EN BANC

[G. R. No. 133250. May 6, 2003]

FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents.

R E S O L U T I O N

CARPIO, J.:

For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by respondent Amari Coastal Bay Development Corporation (Amari for brevity) on September 13, 2002; (2) Motion to Set Case for Hearing on Oral Argument filed by Amari on August 20, 2002; (3) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by Amari on July 26, 2002 and August 20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by respondent Public Estates Authority (PEA for brevity) on July 26, 2002 and August 8, 2002, respectively; and (5) Motion for Reconsideration and/or Clarification filed by the Office of the Solicitor General on July 25, 2002. Petitioner Francisco I. Chavez filed on November 13, 2002 his Consolidated Opposition to the main and supplemental motions for reconsideration.

To recall, the Courts decision of July 9, 2002 (Decision for brevity) on the instant case states in its summary:

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409 of the Civil Code, contracts whose object or purpose is contrary to law, or whose object is outside the commerce of men, are inexistent and void from the beginning. The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice Carpio, before his appointment to the Court, wrote in his Manila Times column of July 1, 1997, I have always maintained that the law requires the public bidding of reclamation projects. Justice Carpio, then a private law practitioner, also stated in the same column, The Amari-PEA reclamation contract is legally flawed because it was not bid out by the PEA. Amari claims that because of these statements Justice Carpio should inhibit himself on the grounds of bias and prejudgment and that the instant case should be re-deliberated after being assigned to a new ponente.

The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after Justice Carpio had already rendered his opinion on the merits of the case. The rule is that a motion to inhibit must be denied if filed after a member of the Court had already given an opinion on the merits of the case,[1] the rationale being that a litigant cannot be permitted to speculate upon the action of the Court xxx (only to) raise an objection of this sort after a decision has been rendered. Second, as can be readily gleaned from the summary of the Decision quoted above, the absence of public bidding is not one of the ratio decidendi of the Decision which is anchored on violation of specific provisions of the Constitution. The absence of public bidding was not raised as an issue by the parties. The absence of public bidding was mentioned in the Decision only to complete the discussion on the law affecting reclamation contracts for the guidance of public officials. At any rate, the Office of the Solicitor General in its Motion for Reconsideration concedes that the absence of public bidding in the disposition of the Freedom Islands rendered the Amended JVA null and void.[2] Third, judges and justices are not disqualified from participating in a case just because they have written legal articles on the law involved in the case. As stated by the Court in Republic v. Cocofed,[3] -

The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not disqualify him, in the same manner that jurists will not be disqualified just because they may have given their opinions as textbook writers on the question involved in a case.

Besides, the subject and title of the column in question was The CCP reclamation project and the column referred to the Amari-PEA contract only in passing in one sentence.

Amaris motion to set the case for oral argument must also be denied since the pleadings of the parties have discussed exhaustively the issues involved in the case.

The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall consider in this Resolution only the new arguments raised by respondents.

In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply prospectively, not retroactively to cover the Amended JVA. Amari argues that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached, citing De Agbayani v. PNB,[4] thus:

x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, - with respect to particular relations, individual and corporate, and particular conduct, private and official." This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. x x x.

x x x

x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all the more reason then to yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached.

Amari now claims that assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive Order Nos. 525 and 654 are inconsistent with the 1987 Constitution, the limitation imposed by the Decision on these decrees and executive orders should only be applied prospectively from the finality of the Decision.

Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested rights. Amari maintains that the new doctrine embodied in the Decision cannot apply retroactively on those who relied on the old doctrine in good faith, citing Spouses Benzonan v. Court of Appeals,[5] thus:

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).

The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and acted on the faith thereof.

There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application of doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the present petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free agricultural land when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he would now repurchase for only P327,995.00, the property purchased by the petitioners in good faith for P1,650,000.00 in 1979 and which, because of improvements and the appreciating value of land must be worth more than that amount now.

The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the disputed lot given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be revived by relying on the 1988 case of Belisario. The right of petitioners over the subject lot had already become vested as of that time and cannot be impaired by the retroactive application of the Belisario ruling.

Amaris reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the prevailing law or doctrine at the time of the signing of the Amended JVA was that a private corporation could acquire alienable lands of the public domain, and the Decision annulled the law or reversed this doctrine. Obviously, this is not the case here.

Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public domain. But since the effectivity of the 1973 Constitution, private corporations were banned from holding, except by lease, alienable lands of the public domain. The 1987 Constitution continued this constitutional prohibition. The prevailing law before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. The Decision has not annulled or in any way changed the law on this matter. The Decision, whether made retroactive or not, does not change the law since the Decision merely reiterates the law that prevailed since the effectivity of the 1973 Constitution. Thus, De Agbayani, which refers to a law that is invalidated by a decision of the Court, has no application to the instant case.

Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by a subsequent decision which adopts a new doctrine. In the instant case, there is no previous doctrine that is overruled by the Decision. Since the case of Manila Electric Company v. Judge Castro-Bartolome,[6] decided on June 29, 1982, the Court has applied consistently the constitutional provision that private corporations cannot hold, except by lease, alienable lands of the public domain. The Court reiterated this in numerous cases, and the only dispute in the application of this constitutional provision is whether the land in question had already become private property before the effectivity of the 1973 Constitution.[7] If the land was already private land before the 1973 Constitution because the corporation had possessed it openly, continuously, exclusively and adversely for at least thirty years since June 12, 1945 or earlier, then the corporation could apply for judicial confirmation of its imperfect title. But if the land remained public land upon the effectivity of the 1973 Constitution, then the corporation could never hold, except by lease, such public land. Indisputably, the Decision does not overrule any previous doctrine of the Court.

The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. This is one of the two main reasons why the Decision annulled the Amended JVA. The other main reason is that submerged areas of Manila Bay, being part of the sea, are inalienable and beyond the commerce of man, a doctrine that has remained immutable since the Spanish Law on Waters of 1886. Clearly, the Decision merely reiterates, and does not overrule, any existing judicial doctrine.

Even on the characterization of foreshore lands reclaimed by the government, the Decision does not overrule existing law or doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and its foreshore areas have always been part of the public domain. And since the enactment of Act No. 1654 on May 18, 1907 until the effectivity of the 1973 Constitution, statutory law never allowed foreshore lands reclaimed by the government to be sold to private corporations. The 1973 and 1987 Constitution enshrined and expanded the ban to include any alienable land of the public domain.

There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution, hold that the sale or transfer of the land may no longer be invalidated because of weighty considerations of equity and social justice.[8] The invalidation of the sale or transfer may also be superfluous if the purpose of the statutory or constitutional ban has been achieved. But none of these cases apply to Amari.

Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen.[9] Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved.[10] In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party. In the instant case, however, Amari has not transferred the Freedom Islands, or any portion of it, to any qualified party. In fact, Amari admits that title to the Freedom Islands still remains with PEA.[11]

The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under the principle of res judicata, provided the requisites for res judicata are present.[12] Under this principle, the courts and the parties are bound by a prior final decision, otherwise there will be no end to litigation. As the Court declared in Toledo-Banaga v. Court of Appeals,[13] once a judgement has become final and executory, it can no longer be disturbed no matter how erroneous it may be. In the instant case, there is no prior final decision adjudicating the Freedom Islands to Amari.

There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition, two Senate Committees[14] had already approved on September 16, 1997 Senate Committee Report No. 560. This Report concluded, after a well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA.

Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom Islands. Amari states that it has paid PEA only P300,000,000.00[15] out of the P1,894,129,200.00 total reimbursement cost agreed upon in the Amended JVA. Moreover, Amari does not claim to have even initiated the reclamation of the 592.15 hectares of submerged areas covered in the Amended JVA, or to have started to construct any permanent infrastructure on the Freedom Islands. In short, Amari does not claim to have introduced any physical improvement or development on the reclamation project that is the subject of the Amended JVA. And yet Amari claims that it had already spent a whopping P9,876,108,638.00 as its total development cost as of June 30, 2002.[16] Amari does not explain how it spent the rest of the P9,876,108,638.00 total project cost after paying PEA P300,000,000.00. Certainly, Amari cannot claim to be an innocent purchaser in good faith and for value.

In its Supplement to Motion for Reconsideration, PEA claims that it is similarly situated as the Bases Conversion Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro Manila military camps and other military reservations. PEAs comparison is incorrect. The Decision states as follows:

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable or disposable lands of the public domain, these lands are still public, not private lands.

PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of 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 lands are public lands in the same manner that these same lands would have been public lands in the hands of DENR. BCDA is an entirely different government entity. BCDA is authorized by law to sell specific government lands that have long been declared by presidential proclamations as military reservations for use by the different services of the armed forces under the Department of National Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is general and national. BCDA holds government lands that have been granted to end-user government entities the military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as the government agency primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government.

In Laurel v. Garcia,[17] cited in the Decision, the Court ruled that land devoted to public use by the Department of Foreign Affairs, when no longer needed for public use, may be declared patrimonial property for sale to private parties provided there is a law authorizing such act. Well-settled is the doctrine that public land granted to an end-user government agency for a specific public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or military purposes and reclassifies such lands as patrimonial property for sale to private parties.

Government owned lands, as long they are patrimonial property, can be sold to private parties, whether Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial property[18] which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified private corporations.

We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR with respect to reclaimed foreshore lands, thus:

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.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can acquire x x x any and all kinds of lands. This will open the floodgates to corporations and even individuals acquiring hundreds, if not thousands, of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations amassing huge landholdings never before seen in this country - creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands. The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition.

Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged areas is enormous and it would be difficult for PEA to accomplish such project without the participation of private corporations.[19] The Decision does not bar private corporations from participating in reclamation projects and being paid for their services in reclaiming lands. What the Decision prohibits, following the explicit constitutional mandate, is for private corporations to acquire reclaimed lands of the public domain. There is no prohibition on the directors, officers and stockholders of private corporations, if they are Filipino citizens, from acquiring at public auction reclaimed alienable lands of the public domain. They can acquire not more than 12 hectares per individual, and the land thus acquired becomes private land.

Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper proceedings, on a quantum meruit basis, whatever Amari may have incurred in implementing the Amended JVA prior to its declaration of nullity.

WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED with FINALITY. The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral Argument are likewise DENIED.

SO ORDERED.

Davide, Jr., C.J., Vitug, Panganiban, Quisumbing, Austria- Martinez, Carpio-Morales, and Callejo, Sr., JJ., concur.

Bellosillo, J., please see separate opinion, concurring and dissenting.

Puno, J., please see separate opinion.

Ynares-Santiago, and Sandoval-Gutierrez, JJ., please see dissenting opinion.

Corona, J., I dissent.

Azcuna, J., I take no part.



[1] Limpin, Jr. v. IAC, 161 SCRA 83 (1988); Araneta v. Dinglasan, 84 Phil. 368 (1949).

[2] Motion for Reconsideration of the Office of the Solicitor General, p. 3.

[3] En Banc Resolution of February 26, 2002.

[4] 38 SCRA 429 (1971).

[5] 205 SCRA 515 (1992).

[6] 114 SCRA 799 (1982).

[7] Republic v. CA and Iglesia ni Cristo, and Republic v. Cendaa and Iglesia ni Cristo, 119 SCRA 449 (1982); Republic v. Villanueva and Iglesia ni Cristo, 114 SCRA 875 (1982); Director of Lands v. Lood, 124 SCRA 460 (1983); Republic v. Iglesia ni Cristo, 128 SCRA 44 (1984); Director of Lands v. Hermanos y Hermanas de Sta. Cruz de Mayo, Inc., 141 SCRA 21 (1986); Director of Lands v. IAC and Acme Plywood & Veneer Inc., 146 SCRA 509 (1986); Republic v. IAC and Roman Catholic Bishop of Lucena, 168 SCRA 165 (1988); Natividad v. CA, 202 SCRA 493 (1991); Villaflor v. CA and Nasipit Lumber Co., 280 SCRA 297 (1997). In Ayog v. Cusi, Jr., 118 SCRA 492 (1982), the Court did not apply the constitutional ban in the 1973 Constitution because the applicant corporation, Bian Development Co., Inc., had fully complied with all its obligations and even paid the full purchase price before the effectivity of the 1973 Constitution, although the sales patent was issued after the 1973 Constitution took effect.

[8] Spouses Benzonan v. Court of Appeals, note 5.

[9] United Church Board for World Ministries v. Sebastian, 159 SCRA 446 (1988); Sarsosa Vda. de Barsobia v. Cuenco, 113 SCRA 547 (1982); Godinez v. Pak Luen, 120 SCRA 223 (1983); Vasquez v. Giap and Li Seng Giap & Sons, 96 Phil. 447 (1955).

[10] Lee v. Republic, G.R. No. 128195, October 3, 2001; Yap v. Maravillas, 121 SCRA 244 (1983); De Castro v. Teng, 129 SCRA 85 (1984).

[11] Amaris Motion for Reconsideration, p. 10.

[12] Republic v. Court of Appeals, G.R. No. 101115, August 22, 2002; Firestone Ceramics v. Court of Appeals, 313 SCRA 522 (1999); Herrera v. Canlas, 310 SCRA 318 (1999); Peoples Homesite and Housing Corporation v. Mencias, 20 SCRA 1031 (1967); Galvez v. Tuason, 10 SCRA 344 (1964).

[13] 302 SCRA 331 (1999).

[14] Committee on Government Corporations and Public Enterprises, and Committee on Accountability of Public Officers and Investigations.

[15] Amaris Motion for Reconsideration, p. 49.

[16] Ibid., p. 50.

[17] 187 SCRA 797 (1990); See also Ignacio v. Director of Lands, 108 Phil. 335 (1960); Cebu Oxygen & Acetylene Co., Inc. v. Bercilles, 66 SCRA 481 (1975).

[18] Central Capiz v. Ramirez, 40 Phil. 883 (1920); Jacinto v. Director of Lands, 49 Phil. 853 (1926); Pugeda v. Trias, 4 SCRA 849 (1962); De la Cruz v. De la Cruz, 130 SCRA 666 (1984).

[19] OSGs Motion for Reconsideration, pp. 22-24; PEAs Supplement to Motion for Reconsideration, p.12.