DOJ Opinion No. 003, s. 1988

DOJ OPINION NO. 003 , s. 1988 January 11, 1988 Mr. Tomas Alcantara Vice-Chairman & Managing Head Board of Investments 385 Gil J. Puyat Avenue Makati, Metro Manila Sir : This refers to your request for opinion on whether or not a foreign-owned domestic corporation "can engage in a prawn hatchery project on a leased private land and/or a patrimonial property of a municipal corporation" in the light of the provisions of the Constitution, particularly Sections 2 and 3 of Article XII of the 1987 Constitution. It appears that City Farms International, organized under the laws of Hongkong with 100% foreign equity, has proposed to undertake prawn hatchery operations in the Philippines by organizing a domestic corporation 100% of the capital of which is to be owned by said corporation with the view to introducing the latest and most economical hatching, raising and feeding techniques developed and patented by the international scientists; that the domestic corporation will be registered with the Board of Investments to avail of incentives; and that the site for the proposed project shall be a four (4)-hectare land (park) belonging to the City of Dagupan which City Farms International shall lease for a period of ten (10) years with option to renew for another ten (10) years. prcd You state that under the Omnibus Investments Code, a corporation duly organized under Philippine laws more than 40% of the capital of which is owned and controlled by a foreign national is entitled to registration if, among other things, it shall engage in a pioneer project or shall export at least 70% of its total production. You further state that the Legal Officer of Dagupan City has issued a certification to the effect that the City of Dagupan can, pursuant to Section 10 of B.P. Blg. 337, "Withdraw a portion of the park through a resolution of the Sangguniang Panlungsod, and use or convey the same for any purpose for which other real property belonging to city might be used or conveyed". Your query raises three issues, to wit: (1) Whether or not a foreign-owned domestic corporation can engage in a prawn hatchery project; (2) If so, whether or not it can lease private land for such purpose; and (3) Whether or not it can lease for the same purpose a portion of the park of the City of Dagupan. The first issue is answered in the affirmative. It is believed that the proposed prawn hatchery project is not a nationalized activity within the intendment of Sections 2 and 3, Article XII of the 1987 Constitution. In Opinion No. 102, s. 1976, we had occasion to rule that processing of fish taken from Philippine waters is not exploitation of our natural resources within the meaning of the constitutional provision imposing a nationality requirement on the disposition, exploitation, development or utilization of our natural resources. We opined therein that under the Fisheries Decree of 1974 (P.D. No. 704), the fishery industry, which includes "fish producers, fish processors, fish traders, both wholesalers and retailers, and owners of refrigerating and cold storage plants serving the industry:, is not a nationalized activity and therefor, the processing of fish is not subject to the nationality requirement under P.D. No. 704. For the additional reasons mentioned in your letter of 12 August 1987 that the proposed prawn hatchery project "will not use the land as ponds or build dikes and collect and store water from rivers . . . (nor) draw water from rivers, streams, creeks or other public waters, that it "will not catch fry's or fingerlings from wild or public waters" but "will buy the female parent spawners", and that the "feeds will be purchased from sellers of processed feeds", there is ample reason to believe that the said proposed project would not involve the utilization or exploitation of the country's natural resources, and, therefore, it would not be subject to the nationality requirement under the Constitution and existing laws. prcd The second issue is likewise answered in the affirmative. We are not aware of any provision of law or the Constitution which imposes a prohibition upon aliens or alien-owned corporations from leasing private lands in the Philippines. Section 7, Article XII of the 1987 Constitution which provides that "(S)ave in cases of hereditary succession, on private lands shall be transferred or conveyed except or conveyed except to individuals, corporations or associations qualified to acquire or hold lands of the public domain", makes the nationality requirement applicable to acquisition of private lands (Op. No. 98, s. 1983). There is no similar nationality requirement imposed where private land is merely to be leased, not transferred or conveyed, to a foreign corporation. Thus, in Opinion No. 180, s. 1973, this Department ruled that "foreigners or multinational corporations may own buildings provided they are constructed on rented land " (see also Op. No. 175, s. 1973). In a much earlier opinion (Op. No. 58, s. 1949), this Department, citing the case of Krivenko vs. Register of Deeds of Manila (44 O.G. No. 2, Feb., 1948, p. 486) stated that "aliens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution ". In Opinion No. 290, s. 1954, it was categorically ruled that a "lease of private agricultural land is not prohibited by the last quoted provision [referring to Section 5, Article XIII of the 1935 Constitution, now Section 7, Article XII of the 1987 Constitution] because lease does not convey title". The third issue is also answered in the affirmative. Pursuant to Section 10 of B.P. Blg. 337 (the Local Government Code), a local government unit, through its head acting pursuant to a resolution of its sanggunian, may "close any barangay, municipal, city or provincial road, street, alley, park or square" and the "property thus withdrawn from public use may be used or conveyed for any purpose for which other real property belonging to the local unit concerned might be lawfully used or conveyed". If the subject 4-hectare portion of the park of the City of Dagupan would be withdrawn from public use by resolution of the Sangguniang Panlungsod of Dagupan City, that portion could thereafter be disposed of by the City of Dagupan "for any purpose for which other real property belonging to (said City)might be lawfully used or conveyed" pursuant to Section 10 of B.P. Blg. 337. prcd Wherefore, all the issues hereinabove raised are resolved accordingly. Very truly yours, (SGD.) SEDFREY A. ORDOEZ Secretary of Justice