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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 92024 November 9, 1990

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,vs.THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY,

LUZON PETROCHEMICAL CORPORATION, and PILIPINAS SHELL CORPORATION,respondents.

Abraham C. La Vina for petitioner.

Sycip, Salazar, Hernandez & Gatmaitan for Luzon Petrochemical Corporation.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Pilipinas Shell PetroleumCorporation.

GUTIERREZ, JR., J. :

This is a petition to annul and set aside the decision of the Board of Investments(BOI)/Department of Trade and Industry (DTI) approving the transfer of the site of theproposed petrochemical plant from Bataan to Batangas and the shift of feedstock for thatplant from naphtha only to naphtha and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled "Congressman EnriqueT. Garcia v. the Board of Investments", September 7, 1989, where this Court issued adecision, ordering the BOI as follows:

WHEREFORE, the petition for certiorari is granted. The Board ofInvestments is ordered: (1) to publish the amended application forregistration of the Bataan Petrochemical Corporation, (2) to allow thepetitioner to have access to its records on the original and amendedapplications for registration, as a petrochemical manufacturer, of therespondent Bataan Petrochemical Corporation, excluding, however,privileged papers containing its trade secrets and other business andfinancial information, and (3) to set for hearing the petitioner'sopposition to the amended application in order that he may present atsuch hearing all the evidence in his possession in support of hisopposition to the transfer of the site of the BPC petrochemical plant toBatangas province. The hearing shall not exceed a period of ten (10)days from the date fixed by the BOI, notice of which should be servedby personal service to the petitioner through counsel, at least three (3)days in advance. The hearings may be held from day to day for aperiod of ten (10) days without postponements. The petition for a writ ofprohibition or preliminary injunction is denied. No costs. (Rollo, pages450-451)

However, acting on the petitioner's motion for partial reconsideration asking that we rule onthe import of P.D. Nos. 949 and 1803 and on the foreign investor's claim of right of finalchoice of plant site, in the light of the provisions of the Constitution and the OmnibusInvestments Code of 1987, this Court on October 24, 1989, made the observation that

P.D. Nos. 949 and 1803 "do not provide that the Limay site should be the onlypetrochemical zone in the country, nor prohibit the establishment of a petrochemical plant

elsewhere in the country, that the establishment of a petrochemical plant in Batangas doesnot violate P.D. No. 949 and P.D. No. 1803.

Our resolution skirted the issue of whether the investor given the initial inducements andother circumstances surrounding its first choice of plant site may change it simply becauseit has the final choice on the matter. The Court merely ruled that the petitioner appears tohave lost interest in the case by his failure to appear at the hearing that was set by the BOIafter receipt of the decision, so he may be deemed to have waived the fruit of the

judgment. On this ground, the motion for partial reconsideration was denied.

A motion for reconsideration of said resolution was filed by the petitioner asking that we

resolve the basic issue of whether or not the foreign investor has the right of final choice ofplant site; that the non-attendance of the petitioner at the hearing was because thedecision was not yet final and executory; and that the petitioner had not therefor waivedthe right to a hearing before the BOI.

In the Court's resolution dated January 17, 1990, we stated:

Does the investor have a "right of finalchoice" of plant site? Neitherunder the 1987 Constitution nor in the Omnibus Investments Code isthere such a 'right offinalchoice.' In the first place, the investor's choiceis subject to processing and approval or disapproval by the BOI (Art. 7,Chapter II, Omnibus Investments Code). By submitting its applicationand amended application to the BOI for approval, the investorrecognizes the sovereign prerogative of our Government, through theBOI, to approve or disapprove the same after determining whether its

proposed project will be feasible, desirable and beneficial to ourcountry. By asking that his opposition to the LPC's amended applicationbe heard by the BOI, the petitioner likewise acknowledges that the BOI,not the investor, has the last word or the "final choice" on the matter.

Secondly, as this case has shown, even a choice that had beenapproved by the BOI may not be 'final', for supervening circumstancesand changes in the conditions of a place may dictate a correspondingchange in the choice of plant site in order that the project will not fail.

After all, our country will benefit only when a project succeeds, notwhen it fails. (Rollo, pp. 538-539)

Nevertheless, the motion for reconsideration of the petitioner was denied.

A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and thisponente

voted to grant the motion for reconsideration stating that the hearing set by the BOI waspremature as the decision of the Court was not yet final and executory; that as contendedby the petitioner the Court must first rule on whether or not the investor has the right offinal choice of plant site for if the ruling is in the affirmative, the hearing would be a uselessexercise; that in the October 19, 1989 resolution, the Court while upholding validity of thetransfer of the plant site did not rule on the issue of who has the final choice; that theyagree with the observation of the majority that "the investor has no final choice either underthe 1987 Constitution or in the Omnibus Investments Code and that it is the BOI whodecides for the government" and that the plea of the petitioner should be granted to givehim the chance to show the justness of his claim and to enable the BOI to give a secondhard look at the matter.

Thus, the herein petition which relies on the ruling of the Court in the resolution of January17, 1990 in G.R. No. 88637 that the investor has no right of final choice under the 1987Constitution and the Omnibus Investments Code.


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Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain located inLamao, Limay, Bataan were reserved for the Petrochemical Industrial Zone under theadministration, management, and ownership of the Philippine National Oil Company(PNOC).

The Bataan Refining Corporation (BRC) is a wholly government owned corporation,located at Bataan. It produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan PetrochemicalCorporation (BPC) and applied with BOI for registration as a new domestic producer ofpetrochemicals. Its application specified Bataan as the plant site. One of the terms and

conditions for registration of the project was the use of "naphtha cracker" and "naphtha" asfeedstock or fuel for its petrochemical plant. The petrochemical plant was to be a jointventure with PNOC. BPC was issued a certificate of registration on February 24, 1988 byBOI.

BPC was given pioneer status and accorded fiscal and other incentives by BOI, like: (1)exemption from taxes on raw materials, (2) repatriation of the entir e proceeds of liquidationinvestments in currency originally made and at the exchange rate obtaining at the time ofrepatriation; and (3) remittance of earnings on investments. As additional incentive, theHouse of Representatives approved a bill introduced by the petitioner eliminating the 48%ad valorem tax on naphtha if and when it is used as raw materials in the petrochemicalplant. (G.R. No. 88637, September 7, 1989, pp. 2-3. Rollo, pp. 441-442)

However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation, the majorinvestor in BPC, personally delivered to Trade Secretary Jose Concepcion a letter dated

January 25, 1989 advising him of BPC's desire to amend the original registrationcertification of its project by changing the job site from Limay, Bataan, to Batangas. Thereason adduced for the transfer was the insurgency and unstable labor situation, and thepresence in Batangas of a huge liquefied petroleum gas (LPG) depot owned by thePhilippine Shell Corporation.

The petitioner vigorously opposed the proposal and no less than President Aquinoexpressed her preference that the plant be established in Bataan in a conference with theTaiwanese investors, the Secretary of National Defense and The Chief of Staff of the

Armed Forces.

Despite speeches in the Senate and House opposing the Transfer of the project toBatangas, BPC filed on April 11, 1989 its request for approval of the amendments. Itsapplication is as follows: "(l) increasing the investment amount from US $220 million to US$320 million; (2) increasing the production capacity of its naphtha cracker, polythylene

plant and polypropylene plant; (3) changing the feedstock from naphtha only to "naphthaand/or liquefied petroleum gas;" and (4) transferring the job site from Limay, Bataan, toBatangas. (Annex B to Petition; Rollo, p. 25)

Notwithstanding opposition from any quarters and the request of the petitioner addressedto Secretary Concepcion to be furnished a copy of the proposed amendment with itsattachments which was denied by the BOI on May 25, 1989, BOI approved the revision ofthe registration of BPC's petrochemical project. (Petition, Annex F; Rollo, p. 32; See pp. 4to 6, Decision in G.R. No. 88637; supra.)

BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways andMeans of the Senate asserted that:

The BOI has taken a public position preferring Bataan over Batangasas the site of the petrochemical complex, as this would provide a better

distribution of industries around the Metro Manila area. ... In advocatingthe choice of Bataan as the project site for the petrochemical complex,

the BOI, however, made it clear, and I would like to repeat this that theBOI made it clear in its view that the BOI or the government for thatmatter could only recomend as to where the project should be located.The BOI recognizes and respect the principle that the final chouce isstill with the proponent who would in the final analysis provide thefunding or risk capital for the project. (Petition, P. 13; Annex D to thepetition)

This position has not been denied by BOI in its pleadings in G.R. No. 88637 and in thepresent petition.

Section 1, Article VIII of the 1987 Constitution provides:

SECTION 1. The judicial power shall be vested in one Supreme Courtand in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actualcontroversies involving rights which are legally demandable andenforceable, and to determine whether or not there has been a graveabuse of discretion amounting to lack or excess of jurisdiction on thepart of any branch or instrumentality of the Government.

There is before us an actual controversy whether the petrochemical plant should remain inBataan or should be transferred to Batangas, and whether its feedstock originally ofnaphtha only should be changed to naphtha and/or liquefied petroleum gas as theapproved amended application of the BPC, now Luzon Petrochemical Corporation (LPC),

shows. And in the light of the categorical admission of the BOI that it is the investor whohas the final choice of the site and the decision on the feedstock, whether or not itconstitutes a grave abuse of discretion for the BOI to yield to the wishes of the investor,national interest notwithstanding.

We rule that the Court has a constitutional duty to step into this controversy and determinethe paramount issue. We grant the petition.

First, Bataan was the original choice as the plant site of the BOI to which the BPC agreed.That is why it organized itself into a corporation bearing the name Bataan. There isavailable 576 hectares of public land precisely reserved as the petrochemical zone inLimay, Bataan under P.D. No. 1803. There is no need to buy expensive real estate for thesite unlike in the proposed transfer to Batangas. The site is the result of careful study longbefore any covetous interests intruded into the choice. The site is ideal. It is not undulyconstricted and allows for expansion. The respondents have not shown nor reiterated that

the alleged peace and order situation in Bataan or unstable labor situation warrant atransfer of the plant site to Batangas. Certainly, these were taken into account when thefirm named itselfBataan Petrochemical Corporation. Moreover, the evidence proves thecontrary.

Second, the BRC, a government owned Filipino corporation, located in Bataan produces60% of the national output of naphtha which can be used as feedstock for the plant inBataan. It can provide the feedstock requirement of the plant. On the other hand, thecountry is short of LPG and there is need to import the same for use of the plant inBatangas. The local production thereof by Shell can hardly supply the needs of theconsumers for cooking purposes. Scarce dollars will be diverted, unnecessarily, fromvitally essential projects in order to feed the furnaces of the transferred petrochemicalplant.

Third, naphtha as feedstock has been exempted by law from the ad valorem tax by the

approval of Republic Act No. 6767 by President Aquino but excludingLPG from exemptionfrom ad valorem tax. The law was enacted specifically for the petrochemical industry. The


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policy determination by both Congress and the President is clear. Neither BOI nor aforeign investor should disregard or contravene expressed policy by shifting the feedstockfrom naphtha to LPG.

Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of the State to"regulate and exercise authority over foreign investments within its national jurisdiction andin accordance with its national goals and priorities." The development of a self-reliant andindependent national economy effectively controlled by Filipinos is mandated in Section19, Article II of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development of the

national economy in consonance with the principles and objectives of economicnationalism" is the set goal of government.

Fifth, with the admitted fact that the investor is raising the greater portion of the capital forthe project from local sources by way of loan which led to the so-called "petroscamscandal", the capital requirements would be greatly minimized if LPC does not have to buythe land for the project and its feedstock shall be limited to naphtha which is certainly moreeconomical, more readily available than LPG, and does not have to be imported.

Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in the ventureto the great benefit and advantage of the government which shall have a participation inthe management of the project instead of a firm which is a huge multinational corporation.

In the light of all the clear advantages manifest in the plant's remaining in Bataan,practically nothing is shown to justify the transfer to Batangas except a near-absolute

discretion given by BOI to investors not only to freely choose the site but to transfer it fromtheir own first choice for reasons which remain murky to say the least.

And this brings us to a prime consideration which the Court cannot rightly ignore.

Section 1, Article XII of the Constitution provides that:

xxx xxx xxx

The State shall promote industrialization and full employment based onsound agricultural development and agrarian reform, through industriesthat make full and efficient use of human and natural resources, andwhich are competitive in both domestic and foreign markets. However,the State shall protect Filipino enterprises against unfair foreigncompetition and trade practices.

xxx xxx xxxEvery provision of the Constitution on the national economy and patrimony is infused withthe spirit of national interest. The non-alienation of natural resources, the State's fullcontrol over the development and utilization of our scarce resources, agreements withforeigners being based on real contributions to the economic growth and general welfareof the country and the regulation of foreign investments in accordance with national goalsand priorities are too explicit not to be noticed and understood.

A petrochemical industry is not an ordinary investment opportunity. It should not be treatedlike a garment or embroidery firm, a shoe-making venture, or even an assembler of cars ormanufacturer of computer chips, where the BOI reasoning may be accorded fuller faith andcredit. The petrochemical industry is essential to the national interest. In other ASEANcountries like Indonesia and Malaysia, the government superintends the industry bycontrolling the upstream or cracker facility.

In this particular BPC venture, not only has the Government given unprecedented favors,among them:

(1) For an initial authorized capital of only P20 million, the Central Bankgave an eligible relending credit or relending facility worth US $50million and a debt to swap arrangement for US $30 million or a totalaccommodation of US $80 million which at current exchange rates isaround P2080 million.

(2) A major part of the company's capitalization shall not come fromforeign sources but from loans, initially a Pl Billion syndicated loan, tobe given by both government banks and a consortium of Philippineprivate banks or in common parlance, a case of 'guiniguisa sa sariling

manteca.'(3) Tax exemptions and privileges were given as part of its 'preferredpioneer status.'

(4) Loan applications of other Philippine firms will be crowded out of theAsian Development Bank portfolio because of the petrochemical firm'smassive loan request. (Taken from the proceedings before the SenateBlue Ribbon Committee).

but through its regulatory agency, the BOI, it surrenders even the power to make acompany abide by its initial choice, a choice free from any suspicion of unscrupulousmachinations and a choice which is undoubtedly in the best interests of the Filipino people.

The Court, therefore, holds and finds that the BOI committed a grave abuse of discretion inapproving the transfer of the petrochemical plant from Bataan to Batangas and authorizing

the change of feedstock from naphtha only to naphtha and/or LPG for the main reason thatthe final say is in the investor all other circumstances to the contrary notwithstanding. Nocogent advantage to the government has been shown by this transfer. This is a repudiationof the independent policy of the government expressed in numerous laws and theConstitution to run its own affairs the way it deems best for the national interest.

One can but remember the words of a great Filipino leader who in part said he would notmind having a government run like hell by Filipinos than one subservient to foreigndictation. In this case, it is not even a foreign government but an ordinary investor whomthe BOI allows to dictate what we shall do with our heritage.

WHEREFORE, the petition is hereby granted. The decision of the respondent Board ofInvestments approving the amendment of the certificate of registration of the LuzonPetrochemical Corporation on May 23, 1989 under its Resolution No. 193, Series of 1989,(Annex F to the Petition) is SET ASIDE as NULL and VOID. The original certificate of

registration of BPC' (now LPC) of February 24, 1988 with Bataan as the plant site andnaphtha as the feedstock is, therefore, ordered maintained.

SO ORDERED.


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Manila

EN BANC

G.R. No. L-30389 December 27, 1972

PEDRO LEE HONG HOK, SIMEON LEE HONG HOK, ROSITA LEE HONG HOK

and LEONCIO LEE HONG HOK, petitioners,vs.ANIANO DAVID, THE HON. SECRETARY OF AGRICULTURE AND NATURALRESOURCES, THE DIRECTOR OF LANDS and COURT OF APPEALS,respondents.

Augusto A. Pardalis for petitioners.

Luis General, Jr. for respondent Aniano David.

Office of the Solicitor General for other respondents.

FERNANDO, J .:p

Petitioners1

in this appeal by certiorari would have us reverse a decision ofrespondent Court of Appeals affirming a lower court judgment dismissing theircomplaint to have the Torrens Title 2of respondent Aniano David declared null andvoid. What makes the task for petitioners quite difficult is that their factual support fortheir pretension to ownership of such disputed lot through accretion was rejected byrespondent Court of Appeals. Without such underpinning, they must perforce rely ona legal theory, which, to put it mildly, is distinguished by unorthodoxy and is thereforefar from persuasive. A grant by the government through the appropriate publicofficials 3exercising the competence duly vested in them by law is not to be set atnaught on the premise, unexpressed but implied, that land not otherwise passing intoprivate ownership may not be disposed of by the state. Such an assumption is at warwith settled principles of constitutional law. It cannot receive our assent. We affirm.

The decision of respondent Court of Appeals following that of the lower court makes

clear that there is no legal justification for nullifying the right of respondent AnianoDavid to the disputed lot arising from the grant made in his favor by respondentofficials. As noted in the decision under review, he "acquired lawful title therebypursuant to his miscellaneous sales application in accordance with which an order ofaward and for issuance of a sales patent was made by the Director of Lands on June18, 1958, covering Lot 2892 containing an area of 226 square meters, which is aportion of Lot 2863 of the Naga Cadastre. On the basis of the order of award of theDirector of Lands the Undersecretary of Agriculture and Natural Resources issued onAugust 26, 1959, Miscellaneous Sales Patent No. V-1209 pursuant to which OCT No.510 was issued by the Register of Deeds of Naga City to defendant-appellee AnianoDavid on October 21, 1959. According to the Stipulation of Facts, since the filing ofthe sales application of Aniano David and during all the proceedings in connectionwith said application, up to the actual issuance of the sales patent in his favor, the

plaintiffs-appellants did not put up any opposition or adverse claim thereto. This isfatal to them because after the registration and issuance of the certificate and

duplicate certificate of title based on a public land patent, the land covered therebyautomatically comes under the operation of Republic Act 496 subject to all thesafeguards provided therein.... Under Section 38 of Act 496 any question concerningthe validity of the certificate of title based on fraud should be raised within one yearfrom the date of the issuance of the patent. Thereafter the certificate of title basedthereon becomes indefeasible.... In this case the land in question is not a privateproperty as the Director of Lands and the Secretary of Agriculture and NaturalResources have always sustained the public character thereof for having beenformed by reclamation.... The only remedy therefore, available to the appellants is an

action for reconveyance on the ground of fraud. In this case we do not see any fraudcommitted by defendant-appellant Aniano David in applying for the purchase of theland involved through his Miscellaneous Sales Application No. MSA-V-26747, enteredin the records of the Bureau of Lands [Miscellaneous Sales] Entry No. V-9033,because everything was done in the open. The notices regarding the auction sale ofthe land were published, the actual sale and award thereof to Aniano David were notclandestine but open and public official acts of an officer of the Government. Theapplication was merely a renewal of his deceased wife's application, and the saiddeceased occupied the land since 1938." 4

On such finding of facts, the attempt of petitioners to elicit a different conclusion islikely to be attended with frustration. The first error assigned predicated an accretionhaving taken place, notwithstanding its rejection by respondent Court of Appeals,would seek to disregard what was accepted by respondent Court as to how the

disputed lot came into being, namely by reclamation. It does not therefore call for anyfurther consideration. Neither of the other two errors imputed to respondent Court, asto its holding that authoritative doctrines preclude a party other than the governmentto dispute the validity of a grant and the recognition of the indefeasible character of apublic land patent after one year, is possessed of merit. Consequently, as set forth atthe outset, there is no justification for reversal.

1. More specifically, the shaft of criticism was let loose by petitioner aimed at thislegal proposition set forth in the exhaustive opinion of then Justice Salvador Esguerraof the Court of Appeals, now a member of this Court: "There is, furthermore, a fataldefect of parties to this action. Only the Government, represented by the Director ofLands, or the Secretary of Agriculture and Natural Resources, can bring an action tocancel a void certificate of title issued pursuant to a void patent (Lucas vs. Durian,102 Phil. 1157; Director of Lands vs. Heirs of Ciriaco Carlo, G.R. No. L-12485, July

31, 1959). This was not done by said officers but by private parties like the plaintiffs,who cannot claim that the patent and title issued for the land involved are void sincethey are not the registered owners thereof nor had they been declared as owners inthe cadastral proceedings of Naga Cadastre after claiming it as their private property.The cases cited by appellants are not in point as they refer to private registered landsor public lands over which vested rights have been acquired but notwithstanding suchfact the Land Department subsequently granted patents to public land applicants." 5Petitioner ought to have known better. The above excerpt is invulnerable to attack. Itis a restatement of a principle that dates back to Maninang v. Consolacion, 6a 1908decision. As was there categorically stated: "The fact that the grant was made by thegovernment is undisputed. Whether the grant was in conformity with the law or not isa question which the government may raise, but until it is raised by the governmentand set aside, the defendant can not question it. The legality of the grant is a questionbetween the grantee and the government." 7 The above citation was repeatedipsissimis verbis in Salazar v. Court of Appeals. 8 Bereft as petitioners were of theright of ownership in accordance with the findings of the Court of Appeals, they


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cannot, in the language ofReyes v. Rodriguez,9"question the [title] legally issued." 10

The second assignment of error is thus disposed of.

2. As there are overtones indicative of skepticism, if not of outright rejection, of thewell-known distinction in public law between the government authority possessed bythe state which is appropriately embraced in the concept of sovereignty, and itscapacity to own or acquire property, it is not inappropriate to pursue the matterfurther. The former comes under the heading of imperium and the latter ofdominium.The use of this term is appropriate with reference to lands held by the state in itsproprietary character. In such capacity, it may provide for the exploitation and use of

lands and other natural resources, including their disposition, except as limited by theConstitution. Dean Pound did speak of the confusion that existed during the medievalera between such two concepts, but did note the existence of res publicae as acorollary to dominium."

11As far as the Philippines was concerned, there was arecognition by Justice Holmes in Cario v. Insular Government,

12a case of Philippineorigin, that "Spain in its earlier decrees embodied the universal feudal theory that alllands were held from the Crown...." 13That was a manifestation of the concept ofjuraregalia,

14which was adopted by the present Constitution, ownership however beingvested in the state as such rather than the head thereof. What was stated by Holmesserved to confirm a much more extensive discussion of the matter in the leading caseof Valenton v. Murciano,

15 decided in 1904. One of the royal decrees cited wasincorporated in the Recopilacion de Leyes de las Indias 16in these words: "We havingacquired full sovereignty over the Indies and all lands, territories, and possessions not

heretofore ceded away by our royal predecessors, or by us, or in our name, stillpertaining to the royal crown and patrimony, it is our will that all lands which are heldwithout proper and true deeds of grant be restored to us according as they belong tous, in order that after reserving before all what to us or to our viceroys audiences, andgovernors may seem necessary for public squares, ways, pastures, and commons inthose places which are peopled, taking into consideration not only their presentcondition, but also their future and their probable increase, and after distributing to thenatives what may be necessary for tillage and pasturage, confirming them in whatthey now have and giving them more if necessary, all the rest of said lands mayremain free and unencumbered for us to dispose of as we may wish." 17

It could therefore be affirmed in Montano v. Insular Government" 18 that "as to theunappropriated public lands constituting the public domain the sole power oflegislation is vested in Congress, ..." 19They continue to possess that character until

severed therefrom by state grant.20

Where, as in this case, it was found by the Courtof Appeals that the disputed lot was the result of reclamation, its being correctlycategorized as public land is undeniable. 21What was held in Heirs ofDatu Pendatunv. Director of Lands

22 finds application. Thus: "There being no evidence whateverthat the property in question was ever acquired by the applicants or their ancestorseither by composition title from the Spanish Government or by possessory informationtitle or by any other means for the acquisition of public lands, the property must beheld to be public domain." 23For it is well-settled "that no public land can be acquiredby private persons without any grant, express or implied, from the government." 24Itis indispensable then that there be a showing of a title from the state or any othermode of acquisition recognized by law. 25 The most recent restatement of thedoctrine, found in an opinion of Justice J.B.L. Reyes, follows: 26 "The applicant,having failed to establish his right or title over the northern portion of Lot No. 463involved in the present controversy, and there being no showing that the same hasbeen acquired by any private person from the Government, either by purchase or by

grant, the property is and remains part of the public domain." 27To repeat, the secondassignment of error is devoid of merit.

3. The last error assigned would take issue with this portion of the opinion of JusticeEsguerra: "According to the Stipulation of Facts, since the filing of the salesapplication of Aniano David and during all the proceedings in connection with saidapplication, up to the actual issuance of the sales patent in his favor, theplaintiffs-appellants did not put up any opposition or adverse claim thereto. This isfatal to them because after the registration and issuance of the certificate andduplicate certificate of title based on a public land patent, the land covered thereby

automatically comes under the operation of Republic Act 496 subject to all thesafeguards provided therein ... Under Section 38 of Act 496 any question concerningthe validity of the certificate of title based on fraud should be raised within one yearfrom the date of the issuance of the patent. Thereafter the certificate of title basedthereon becomes indefeasible ..." 28 Petitioners cannot reconcile themselves to theview that respondent David's title is impressed with the quality of indefeasibility. Inthus manifesting such an attitude, they railed to accord deference to controllingprecedents. As far back as 1919, in Aquino v. Director of Lands,

29Justice Malcolm,speaking for the Court, stated: "The proceedings under the Land Registration Lawand under the provisions of Chapter VI of the Public Land Law are the same in thatboth are against the whole world, both take the nature of judicial proceedings, and forboth the decree of registration issued is conclusive and final." 30 Such a view hasbeen followed since then. 31The latest case in point is Cabacug v. Lao. 32There is

this revealing excerpt appearing in that decision: "It is said, and with reason, that aholder of a land acquired under a free patent is more favorably situated than that ofan owner of registered property. Not only does a free patent have a force and effectof a Torrens Title, but in addition the person to whom it is granted has likewise in hisfavor the right to repurchase within a period of five years." 33 It is quite apparent,therefore, that petitioners' stand is legally indefensible.

WHEREFORE, the decision of respondent Court of Appeals of January 31, 1969 andits resolution of March 14, 1969 are affirmed. With costs against petitioners-appellants.


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U.S. Supreme Court

CARINO v. INSULAR GOVERNMENT OF PHILIPPINE ISLANDS, 212 U.S. 449(1909)

212 U.S. 449

MATEO CARINO, Plff. in Err.,v.

INSULAR GOVERNMENT OF THE PHILIPPINE ISLANDS.

No. 72.

Argued January 13, 1909.Decided February 23, 1909.

[212 U.S. 449, 450] Messrs. Frederic R. Coudert, Howard Thayer Kingsbury,Charles C. Cohn, D. R. Williams, and Paul Fuller for plaintiff in error.

[212 U.S. 449, 453] Solicitor General Hoyt and Paul Charlton for defendant inerror.

[212 U.S. 449, 455]

Mr. Justice Holmes delivered the opinion of the court:

This was an application to the Philippine court of land registration for theregistration of certain land. The application was granted by the court on March 4,1904. An appeal was taken to the court of first instance of the province ofBenguet, on behalf of the government of the Philippines, and also on behalf ofthe United States, those governments having taken possession of the propertyfor public and military purposes. The court of first instance found the facts anddismissed the application upon grounds of law. This judgment was affirmed bythe supreme court (7 Philippine, 132 ), and the case then was brought here bywrit of error.

The material facts found are very few. The applicant and plaintiff in error is anIgorot of the province of Benguet, where the land lies. For more than fifty yearsbefore the treaty of [212 U.S. 449, 456] Paris, April 11, 1899 [30 Stat. at L.1754], as far back as the findings go, the plaintiff and his ancestors had held theland as owners. His grandfather had lived upon it, and had maintained fencessufficient for the holding of cattle, according to the custom of the country, some ofthe fences, it seems, having been of much earlier date. His father had cultivatedparts and had used parts for pasturing cattle, and he had used it for pasture inhis turn. They all had been recognized as owners by the Igorots, and he hadinherited or received the land from his father, in accordance with Igorot custom.No document of title, however, had issued from the Spanish Crown, andalthough, in 1893-1894, and again in 1896-1897, he made application for oneunder the royal decrees then in force, nothing seems to have come of it, unless,perhaps, information that lands in Benguet could not be conceded until those tobe occupied for a sanatorium, etc., had been designated,-a purpose that hasbeen carried out by the Philippine government and the United States. In 1901 the

plaintiff filed a petition, alleging ownership, under the mortgage law, and the

lands were registered to him, that process, however, establishing only apossessory title, it is said.

Before we deal with the merits, we must dispose of a technical point. Thegovernment has spent some energy in maintaining that this case should havebeen brought up by appeal, and not by writ of error. We are of opinion, however,that the mode adopted was right. The proceeding for registration is likened tobills in equity to quiet title, but it is different in principle. It is a proceeding in remunder a statute of the type of the Torrens act, such as was discussed in Tyler v.

Registration Ct. Judges, 175 Mass. 71, 51 L.R.A. 433, 55 N. E. 812. It is nearerto law than to equity, and is an assertion of legal title; but we think it unnecessaryto put it into either pigeon hole. A writ of error is the general method of bringingcases to this court, an appeal the exception, confined to equity in the main. Thereis no reason for not applying the general rule to this case. Ormsby v. Webb, 134U.S. 47, 65 , 33 S. L. ed. 805, 812, 10 Sup. Ct. Rep. 478; Campbell v. Porter,162 U.S. 478 , 40 L. ed. 1044, 16 Sup. Ct. Rep. 871; Metropolitan R. Co. v.District of Columbia ( Metropolitan R. Co. v. Macfarland) 195 U.S. 322 , 49 L. ed.219, 25 Sup. Ct. Rep. 28. [212 U.S. 449, 457] Another preliminary matter mayas well be disposed of here. It is suggested that, even if the applicant have title,he cannot have it registered, because the Philippine Commission's act No. 926,of 1903, excepts the province of Benguet among others from its operation. Butthat act deals with the acquisition of new titles by homestead entries, purchase,

etc., and the perfecting of titles begun under the Spanish law. The applicant'sclaim is that he now owns the land, and is entitled to registration under thePhilippine Commission's act No. 496, of 1902, which established a court for thatpurpose with jurisdiction 'throughout the Philippine archipelago,' 2, andauthorized in general terms applications to be made by persons claiming to ownthe legal estate in fee simple, as the applicant does. He is entitled to registrationif his claim of ownership can be maintained.

We come, then, to the question on which the case was decided below,- namely,whether the plaintiff owns the land. The position of the government, shortlystated, is that Spain assumed, asserted, and had title to all the land in thePhilippines except so far as it saw fit to permit private titles to be acquired; thatthere was no prescription against the Crown, and that, if there was, a decree of

June 25, 1880, required registration within a limited time to make the title good;that the plaintiff's land was not registered, and therefore became, if it was notalways, public land; that the United States succeeded to the title of Spain, and sothat the plaintiff has no rights that the Philippine government is bound to respect.

If we suppose for the moment that the government's contention is so far correctthat the Crown of Spain in form asserted a title to this land at the date of thetreaty of Paris, to which the United States succeeded, it is not to be assumedwithout argument that the plaintiff's case is at an end. It is true that Spain, in itsearlier decrees, embodied the universal feudal theory that all lands were heldfrom the Crown, and perhaps the general attitude of conquering nations towardpeople not recognized as entitled to the treatment accorded to those [212 U.S.449, 458] in the same zone of civilization with themselves. It is true, also, that,in legal theory, sovereignty is absolute, and that, as against foreign nations, theUnited States may assert, as Spain asserted, absolute power. But it does not
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follow that, as against the inhabitants of the Philippines, the United Statesasserts that Spain had such power. When theory is left on one side, sovereigntyis a question of strength, and may vary in degree. How far a new sovereign shallinsist upon the theoretical relation of the subjects to the head in the past, andhow far it shall recognize actual facts, are matters for it to decide.

The province of Benguet was inhabited by a tribe that the Solicitor General, in hisargument, characterized as a savage tribe that never was brought under the civilor military government of the Spanish Crown. It seems probable, if not certain,

that the Spanish officials would not have granted to anyone in that province theregistration to which formerly the plaintiff was entitled by the Spanish laws, andwhich would have made his title beyond question good. Whatever may havebeen the technical position of Spain, it does not follow that, in the view of theUnited States, he had lost all rights and was a mere trespasser when the presentgovernment seized his land. The argument to that effect seems to amount to adenial of native titles throughout an important part of the island of Luzon, at least,for the want of ceremonies which the Spaniards would not have permitted andhad not the power to enforce.

The acquisition of the Philippines was not like the settlement of the white race inthe United States. Whatever consideration may have been shown to the NorthAmerican Indians, the dominant purpose of the whites in America was to occupythe land. It is obvious that, however stated, the reason for our taking over thePhilippines was different. No one, we suppose, would deny that, so far asconsistent with paramount necessities, our first object in the internaladministration of the islands is to do justice to the natives, not to exploit theircountry for private gain. By the organic act of July 1, 1902, chap. 1369, 12, 32Stat. at L. 691, all the property and rights acquired there by the [212 U.S. 449,459] United States are to be administered 'for the benefit of the inhabitantsthereof.' It is reasonable to suppose that the attitude thus assumed by the UnitedStates with regard to what was unquestionably its own is also its attitude indeciding what it will claim for its own. The same statute made a bill of rights,embodying the safeguards of the Constitution, and, like the Constitution, extendsthose safeguards to all. It provides that 'no law shall be enacted in said islandswhich shall deprive any person of life, liberty, or property without due process of

law, or deny to any person therein the equal protection of the laws.' 5. In the lightof the declaration that we have quoted from 12, it is hard to believe that theUnited States was ready to declare in the next breath that 'any person' did notembrace the inhabitants of Benguet, or that it meant by 'property' only that whichhad become such by ceremonies of which presumably a large part of theinhabitants never had heard, and that it proposed to treat as public land whatthey, by native custom and by long association,-one of the profoundest factors inhuman thought,-regarded as their own.

It is true that, by 14, the government of the Philippines is empowered to enactrules and prescribe terms for perfecting titles to public lands where some, but notall, Spanish conditions had been fulfilled, and to issue patents to natives for notmore than 16 hectares of public lands actually occupied by the native or hisancestors before August 13, 1898. But this section perhaps might be satisfied ifconfined to cases where the occupation was of land admitted to be public land,

and had not continued for such a length of time and under such circumstancesas to give rise to the understanding that the occupants were owners at that date.We hesitate to suppose that it was intended to declare every native who had nota paper title a trespasser, and to set the claims of all the wilder tribes afloat. It istrue again that there is excepted from the provision that we have quoted as to theadministration of the property and rights acquired by the United States, such landand property as shall be designated by the President for military or other reser-[212 U.S. 449, 460] vations, as this land since has been. But there still remainsthe question what property and rights the United States asserted itself to have

acquired.

Whatever the law upon these points may be, and we mean to go no further thanthe necessities of decision demand, every presumption is and ought to beagainst the government in a case like the present. It might, perhaps, be properand sufficient to say that when, as far back as testimony or memory goes, theland has been held by individuals under a claim of private ownership, it will bepresumed to have been held in the same way from before the Spanish conquest,and never to have been public land. Certainly in a case like this, if there is doubtor ambiguity in the Spanish law, we ought to give the applicant the benefit of thedoubt. Whether justice to the natives and the import of the organic act ought notto carry us beyond a subtle examination of ancient texts, or perhaps evenbeyond the attitude of Spanish law, humane though it was, it is unnecessary to

decide. If, in a tacit way, it was assumed that the wild tribes of the Philippineswere to be dealt with as the power and inclination of the conqueror might dictate,Congress has not yet sanctioned the same course as the proper one 'for thebenefit of the inhabitants thereof.'

If the applicant's case is to be tried by the law of Spain, we do not discover suchclear proof that it was bad by that law as to satisfy us that he does not own theland. To begin with, the older decrees and laws cited by the counsel for theplaintiff in error seem to indicate pretty clearly that the natives were recognizedas owning some lands, irrespective of any royal grant. In other words, Spain didnot assume to convert all the native inhabitants of the Philippines intotrespassers or even into tenants at will. For instance, Book 4, title 12, Law 14 ofthe Recopilacion de Leyes de las Indias, cited for a contrary conclusion in

Valenton v. Murciano, 3 Philippine, 537, while it commands viceroys and others,when it seems proper, to call for the exhibition of grants, directs them to confirmthose who hold by good grants or justa prescripcion. It is true that it [212 U.S.449, 461] begins by the characteristic assertion of feudal overlordship and theorigin of all titles in the King or his predecessors. That was theory and discourse.The fact was that titles were admitted to exist that owed nothing to the powers ofSpain beyond this recognition in their books.

Prescription is mentioned again in the royal cedula of October 15, 1754, cited in3 Philippine, 546: 'Where such possessors shall not be able to produce titledeeds, it shall be sufficient if they shall show that ancient possession, as a validtitle by prescription.' It may be that this means possession from before 1700; but,at all events, the principle is admitted. As prescription, even against Crown lands,was recognized by the laws of Spain, we see no sufficient reason for hesitating to


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admit that it was recognized in the Philippines in regard to lands over whichSpain had only a paper sovereignty.

The question comes, however, on the decree of June 25, 1880, for theadjustment of royal lands wrongfully occupied by private individuals in thePhilippine Islands. This begins with the usual theoretic assertion that, for privateownership, there must have been a grant by competent authority; but instantlydescends to fact by providing that, for all legal effects, those who have been inpossession for certain times shall be deemed owners. For cultivated land, twenty

years, uninterrupted, is enough. For uncultivated, thirty. Art. 5. So that, when thisdecree went into effect, the applicant's father was owner of the land by the veryterms of the decree. But, it is said, the object of this law was to require theadjustment or registration proceedings that it described, and in that way torequire every one to get a document of title or lose his land. That purpose mayhave been entertained, but it does not appear clearly to have been applicable toall. The regulations purport to have been made 'for the adjustment of royal landswrongfully occupied by private individuals.' (We follow the translation in thegovernment's brief.) It does not appear that this land ever was royal land orwrongfully occupied. In Article 6 it is provided that 'interested parties not includedwithin the two preceding [212 U.S. 449, 462] articles [the articles recognizingprescription of twenty and thirty years] may legalize their possession, andthereby acquire the full ownership of the said lands, by means of adjustment

proceedings, to be conducted in the following manner.' This seems, by its veryterms, not to apply to those declared already to be owners by lapse of time.Article 8 provides for the case of parties not asking an adjustment of the lands ofwhich they are unlawfully enjoying the possession, within one year, andthreatens that the treasury 'will reassert the ownership of the state over thelands,' and will sell at auction such part as it does not reserve. The applicant'spossession was not unlawful, and no attempt at any such proceedings againsthim or his father ever was made. Finally, it should be noted that the naturalconstruction of the decree is confirmed by the report of the council of state. Thatreport puts forward as a reason for the regulations that, in view of the condition ofalmost all property in the Philippines, it is important to fix its status by generalrules, on the principle that the lapse of a fixed period legalizes completely allpossession; recommends in two articles twenty and thirty years, as adopted in

the decree; and then suggests that interested parties not included in thosearticles may legalize their possession and acquire ownership by adjustment at acertain price.

It is true that the language of arts. 4 and 5 attributes title to those 'who mayprove' possession for the necessary time, and we do not overlook the argumentthat this means may prove in registration proceedings. It may be that an Englishconveyancer would have recommended an application under the foregoingdecree, but certainly it was not calculated to convey to the mind of an Igorot chiefthe notion that ancient family possessions were in danger, if he had read everyword of it. The words 'may prove' (acrediten), as well, or better, in view of theother provisions, might be taken to mean when called upon to do so in anylitigation. There are indications that registration was expected from all, but none

sufficient to show that, for want of it, ownership actually gained would be lost.[212 U.S. 449, 463] The effect of the proof, wherever made, was not to confer

title, but simply to establish it, as already conferred by the decree, if not by earlierlaw. The royal decree of February 13, 1894, declaring forfeited titles that werecapable of adjustment under the decree of 1880, for which adjustment had notbeen sought, should not be construed as a confiscation, but as the withdrawal ofa privilege. As a matter of fact, the applicant never was disturbed. This samedecree is quoted by the court of land registration for another recognition of thecommon-law prescription of thirty years as still running against alienable Crownland.

It will be perceived that the rights of the applicant under the Spanish law presenta problem not without difficulties for courts of a different legal tradition. We havedeemed it proper on that account to notice the possible effect of the change ofsovereignty and the act of Congress establishing the fundamental principles nowto be observed. Upon a consideration of the whole case we are of opinion thatlaw and justice require that the applicant should be granted what he seeks, andshould not be deprived of what, by the practice and belief of those among whomhe lived, was his property, through a refined interpretation of an almost forgottenlaw of Spain.

Judgment reversed.


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Manila

EN BANC

G.R. No. L-30299 August 17, 1972

REPUBLIC OF THE PHILIPPINES and/or THE SOLICITOR GENERAL petitioners,vs.

WILLIAM H. QUASHA, respondent.Office of the Solicitor General Estelito P. Mendoza for petitioner.

Quasha, Asperilla Blanco, Zafra & Tayag for respondent.

REYES J. B. L., J.:p

This case involves a judicial determination of the scope and duration of the rights acquired byAmerican citizens and corporations controlled by them, under the Ordinance appended to theConstitution as of 18 September 1946, or the so-called Parity Amendment.

The respondent, William H. Quasha, an American citizen, had acquired by purchase on 26November 1954 a parcel of land with the permanent improvements thereon, situated at 22Molave Place, in Forbes Park, Municipality of Makati, Province of Rizal, with an area of 2,616 sq.

m. more or less, described in and covered by T. C. T. 36862. On 19 March 1968, he filed apetition in the Court of First Instance of Rizal, docketed as its Civil Case No. 10732, wherein he(Quasha) averred the acquisition of the real estate aforesaid; that the Republic of thePhilippines, through its officials, claimed that upon expiration of the Parity Amendment on 3 July1974, rights acquired by citizens of the United States of America shall cease and be of no furtherforce and effect; that such claims necessarily affect the rights and interest of the plaintiff, andthat continued uncertainty as to the status of plaintiff's property after 3 July 1974 reduces thevalue thereof, and precludes further improvements being introduced thereon, for which reasonplaintiff Quasha sought a declaration of his rights under the Parity Amendment, said plaintiffcontending that the ownership of properties during the effectivity of the Parity Amendmentcontinues notwithstanding the termination and effectivity of the Amendment.

The then Solicitor General Antonio P. Barredo (and later on his successors in office, Felix V.Makasiar and Felix Q. Antonio) contended that the land acquired by plaintiff constituted privateagricultural land and that the acquisition violated section 5, Article XIII, of the Constitution of thePhilippines, which prohibits the transfer of private agricultural land to non-Filipinos, except by

hereditary succession; and assuming, without conceding, that Quasha's acquisition was valid,any and all rights by him so acquired "will expire ipso facto and ipso jure at the end of the day on3 July 1974, if he continued to hold the property until then, and will be subject to escheat orreversion proceedings" by the Republic.

After hearing, the Court of First Instance of Rizal (Judge Pedro A. Revilla presiding) rendered adecision, dated 6 March 1969, in favor of plaintiff, with the following dispositive portion:

WHEREFORE, judgment is hereby rendered declaring that acquisition bythe plaintiff on 26 November 1954 of, the private agricultural land describedin and covered by Transfer Certificate of Title No. 36862 in his name wasvalid, and that plaintiff has a right to continue in ownership of the saidproperty even beyond July 3, 1974.

Defendants appealed directly to this Court on questions of law, pleading that the court belowerred:

(1) In ruling that under the Parity Amendment American citizens andAmerican owned and/or controlled business enterprises "are also qualifiedto acquire private agricultural lands" in the Philippines; and

(2) In ruling that when the Parity Amendment ceases to be effective on 3July 1974, "what must be considered to end should be the right to acquireland, and not the right to continue in ownership of land already acquiredprior to that time."

As a historical background, requisite to a proper understanding of the issues being litigated, itshould be recalled that the Constitution as originally adopted, contained the following provisions:

Article XIII CONSERVATION AND UTILIZATIONOF NATURAL RESOURCES

Section 1. All Agricultural, timber, and mineral lands of the public domain,waters, minerals, coal, petroleum, and other mineral oils, all forces ofpotential energy, and other natural resources of the Philippines belong tothe State, and their disposition, exploitation, development, or utilization shallbe limited to citizens of the Philippines, or to corporations or associations atleast sixty per centum of the capital of which is owned by such citizenssubject to any existing right, grant, lease, or concession at the time of theinauguration of the Government established under this Constitution. Naturalresources, with the exception of public agricultural land, shall not bealienated, and no license, concession, or lease for the resources shall begranted for a period exceeding twenty-five years, renewable for anothertwenty-five years, except as to water right for irrigation, water supply,

fisheries, or industrial uses other than the development of water power, inwhich cases beneficial use may be the measure and the limit of the grant.

Section 2. No private corporation or association may acquire, lease, or holdpublic agricultural lands in excess of one thousand and twenty-fourhectares, nor may any individual acquire such lands by purchase in excessof one hundred and forty-four hectares, or by lease in excess of onethousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing not exceeding two thousandhectares, may be leased to an individual, private corporation, or association.

xxx xxx xxx

Section 5. Save in cases of hereditary succession, no private agriculturalland shall be transferred or assigned except to individuals, corporations, orassociations qualified to acquire or hold lands of the public domain in thePhilippines.

Article XIV GENERAL PROVISIONS

Section 8. No franchise, certificate, or any other form of authorization for theoperation of a public utility shall be granted except to citizens of thePhilippines or to corporations or other entities organized under the laws ofthe Philippines, sixty per centum of the capital of which is owned by citizensof the Philippines, nor shall such franchise, certificate, or authorization beexclusive in character or for a longer period than fifty years. No franchise orright shall be granted to any individual, firm, or corporation, except under thecondition that it shall be subject to amendment, alteration, or repeal by theCongress when the public interest so requires.

The nationalistic spirit that pervaded these and other provisions of the Constitution are self-evident and require no further emphasis.

From the Japanese occupation and the reconquest of the Archipelago, the Philippine nationemerged with its industries destroyed and its economy dislocated. It was described in this


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Court's opinion in Commissioner of Internal Revenue vs. Guerrero, et al.,L-20942, 22 September 1967, 21 SCRA 181, 187, penned by Justice Enrique M. Fernando, inthe following terms:

It was fortunate that the Japanese Occupation ended when it did. Liberationwas hailed by all, but the problems faced by the legitimate government wereawesome in their immensity. The Philippine treasury was bankrupt and hereconomy prostrate. There were no dollar-earning export crops to speak of;commercial operations were paralyzed; and her industries were unable toproduce with mills, factories and plants either destroyed or their machineriesobsolete or dismantled. It was a desolate and tragic sight that greeted the

victorious American and Filipino troops. Manila, particularly that portionsouth of the Pasig, lay in ruins, its public edifices and business buildingslying in a heap of rubble and numberless houses razed to the ground. It wasin fact, next to Warsaw, the most devastated city in the expert opinion of thethen General Eisenhower. There was thus a clear need of help from theUnited States. American aid was forthcoming but on terms proposed by hergovernment and later on accepted by the Philippines.

The foregoing description is confirmed by the 1945 Report of the Committee on Territories andInsular Affairs to the United States Congress:

When the Philippines do become independent next July, they will start onthe road to independence with a country whose commerce, trade andpolitical institutions have been very, very seriously damaged. Years ofrebuilding are necessary before the former physical conditions of the islandscan be restored. Factories, homes, government and commercial buildings,

roads, bridges, docks, harbors and the like are in need of completereconstruction or widespread repairs. It will be quite some while before thePhilippine can produce sufficient food with which to sustain themselves.

The internal revenues of the country have been greatly diminished by war.Much of the assessable property basis has been destroyed. Foreign tradehas vanished. Internal commerce is but a faction of what it used to be.Machinery, farming implements, ships, bus and truck lines, inter-islandtransportation and communications have been wrecked.

Shortly thereafter, in 1946, the United States 79th Congress enacted Public Law 3721, known asthe Philippine Trade Act, authorizing the President of the United States to enter into anExecutive Agreement with the President of the Philippines, which should contain a provision that

The disposition, exploitation, development, and utilization of all agricultural,

timber, and mineral lands of the public domain, waters, minerals, coal,petroleum, and other mineral oils,; all forces and sources of potentialenergy, and other natural resources of the Philippines, and the operation ofpublic utilities shall, if open to any person, be open to citizens of the UnitedStates and to all forms of business enterprise owned or controlled, directlyor indirectly, by United States citizens.

and that:

The President of the United States is not authorized ... to enter into suchexecutive agreement unless in the agreement the Government of thePhilippines ... will promptly take such steps as are necessary to secure theamendment of the Constitution of the Philippines so as to permit the takingeffect as laws of the Philippines of such part of the provisions of section1331 ... as is in conflict with such Constitution before such amendment.

The Philippine Congress, by Commonwealth Act No. 733, authorized the President of thePhilippines to enter into the Executive Agreement. Said Act provided, inter alia, the following:

ARTICLE VII

1. The disposition, exploitation, development, and utilization of allagricultural, timber, and mineral lands of the public domain, waters, mineral,coal, petroleum, and other mineral oils, all forces and sources of potentialenergy, and other natural resources of the Philippines, and the operation ofpublic utilities, shall, if open to any person, be open to citizens of the UnitedStates and to all forms of business enterprise owned or controlled, directlyor indirectly, by United States citizens, except that (for the period prior to theamendment of the Constitution of the Philippines referred to in Paragraph 2of this Article) the Philippines shall not be required to comply with such part

of the foregoing provisions of this sentence as are in conflict with suchConstitution.

2. The Government of the Philippines will promptly take such steps as arenecessary to secure the amendment of the constitution of the Philippines soas to permit the taking effect as laws of the Philippines of such part of theprovisions of Paragraph 1 of this Article as is in conflict with suchConstitution before such amendment.

Thus authorized, the Executive Agreement was signed on 4 July 1946, and shortly thereafter thePresident of the Philippines recommended to the Philippine Congress the approval of aresolution proposing amendments to the Philippine Constitution pursuant to the Executive

Agreement. Approved by the Congress in joint session, the proposed amendment was submittedto a plebiscite and was ratified in November of 1946. Generally known as the Parity Amendment,it was in the form of an Ordinance appended to the Philippine Constitution, reading as follows:

Notwithstanding the provision of section one, Article Thirteen, and sectioneight, Article Fourteen, of the foregoing Constitution, during the effectivity ofthe Executive Agreement entered into by the President of the Philippineswith the President of the United States on the fourth of July, nineteenhundred and forty-six, pursuant to the provisions of Commonwealth ActNumbered Seven hundred and thirty-three, but in no case to extend beyondthe third of July, nineteen hundred and seventy-four, the disposition,exploitation, development, and utilization of all agricultural, timber, andmineral lands of the public domain, waters, minerals, coals, petroleum, andother mineral oils, all forces and sources of potential energy, and othernatural resources of the Philippines, and the operation of public utilities,shall, if OPEN to any person, be open to citizens of the United States and toall forms of business enterprise owned or controlled, directly or indirectly, bycitizens of the United States in the same manner as to and under the sameconditions imposed upon, citizens of the Philippines or corporations or

associations owned or controlled by citizens of the Philippines.A revision of the 1946 Executive Agreement was authorized by the Philippines by Republic Act1355, enacted in July 1955. The revision was duly negotiated by representatives of thePhilippines and the United States, and a new agreement was concluded on 6 September 1955to take effect on 1 January 1956, becoming known as the Laurel-Langley Agreement.

This latter agreement, however, has no direct application to the case at bar, since the purchaseby herein respondent Quasha of the property in question was made in 1954, more than one yearprior to the effectivity of the Laurel-Langley Agreement..

I

Bearing in mind the legal provisions previously quoted and their background, We turn to the firstmain issue posed in this appeal: whether under or by virtue of the so-called Parity Amendmentto the Philippine Constitution respondent Quasha could validly acquire ownership of the privateresidential land in Forbes Park, Makati, Rizal, which is concededly classified private agricultural

land.


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Examination of the "Parity Amendment", as ratified, reveals that it only establishes an expressexception to two (2) provisions of our Constitution, to wit: (a) Section 1, Article XIII, redisposition, exploitation, development and utilization of agricultural, timber and mineral lands ofthe public domain and other natural resources of the Philippines; and (b) Section 8, Article XIV,regarding operation of public utilities. As originally drafted by the framers of the Constitution, theprivilege to acquire and exploit agricultural lands of the public domain, and other naturalresources of the Philippines, and to operate public utilities, were reserved to Filipinos andentities owned or controlled by them: but the "Parity Amendment" expressly extended theprivilege to citizens of the United States of America and/or to business enterprises owned orcontrolled by them.

No other provision of our Constitution was referred to by the "Parity Amendment"; nor Section 2of Article XIII limiting the maximum area of public agricultural lands that could be held byindividuals or corporations or associations; nor Section 5 restricting the transfer or assignment ofprivate agricultural lands to those qualified to acquire or hold lands of the public domain (whichunder the original Section 1 of Article XIII meant Filipinos exclusively), save in cases ofhereditary succession. These sections 2 and 5 were therefore left untouched and allowed tocontinue in operation as originally intended by the Constitution's framers.

Respondent Quasha argues that since the amendment permitted United States citizens orentities controlled by them to acquire agricultural lands of the public domain, then such citizensor entities became entitled to acquire private agricultural land in the Philippines, even withouthereditary succession, since said section 5 of Article XIII only negates the transfer or assignmentof private agricultural land to individuals or entities not qualified to acquire or hold lands of thepublic domain. Clearly, this argument of respondent Quasha rests not upon the text of theConstitutional Amendment but upon a mere inference therefrom. If it was ever intended to createalso an exception to section 5 of Article XIII, why was mention therein made only of Section 1 of

Article XIII and Section 8 of Article XIV and of no other? When the text of the Amendment wassubmitted for popular ratification, did the voters understand that three sections of theConstitution were to be modified, when only two sections were therein mentioned?

A reading of Sections 1 and 4 of Article XIII, as originally drafted by its farmers, leaves no doubtthat the policy of the Constitution was to reserve to Filipinos the disposition, exploitationdevelopment or utilization of agricultural lands, public (section 1) or private (section 5), as well asall other natural resources of the Philippines. The "Parity Amendment" created exceptions to thatConstitutional Policy and in consequence to the sovereignty of the Philippines. By all canons ofconstruction, such exceptions must be given strict interpretation; and this Court has already soruled in Commissioner of Internal Revenue vs. Guerrero, et al., L-20942, 22 September 1967, 21SCRA 181, per Justice Enrique M. Fernando:

While good faith, no less than adherence to the categorical wording of theOrdinance, requires that all the rights and privileges thus granted to

Americans and business enterprises owned and controlled by them berespected, anything further would not be warranted. Nothing less wouldsuffice but anything more is not justified.

The basis for the strict interpretation was given by former President of the University of thePhilippines, Hon. Vicente G. Sinco (Congressional Record, House of Representatives, Volume1, No. 26, page 561):

It should be emphatically stated that the provisions of our Constitution whichlimit to Filipinos the rights to develop the natural resources and to operatethe public utilities of the Philippines is one of the bulwarks of our nationalintegrity. The Filipino people decided to include it in our Constitution in orderthat it may have the stability and permanency that its importance requires. Itis written in our Constitution so that it may neither be the subject of barternor be impaired in the give and take of politics. With our natural resources,our sources of power and energy, our public lands, and our public utilities,

the material basis of the nation's existence, in the hands of aliens overwhom the Philippine Government does not have complete control, the

Filipinos may soon find themselves deprived of their patrimony and living asit were, in a house that no longer belongs to them.

The true extent of the Parity Amendment, as understood by its proponents in the PhilippineCongress, was clearly expressed by one of its advocates, Senator Lorenzo Sumulong:

It is a misconception to believe that under this amendment Americans willbe able to acquire all kinds of natural resources of this country, and evenafter the expiration of 28 years their acquired rights cannot be divested fromthem. If we read carefully the language of this amendment which is takenverbatim from the Provision of the Bell Act, and, which in turn, is taken alsoverbatim from certain sections of the Constitution, you will find out that theequality of rights granted under this amendment refers only to two subjects.Firstly, it refers to exploitation of natural resources, and secondly, it refers tothe operation of public utilities. Now, when it comes to exploitation of naturalresources, it must be pointed out here that, under our Constitution andunder this amendment, only public agricultural land may be acquired, maybe bought, so that on the supposition that we give way to this amendmentand on the further supposition that it is approved by our people, let not themistaken belief be entertained that all kinds of natural resources may beacquired by Americans because under our Constitution forest lands cannotbe bought, mineral lands cannot be bought, because by explicit provision ofthe Constitution they belong to the State, they belong to our Government,they belong to our people. That is why we call them rightly the patrimony ofour race. Even if the Americans should so desire, they can have no furtherprivilege than to ask for a lease of concession of forest lands and minerallands because it is so commanded in the Constitution. And under theConstitution, such a concession is given only for a limited period. It can beextended only for 25 years, renewable for another 25. So that with respectto mineral or forest lands, all they can do is to lease it for 25 years, and afterthe expiration of the original 25 years they will have to extend it, and Ibelieve it can be extended provided that it does not exceed 28 yearsbecause this agreement is to be effected only as an ordinance and for theexpress period of 28 years. So that it is my humble belief that there isnothing to worry about insofar as our forest and mineral lands areconcerned.

Now, coming to the operation of public utilities, as every member of theCongress knows, it is also for a limited period, under our Constitution, for a

period not exceeding 50 years. And since this amendment is intended toendure only for 28 years, it is my humble opinion that when Americans try tooperate public utilities they cannot take advantage of the maximum provided

in the Constitution but only the 28 years which is expressly provided to bethe life of this amendment.

There remains for us to consider the case of our public agricultural lands. Tobe sure, they may be bought, and if we pass this amendment, Americansmay buy our public agricultural lands, but the very same Constitutionapplying even to Filipinos, provides that the sale of public agricultural landsto a corporation can never exceed one thousand and twenty-four hectares.That is to say, if an American corporation, and American enterprise, shoulddecide to invest its money in public agricultural lands, it will be limited to theamount of 1,024 hectares, no more than 1,024 hectares' (Emphasissupplied).

No views contrary to these were ever expressed in the Philippine Legislature during thediscussion of the Proposed Amendment to our Constitution, nor was any reference made toacquisition of private agricultural lands by non-Filipinos except by hereditary succession. On the

American side, it is significant to observe that the draft of the Philippine Trade Act submitted to


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the House of Representatives by Congressman Bell, provided in the first Portion of Section 19the following:

SEC. 19. Notwithstanding any existing provision of the constitution andstatutes of the Philippine Government, citizens and corporations of theUnited States shall enjoy in the Philippine Islands during the period of thevalidity of this Act, or any extension thereof by statute or treaty, the samerights as toproperty, residence, and occupation as citizens of the PhilippineIslands ...

But as finally approved by the United States Congress, the equality as to " property residenceand occupation" provided in the bill was eliminated and Section 341 of the Trade Act limitedsuch parity to the disposition, exploitation, development, and utilization of lands of the publicdomain, and other natural resources of the Philippines (V. ante, page 5 of this opinion).

Thus, whether from the Philippine or the American side, the intention was to secure parity forUnited States citizens, only in two matters: (1) exploitation, development and utilization of publiclands, and other natural resources of the Philippines; and (2) the operation of public utilities.That and nothing else.

Respondent Quasha avers that as of 1935 when the Constitution was adopted, citizens of theUnited States were already qualified to acquire public agricultural lands, so that the literal text ofsection 5 must be understood as permitting transfer or assignment of private agricultural lands to

Americans even without hereditary succession. Such capacity of United States citizens couldexist only during the American sovereignty over the Islands. For the Constitution of thePhilippines was designed to operate even beyond the extinction of the United Statessovereignty, when the Philippines would become fully independent. That is apparent from the

provision of the original Ordinance appended to the Constitution as originally approved andratified. Section 17 of said Ordinance provided that:

(17) Citizens and corporations of the United States shall enjoy in theCommonwealth of the Philippines all the civil rights of the citizens andcorporations, respectively, thereof. (Emphasis supplied)

The import of paragraph (17) of the Ordinance was confirmed and reenforced by Section 127 ofCommonwealth Act 141 (the Public Land Act of 1936) that prescribes:

Sec. 127. During the existence and continuance of the Commonwealth, andbefore the Republic of the Philippines is established, citizens andcorporations of the United States shall enjoy the same rights granted tocitizens and corporations of the Philippines under this Act.

thus clearly evidencing once more that equal rights of citizens and corporations of the UnitedStates to acquire agricultural lands of the Philippines vanished with the advent of the Philippine

Republic. Which explains the need of introducing the "Parity Amendment" of 1946.

It is then indubitable that the right of United States citizens and corporations to acquire andexploit private or public lands and other natural resources of the Philippines was intended toexpire when the Commonwealth ended on 4 July 1946. Thereafter, public and privateagricultural lands and natural resources of the Philippines were or became exclusively reservedby our Constitution for Filipino citizens. This situation lasted until the "Parity Amendment",ratified in November, 1946, once more reopened to United States citizens and businessenterprises owned or controlled by them the lands of the public domain, the natural resources ofthe Philippines, and the operation of the public utilities, exclusively, but not the acquisition orexploitation of private agricultural lands, about which not a word is found in the Parity

Amendment..Respondent Quasha's pretenses can find no support in Article VI of the TradeAgreement of 1955, known popularly as the Laurel-Langley Agreement, establishing a sort ofreciprocity rights between citizens of the Philippines and those of the United States, couched inthe following terms:

ARTICLE VI

2. The rights provided for in Paragraph I may be exercised, in the case ofcitizens of the Philippines with respect to natural resources in the UnitedStates which are subject to Federal control or regulations, only through themedium of a corporation organized under the laws of the United States orone of the States hereof and likewise, in the case of citizens of the UnitedStates with respect to natural resources in the public domain in thePhilippines only through the medium of a corporation organized under thelaws of the Philippines and at least 60% of the capital stock of which isowned or controlled by citizens of the United States. This provision,however, does not affect the rightof citizens of the United States to acquireor own private agricultural lands in the Philippines or citizens of the

Philippines to acquire or own land in the United States which is subject tothe jurisdiction of the United States and not within the jurisdiction of anystate and which is not within the public domain. The Philippines reserves theright to dispose of the public lands in small quantities on especiallyfavorable terms exclusively to actual settlers or other users who are its owncitizens. The United States reserves the right to dispose of its public lands insmall quantities on especially favorable terms exclusively to actual settlersor other users who are its own citizens or aliens who have declared theirintention to become citizens. Each party reserves the right to limit the extentto which aliens may engage in fishing, or engage in enterprises whichfurnish communications services and air or water transport. The UnitedStates also reserves the right to limit the extent to which aliens may ownland in its outlying territories and possessions, but the Philippines willextend to American nationals who are residents of any of those outlyingterritories and possessions only the same rights, with respect to, ownership

of lands, which are granted therein to citizens of the Philippines. The rightsprovided for in this paragraph shall not, however, be exercised by eitherparty so as to derogate from the rights previously acquired by citizens orcorporations or associations owned or controlled by citizens of the otherparty.

The words used in Article VI to the effect that

... This provision does not affect the right of citizen of the United States toacquire or own private agricultural lands in the Philippines, or citizens of thePhilippines to acquire or own land in the United States which is subject tothe jurisdiction of the United States ...

must be understood as referring to rights of United States citizens to acquire or own privateagricultural lands before the independence of the Philippines since the obvious purpose of thearticle was to establish rights of United States and Filipino citizens on a basis of reciprocity. For

as already shown, no such right to acquire or own private agricultural lands in the Philippineshas existed since the independent Republic was established in 1946. The quoted expressions ofthe Laurel-Langley Agreement could not expand the rights of United States citizens as to publicagricultural lands of the Philippines to private lands, when the Parity Amendment and theConstitution authorize such United States citizens and business entities only to acquire andexploit agricultural lands of the public domain. If the reopening of only public lands to Americansrequired a Constitutional Amendment, how could a mere Trade Agreement, like the Laurel-Langley, by itself enable United States citizens to acquire and exploit private agricultural lands, aright that ceased to exist since the independence of the Philippines by express prescription ofour Constitution?

We turn to the second issue involved in this appeal: On the assumption that respondentQuasha's purchase of the private agricultural land involved is valid and constitutional, will or willnot his rights expire on 3 July 1974?

For the solution of this problem, We again turn to the "Parity Amendment". Under it,


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Notwithstanding the provision of section one, Article Thirteen, and sectioneight, Article Fourteen, of the foregoing Constitution, during the effectivity ofthe Executive Agreement entered into by the President of the Philippineswith the President of the United States on the fourth of July, nineteenhundred and forty-six, pursuant to the provisions of Commonwealth ActNumbered Seven hundred and thirty-three, but in no case to extend beyondthe third of July, nineteen hundred and seventy-four, the disposition,exploitation, development, and utilization of all agricultural, timber, andmineral lands of the public domain, waters, minerals, coals, petroleum, andother mineral oils, all forces and sources of potential energy, and othernatural resources of the Philippines, and the operation of public utilities,

shall, if open to any person, be open to citizens of the United states and toall forms of business enterprise owned or controlled, directly or indirectly, bycitizens of the United States in the same manner as to, and under the sameconditions imposed upon, citizens of the Philippines or corporations orassociations owned or controlled by citizens of the Philippines. (Emphasissupplied)

It is easy to see that all exceptional rights conferred upon United States citizens and businessentities owned or controlled by them, under the Amendment, are subject to one and the sameresolutory term or period: they are to last "during the effectivity of the Executive Agreemententered into on 4 July 1946", "but in no case to extend beyond the, third of July, 1974 ". None ofthe privileges conferred by the "Parity Amendment" are excepted from this resolutory period.

This limitation of time is in conformity with Article X, Section 2, of the Philippine Trade Act of1946, as embodied in Commonwealth Act No. 733. It says:

ARTICLE X

2. This Agreement shall have no effect after 3 July 1974. It may beterminated by either the United States or the Philippines at any time, uponnot less than five years' written notice. It the President of the United Statesor the President of the Philippines determines and proclaims that the otherCountry has adopted or applied measures or practices which would operateto nullify or impair any right or obligation provided for in this Agreement,then the Agreement may be terminated upon not less than six months'written notice.

Respondent Quasha argues that the limitative period set in the "Parity Amendment" should beunderstood not to be applicable to the disposition, or correlative acquisition, of alienableagricultural lands of the public domain, since such lands can be acquired in full ownership, inwhich event, under Article 428 of the Civil Code of Philippines

ART, 428. The owner has the right to enjoy and dispose of a thing, withoutother limitations than those established by law.

The owner has also a right of action against the holder and possessor of thething in order to recover it.

and that since any period or condition which produces the effect of loss or deprivation ofvaluable rights is in derogation of due process of law, there must be "a law which expressly andindubitably limits and extinguishes the ownership of non-citizens over private agricultural landssituated in the Philippines validly acquired under the law existing at the time of acquisition."

Strangely enough, this argument ignores the provisions of the "Parity Amendment" prescribingthat the disposition and exploitation, etc. of agricultural lands of the public domain are in no caseto extend beyond the third of July 1974. This limitation already existed when Quasha in 1954purchased the Forbes Park property, and the acquisition was subject to it. If the Philippinegovernment can not dispose of its alienable public agricultural lands beyond that date under the

"Parity Amendment", then, logically, the Constitution, as modified by the Amendment, onlyauthorizes either of two things: (a) alienation or transfer of rights less than ownership or (b) a

resoluble ownership that will be extinguished not later than the specified period. For thePhilippine government to dispose of the public agricultural land for an indefinite time wouldnecessarily be in violation of the Constitution. There is nothing in the Civil Law of this countrythat is repugnant to the existence of ownership for a limited duration; thus the title of a"reservista" (ascendant inheriting from a descendant) in reserva troncal, under Article 891 of theCivil Code of the Philippines, is one such owner, holding title and dominion, although undercondition subsequent; he can do anything that a genuine owner can do, until his deathsupervenes

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