution ("Resolution No. 36-83"), approving the "sale" of the property to CHGCCI at P40/sq.m. and illegally authorizing General Manager Ilustre to sign the covering contract.This "resolution" was signed by Messrs. Jesus Hipolito as Chairman; Oscar Ilustre, as Vice Chairman; Aflredo Junio, as Member; and Silvestre Payoyo, as Member; . . . .

Paragraph 53 states:53. Defendants Pablo Roman, Jr., Josefino Cenizal, and Jose Roxas as well as defendant corporations (CHGCCI, STC and Ayala) who acted through the former and their other principal officers, knowingly induced and caused then President Marcos and the former officers of plaintiff MWSS to enter into the aforesaid undated "Agreement" which are manifestly and grossly disadvantageous to the government and which gave the same defendants unwarranted benefits, i.e., the ownership and dominion of the afore-described property of plaintiff.

Paragraph 54 avers:54. Defendants Jesus Hipolito and Alfredo Junio, then public officers, together with the other public officers who are now deceased (Ferdinand Marcos, Oscar Ilustre, and Sivestre Payoyo) knowingly allowed themselves

to be persuaded, induced and influenced to approve and/or enter into the aforementioned "Agreements" which are grossly and manifestly disadvantageous to the MWSS/government and which bestowed upon the other defendants the unwarranted benefit/ownership of subject property.

The three elements of a contract — consent, the object, and the cause of obligation 1 are all present. It cannot be otherwise argued that the contract had for its object the sale of the property and the cause or consideration thereof was the price to be paid (on the part of respondents CHGCCI/SILHOUETTE) and the land to be sold (on the part of petitioner MWSS). Likewise, petitioner MWSS' consent to the May 11, 1983 and August 11, 1983 Agreements is patent on the face of these documents and on its own resolution No. 36-83.As noted by both lower courts, petitioner MWSS admits that it consented to the sale of the property, with the qualification that such consent was allegedly unduly influenced by the President Marcos. Taking such allegation to be hypothetically true, such would have resulted in only voidable contracts because all three elements of a contract, still obtained nonetheless. The alleged vitiation of MWSS' consent did not make the sale null and void ab initio. Thus, "a contract where consent is given through mistake, violence, intimidation, undue influence or fraud, is voidable" 2. Contracts "where consent is vitiated by mistake, violence, intimidation, undue influence or fraud" are voidable or annullable 3. These are not void as —

Concepts of Voidable Contracts. — Voidable or anullable contracts are existent, valid, and binding, although they can be annulled because of want of capacity or vitiated consent of the one of the parties, but before annulment, they are effective and obligatory between parties. Hence, it is valid until it is set aside and its validity may be assailed only in an action for that purpose. They can be confirmed or ratified. 4

As the contracts were voidable at the most, the four year prescriptive period under Art. 1391 of the New Civil Code will apply. This article provides that the prescriptive period shall begin in the cases of intimidation, violence or undue influence, from the time the defect of the consent ceases", and "in case of mistake or fraud, from the time of the discovery of the same time".Hypothetically admitting that President Marcos unduly influenced the sale, the prescriptive period to annul the same would have begun on February 26, 1986 which this Court takes judicial notice of as the date President Marcos was deposed. Prescription would have set in by February 26, 1990 or more than three years before petitioner MWSS' complaint was failed.However, if petitioner MWSS' consent was vitiated by fraud, then the prescriptive period commenced upon discovery. Discovery commenced from the date of the execution of the sale documents as petitioner was party thereto. At the least, discovery is deemed to have taken place on the date of registration of the deeds with the register of Deeds as registration is constructive notice to the world. 5 Given these two principles on discovery, the prescriptive period commenced in 1983 as petitioner MWSS actually knew of the sale, or, in 1984 when the agreements were registered and titles thereafter were issued to respondent SILHOUTTE. At the latest, the action would have prescribed by 1988, or about five years before the complaint was instituted. Thus, in Aznar vs. Bernard 6, this Court held that:

Lastly, even assuming that the petitioners had indeed failed to raise the affirmative defense of prescription in a motion to dismiss or in an appropriate pleading (answer, or amended or supplemental answer) and an amendment would no longer be feasible, still prescription, if apparent on the face of the complaint, may be favorably considered. In the case at bar, the private respondents admit in their complaint that the contract or real estate mortgage which they alleged to be fraudulent and which had been foreclosed, giving rise to this controversy with the petitioners, was executed on July 17, 1978, or more than eight long years before the commencement of the suit in the court a quo, on September 15, 1986. And an action declare a contract null and void on the ground of fraud must be instituted within four years. Extinctive prescription is thus apparent on the face of the complaint itself as resolved by the Court.

Petitioner MWSS further contends that prescription does not apply as its complaint prayed not for the nullification of voidable contracts but for the declaration of nullity of void ab initio contracts which are imprescriptible. This is incorrect, as the prayers in a complaint are not determinative of what legal principles will operate based on the factual allegations of the complaint. And these factual allegations, assuming their truth, show that MWSS consented to the sale, only that such consent was purportedly vitiated by undue influence or fraud. Therefore, the rules on prescription will operate. Even if petitioner MWSS asked for the declaration of nullity of these contracts, the prayers will not be controlling as only the factual allegations in the complaint determine relief. "(I)t is the material allegations of fact in the complaint, not the legal conclusion made therein or the prayer that determines the relief to which the plaintiff is entitled" 7. Respondent court is thus correct in holding that:

xxx xxx xxxThe totality then of those allegations in the complaint makes up a case of a voidable contract of sale — not a void one. The determinative allegations are those that point out that the consent of MWSS in the Agreement of Sale was vitiated either by fraud or undue for the declaration of nullity of the said contract because the Complaint says no. Basic is the rule however that it is the body and not the caption nor the prayer of the Complaint that determines the nature of the action. True, the caption and prayer of the Complaint state that the action is for a judicial declaration of nullity of a contract, but alas, as already pointed out, its body unmistakably alleges only a voidable contract. One

cannot change the real nature of an action adopting a different nomenclature any more than one can change gin into whisky by just replacing the label on the bottle with that of the latter's and calling it whisky. No matter what, the liquid inside remains gin.

xxx xxx xxxPetitioner MWSS also theorizes that the May 11, 1983 MWSS-SILHOUTTE Agreement and the August 11, 1983 Supplemental Agreement were void ab initio because the "initial agreement" from which these agreements emanated was executed "without the knowledge, much less the approval" of petitioner MWSS through its Board of Trustees. The "initial agreement" referred to in petitioner MWSS' argument is the December 20, 1982 letter of respondents Roxas and Roman, Jr. to President Marcos where the authors mentioned that they had reached an agreement with petitioner's then general manager, Mr. Oscar Ilustre. Petitioner MWSS maintains that Mr. Ilustre was not authorized to enter into such "initial agreement", contrary to Art. 1874 of the New Civil Code which provides that "when a sale of a parcel of land or any interest therein is through an agent, the authority of the latter shall be in writing otherwise the sale shall be void." It then concludes that since its Res. No. 36-83 and the May 11, 1983 and August 11, 1983 Agreements are "fruits" of the "initial agreement" (for which Mr. Ilustre was allegedly not authorized in writing), all of these would have been also void under Art. 1422 of NCC, which provides that a contract which is the direct result of a pronounced illegal contract, is also void and inexistent."The argument does not impress. The "initial agreement" reflected in the December 20, 1982 letter of respondent Roman to Pres. Marcos, is not a sale under Art. 1874. Since the nature of the "initial agreement" is crucial, wequotes 8 the letter in full:

We respectfully approach Your Excellency in all humility and in the spirit of the Yuletide Season. We have explained to Your Excellency when you allowed us the honor to see you, that the negotiations with MWSS which the late Pablo R. Roman initiated way back in 1975, with your kind approval, will finally be concluded.We have agreed in principle with Mr. Oscar Ilustre on the terms of the sale as evidenced by the following:

1. Our written agreement to hire Asian Appraisal Company to appraise the entire leased area which then be the basis for the negotiations of the purchase price of the property; and2. Our exchange of communications wherein made a counter-offer and our acceptance counter-offer.

However, we were informed by Mr. Ilustre that only written instruction from Your Excellency will allow us to finally sign the Agreement.In sum, our Agreement is for the purchase price of FIFTY-SEVEN MILLION TWO-HUNDRED-FORTY THOUSAND PESOS (P57,240,000) for the entire leased area of 135 hectares; TWENTY-SEVEN MILLION PESOS (P27,000,000) payable upon approval of the contract by Your Excellency and the balance of THIRTY MILLION TWO HUNDRED FORTY THOUSAND PESOS (P30,240,000) after one (1) year inclusive of a 12% interest.We believe that this arrangement is fair and equitable to both parties considering that the value of the land was appraised by a reputable company and independent appraisal company jointly commissioned by both parties and considering further that Capitol Hills has still a 23-year lien on the property by virtue of its existing lease contract with MWSS.We humbly seek your instruction, Your Excellency and please accept our families' sincere wish for a Merry Christmas and a Happy New Year to you and the First Family.

The foregoing does not document a sale, but at most, only the conditions proposed by respondent Roman to enter into one. By the terms thereof, it refers only to an "agreement in principle". Reflecting a future consummation, the letter mentions "negotiations with MWSS (which) with your (Marcos) kind approval, will finally be concluded". It must likewise be noted that presidential approval had yet to be obtained. Thus, the "initial agreement" was not a sale as it did not in any way transfer ownership over the property. The proposed terms had yet to be approval by the President and the agreement in principle still had to be formalized in a deed of sale. Written authority as is required under Art. 1834 of the New Civil Code, was not needed at the point of the "initial agreement".Verily, the principle on prescription of actions is designed to cover situations such as the case at bar, where there have been a series of transfers to innocent purchasers for value. To set aside these transactions only to accommodate a party who has slept on his rights is anathema to good order. 9

RE: LachesEven assuming, for argument's sake, that the allegations in the complaint establish the absolute nullity of the assailed contracts and hence imprescriptible, the complaint can still be dismissed on the ground of laches which is different from prescription. This Court, as early as 1966, has distinguished these two concepts in this wise:

. . . (T)he defense of laches applies independently of prescription. Laches is different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches, is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in inequity, whereas prescription applies at law. Prescription is based on fixed-time; laches is not. 10

Thus, the prevailing doctrine is that the right to have a contract declared void ab initio may be barred by laches although not barred by prescription. 11

It has, for all its elements are present, viz:(1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint and for which the complaint seeks a remedy;(2) delay in asserting the complainant's rights, having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute a suit;(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. 12

There is no question on the presence of the first element. the main thrust of petitioner MWSS's complaint is to bring to the fore what it claims as fraudulent and/or illegal acts of the respondents in the acquisition of the subject property.The second element of delay is evident from the fact that petitioner tarried for almost ten (10) years from the conclusion of the sale sometime in 1983 before formally laying claim to the subject property in 1993.The third element is present as can be deduced from the allegations in the complaint that petitioner MWSS (a) demanded for a downpayment for no less than three times; (b) accepted downpayment for P25 Million; and (c) accepted a letter of credit for the balance. The pertinent paragraphs in the complaint thus read:

38. In a letter dated September 19, 1983, for failure of CHGCCI to pay on time, Mr. Ilustre demanded payment of the downpayment of P25 Million which was due as of 18 April 1983. A copy of this letter is hereto attached as Annex "X";39. Again, in a letter dated February 7, 1984, then MWSS Acting General Manager Aber Canlas demanded payment from CHGCCI of the purchase price long overdue. A copy of this letter is hereto attached as Annex "Y";40. Likewise, in a letter dated March 14, 1984, Mr. Canlas again demanded from CHGCCI payment of the price. A copy of this demand letter is hereto attached as Annex "Z";41. Thereafter, in a letter dated July 27, 1984, another entity, defendant Ayala Corporation, through SVP Renato de la Fuente, paid with a check the long overdue downpayment of P25,000,000.00 of STC/CHGCCI. Likewise a domestic stand-by letter of credit for the balance was issued in favor of MWSS; Copies of the said letter, check and letter of credit are hereto attached as Annexes "AA", "BB", and "CC", respectively.

Under these facts supplied by petitioner MWSS itself, respondents have every good reason to believe that petitioner was honoring the validity of the conveyances of the subject property, and that the sudden institution of the complaint in 1993 alleging the nullity of such conveyances was surely an unexpected turn of events for respondents. Hence, petitioner MWSS cannot escape the effect of laches.RE: Ratification

Pertinent to this issue is the claim of petitioner MWSS that Mr. Ilustre was never given the authority by its Board of Trustees to enter into the "initial agreement" of December 20, 1982 and therefore, the sale of the subject property is invalid.Petitioner MWSS misses the paint. The perceived infirmity in the "initial agreement" can be cured by ratification. So settled is the precept that ratification can be made by the corporate board either expressly or impliedly. Implied ratification may take various forms — like silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. 13 Both modes of ratification have been made in this case.There was express ratification made by the Board of petitioner MWSS when it passed Resolution No. 36-83 approving the sale of the subject property to respondent SILHOUETTE and authorizing Mr. Ilustre, as General Manager, "to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative thereto." Implied ratification by "silence or acquiescence" is revealed from the acts of petitioner MWSS in (a) sending three (3) demand letters for the payment of the purchase price, (b) accepting P25 Million as downpayment, and (c) accepting a letter of credit for the balance, as hereinbefore mentioned. It may well be pointed out also that nowhere in petitioner MWSS' complaint is it alleged that it returned the amounts, or any part thereof, covering the purchase price to any of the respondents-vendees at any point in time. This is only indicative of petitioner MWSS' acceptance and retention of benefits flowing from the sales transactions which is another form of implied ratification.

RE: Non-joinder of indispensable partiesThere is no denying that petitioner MWSS' action against herein respondents for the recovery of the subject property now converted into a prime residential subdivision would ultimately affect the proprietary rights of the many lot owners to whom the land has already been parceled out. They should have been included in the suit as parties-defendants, for "it is well established that owners of property over which reconveyance is asserted are indispensable parties without whom no relief is available and without whom the court can render no valid judgment." 14 Being indispensable parties, the absence of these lot-owners in the suit renders all subsequent actions of the trial court null and void for want of authority to act, not only as to

the absent parties but even as to those present. 15 Thus, when indispensable parties are not before the court, the action should be dismissed. 16WHEREFORE, in view of the foregoing, the consolidated petitions are hereby DENIED.SO ORDERED.Regalado and Mendoza, JJ., concur.Melo and Puno, JJ., took no part.

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Chapter 3/ Cases in Property

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