Haystack: Manila Lodge 761 v. Court of Appeals (GR L-41001, 30 September 1976)

Manila Lodge 761 v. CA
[G.R. No. L-41001. September 30, 1976.]; also Tarlac Development Corp. v. CA [G.R. No. L-41012]
First Division, Castro (J): 3 concur, 1 concurs in the result.

Facts: On 26 June 1905 the Philippine Commission enacted Act 1360 which authorized the City of Manila to reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act provided that the reclaimed area "shall be the property of the City of Manila" and that "the City of Manila is hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension at the north end not to exceed 500 feet by 600 feet in size, for a hotel site, and to lease the same, with the approval of the Governor General, to a responsible person or corporation for a term not to exceed 99 years." Subsequently, the Philippine Commission passed on 18 May 1907 Act 1657, amending Act 1360, so as to authorize the City of Manila either to lease or to sell the portion set aside as a hotel site.

The total area reclaimed was a little over 25 hectares. The City of Manila applied for the registration of the reclaimed area, and on 20 January 1911, OCT 1909 was issued in the name of the City of Manila. On 13 July 1911 the City of Manila, affirming a prior sale dated 16 January 1909, conveyed 5,543.07 sq. m. of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of Elks of the U.S.A. (BPOE) on the basis of which TCT 2195 was issued to the latter over the parcel of land which was part of Luneta Extension in the District of Ermita. For the remainder of the Luneta Extension, i.e. after segregating therefrom the portion sold to the Manila Lodge No. 761, BPOE, a new Certificate of Title 2196 was issued on 17 July 1911 to the City of Manila. Manila Lodge subsequently sold said 5,543.07 sq. m. to the Elks Club, Inc., to which was issued TCT 67488. The registered owner, "The Elks Club, Inc.," was later changed by court order to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc." In January 1963 the BPOE petitioned the CFI Manila, Branch IV, for the cancellation of the right of the City of Manila to repurchase the property. This petition was granted on 15 February 1963.

On 19 November 1963 the BPOE sold the land together with all the improvements thereon to the Tarlac Development Corporation which paid P1,700,000 as down payment and mortgaged to the vendor the same realty to secure the payment of the balance to be paid in quarterly installments. At the time of the sale, there was no annotation of any subsisting lien on the title to the property. On 12 December 1963 TCT 73444 was issued to TDC. In June 1964 the City of Manila filed with the CFI Manila a petition for the reannotation of its right to repurchase; the court, after hearing, issued an order, dated November 19, 1964, directing the Register of Deeds of the City of Manila to reannotate in toto the entry regarding the right of the City of Manila to repurchase the property after 50 years. From this order TDC and BPOE appealed to the Supreme Court which on 31 July 1968 affirmed the trial court's order of reannotation, but reserved to TDC the right to bring another action for the clarification of its rights.

On 28 April 1971, as a consequence of such reservation, TDC filed a complaint against the City of Manila and Manila Lodge 761, BPOE with the CFI Manila praying that Entry 4608/T-1635 found in TCT 73444 covering the parcel of land with buildings and improvements thereon purchased from BPOE be cancelled; that Manila pays TDS the sum of P100,000 as damages, that TDC reserve the right to recover amounts from BPOE in case that the judgment on the parcel of land declares it a public park. The City of Manila set up a special and affirmative defense claiming that TDC is not a purchaser in good faith. Manila Lodge 761 admitted to have sold the land in good faith, and that it had received quarterly installments from TDC until 15 October 1964 when the latter failed without justifiable cause to pay the subsequent installments. After due trial the court a quo rendered on 14 July 1972 its decision finding the subject land to be part of the "public park or plaza" and, therefore, part of the public domain. The court consequently declared that the sale of the subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and void; that plaintiff TDC was a purchaser thereof in good faith and for value from BPOE and can enforce its rights against the latter; and that BPOE is entitled to recover from the City of Manila whatever consideration it had paid the latter. From said decision, TDC and Manila Lodge 761, BPOE appealed to the Court of Appeals.

In its decision promulgated on 30 June 1975, the Court of Appeals concurred in the findings and conclusions of the lower court upon the ground that they are supported by the evidence and are in accordance with law, and accordingly affirmed the lower court's judgment. Hence, the petitions for review on certiorari.

The Supreme Court denied the petitions for lack of merit, and affirmed the decision of the Court of Appeals, at petitioner’s cost.

1. Statutory Construction; Courts must give effect to the general legislative intent
It is a cardinal rule of statutory construction that courts must give effect to the general legislative intent that can be discovered from or is unraveled by the four corners of the statute, and in order to discover said intent, the whole statute, and not only a particular provision thereof, should be considered. In the present case, it is thus necessary to analyze all the provisions of Act 1360, as amended, in order to unravel the legislative intent.

2. Grant of public nature strictly construed against the grantee
The grant made by Act 1360 of the reclaimed land to the City of Manila is a grant of a "public" nature, the same having been made to a local political subdivision. Such grants have always been strictly construed against the grantee. One compelling reason given for the strict interpretation of a public grant is that there is in such grant a gratuitous donation of, public money or resources which results in an unfair advantage to the grantee and for that reason, the grant should be narrowly restricted in favor of the public. This reason for strict interpretation obtains relative to the aforesaid grant for although the City of Manila was to pay for the construction of such work and timber bulkheads or sea walls as may be necessary for the making of the Luneta extension, the area to be reclaimed would be filled at the expense of the Insular Government and without cost to the City of Manila, with material dredged from Manila Bay. Hence, the letter of the statute should be narrowed to exclude matters which if included would defeat the policy of the legislation.

3. Reclaimed area of public dominion, intended for public use
The reclaimed area, an extension to the Luneta, is declared to be property of the City of Manila; and is of public dominion, intended for public use. It cannot be patrimonial property as Act 1360, as amended, provides by necessary implication, that the City of Manila could not dispose of the reclaimed area without being authorized by the lawmaking body.

4. Ownership defined
Article 348 of the Civil Code of Spain provides that "ownership is the right to enjoy and dispose of a thing without further limitations than those established by law." The right to dispose ( jus disponendi) of one's property is an attribute of ownership.

5. Statutory Construction; every word, clause of statute interpreted in a way that no part becomes inoperative or superfluous
If the reclaimed area were patrimonial property of the City, the latter could dispose of it without need of the authorization provided by the statute, and the authorization to set aside, lease, or sell given by the statute would indeed be superfluous. To so construe the statute as to render the term "authorize," which is repeatedly used by the statute, superfluous would violate the elementary rule of legal hermeneutics that effect must be given to every word, clause, and sentence of the statute and that a statute should be so interpreted that no part thereof becomes inoperative or superflous. To authorize means to empower, to give a right to act. Act 1360 furthermore qualifies the verb "authorize" with the adverb "hereby," which means "by means of this statute or section." Hence without the authorization expressly given by Act 1360, the City of Manila could not lease or sell even the northern portion; much less could it dispose of the whole reclaimed area. At most, only the northern portion reserved as a hotel site could be said to be patrimonial property, for, by express statutory provision it could be disposed of, and the title thereto would revert to the City should the grantee fail to comply with the terms provided by the statute.

6. Presumption of full knowledge of prior laws and legislation when lawmaking body enacts a statute
It is presumed that when the lawmaking body enacted the statute, it had full knowledge of prior and existing laws and legislation on the subject of the statute and acted in accordance or with respect thereto. If by another previous law, the City of Manila could already dispose of the reclaimed area, which it could do if such area were given to it as its patrimonial property, it would be a superfluity for Act 1360 to authorize the City to dispose of the reclaimed land.

7. Extension to Luneta is also a public park or plaza and for public use
The reclaimed area, being an "extension to the Luneta in the City of Manila," it is of the same nature or character as the old Luneta. Anent this matter, it has been said that a power to extend (or continue an act or business) cannot authorize a transaction that is totally distinct. It is not disputed that the old Luneta is a public park or plaza and it is so considered by Section 859 of the Revised Ordinances of the City of Manila. Hence the "extension to the Luneta" must be also a public park or plaza and for public use.

8. Extension defined
Extension signifies enlargement in any direction — in length, breadth, or circumstance.

9. Bays, roadsteads, coast sea, inlets and shores are part of the national domain open for public use
A bay is nothing more than an inlet of the sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores are parts of the national domain open to public use. These are also property of public ownership devoted to public use, according to Article 339 of the Civil Code of Spain. In the present case, the reclaimed area was formerly a part of the Manila Bay.

10. When shore or part of bay is reclaimed, it does not lose character of being property for public use
When the shore or part of the bay is reclaimed, it does not lose its character of being property for public use, according to Government of the Philippine Islands vs. Cabangis. When the tract of land owned by a private individual wears away and later on is submerged in water in ordinary tides (thus becoming part of the shore), until the Government later on undertakes the dredging of the estuary and dumping the sand and silt from estuary on the low lands completely submerged in water forming the reclaimed lots, they belong to the public domain for public use. Hence, a part of the shore, and for that purpose, a part of the bay, did not lose its character of being for public use after it was reclaimed.

11. Expressio unius est exclusio alterius; Southern portion is not the northern portion authorized to be leased or sold
Act 1360, as amended, authorized the lease or sale of the northern portion of the reclaimed area as a hotel site. The subject property is not that northern portion authorized to be leased or sold; the subject property is the southern portion. Hence, applying the rule of expresio unius est exclusio alterius, the City of Manila was not authorized to sell the subject property. The application of this principle of statutory construction becomes the more imperative inasmuch as not only must the public grant of the reclaimed area to the City of Manila be strictly construed against the City of Manila, but also because a grant of power to a municipal corporation, as happens in this case where the city is authorized to lease or sell the northern portion of the Luneta extension, is strictly limited to such as are expressly or impliedly authorized or necessarily incidental to the objectives of the corporation.

12. Property of public use; Intention to consider property for public use important, not actual construction or layout
Article 344 of the Civil Code of Spain provides that "property of public use, in provinces and in towns, comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service paid for by such towns or provinces." A park or plaza, such as the extension to the Luneta, is undoubtedly comprised in said article. Properties of provinces and towns for public use are governed by the same principles as properties of the same character belonging to the public domain. In order to be property of public domain an intention to devote it to public use is sufficient. It is not necessary, therefore, that a plaza be already construed or laid out as a plaza in order that it be considered property for public use. It is sufficient that it be intended to be such.

13. Conversion of property of public us to patrimonial property requires explicit declaration by the executive and the legislative department
As held in Ignacio vs. The Director of Lands, it is only the executive and possibly the legislative department that has the authority and the power to make the declaration that said property is no longer required for public use, and until such declaration is made the property must continue to form part of the public domain. In the present case, there has been no such explicit or unequivocal declaration. The courts are undoubtedly not primarily called upon, and are not in a position, to determine whether any public land is still needed for the purposes specified in Article 4 of the Law of Waters.

14. Circumstantial evidence far removed in time to be considered contemporaneous to the enactment of Act 1360
All items of alleged circumstantial evidence are acts far removed in time from the date of the enactment of Act 1360 such that they cannot be considered contemporaneous with its enactment. Moreover, it is not far-fetched that this mass of circumstantial evidence might have been influenced by the antecedent series of invalid acts, i.e. the City's having obtained over the reclaimed area OCT 1909 (20 January 1911); the sale made by the City of the subject property to Manila Lodge No. 761; and the issuance to the latter of TCT 2195. It cannot be gainsaid that if the subsequent acts constituting the circumstantial evidence have been based on, or at least influenced, by those antecedent invalid acts and Torrens titles, they can hardly be indicative of the intent of the lawmaking body in enacting Act 1360 and its amendatory act.

15. Mention as boundary owner is not a means of acquiring title
OCT 7333 (13 November 1935), covering the lot where the American Embassy [Chancery] stands, states that the property is "bounded on the Northwest by properties of Army and Navy Club and Elks Club." Even if said boundaries were delineated by the Philippine Legislature in Act 4269, this does not mean that the Legislature "recognized and conceded the existence of the Elks Club property as a private property and not as a public park or plaza. A contrary argument is non sequitur, plain and simple. Said Original Certificate of Title cannot be considered as an inconvertible declaration that the Elks Club was in truth and in fact the owner of such boundary lot. Such mention as boundary owner is not a means of acquiring title nor can it validate a title that is null and void.

16. Government not estopped by mistake or errors on the part of its agents
The Government is never estopped by mistakes or errors on the part of its agents, and estoppel does not apply to a municipal corporation to validate a contract that is prohibited by law or its against public policy. In the present case, the 13 July 1911 sale executed by the city of Manila to Manila Lodge was certainly a contract prohibited by law. Estoppel cannot be urged even if the City of Manila accepted the benefits of such contract of sale and the Manila Lodge No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel against the City of Manila in this case would be tantamount to enabling it to do indirectly what it could not do directly.

17. Sale void and existent; cannot be ratified by lapse of time or by express ratification
The sale of the subject property executed by the City of Manila to the Manila Lodge No. 761, BPOE, was void and inexistent for lack of subject matter. It suffered from an incurable defect that could not be ratified either by lapse of time or by express ratification. The Manila Lodge No. 761 therefore acquired no right by virtue of the said sale. Hence to consider now the contract inexistent as it always has been, cannot be, as claimed by the Manila Lodge No. 761, an impairment of the obligations of contracts, for there was in contemplation of law, no contract at all.

18. Good faith of purchaser cannot create title where none exist
The inexistence of said sale can be set up against anyone who asserts a right arising from it, not only against the first vendee but also against all its successors, which are not protected by law. The doctrine of bona fide purchaser without notice does not apply where there is a total absence of title in the vendor, and the good faith of the purchaser cannot create title where none exists.

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