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PROPERTY CASE DIGESTS CASE No. 1 Eric Mark E. Opaon BENGUET CORPORATION, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN MARCELINO, respondents. [January 29, 1993, G.R. No. 106041] FACTS: On 1985, Provincial Assessor of Zambales assessed the said properties in issue as taxable improvements. The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. However, the appeal was dismissed mainly on the ground of the petitioner's failure to pay the realty taxes that fell due during the pendency of the appeal. The petitioner elevated the matter to the Central Board of Assessment Appeals, one of the herein respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the appeal but, agreed that the tailings dam and the lands submerged thereunder shall be subject to realty tax. For purposes of taxation the dam is considered as real property as it comes within the object mentioned in Article 415 of the New Civil Code, It is a construction adhered to the soil which cannot be separated or detached without breaking the material or causing destruction on the land upon which it is attached. The immovable nature of the dam as an improvement which determines its character as real property, hence taxable under Section 38 of the Real Property Tax Code. ISSUES: 1. Whether or not the tailings dam is subject to realty tax? 2. Whether or not it be considered as immovable property? HELD: Yes, it is subject to realty tax and it is considered an immovable property. The petitioner does not dispute that the tailings dam may be considered realty within the meaning of Article 415. It insists, however, that the dam cannot be subjected to realty tax as a separate and independent property because it does not constitute an "assessable improvement" on the mine although a considerable sum may have been spent in constructing and maintaining it. The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is imposed on "real property, such as lands, buildings, machinery and
other improvements affixed or attached to real property." In the absence of such a definition, applying Article 415 of the Civil Code, which states that the following are considered immovables: Section No. 1 Lands, buildings and constructions of all kinds adhered to the soil; Section no. 3 Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object. Even without the tailings dam, the petitioner's mining operation can still be carried out because the primary function of the dam is merely to receive and retain the wastes and water coming from the mine. There is no allegation that the water coming from the dam is the sole source of water for the mining operation so as to make the dam an integral part of the mine. In fact, as a result of the construction of the dam, the petitioner can now impound and recycle water without having to spend for the building of a water reservoir. And as the petitioner itself points out, even if the petitioner's mine is shut down or ceases operation, the dam may still be used for irrigation of the surrounding areas. From the definitions and the cases cited in relation to this case, it would appear that whether a structure constitutes an improvement so as to partake of the status of realty would depend upon the degree of permanence intended in its construction and use, The expression "permanent" as applied to an improvement does not imply that the improvement must be used perpetually but only until the purpose to which the principal realty is devoted has been accomplished. It is sufficient that the improvement is intended to remain as long as the land to which it is annexed is still used for the said purpose. The Court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent in character and it enhances both the value and utility of petitioner's mine. Moreover, the immovable nature of the dam defines its character as real property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax Code. Hence, petition was dismissed by the Supreme Court.
CASE No. 2 Eric Mark E. Opaon MARCELO R. SORIANO, petitioner, vs. SPOUSES RICARDO and ROSALINA GALIT, respondents. [September 23, 2003, G.R. No. 156295] FACTS: Respondent Ricardo Galit contracted a loan from petitioner Marcelo Soriano, in the total sum of P480,000.00. This loan was secured by a real estate mortgage over a parcel of land covered by Original Certificate of Title No. 569. After he failed to pay his obligation, Soriano filed a complaint for sum of money against him with the Regional Trial Court of Balanga City.
Respondents, the Spouses Ricardo and Rosalina Galit, failed to file their answer. Hence, upon motion of Marcelo Soriano, the trial court declared the spouses in default and proceeded to receive evidence for petitioner Soriano ex parte. On July 7, 1997, the Regional Trial Court of Balanga City, rendered judgment in favor of petitioner Soriano, The judgment became final and executory. Accordingly, the trial court issued a writ of execution in due course, by virtue of which, Deputy Sheriff Renato E. Robles levied on the following real properties of the Galit spouses: 1. A parcel of land covered by Original Certificate of Title No. T-569 ; 2. STORE/HOUSE – CONSTRUCTED on Lot No. 1103 made of strong materials G.I. roofing situated at Centro I, Orani, Bataan; and 3. BODEGA – constructed on Lot 1103, made of strong materials, G.I. roofing, situated in Centro I, Orani, Bataan. At the sale of the above-enumerated properties at public auction held on December 23, 1998, petitioner was the highest and only bidder with a bid price of P483,000.00. Accordingly, on February 4, 1999, Deputy Sheriff Robles issued a Certificate of Sale of Execution of Real Property. On April 23, 1999, petitioner caused the registration of the Certificate of Sale on Execution of Real Property with the Registry of Deeds. On February 23, 2001, ten months from the time the Certificate of Sale on Execution was registered with the Registry of Deeds, petitioner moved for the issuance of a writ of possession. He averred that the one-year period of redemption had elapsed without the respondents having redeemed the properties sold at public auction; thus, the sale of said properties had already become final. He also argued that after the lapse of the redemption period, the titles to the properties should be considered, for all legal intents and purposes, in his name and favor. On June 4, 2001, the Regional Trial Court of Balanga City, granted the motion for issuance of writ of possession. Subsequently, on July 18, 2001, a writ of possession was issued in petitioner’s favor. Respondents filed a petition for certiorari with the Court of Appeals, assailing the inclusion of the parcel of land covered by Transfer Certificate of Title No. T-40785 among the list of real properties in the writ of possession. Respondents argued that said property was not among those sold on execution by Deputy Sheriff Renato E. Robles as reflected in the Certificate of Sale on Execution of Real Property. A writ of possession was issued in Civil Case No. 6643 for Sum of Money by the Regional Trial Court of Balanga, Bataan. The writ of possession was, however, nullified by the Court of Appeals because it included a parcel of land which was not among those explicitly enumerated in the Certificate of Sale issued by the Deputy Sheriff, but on which stand the immovables covered by the said Certificate. Petitioner contends that the sale of these immovables necessarily encompasses the land on which they stand.
On May 13, 2002, the Court of Appeals rendered judgment granting the appeal. Accordingly, the writ of possession issued by the Regional Trial Court of Balanga City was declared null and void. Hence, this instant petition for certiorari. ISSUE: Whether or not the Honorable Court gravely erred in declaring the certificate of sale on execution of real property as null and void. HELD: No, there was no error in the judgment rendered by the Court of Appeals regarding the nullification of the certificate of sale on execution of real property. The certificate of sale is an accurate record of what properties were actually sold to satisfy the debt. Article 415 of the Civil Code provides that the following are immovable property: Section 1 Land, buildings, roads and constructions of all kinds adhered to the soil; Section 3 Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking them material or deterioration of the object. The foregoing provision of the Civil Code enumerates land and buildings separately. This can only mean that a building is, by itself, considered immovable. Thus, it has been held that while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land. In this case, considering that what was sold by virtue of the writ of execution issued by the trial court was merely the storehouse and bodega constructed on the parcel of land covered by Transfer Certificate of Title No. T-40785, which by themselves are real properties of respondents spouses, the same should be regarded as separate and distinct from the conveyance of the lot on which they stand. Hence the petition was denied for lack of merit.
CASE No. 3 Eric Mark E. Opaon Serg’s Products v. PCI Leasing [GR No. 137705, 22 August 2000] FACTS: On 13 February 1998, PCI Leasing and Finance, Inc. filed a complaint for sum of money, with an application for a writ of replevin (Civil Case Q-98-33500). On 6 March 1998, upon an ex-parte application of PCI Leasing, judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses. On 24 March 1998, the sheriff proceeded to petitioner's factory, seized one machinery with word that the return for the other machineries. On 25 March 1998, petitioners filed a motion for special protective order, invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin. On 6 April 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest. On 7 April 1998, they went to the CA via an original action for certiorari. Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners; and ruled that the "words of the contract are clear and leave no doubt upon the true intention of the contracting parties." It thus affirmed the 18 February 1998 Order, and the 31 March 1998 Resolution of the lower court, and lifted the preliminary injunction issued on 15 June 1998. A subsequent motion for reconsideration was denied on 26 February 1999. Hence, the petition for review on certiorari. ISSUES: Whether or not the subject machines were personal property. DECISION: The Supreme Court denied the petition and affirmed the decision of the Court of Appeals with costs against petitioners. Contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. Thus, said machines are proper subjects of the Writ of Seizure (compare Tumalad v. Vicencio).
CASE No. 4 Eric Mark E. Opaon
FEL'S ENERGY, INC. vs. Province of Batangas, et.al [G.R. No. 68557, Feb. 16, 2007] FACTS: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement (Agreement), was for a period of five years. Article 10 reads: RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import duties, fees, charges and other levies imposed by the National Government of the Republic of the Philippines or any agency or instrumentality thereof to which POLAR may be or become subject to or in relation to the performance of their obligations under this agreement (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges. Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement. On August 7, 1995, FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of the Provincial Assessor. In a letter dated September 7, 1995, NPC sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the power barges. However, the motion was denied on September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment. This prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as non-taxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections. In its Answer to the petition, the Provincial Assessor averred that the barges were real property for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of Finance (DOF) had rendered an opinion dated May 20, 1996, where it is clearly stated that power barges are not real property subject to real property assessment. On August 26, 1996, the LBAA rendered a Resolution denying the petition. The fallo reads: WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the amount of P56,184,088.40, for the year 1994. ISSUE: Whether or not FELS can be considered a taxable entity. HELD: Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Thus, applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is considered a taxable entity. The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas. It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local government’s deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.
CASE No. 5 Eric Mark E. Opaon SIMPLICIO BINALAY vs. GUILLERMO MANALO [G.R. No. 92161, March 18, 1991] FACTS: The late Judge Taccad owned a parcel of land – on the west, bordering on the Cagayan River, on the east, the national road. The western portion would occasionally go under the waters and reappear during the dry season. Manalo purchased the land. A relocation survey was conducted during the rainy season, so the survey didn't cover the submerged land. The sketch would show that the river branches through the west and east, leaving a strip of land. The land was then surveyed into two 2 lots. One of these is being claimed by Manalo through accretion. ISSUE: Whether or not Manalo has a right over the land by virtue of accretion. HELD: The subject land couldn’t have been sold to Manalo, being part of the public domain. Article 70 of the Law of Waters of 3 August 1866 is the law applicable to the case at bar: Art. 70. The natural bed or channel of a creek or river is the ground covered by its waters during the highest floods. Now, then, pursuant to Article 420 of the Civil Code, respondent Manalo did not acquire private ownership of the bed of the eastern branch of the river even if it was included in the deeds of absolute sale executed by Gregorio Taguba and Faustina Taccad in his favor. These vendors could not have validly sold land that constituted property of public dominion. Article 420 of the Civil Code states: The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
CASE No. 6 Eric Mark E. Opaon REPUBLIC OF THE PHILIPPINES vs. COURT OF APPEALS G.R. No. 100709 November 14, 1997 FACTS: Respondent Morato filed a Free Patent Application on a parcel of land which was approved. Both the free patent and the title specifically mandate that the land shall not be alienated nor encumbered within five years from the date of the issuance of the patent. Thereafter, it was established that the subject land was not suitable to vegetation. Moreover, a portion of the land was mortgaged by respondent Morato ISSUES: I. Respondent court erred in holding that the patent granted and certificate of title issued to Respondent Morato cannot be cancelled and annulled since the certificate of title becomes indefeasible after one year from the issuance of the title. II. Respondent Court erred in holding that the questioned land is part of a disposable public land and not a foreshore land. HELD: The Commonwealth Act No. 141, otherwise known as the Public Land Act clearly proscribe the encumbrance of a parcel of land acquired under a free patent or homestead within five years from the grant of such patent. Furthermore, such encumbrance results in the cancellation of the grant and the reversion of the land to the public domain. Encumbrance has been defined as "[a]nything that impairs the use or transfer of property; anything which constitutes a burden on the title; a burden or charge upon property; a claim or lien upon property." It may be a "legal claim on an estate for the discharge of which the estate is liable; and embarrassment of the estate or property so that it cannot be disposed of without being subject to it; an estate, interest, or right in lands, diminishing their value to the general owner; a liability resting upon an estate." It is indisputable, however, that Respondent Morato cannot fully use or enjoy the land during the duration of the lease contract. This restriction on the enjoyment of her property sufficiently meets the definition of an encumbrance under Section 118 of the Public Land Act, because such contract "impairs the use of the property" by the grantee. In a contract of lease which is consensual, bilateral, onerous and commutative, the owner temporarily grants the use of his or her property to another who undertakes to pay rent therefor. During the term of the lease, the grantee of the patent cannot enjoy the beneficial use of the land leased. As already observed, the Public Land Act does not permit a grantee of a free patent from encumbering any portion of such land. Such encumbrance is a ground for the nullification of the award. It is well-known that the homestead laws were designed to distribute disposable
agricultural lots of the State to land-destitute citizens for their home and cultivation. Pursuant to such benevolent intention the State prohibits the sale or incumbrance of the homestead (Section 116) within five years after the grant of the patent. After that five-year period the law impliedly permits alienation of the homestead; but in line with the primordial purpose to favor the homesteader and his family the statute provides that such alienation or conveyance (Section 117) shall be subject to the right of repurchase by the homesteader, his widow or heirs within five years. This section 117 is undoubtedly a complement of section 116. It aims to preserve and keep in the family of the homesteader that portion of public land which the State had gratuitously given to him. It would, therefore, be in keeping with this fundamental idea to hold, as we hold, that the right to repurchase exists not only when the original homesteader makes the conveyance, but also when it is made by his widow or heirs. This construction is clearly deducible from the terms of the statute. Conversely, when a "homesteader has complied with all the terms and conditions which entitled him to a patent for [a] particular tract of public land, he acquires a vested interest therein and has to be regarded an equitable owner thereof." 24 However, for Respondent Morato's title of ownership over the patented land to be perfected, she should have complied with the requirements of the law, one of which was to keep the property for herself and her family within the prescribed period of five (5) years. Prior to the fulfillment of all requirements of the law, Respondent Morato's title over the property was incomplete. Accordingly, if the requirements are not complied with, the State as the grantor could petition for the annulment of the patent and the cancellation of the title. Respondent Morato cannot use the doctrine of the indefeasibility of her Torrens title to bar the state from questioning its transfer or encumbrance. The certificate of title issued to her clearly stipulated that its award was "subject to the conditions provided for in Sections 118, 119, 121, 122 and 124 of Commonwealth Act (CA) No. 141." Because she violated Section 118, the reversion of the property to the public domain necessarily follows, pursuant to Section 124. When the sea moved towards the estate and the tide invaded it, the invaded property became foreshore land and passed to the realm of the public domain. In fact, the Court in Government vs. Cabangis annulled the registration of land subject of cadastral proceedings when the parcel subsequently became foreshore land. In another case, the Court voided the registration decree of a trial court and held that said court had no jurisdiction to award foreshore land to any private person or entity. The subject land in this case, being foreshore land, should therefore be returned to the public domain.
CASE No. 7 Eric Mark E. Opaon FRANCISCO I. CHAVEZ vs. PUBLIC ESTATES AUTHORITY FACTS: The government signed a contract with the Construction and Development Corporation of the Philippines ("CDCP") to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction of Phases I and II of the Manila-Cavite Coastal Road. Then President Marcos created PEA which was tasked to reclaim land, including foreshore and submerged areas, and to develop, improve, acquire, lease and sell any and all kinds of lands. On the same date, then President Marcos transferred to PEA the lands reclaimed in the foreshore and offshore of the Manila Bay under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP). Then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that all future works in MCCRRP shall be funded and owned by PEA. Then President Aquino issued a special patent granting and transferring to PEA the parcels of land so reclaimed under the MCCRRP. Subsequently, the Register of Deeds issued Transfer Certificates of Title in the name of PEA, covering the three reclaimed islands known as the "Freedom Islands." Later on, PEA entered into a Joint Venture Agreement ("JVA") with AMARI, a private corporation, to develop the Freedom Islands, without public bidding. Then Senate President Maceda delivered a privilege speech in the Senate and denounced the JVA as the "grandmother of all scams." As a result, a joint investigation was conducted. Among the conclusions of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public domain which the government has not classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal. Then President Ramos created a Legal Task Force to conduct a study on the legality of the JVA which upheld the legality of the JVA, contrary to the conclusions reached by the Senate Committees. Petitioner Frank I. Chavez ("Petitioner") as a taxpayer, filed the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order contending that the government stands to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA asserting the right of the people to information on matters of public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant violation of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of public dominion. However, PEA and AMARI later on signed the Amended JVA which the then President Estrada approved. Petitioner now prays that on constitutional and statutory grounds, the renegotiated contract be declared null and void.
ISSUE: WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION. HELD: The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine which holds that the State owns all lands and waters of the public domain. The Regalian doctrine is the foundation of the time-honored principle of land ownership that "all lands that were not acquired from the Government, either by purchase or by grant, belong to the public domain. Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine. On November 7, 1936, the National Assembly passed Commonwealth Act No. 141, known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals, which is the general law governing the classification and disposition of lands of the public domain. Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or disposable" lands of the public domain, which prior to such classification are inalienable and outside the commerce of man. Section 7 authorizes the President to "declare what lands are open to disposition or concession." Section 8 states that the government can declare open for disposition or concession only lands that are "officially delimited and classified." Thus, before the government could alienate or dispose of lands of the public domain, the President must first officially classify these lands as alienable or disposable, and then declare them open to disposition or concession. There must be no law reserving these lands for public or quasi-public uses. Since then and until now, the only way the government can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only alienable or disposable lands for nonagricultural purposes that the government could sell to private parties. Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under Section 59 that the government previously transferred to government units or entities could be sold to private parties. In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141, Sections 63 and 67 require a public bidding. Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or disposable lands of the public domain. Private parties could still reclaim portions of the sea with government permission. However, the reclaimed land could become private land only if classified as alienable agricultural land of the public domain open to disposition under CA No. 141. Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not make the lands alienable or disposable lands of the public domain, much less
patrimonial lands of PEA. Absent two official acts – a classification that these lands are alienable or disposable and open to disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain inalienable lands of the public domain. Only such an official classification and formal declaration can convert reclaimed lands into alienable or disposable lands of the public domain, open to disposition. Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.
CASE No. 8 Eric Mark E. Opaon PHILIPPINE PORTS AUTHORITY vs. CITY OF ILOILO FACTS: This is an action for the recovery of sum of money filed by respondent City of Iloilo, a public corporation organized under the laws of the Philippines, against petitioner Philippine Ports Authority (PPA), a government corporation created by P.D. 857. Respondent seeks to collect from petitioner real property taxes as well as business taxes alleging that petitioner is engaged in the business of arrastre and stevedoring services and the leasing of real estate for which it should be obligated to pay business taxes. It further alleges that petitioner is the declared and registered owner of a warehouse which is used in the operation of its business and is also thereby subject to real property taxes. ISSUE: Whether or not Philippine Ports Authority is exempt from the payment of real property tax and business tax. HELD: Originally, petitioner was exempt from real property taxes on the basis of the Real Property Tax Code then governing. Petitioner’s charter, P.D. 857, further specifically exempted it from real property taxes. However, P.D. 1931 effectively withdrew all tax exemption privileges granted to government-owned or controlled corporations. Subsequently, Executive Order (E.O.) No. 93 was enacted restoring tax exemptions provided under certain laws, one of which is the Real Property Tax Code. The abovecited laws, therefore, indicate that petitioner’s tax exemption from real property taxes was withdrawn by P.D. 1931 effective June 11, 1984, but was subsequently restored by virtue of E.O. 93, starting December 17, 1986. Hence, petitioner is liable for real
property taxes on its warehouse, computed from the last quarter of 1984 up to December 1986. Petitioner, however, seeks to be excused from liability for taxes by invoking the pronouncement in Basco v. PAGCOR (Basco). Petitioner points out that its exercise of regulatory functions places it within the category of an "agency or instrumentality of the government," which, according to Basco, is beyond the reach of local taxation. Reliance in the abovecited case is unavailing considering that P.D. 1931 was never raised therein, and given that the issue in said case focused on the constitutionality of P.D. 1869, the charter of PAGCOR. The said decision did not absolutely prohibit local governments from taxing government instrumentalities. We affirm the finding of the lower court on petitioner’s liability for business taxes for the lease of its building to private corporations. During the trial, petitioner did not present any evidence to refute respondent’s proof of petitioner’s income from the lease of its property. Neither did it present any proof of exemption from business taxes. Instead, it emphasized its charter provisions defining its functions as governmental in nature. It averred that it allowed port users to occupy certain premises within the port area only to ensure order and convenience in discharging its governmental functions. It hence claimed that it is not engaged in business, as the act of leasing out its property was not motivated by profit, but by its duty to manage and control port operations. The argument is unconvincing. As admitted by petitioner, it leases out its premises to private persons for "convenience" and not necessarily as part of its governmental function of administering port operations. In fact, its charter classifies such act of leasing out port facilities as one of petitioner’s corporate powers. Any income or profit generated by an entity, even of a corporation organized without any intention of realizing profit in the conduct of its activities, is subject to tax. What matters is the established fact that it leased out its building to ten private entities from which it regularly earned substantial income. Thus, in the absence of any proof of exemption therefrom, petitioner is liable for the assessed business taxes. In closing, we reiterate that in taxing government-owned or controlled corporations, the State ultimately suffers no loss. Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government was that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, hence resulting in the need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them. WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
CASE No. 9
Eric Mark E. Opaon FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents. [G.R. No. 133250, November 11, 2003] FACTS: PEA, under the JVA, obligated itself to convey title and possession over the Property, consisting of approximately One Million Five Hundred Seventy Eight Thousand Four Hundred Forty One (1,578,441) Square Meters for a total consideration of One Billion Eight Hundred Ninety Four Million One Hundred Twenty Nine Thousand Two Hundred (P1,894,129,200.00) Pesos, or a price of One Thousand Two Hundred (P1,200.00) Pesos per square meter.According to the zonal valuation of the Bureau of Internal Revenue, the value of the Property is Seven Thousand Eight Hundred Pesos (P7,800.00) per square meter. The Municipal Assessor of Parañaque, Metro Manila, where the Property is located, pegs the market value of the Property at Six Thousand Pesos (P6,000.00) per square meter. Based on these alone, the price at which PEA agreed to convey the property is a pittance. And PEA cannot claim ignorance of these valuations, at least not those of the Municipal Assessors’ office, since it has been trying to convince the Office of the Municipal Assessor of Parañaque to reduce the valuation of various reclaimed properties thereat in order for PEA to save on accrued real property taxes. The credibility of the foregoing appraisals, however, are greatly impaired by a subsequent appraisal report of AACI stating that the property is worth P4,500.00 per square meter as of 26 March 1996. Such discrepancies in the appraised value as appearing in two different reports by the same appraisal company submitted within a span of one year render all such appraisal reports unworthy of even the slightest consideration. Furthermore, the appraisal report submitted by the Commission on Audit estimates the value of the Property to be approximately P33,673,000,000.00, or P21,333.07 per square meter. There were also other offers made for the property from other parties which indicate that the Property has been undervalued by PEA. For instance, on 06 March 1995, Mr. Young D. See, President of Saeil Heavy Industries Co., Ltd., (South Korea), offered to buy the property at P1,400.00 and expressed its willingness to issue a stand-by letter of credit worth $10 million. PEA did not consider this offer and instead finalized the JVA with AMARI. Other offers were made on various dates by Aspac Management and Development Group Inc. (for P1,600 per square meter), Universal Dragon Corporation (for P1,600 per square meter), Cleene Far East Manila Incorporated and Hyosan Prime Construction Co. Ltd. which had prepared an Irrevocable Clean Letter of Credit for P100,000,000. Whether based on the official appraisal of the BIR, the Municipal Assessor or the Commission on Audit, the P1,200 per square meter purchase price, or a total of P1.894 billion for the 157.84 hectares of government lands, is grossly and unconscionably undervalued. The authoritative appraisal, of course, is that of the Commission on Audit which valued the 157.84 hectares at P21,333.07 per square meter or a total of P33.673 billion. Thus, based on the official appraisal of the Commission on Audit, the independent constitutional body that safeguards government assets, the actual loss to the Filipino people is a shocking P31.779 billion.
Despite these revolting anomalies unearthed by the Senate Committees, the fatal flaw of this contract is that it glaringly violates provisions of the Constitution expressly prohibiting the alienation of lands of the public domain. ISSUE: Whether or not PEA is allowed to validly convey to a private corporation the subject land. HELD: The Supreme Court ruled in the negative. Section 2, Article XII of the 1987 Constitution provides that all lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. Submerged lands, like the waters (sea or bay) above them, are part of the State’s inalienable natural resources. Submerged lands are property of public dominion, absolutely inalienable and outside the commerce of man. This is also true with respect to foreshore lands. Any sale of submerged or foreshore lands is void being contrary to the Constitution. The bulk of the lands subject of the Amended JVA are still submerged lands even to this very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject of the Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under the waters of Manila Bay. Under the Amended JVA, the PEA conveyed to Amari the submerged lands even before their actual reclamation, although the documentation of the deed of transfer and issuance of the certificates of title would be made only after actual reclamation. PEA is not an end user agency with respect to the reclaimed lands under the Amended JVA. PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of the Department of Environment and Natural Resources as the government agency charged with leasing or selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed foreshore (or submerged lands) lands are public lands in the same manner that these same lands would have been public lands in the hands of DENR. To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong. The only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to
cancel PEA’s patent or certificates of title. In fact, the thrust of the instant petition is that PEA’s certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation.
CASE No. 10 Eric Mark E. Opaon SALVADOR H. LAUREL, petitioner, vs. RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents. [G.R. No. 92047 July 25, 1990] DIONISIO S. OJEDA, petitioner, vs. EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN, respondents. FACTS: The subject property in this case is one of the four properties in Japan acquired by the Philippine government under the Reparations Agreement entered into with Japan on May 9, 1956. The properties and the capital goods and services procured from the Japanese government for national development projects are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II. The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty years in accordance with annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization of reparations and development loans. The procurements are divided into those for use by the government sector and those for private parties in projects as the then National Economic Council shall determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one hundred percent Filipino-owned entities in national development projects. Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since only one bidder qualified. The second one, after postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by the Court. Later, the rules on bidding were changed such that the $225 million floor price became merely a suggested floor price. The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to
anyone while the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at the same time for the objective is the same - to stop the sale of the Roppongi property. ISSUE: Whether or not the Roppongi property and others of its kind can be alienated by the Philippine Government. HELD: The Supreme Court ruled in the negative. ART. 420 of the New Civil Code provides that the following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks shores roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. ART. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and intended for some public service. The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 ). A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 ). A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose. Even the failure by the government to repair the building in Roppongi is not abandonment since as earlier stated, there simply was a shortage of government funds. The recent Administrative Orders authorizing a study of the status and conditions of government properties in Japan were merely directives for investigation but did not in any way signify a clear intention to dispose of the properties. Having declared a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a need for legislative authority to allow the sale of the property, we see no compelling reason to tackle the constitutional issues. The Roppongi property is not just like any piece of property. It was given to the Filipino people in reparation for the lives and blood of Filipinos who died and suffered during the Japanese military occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or
financial benefits from them. But who would think of selling these monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered. Even if we should become paupers we should not think of selling them. For it would be as if we sold the lives and blood and tears of our countrymen. Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole Filipino people endured in World War II. It is for what it stands for, and for what it could never bring back to life, that its significance today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property passed on to the Philippine government. It is indeed true that the Roppongi property is valuable not so much because of the inflated prices fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos — veterans and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy determination where both the President and Congress must concur. Considering the properties' importance and value, the laws on conversion and disposition of property of public dominion must be faithfully followed.