Chavez vs.

Public Estates Authority (PEA) and Amari

Carpio, J.
GR No. 133250 July 9, 2002

The case discusses the constitutionality of land reclamation and ownership under the Amended
Joint Venture Agreement between the Public Estates Authority and AMARI vis--vis Sections 2 and 3 of
Article XII of the 1987 Constitution.

Facts:
November 20, 1973: Commissioner on Public Highways entered into a contract to reclaim areas
of Manila Bay with the Construction and Development Corporation of the Philippines (CDCP).
February 4, 1977: President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating
Public Estates Authority (PEA). PD No. 1084 tasked PEA "to reclaim land, including foreshore and
submerged areas," and "to develop, improve, acquire, lease and sell any and all kinds of lands."
On the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA
the "lands reclaimed in the foreshore and offshore of the Manila Bay" under the Manila-Cavite
Coastal Road and Reclamation Project (MCCRRP).
CDCP and PEA entered into an agreement that all future projects under the MCRRP would be
funded and owned by PEA.
January 19, 1988: President Corazon C. Aquino issued Special Patent No. 3517, granting and
transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen
thousand eight hundred ninety-four (1,915,894) square meters."
April 9, 1988: Register of Deeds of the Municipality of Paraaque issued Transfer Certificates of
Title Nos. 7309, 7311, and 7312, in the name of PEA, covering the three reclaimed islands known
as the "Freedom Islands" located at the southern portion of the Manila-Cavite Coastal Road,
Paraaque City.
PEA and AMARI, a Thai-Philippine corporation, entered into the joint venture agreement (JVA)
through negotiation without public bidding to develop the Freedom Islands. Along with another
250 hectares, the JVA which would later transfer said lands to AMARI.
April 28, 1995: Board of Directors of PEA, in its Resolution No. 1245, confirmed the JVA
June 8, 1995: President Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved
the JVA.
November 29, 1996: This caused a stir especially when Sen. Maceda assailed the agreement,
claiming that such lands were part of public domain (famously known as the grandmother of all
scams).
September 16, 1997: The Senate Committees reported the results of their investigation in Senate
Committee Report No. 560. Among the conclusions of their report are:
(1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public
domain which the government has not classified as alienable lands and therefore PEA cannot
alienate these lands;
(2) the certificates of title covering the Freedom Islands are thus void, and
(3) the JVA itself is illegal.
 December 5, 1997: President Fidel V. Ramos issued Presidential Administrative Order No. 365
creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate
Committee Report No. 560. The members of the Legal Task Force were the Secretary of Justice,
the Chief Presidential Legal Counsel, and the Government Corporate Counsel. The Legal Task
Force upheld the legality of the JVA, contrary to the conclusions reached by the Senate
Committees.
April 27, 1998, petitioner Frank I. Chavez as a taxpayer, filed the instant Petition for Mandamus
with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order.
Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking
Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the people
to information on matters of public concern.
Under President Estradas administration, PEA and AMARI entered into an Amended JVA,
petitioner now prays that on "constitutional and statutory grounds the renegotiated contract be
declared null and void."

ISSUE/S:
1. Whether the reliefs prayed for are moot and academic because of subsequent events
2. Whether the petition should be dismissed for failing to observe the principle of governing the
hierarchy of courts
3. Whether the petition should be dismissed for non-exhaustion of administrative remedies
4. Whether petitioner has locus standi
5. Whether the constitutional right to information includes information on on-going negotiations
BEFORE a final agreement
6. Whether the stipulations in the amended joint venture agreement for the transfer to AMARI of
certain lands, reclaimed and still to be reclaimed violate the 1987 Constitution
7. Whether the Court has jurisdiction over the issue whether the amended JVA is grossly
disadvantageous to the government

HELD:
1. No, the reliefs prayed for are not moot and academic because of subsequent events.
We rule that the signing and of the Amended JVA by PEA and AMARI and its approval by the President
cannot operate to moot the petition and divest the Court of its jurisdiction.

PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the
Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the
meantime PEA and AMARI have signed one in violation of the Constitution. Petitioner's principal basis
in assailing the renegotiation of the JVA is its violation of the Section 3, Article XII of the Constitution,
which prohibits the government from alienating lands of the public domain to private corporations.

The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single
private corporation.

Also, the instant petition is a case of first impression being a wholly government owned corporation
performing public as well as proprietary functions. All previous decisions of the Court involving
Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,
covered agricultural lands sold to private corporations which acquired the lands from private parties.
 Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because
of the possible transfer at any time by PEA to AMARI of title and ownership to portions of the
reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy
percent proportionate share in the reclaimed areas as the reclamation progresses, The Amended
JVA even allows AMARI to mortgage at any time the entire reclaimed area to raise financing for the
reclamation project.

2. No.
The instant case, however, raises constitutional issues of transcendental importance to the public.
The Court can resolve this case without determining any factual issue related to the case. Also, the
instant case is a petition for mandamus which falls under the original jurisdiction of the Court under
Section 5, Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant
case.

3. No, petition should not be dismissed for non-exhaustion of administrative remedies.

PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of
its lands. The law obligated PEA make this public disclosure even without demand from petitioner or
from anyone. PEA failed to make this public disclosure because the original JVA, like the Amended
JVA, was the result of a negotiated contract, not of a public bidding. Considering that PEA had an
affirmative statutory duty to make the public disclosure, and was even in breach of this legal duty,
petitioner had the right to seek direct judicial intervention.

The principle of exhaustion of administrative remedies does not apply when the issue involved is a
purely legal or constitutional question. The principal issue in the instant case is the capacity of AMARI
to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of lands of
the public domain to private corporations. We rule that the principle of exhaustion of administrative
remedies does not apply in the instant case.

The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to
comply with its constitutional duties. There are two constitutional issues involved here. First, is the
right of citizens to information on matters of public concern. Second, is the application of a
constitutional provision intended to insure the equitable distribution of alienable lands of the public
domain among Filipino Citizens. The thrust of the second issue is to prevent PEA from alienating
hundreds of hectares of alienable lands of the public domain in violation of the Constitution,
compelling PEA to comply with a constitutional duty to the nation.

4. Yes. Ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts
or orders of government agencies or instrumentalities, if the issues raised are of 'paramount public
interest,' and if they 'immediately affect the social, economic and moral wellbeing of the people.'

We rule that since the instant petition, brought by a citizen, involves the enforcement of
constitutional rights to information and to the equitable diffusion of natural resources matters
of transcendental public importance, the petitioner has the requisite locus standi.

5. Yes. The State policy of full transparency in all transactions involving public interest reinforces the
people's right to information on matters of public concern. This State policy is expressed in Section
28, Article II of the Constitution, thus: Subject to reasonable conditions prescribed by law, the State
 adopts and implements a policy of full public disclosure of all its transactions involving public
interest."

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission

understood that the right to information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not a requirement for the
exercise of the right to information. Otherwise, the people can never exercise the right if no contract
is consummated, and if one is consummated, it may be too late for the public to expose its defects.

Requiring a consummated contract will keep the public in the dark until the contract, which may be
grossly disadvantageous to the government or even illegal, becomes a fait accompli.

However, the right to information does not compel PEA to prepare lists, abstracts, summaries and
the like relating to the renegotiation of the JVA. The right only affords access to records, documents
and papers, which means the opportunity to inspect and copy them. One who exercises the right
must copy the records, documents and papers at his expense. The exercise of the right is also subject
to reasonable regulations to protect the integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to conduct the inspection and copying.

6. YES.

Brief Narration of the Evolution of Ownership of Reclaimed Land in the Philippines

- Spanish Law of Waters of 1866: The land belongs to the party undertaking the reclamation
(Section 5)

- Civil Code of 1889:

Article 339: Property devoted to public use referred to property open for use by the public. In
contrast, property devoted to public service referred to property used for some specific public service
and open only to those authorized to use the property. Property of public dominion referred not only
to property devoted to public use, but also to property not so used but employed to develop the
national wealth. This class of property constituted property of public dominion although employed
for some economic or commercial activity to increase the national wealth.
Article 341: Property of public dominion, when no longer devoted to public use or to the defense
of the territory, shall become a part of the private property of the State." This provision, however,
was not self-executing. The legislature, or the executive department pursuant to law, must declare
the property no longer needed for public use or territorial defense before the government could
lease or alienate the property to private parties.

- Act No. 1654 of the Philippine Commission: All lands reclaimed by the government shall
remain government-owned; DID NOT repeal Section 5 of the Spanish Law of Waters

- Act No. 2874 of the Philippine Legislature

Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land,
shall be classified as suitable for residential purposes or for commercial, industrial, or other
productive purposes other than agricultural purposes, and shall be open to disposition or concession,
shall be disposed of under the provisions of this chapter, and not otherwise.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public
lands for non-agricultural purposes retain their inherent potential as areas for public service.
However, government reclaimed and marshy lands, although subject to classification as disposable
public agricultural lands, could only be leased and not sold to private parties because of Act No. 2874.

- 1935 Constitution: In line with Act No. 2874

- Commonwealth Act 141: Sec. 6 gives the President the power to identify the types of land;
readopted Sec. 58 of Act No. 2874; Section 60 states that selling of land to private parties by
government units or entities REQUIRES congressional approval

- 1950 Civil Code: The State must formally declare public domain is no longer needed for it to
become disposable land

MAIN ARGUMENT OF THE COURT:

The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations from acquiring any kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public
domain only through lease.
- Reason for Constitutional ban of sale to private corporations: Individuals who already
acquired the maximum area of alienable lands of the public domain could easily set up
corporations to acquire more alienable public lands. An individual could own as many
corporations as his means would allow him. An individual could even hide his ownership of a
corporation by putting his nominees as stockholders of the corporation.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable
or disposable lands of the public domain. Being neither timber, mineral, nor national park lands, the
reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the public
domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural
resources that the State may alienate to qualified private parties. All other natural resources, such as
the seas or bays, are "waters . . . owned by the State" forming part of the public domain, and are
inalienable pursuant to Section 2, Article XII of the 1987 Constitution.

The mere physical act of reclamation by PEA of foreshore or submerged areas nor the mere transfer
by the National Government of lands of the public domain to PEA does not make the reclaimed lands
alienable or disposable lands of the public domain.
- PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from
Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or
be owned by PEA." HOWEVER, PEA's charter, expressly states that is has the power to sell
any and all kinds of lands . . . owned, managed, controlled and/or operated by the
government."

The Charter of PEA, nonetheless, is subject to the constitutional ban on the sale to private
corporations, such as AMARI.
 Assuming that the lands are alienable and disposable, the Government Auditing Code, the is required
to sell valuable government property through public bidding. Section 79 of PD No. 1445 mandates
that: "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."

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to government
units and entities like PEA.

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. This scheme can even be applied to alienable agricultural
lands of the public domain since PEA can "acquire . . . any and all kinds of lands."

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.

7. Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last
issue. Besides, the Court is not the trier of facts, and this last issue involves a determination of factual
matters.

COURT: The Amended JVA clearly violates Sections 2 and 3 of Article XII of the COnsitution and therefore
declared the amended JVA as void ab initio. Petition is GRANTED. PEA and AMARI anre permanently
enjoined from implementing the Amended JVA.

NOTES:

Sec. 2 Art. XII of the 1987 Constitution. 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. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The State may directly undertake
such activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water
rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower,
beneficial use may be the measure and limit of the grant.

The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive
economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as
cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers, lakes, bays,
and lagoons.
The President may enter into agreements with foreign-owned corporations involving either technical or
financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and
other mineral oils according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such agreements, the State
shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision,
within thirty days from its execution.

Sec. 3 Art. XII of the 1987 Constitution. Lands of the public domain are classified into agricultural, forest
or timber, mineral lands and national parks. Agricultural lands of the public domain may be further
classified by law according to the uses to which they may be devoted. Alienable lands of the public domain
shall be limited to agricultural lands. Private corporations or associations may not hold such alienable
lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for
not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the
Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares
thereof, by purchase, homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor.

Section 5. Article VIII of the 1987 Constitution. The Supreme Court shall have the following powers:

1. Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls,
and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court
may provide, final judgments and orders of lower courts in:
a. All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or
regulation is in question.
b. All cases involving the legality of any tax, impost, assessment, or toll, or any penalty
imposed in relation thereto.
c. All cases in which the jurisdiction of any lower court is in issue.
d. All criminal cases in which the penalty imposed is reclusion perpetua or higher.
e. All cases in which only an error or question of law is involved.
3. Assign temporarily judges of lower courts to other stations as public interest may require. Such
temporary assignment shall not exceed six months without the consent of the judge concerned.
4. Order a change of venue or place of trial to avoid a miscarriage of justice.
5. Promulgate rules concerning the protection and enforcement of constitutional rights, pleading,
practice, and procedure in all courts, the admission to the practice of law, the integrated bar, and
legal assistance to the under-privileged. Such rules shall provide a simplified and inexpensive
procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade,
and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts
and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court.
6. Appoint all officials and employees of the Judiciary in accordance with the Civil Service Law.