#1

LEUNG YEE vs. STRONG MACHINERY FACTS: The Compania Agricola Filipna (Agricola), purchased from Strong Machinery Co., (Strong Machinery), rice-cleaning materials which the former installed in one of its building. As a security for the purchase price, Agricola executed a Chattel Mortgage on the machines and the building on which they had been installed. Upon buyers failure to pay, the registered mortgage was foreclosed and the building was purchased by Strong Machinery Co. This sale was annotated in the Chattel Mortgage Registry. Lather the Agricola also sold to Strong Machinery the lot on which the building had been constructed. This sale was not registered in the Registry of Property but Strong Machinery took possession of the building and lot. Previously, however, the same building had been purchased at a Sheriffs sale by Leung Yee, a creditor of Agricola, although Leung Yee knew all the time of the prior sale in favor of Strong Machinery. The sale in favor of Leung Yee was recorded in the Registry of Property. Leung Yee now sues to recover the property from Strong Machinery. ISSUE: Will the sale of a building separate and apart from the land which it stands change its character as a real property? Who has a better right to the property? HELD: The building of strong materials in which the rice-cleaning machinery was installed by the "Compaia Agricola Filipina" was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. As a real property, therefore, its sale as annotated in the Chattel Mortgage Registry cannot be given legal effect of registration in the Registry of Real Property. The mere fact that the parties decided to deal with the building as personal property does not change its character as real property. Thus, neither the original registry in the Chattel Mortgage registry, nor the annotation in said registry sale of the mortgaged property had any effect on the building. The sole purpose and object of the chattel mortgage registry is to provide for the registry of "chattel mortgages," and transfers thereof, that is to say, mortgages of personal property executed in the manner and form prescribed in the statute. Neither the original registry in a chattel mortgage registry of an instrument purporting to be a chattel mortgage of a building and the machinery installed therein, nor the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building is concerned. However, since the land and the building had first been purchased by Strong Machinery and this fact is known to Leung Yee, it follows that Leung Yee was not a purchaser in good faith. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein. Leung Yees purchase despite knowledge of the first sale made him a purchaser in bad faith and should therefore not be entitled to the property. Strong Machinery thus has a better right to the property.

#2
Sergs Products v. PCI Leasing 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. 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. Issue: Whether the machines are personal or real property? Held: The machinery were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become "immobilized by destination because they are essential and principal elements in the industry." The machines are thus, real, not personal, property pursuant to Article 415 (5) of the Civil Code. 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). The holding that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned. Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal. In the present case, however, there is no showing that any specific third party would be adversely affected.

#3

Lopez vs. Orosa

Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. G.R. Nos. L-10817-18. February 28, 1958. Felix, J. Doctrine: In the absence of any specific provision of law to the contrary, a building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. Facts: Sometime in May, 1946, Vicente Orosa, Jr., invited Lopez to make an investment in the theatre business. Although Lopez expressed his unwillingness to invest of the same, he agreed to supply the lumber necessary for the construction of the proposed theatre, and at Orosas request and assurance that the latter would be personally liable for any account that the said construction might incur, Lopez further agreed that payment therefore would be on demand and not cash on delivery basis. With this, Lopez delivered the lumber which was used for the construction of the Plaza Theatre on May 17, 1946, up to December 4 of the same year. The total cost of materials amounted to P62,255.85 but Lopez was only paid P20,848.50, thus leaving a balance of P41,771.35. Orosa and Rustia, corporation president, promised Lopez to obtain a bank loan to satisfy the balance, to which assurance Lopez had to accede. Unknown to Lopez, Orosa and Rustia already secured a loan for P30,000 from the PNB with the Luzon Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in favor of said company as counter-security. As the land at that time was not yet brought under the operation of the Torrens System, the mortgage on the same was registered on 16 November 1946, under Act 3344. Subsequently, when the corporation applied for the registration of the land under Act 496, such mortgage was not revealed and thus OCT O-391 was correspondingly issued on October 25, 1947, without any encumbrance appearing thereon. Persistent demand from Lopez caused Vicente Orosa, Jr. to execute, on 17 March 1947, an alleged deed of assignment of his 420 shares of stock of the Plaza Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the creditor, and as the obligation still remained unsettled, Lopez filed on 12 November 1947, a complaint with the CFI Batangas against Vicente Orosa Jr. and Plaza Theatre, Inc., praying that defendants be sentenced to pay him jointly and severally the sum of P41,771.35 with legal interest from the filing of the action; that in case defendants fail to pay the same, that the building and the land owned by the corporation be sold at public auction and the proceeds thereof be applied to said indebtedness. Plaintiff also caused the annotation of a notice of lis pendens on said properties with the Register of Deeds. The surety company upon discovery that the land was already registered under the Torrens System and that there was a notice of lis pendens thereon, filed a petition for review of the decree of the land

registration court in order to annotate the lights and interests of the surety company over said properties. Lopez opposed by asserting that the amount demanded by him constituted a preferred lien over the properties of the obligors; that the surety company was guilty of negligence when it failed to present an opposition to the application for registration of the property; and that if any annotation of the rights and interest of said surety would ever be made, same must be subject to the lien in his favor. The court ruled that Orosa and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of the building and the plaintiff thus acquired the materialmans lien over the same; the lien being merely confined to the building and did not extend to the land on which the construction was made. Issue: Whether materialmans lien for the value of the materials used in the construction of a building attaches to the building alone and does not extend to the land on which the building is adhered to. Held: No. While it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties could mean only one thing that a building is by itself an immovable property ( Leung Yee v. Strong Machinery). In the absence of any specific provision of law to the contrary, a building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. Caveat: Anyone who claims this digest as his own without proper authority shall be held liable under the law of Karma. Digest by: 2S, San Beda Law 2010-2011

#4 Tsai vs. Court of Appeals

Ruby Tsai vs. Court of Appeals, Ever Textile Mills, Inc. and Mamerto Villaluz G.R. No. 120109, October 2, 2001 Quisumbing, J. Doctrine: Nothing detracts the parties from treating it [the property that is immovable by nature as chattels to secure an obligation under the principle of estoppel. Facts: On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a P3,000,000.00 loan from Philippine Bank of Communications (PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot where its factory stands and the chattels located therein as enumerated in a schedule attached to the mortgage contract. PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto which were similar to those listed in Annex A of the first mortgage deed. After April 23, 1979, the date of the execution of the second mortgage, EVERTEX purchased various machines and equipments. Then, due to business reverses, EVERTEX filed insolvency proceedings. The CFI issued an order declaring the corporation insolvent. All its assets were taken into the custody of the Insolvency Court. In the meantime, upon EVERTEXs failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX. On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the highest. On December 23, 1982, another public auction was held and again, PBCom was the highest bidder. PBCom then leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a month and subsequently sold the factory, lock, stock and barrel to Tsai for P9,000,000.00, including the contested machineries. On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court against PBCom, alleging that the extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law. Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested properties, which were not included in the Real and Chattel Mortgage nor in the Chattel Mortgage and neither were those properties included in the Notice of Sheriffs. The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset Equipment. The trial court rendered in favor of EVERTEX. PBCom and Tsai appealed to the Court of

Appeals which affirmed RTCs decision. Their Motion for reconsideration was also denied. Thus, PBCom and Tsai filed their separate petitions for review with this Court. Issue: Whether the nature of the disputed machineries make them immovable under Article 415 (3) and (5) of the Civil Code. Held: No. Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does not settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the parties intent. While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the case at bar, both the trial and the appellate courts reached the same finding that the true intention of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The pertinent portion of respondent appellate courts ruling is quoted below: It should be noted that the printed form used by appellant bank was mainly for real estate mortgages. But reflective of the true intention of appellant PBCOM and appellee EVERTEX was the typing in capital letters, immediately following the printed caption of mortgage, of the phrase real and chattel. So also, the machineries and equipment in the printed form of the bank had to be inserted in the blank space of the printed contract and connected with the word building by typewritten slash marks. Now, then, if the machineries in question were contemplated to be included in the real estate mortgage, there would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and building involved. Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar. In the instant case, the parties herein: (1) executed a contract styled as Real Estate Mortgage and Chattel Mortgage, instead of just Real Estate Mortgage if indeed their intention is to treat all properties included therein as immovable, and (2) attached to

the said contract a separate LIST OF MACHINERIES & EQUIPMENT. These facts, taken together, evince the conclusion that the parties intention is to treat these units of machinery as chattels. A fortiori, the contested after-acquired properties, which are of the same description as the units enumerated under the title LIST OF MACHINERIES & EQUIPMENT, must also be treated as chattels. And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages.

#5 Yap vs. Taada

Julian S. Yap vs. Hon. Santiago O. Taada and Goulds Pumps International (Phil), Inc., G.R. No. L-32917, July 18, 1988 Narvasa, J. Doctrine: Article 415, par. 3 of the Civil Code considers and immovable property as everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object. The pump does not fit this description. It could be, and was, in fact,separated from Yaps premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners. Facts: The case began in the City Court of Cebu with the filing of Goulds Pumps International (Phil), Inc. of a complaint against Yap and his wife seeking recovery of P1,459.30, representing the balance of the price and installation cost of a water pump in the latters premises. The Court rendered judgment in favor of herein respondent after they presented evidence ex-parte due to failure of petitioner Yap to appear before the Court. Petitioner then appealed to the CFI, particularly to the sale of Judge Tanada. For again failure to appear for pre-trial, Yap was declared in default. He filed for a motion for reconsideration which was denied by Judge Tanada. On October 15, 1969, Tanada granted Goulds Motion for Issuance of Writ of Execution. Yap forthwith filed an Urgent Motion for Reconsideration of the said Order. In the meantime, the Sheriff levied on the water pump in question and by notice scheduled the execution sale thereof. But in view of the pendency of Yaps motion, suspension of sale was directed by Judge Tanada. It appears, however, that this was not made known to the Sheriff whocontinued with the auction sale and sold the property to the highest bidder, Goulds. Because of such,

petitioner filed a Motion to Set Aside Execution Sale and to Quash Alias Writ of Execution. One of his arguments was that the sale was made without the notice required by Sec. 18, Rule 29 of the New Rules of Court, i.e. notice by publication in case of execution of sale of real property, the pump and its accessories being immovable because attached to the ground with the character of permanency. Such motion was denied by the CFI. Issue: Whether or not the pump and its accessories are immovable property Held: No. The water pump and its accessories are NOT immovable properties. The argument of Yap that the water pump had become immovable property by its being installed in his residence is untenable. Article 415, par. 3 of the Civil Code considers and immovable property as everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object. The pump does not fit this description. It could be, and was, in fact, separated from Yaps premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners.

#7 Fels Energy vs. Batangas

Fels Energy, Inc. vs. Province of Batangas G.R. No. 168557. February 16, 2007. Callejo Sr., J. Doctrine: In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation. Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be

carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 330 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement, was for a period of five years. Article 10 states that NPC shall be responsible for the payment of taxes. (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. Polar Energy then assigned its rights under the Agreement to Fels despite NPCs initial opposition. FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. 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. NPC filed a petition with the LBAA. The LBAA ordered Fels to pay the real estate taxes. The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a character of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time. Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed itself. Issue: Whether or not the petitioner may be assessed of real property taxes. Held: YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the

taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from this rule in this case. In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation. Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation, and transmission of electric power. We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement: OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity. It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by the government

owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides: OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7. It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and conditions. 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 governments 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.

#9 MIAA vs. CA
Manila International Airport Authority vs. Court of Appeals G.R. No 155650, July 20, 2006. Carpio, J.: Doctrine: The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. Facts: Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport Complex in Paraaque City. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,including the runways and buildings (Airport Lands and Buildings) then under the Bureau of Air Transportation. The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.The Office of the Government Corporate Counsel issued Opinion No. 061, in which it said that the Local Government Code of 1991 withdrew the exemption for real estate tax granted to MIAA under Section 21 of the MIAA charter. Therefore, MIAA was held to be delinquent in paying its taxes. The City of Paraaque Levied upon the properties of MIAA, and posted invitations for public biddings of MIAAs properties. The City of Paraaque averred that Section 193 of the Local Government code expressly withdrew tax exemptions from government owned and controlled corporations (GOCCs). Issue: Whether properties of the MIAA are subject to real estate taxes.

Held: No.

In the first place, MIAA is not a GOCC, it is an instrumentality of the

government. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land, including the runways and buildings (Airport Lands and Buildings) then under the Bureau of Air Transportation. The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines. Furthermore, Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. Article 419 of the Civil Code provides, The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public dominion or of private ownership. ARTICLE 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the State. The term ports includes seaports and airports. The

MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one intended for public use. Even if the government collects toll fees, the road is still intended for public use if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed users tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A users tax is more equitable a principle of taxation mandated in the 1987 Constitution. The Airport Lands and Buildings of MIAA, which its Charter calls the principal airport of the Philippines for both international and domestic air traffic, are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines. Being a property of public dominion, the properties of MIAA are beyond the commerce of man.

#10 Chavez vs. NHA

Francisco I. Chavez vs. National Housing Authority G.R. No 164527. August 15, 2007. Velasco, Jr., J. Doctrine: There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Facts: Petitioner Francisco Chavez in his capacity as taxpayer seeks to declare null and void the Joint Venture Agreement (JVA) between the NHA and R-II Builders Inc (RBI) for being unconstitutional and invalid, and to enjoin respondents particularly respondent NHA from implementing and/or enforcing the said project and other agreements related thereto. On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. 161 (MO 161) approving and directing the implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan. Specifically, respondent NHA was ordered to conduct feasibility studies and develop low-cost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects. Pursuant to MO 161-A, NHA prepared the feasibility studies which resulted in the formulation of the Smokey Mountain Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain Development and Reclamation Project (SMDRP). SMDRP aimed to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling component of the project. Once finalized, the Plan was submitted to President Aquino for her approval. On January 17, 1992, President Aquino proclaimed MO 415, approving and directing the implementation of the SMDRP through a private sector joint venture. Said MO stipulated that the land area covered by the Smokey Mountain dumpsite is conveyed to the NHA as well as the area to be reclaimed across R-10. In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the implementation of the Plan and an inter-agency technical committee (TECHCOM) was created composed of the technical representatives of the EXECOM. Based on the evaluation of the prequalification documents, the EXECOM declared the New San Jose Builders, Inc. and RBI as top two contractors. Thereafter, TECHCOM submitted its recommendation to the EXECOM to approve the RBI proposal which garnered the highest score.

On October 7, 1992, President Ramos authorized NHA to enter into a JVA with RBI. Afterwards, President Ramos issued Proclamation No. 465 increasing the proposed area for reclamation across R-10 from 40 hectares to 79 hectares. On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain Dumpsite. The land reclamation was completed in August 1996. Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter area. After some time, the JVA was terminated. RBI demanded the payment of just compensation for all accomplishments and costs incurred in developing the SMDRP plus a reasonable rate of return. In a Memorandum of Agreement (MOA) executed by NHA and RBI, both parties agreed to terminate the JVA and other subsequent agreements, which stipulated, among others, that unpaid balance may be paid in cash, bonds or through the conveyance of properties or any combination thereof. Issues: 1. Whether RBI can acquire reclaimed foreshore and submerged land areas because they are allegedly inalienable lands of the public domain 2. Whether RBI can acquire reclaimed lands when there was no declaration that said lands are no longer needed for public use. 3. Whether RBI, being a private corporation, is barred from the Constitution to acquire lands of the public domain. Held: 1. Yes. The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the State. First, there were three presidential proclamations classifying the reclaimed lands across R-10 as alienable or disposable hence open to disposition or concession. These were MO 415 issued by President Aquino, Proclamation No. 39 and Proclamation No. 465 both issued by President Ramos. Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR classified the reclaimed areas as alienable and disposable. Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the lands to be reclaimed are classified as alienable and disposable. We find however that such conclusion is derived and implicit from the authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries. In line with the ruling in Chavez v. PEA, the court held that MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the requirement in PEA that [t]here must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and

open to disposition or concession. 2. Yes. Even if it is conceded that there was no explicit declaration that the lands are no longer needed for public use or public service, there was however an implicit executive declaration that the reclaimed areas R-10 are not necessary anymore for public use or public service. President Aquino through MO 415 conveyed the same to the NHA partly for housing project and related commercial/industrial development intended for disposition to and enjoyment of certain beneficiaries and not the public in general and partly as enabling component to finance the project. Also, President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed lands of the Smokey Mountain project are no longer required for public use or service. In addition, President Ramos issued Proclamation No. 465 increasing the area to be reclaimed from forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are undoubtedly set aside for the beneficiaries of SMDRP and not the public. MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the reclaimed areas for public use or service as the SMDRP cannot be successfully implemented without the withdrawal of said lands from public use or service. 3. Yes. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said proclamations were converted to alienable and disposable lands of public domain. When the titles to the reclaimed lands were transferred to the NHA, said alienable and disposable lands of public domain were automatically classified as lands of the private domain or patrimonial properties of the State because the NHA is an agency NOT tasked to dispose of alienable or disposable lands of public domain. The only way it can transfer the reclaimed land in conjunction with its projects and to attain its goals is when it is automatically converted to patrimonial properties of the State. Being patrimonial or private properties of the State, then it has the power to sell the same to any qualified personunder the Constitution, Filipino citizens as private corporations, 60% of which is owned by Filipino citizens like RBI.

#11 Republic vs. Court of Appeals

Republic of the Philippines vs. Court of Appeals G.R. No. 100709. November 14, 1997. Panganiban, J. Doctrine: When the sea moved towards the estate and the tide invaded it, the invaded property became foreshore land and passed the realm of the public domain and accordingly cannot be a subject of a free patent.

Facts: Josefina Morato, private respondent, applied sometime in 1972 a free patent on a parcel of land situated at Pinagtalleran, Calauag, Quezon. On January 16, 1974, the patent was approved and the Register of Deeds issued an Original Certificate of Title in favor of Morato on February 4, 1974. Both the free patent and the title specifically required that the land shall not be alienated or encumbered within five years from the date of the issuance of the patent. Upon reports that Morato encumbered the said land, violating the 5-year prohibition of the patent, the District Land Officer in Lucena City conducted an investigation. The officer found out that Morato mortgaged the said property to Nenita Co and Antonio Quilatan on October 24, 1974, who subsequently built a house on it. Two years later, or on February 2, 1976, part of the property was also leased by Morato to Perfecto Advincula where a warehouse was thereafter constructed. Moreover it was found out that the said property was a portion of the Calauag Bay, five to six feet deep under water during high tide and two feet deep at low tide, and not suitable to vegetation. Petitioner then filed a complaint for the cancellation of the title and reversion of the parcel of land to the public domain on the grounds that the land is a foreshore land and was mortgaged and leased within the five-year prohibitory period. The lower court dismissed the complaint ruling that there was no violation of the fiveyear ban since Morato did not encumber nor alienate the land as it was merely leased, and the mortgage the latter entered into with Nenita Co and Antonio Quilatan covered only the improvement and not the land itself. Upon appeal, CA affirmed in toto the courts decision. Hence, this petition. Issue: Whether the questioned land is a foreshore land and thus must be reverted to the public domain. Held: Yes. The Supreme Court defined a foreshore land as that parcel of land which is between high and low water and left dry by the flux and reflux of the tides; it is that strip of land that lies between the high and low water marks and that is alternatively wet and dry according to the flow of the tide. From the factual findings of the lower court, it was found out that years before the issuance of the free patent to private respondent, the questioned land was subjected to several natural calamities like earthquakes and typhoons that caused severe erosion of the land. Then private respondent introduced improvements and developments to the land. At the time then of the issuance of free patent of land to Morato, it was not covered by water but due to the gradual sinking of the land caused by natural calamities, the sea advances had permanently invaded a portion of subject land. During high tide, at least half of the land is 6 feet deep under water and three feet deep during low tide. The Calauag Bay has extended up to a portion of the land. Thus, uncontestedly, the land has become a foreshore land and is now a part of the public domain pursuant to Article 420 of the New Civil Code being part of the shores defined therein. Accordingly, it cannot be

disposed of by the government and appropriated by a private individual, i.e. be a subject of a free patent.

#12 Rabuco vs. Villegas

Benjamin Rabuco, et. al. vs. Hon. Antonio Villegas G.R. No. L-24661. February 28, 1974. Teehankee, J. Doctrine: When a property is owned by a political subdivision in its public and governmental capacity, the Congress has absolute control as distinguished from patrimonial property owned by it in its private or proprietary capacity of which it could not be deprived without due process and without just compensation. Facts: In the early morning of April 19, 1970, a large fire of undetermined origin gutted the Malate area including the lot on which petitioners had built their homes and dwellings. Respondents city officials then took over the lot and kept petitioners from reconstructing or repairing their burned dwellings. At petitioners instance, the Court issued on June 17, 1970 a temporary restraining order enjoining respondents city officials from performing any act constituting an interference in or disturbance of herein petitioners possession of Lot No. 21-B, Block No. 610, of the Cadastral Survey of the City of Manila as safeguarded them under the Courts subsisting preliminary injunction of August 17, 1965 pursuant to RA 3120. Issue: Whether RA 3120 is unconstitutional as it infringes the right to due process. Held: No. The Court herein upholds the constitutionality of Republic Act 3120 on the strength of the established doctrine that the subdivision of communal land of the State (although titled in the name of the municipal corporation) and conveyance of the resulting subdivision lots by sale on installment basis to bona fide occupants by Congressional authorization and disposition does not constitute infringements of the due process clause or the eminent domain provisions of the Constitution but operates simply as a manifestation of the legislatures right of control and power to deal with State property.

#13

Macasiano vs. Diokno

Levy D. Macasiano vs. Honorable Roberto C. Diokno G.R. No. 97764 August 10, 1992 Medialdea, J.: Doctrine: Properties of the local government which are devoted to public service are deemed public and are under the absolute control of Congress. Hence, local governments have no authority whatsoever to control or regulate the use of public properties unless specific authority is vested upon them by Congress. Facts: On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets located at Baclaran, Paraaque, Metro Manila and the establishment of a flea market thereon, pursuant to MMC Ordinance No. 2, Series of 1979, authorizing and regulating the use of certain city and/or municipal streets, roads and open spaces within Metropolitan Manila as sites for flea market and/or vending areas, under certain terms and conditions.. On June 20, 1990, the municipal council of Paraaque issued a resolution authorizing Paraaque Mayor Walfrido N. Ferrer to enter into contract with any service cooperative for the establishment, operation, maintenance and management of flea markets and/or vending areas. On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative, entered into an agreement whereby the latter shall operate, maintain and manage the flea market in the aforementioned streets with the obligation to remit dues to the treasury of the municipal government of Paraaque. Consequently, market stalls were put up by respondent Palanyag on the said streets. On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan Traffic Command, ordered the destruction and confiscation of stalls along G.G. Cruz and J. Gabriel St. in Baclaran. These stalls were later returned to respondent Palanyag. Issue: Whether or not an ordinance or resolution issued by the municipal council of Paraaque authorizing the lease and use of public streets or thoroughfares as sites for flea markets is valid. Held: No. The ordinance or resolution authorizing the lease and use of public streets or

thoroughfares as sites for a flea market is invalid. Property for public use, in the provinces, cities and municipalities, consists of the provincial roads, city streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities or municipalities. All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws. Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local roads used for public service and are therefore considered public properties of respondent municipality. Properties of the local government which are devoted to public service are deemed public and are under the absolute control of Congress. Hence, local governments have no authority whatsoever to control or regulate the use of public properties unless specific authority is vested upon them by Congress. Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed ordinance, the same cannot be validly implemented because it cannot be considered approved by the Metropolitan Manila Authority due to noncompliance by respondent municipality of the conditions imposed by the former for the approval of the ordinance. Further, it is of public notice that the streets along Baclaran area are congested with people, houses and traffic brought about by the proliferation of vendors occupying the streets. To license and allow the establishment of a flea market along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not help in solving the problem of congestion. Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down by toe Constitution and the laws such as our Civil Code. Moreover, the exercise of such powers should be subservient to paramount considerations of health and well-being of the members of the community. Every local government unit has the sworn obligation to enact measures that will enhance the public health, safety and convenience, maintain peace and order, and promote the general prosperity of the inhabitants of the local units. Based on this objective, the local government should refrain from acting towards that which might prejudice or adversely affect the general welfare.