FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents. [G.R. No. 133250.
November 11, 2003] – denial of motions for
reconsideration filed by PEA and AMARI.
“x x x.
However, the Supplement to Separate Opinion, Concurring and Dissenting of Justice Josue N. Bellosillo brings to the Courts attention the Resolutions of this Court on 3 February 1965 and 24 June 1966 in L- 21870 entitled Manuel O. Ponce, et al. v. Hon. Amador Gomez, et al. and No. L-22669 entitled Manuel O. Ponce, et al. v. The City of
et al. ( Cebu
Cases). In effect, the Supplement to the Dissenting Opinion claims that these
two Resolutions serve as authority that a single private corporation like Amari
may acquire hundreds of hectares of submerged lands, as well as reclaimed
submerged lands, within Ponce under the Amended
Joint Venture Agreement (Amended JVA). Manila
We find the cited Ponce Cases inapplicable to the instant case.
First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit that submerged lands still belong to the National Government. The correct formulation, however, is that submerged lands are owned by the State and are inalienable. Section 2, Article XII of the 1987 Constitution provides:
All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. x x x. (Emphasis supplied)
Submerged lands, like the waters (sea or bay) above them, are part of the States inalienable natural resources. Submerged lands are property of public dominion, absolutely inalienable and outside the commerce of man. This is also true with respect to foreshore lands. Any sale of submerged or foreshore lands is void being contrary to the Constitution.
This is why the
ordinance merely granted Essel,
Inc. an irrevocable option to
purchase the foreshore lands after
the reclamation and did not actually sell to Essel, Inc. the still to be
reclaimed foreshore lands. Clearly, in the Ponce Cases the option to purchase referred to reclaimed lands, and not to foreshore
lands which are inalienable. Reclaimed
lands are no longer foreshore or submerged lands, and thus may qualify
as alienable agricultural lands of the
public domain provided the requirements of public land laws are met. Cebu City
In the instant case, the bulk of the lands subject of the Amended JVA are still submerged lands even to this very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject of the Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under the waters of
Under the Amended JVA, the PEA conveyed to Amari the submerged lands even
before their actual reclamation, although the documentation of the deed of
transfer and issuance of the certificates of title would be made only after
actual reclamation. Manila Bay
The Amended JVA states that the PEA hereby contributes to the Joint Venture its rights and privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area. The Amended JVA further states that the sharing of the Joint Venture Proceeds shall be based on the ratio of thirty percent (30%) for PEA and seventy percent (70%) for AMARI. The Amended JVA also provides that the PEA hereby designates AMARI to perform PEAs rights and privileges to reclaim, own and develop the Reclamation Area. In short, under the Amended JVA the PEA contributed its rights, privileges and ownership over the Reclamation Area to the Joint Venture which is 70% owned by Amari. Moreover, the PEA delegated to Amari the right and privilege to reclaim the submerged lands.
The Amended JVA mandates that the PEA had the duty to execute without delay the necessary deed of transfer or conveyance of the title pertaining to AMARIs Land share based on the Land Allocation Plan. The Amended JVA also provides that PEA, when requested in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering AMARIs Land Share in the name of AMARI, x x x.
In the Ponce Cases, the City of Cebu retained ownership of the reclaimed foreshore lands and Essel, Inc. only had an irrevocable option to purchase portions of the foreshore lands once actually reclaimed. In sharp contrast, in the instant case ownership of the reclamation area, including the submerged lands, was immediately transferred to the joint venture. Amari immediately acquired the absolute right to own 70% percent of the reclamation area, with the deeds of transfer to be documented and the certificates of title to be issued upon actual reclamation. Amaris right to own the submerged lands is immediately effective upon the approval of the Amended JVA and not merely an option to be exercised in the future if and when the reclamation is actually realized. The submerged lands, being inalienable and outside the commerce of man, could not be the subject of the commercial transactions specified in the Amended JVA.
Second, in the Ponce Cases the
Essel, Inc. an irrevocable option to purchase from Cebu
not more than 70% of the reclaimed lands. The ownership of the reclaimed lands
remained with Cebu City until Essel, Inc.
exercised its option to purchase. With the subsequent enactment of the Government Auditing Code (Presidential
Decree No. 1445) on Cebu
City 11 June
1978, any sale of
government land must be made only through public bidding. Thus, such an irrevocable option to
purchase government land would now be void being contrary to the requirement of
public bidding expressly required in Section 79 of PD No. 1445. This requirement of public
bidding is reiterated in Section 379 of the 1991 Local Government Code. Obviously, the ingenious
reclamation scheme adopted in the ordinance can no
longer be followed in view of the requirement of public bidding in the sale of
government lands. In the instant case,
the Amended JVA is a negotiated contract which clearly contravenes Section 79
of PD No. 1445. Cebu
Third, Republic Act No. 1899 authorized municipalities and chartered cities to reclaim foreshore lands. The two Resolutions in the Ponce Cases upheld the
ordinance only with respect to foreshore
areas, and nullified the same with
respect to submerged areas. Thus, the Cebu City 27 June 1965 Resolution made the injunction of
the trial court against the City of
permanent insofar x x x as the area outside or beyond the foreshore land proper
is concerned. Cebu
As we held in the 1998 case of Republic Real Estate Corporation v. Court of Appeals, citing the
Cases, RA No. 1899 applies
only to foreshore lands, not to submerged
lands. In his concurring opinion in Republic Real Estate Corporation,
Justice Reynato S. Puno stated that under Commonwealth
Act No. 141, foreshore and lands under water were not to be alienated and sold
to private parties, and that such lands remained property of the State.
Justice Puno emphasized that Commonwealth Act No. 141 has remained in effect at
present. The instant case involves
principally submerged lands within Manila Bay. On this score, the Ponce Cases,
which were decided based on RA No. 1899, are not applicable to the instant
Fourth, the Ponce Cases involve the authority of the City of
to reclaim foreshore areas pursuant to a
general law, RA No. 1899. The City of Cebu
is a public corporation and is qualified, under the 1935, 1973, and 1987
Constitutions, to hold alienable or even inalienable lands of the public
domain. There is no dispute that a public
corporation is not covered by the constitutional ban on acquisition of alienable
public lands. Both the Cebu 9
July 2002 Decision and the 6 May 2003 Resolution of this Court in the instant case
expressly recognize this.
However, in the instant case the PEA is not an end user agency with respect to the reclaimed lands under the Amended JVA. As we explained in the 6 May 2003 Resolution:
PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of the Department of Environment and Natural Resources (DENR for brevity) as the government agency charged with leasing or selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed foreshore (or submerged lands) lands are public lands in the same manner that these same lands would have been public lands in the hands of DENR. (Emphasis supplied)
Our 9 July 2002 Decision explained the rationale for treating the PEA in the same manner as the DENR with respect to reclaimed foreshore or submerged lands in this wise:
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong. (Emphasis supplied)
Finally, the Ponce Cases were decided under the 1935 Constitution which allowed private corporations to acquire alienable lands of the public domain. However, the 1973 Constitution prohibited private corporations from acquiring alienable lands of the public domain, and the 1987 Constitution reiterated this prohibition. Obviously, the Ponce Cases cannot serve as authority for a private corporation to acquire alienable public lands, much less submerged lands, since under the present Constitution a private corporation like Amari is barred from acquiring alienable lands of the public domain.
Clearly, the facts in the Ponce Cases are different from the facts in the instant case. Moreover, the governing constitutional and statutory provisions have changed since the Ponce Cases were disposed of in 1965 and 1966 through minute Resolutions of a divided (6 to 5) Court.
This Resolution does not prejudice any innocent third party purchaser of the reclaimed lands covered by the Amended JVA. Neither the PEA nor Amari has sold any portion of the reclaimed lands to third parties. Title to the reclaimed lands remains with the PEA. As we stated in our
9 July 2002 Decision:
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEAs patent or certificates of title. In fact, the thrust of the instant petition is that PEAs certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation.
X x x.
 Decision dated
1964 of Judge Amador E. Gomez. Also quoted in Justice Josue N.
Bellosillos Supplement to Separate Opinion, Concurring and Dissenting.
 Sections 2 and 3, Article XII of the 1987 Constitution.
 Article 112 , Civil Code of the
 Section 3.2 (a), Amended JVA.
 Section 3.3 (a), Amended JVA.
 Section 2.2, Amended JVA.
 Section 5.2 (c), Amended JVA.
 SECTION 79. Destruction or sale of unserviceable property. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsalable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on awards or similar body in the presence of the auditor concerned or other duly authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission.
 SECTION 379. Property Disposal. When property of any local government unit has become unserviceable for any cause or is no longer needed, it shall upon application of the officer accountable therefor, be inspected and appraised by the provincial, city or municipal auditor, as the case may be, or his duly authorized representative or that of the Commission on Audit and, if found valueless or unusable, shall be destroyed in the presence of the inspecting officer.
If found valuable, the same shall be sold at public auction to the highest bidder under the supervision of the committee on awards and in the presence of the provincial, city or municipal auditor or his duly authorized representative. Notice of the public auction shall be posted in at least three (3) publicly accessible and conspicuous places, and if the acquisition cost exceeds One hundred thousand pesos (
P100,000.00) in the
case of provinces and cities, and Fifty thousand pesos ( P50,000.00) in
the case of municipalities, notice of auction shall be published at least two
(2) times within a reasonable period in a newspaper of general circulation in
 Under Section 380 of the 1991 Local Government Code, local governments can sell real property through negotiated sale only with the approval of the Commission on Audit. Under paragraph 2 (a) of COA Circular No. 89-296, on Sale Thru Negotiation, a negotiated sale may be resorted to only if [T]here was a failure of public auction. The Commission on Audit enforces the express requirement in Section 79 of the Government Auditing Code that a negotiated sale is possible only after there is a failure of public auction.
 359 Phil. 530 (1998).
 Laurel v. Garcia, G.R. No. 92013,
25 July 1990,
187 SCRA 797.