LBC EXPRESS v. CA
He
SUMMARY: Carloto is the President-Manager of Rural Bank of
Labason and he was in Cebu transacting with the Central Bank. To
move forward with the transaction, he was supposed to go to
Manila on or before November 21, 1984. Before going, he phoned
his sister to send him P1k for his pocket money (to treat people to
dinner) and some rediscounting papers. Which she did. However,
he failed to receive the cashpack. He ended up staying in Cebu
trying to sort out the issue which caused him to stay until
December 15. Because of the delay, he failed to proceed with the
transaction with Central Bank on time and Rural Bank was
penalized Php32k. He then filed for damages against LBC for its
failure to perform the obligation. RTC awarded him and Rural
Bank moral and exemplary damages, as well as the reimbursement
for Php32k penalty. CA affirmed. SC reversed.
DOCTRINE: A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no emotions,
no senses; therefore, it cannot experience physical suffering and
mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and
griefs of life—all of which cannot be suffered by respondent bank
as an artificial person.
FACTS:
 Private respondent Adolfo Carloto, incumbent President-
Manager of private respondent Rural Bank of Labason, alleged that
on November 12, 1984, he was in Cebu City transacting business
with the Central Bank Regional Office.
 He was instructed to proceed to Manila on or before
November 21, 1984 to follow-up the Rural Bank's plan of payment
of rediscounting obligations with Central Bank's main office in
Manila.
 He then purchased a round trip plane ticket to Manila.
also phoned his sister Elsie Carloto-Concha to send him Php
1,000.00 for his pocket money in going to Manila and some
rediscounting papers thru petitioner's LBC Office at Dipolog City.
 Mrs. Concha, thru her clerk, on November 16, 1984, Adelina
Antigo consigned thru LBC Dipolog Branch the pertinent
documents and the sum of Php 1,000.00 to Carloto in Cebu City.
o This was evidenced by LBC Air Cargo, Inc., Cashpack
Delivery Receipt No. 34805.
 On November 17, 1984, the documents arrived without the
cashpack. Respondent Carloto made personal follow-ups on that
same day, and also on November 19 and 20, 1984 at LBC's office in
Cebu but petitioner failed to deliver to him the cashpack.
 Consequently, Carloto said he was compelled to go to
Dipolog City a week and a half later (Nov. 24), to claim the money
at LBC's office. His effort was once more in vain.
 After three days (Nov. 27), he went back to Cebu City at
LBC's office. He was, however, advised that the money has been
returned to LBC's office in Dipolog City upon shipper's request.
Again, he demanded for the Php 1,000.00 and refund of Php 49.00
LBC revenue charges.
 He received the money only on December 15, 1984 less the
revenue charges.
 CARLOTO: because of the delay in the transmittal of the
cashpack, he failed to submit the rediscounting documents to
Central Bank on time.
o As a consequence, his rural bank was made to pay the
Central Bank P32,000.00 as penalty interest. He allegedly suffered
embarrassment and humiliation.
 LBC: the cashpack was forwarded via PAL to LBC Cebu
branch on November 22, 1984. On the same day, it was delivered
at Carloto’s residence. However, he wasn’t there to receive it.
Instead, the delivery man served a claim notice to insure that he
would personally receive the money. This was annotated on
Cashpack Delivery Receipt No. 342805. Notwithstanding said
notice, Carloto didn’t claim the cashpack at the LBC Cebu branch.
Thus, on November 23, it was returned to the shipper, Elsie
Carloto-Concha
 Carloto then instituted an action for Damages Arising from
Non-Performance of Obligation.
o Respondent rural bank was added as one of the plaintiffs
and prayed for the reimbursement of the Php32,000.00 in the
amendment of the complaint
 RTC: Ordered LBC to pay Carloto and Rural Bank of
Labason moral damages for Php10k; exemplary for Php5k,
attorney’s fees for Php3k; and to reimburse the Rural Bank for
Php32k which it paid as penalty interest to the Central Bank of the
Philippines
 CA: Affirmed but modified the judgment by deleting the
award for attorney’s fees.
 Petitioner filed an MR which was denied.
 Hence, this petition
Whether or not Rural Bank, as an artificial person, should be
awarded moral damages—NO
 The respondent court erred in awarding moral damages to
the Rural Bank of Labason, Inc., an artificial person.
 Moral damages are granted in recompense for physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and
similar injury.
 A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no emotions,
no senses; therefore, it cannot experience physical suffering and
mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and
griefs of life—all of which cannot be suffered by respondent bank
as an artificial person.
Whether or not the award of Php32,000.00 was made with
grave abuse of discretion—YES. CARLOTO DOES NOT HAVE
CLEAN HANDS
 The award of moral damages in favor of the private
respondents cannot be sustained. The right to recover moral
damages is based on equity. Moral damages are recoverable only if
the case falls under Article 2219 of the Civil Code in relation to
Article 21. Part of conventional wisdom is that he who comes to
court to demand equity, must come with clean hands.
 In the case at bench, respondent Carloto is not without
fault.
 He was fully aware that his rural bank's obligation would
mature on November 21, 1984 and his bank has set aside cash for
these bills payable.
 He was all set to go to Manila to settle this obligation. He
has received the documents necessary for the approval of their
rediscounting application with the Central Bank. He has also
received the plane ticket to go to Manila.
 Nevertheless, he did not immediately proceed to Manila but
instead tarried for days allegedly claiming his Php1k pocket
money. Due to his delayed trip, he failed to submit the
rediscounting papers to the Central Bank on time and his bank was
penalized Php 32k for failure to pay its obligation on its due date.
 The undue importance given by respondent Carloto to
Php1,000.00 pocket money is inexplicable for it was not
indispensable for him to follow up his bank's rediscounting
application with Central Bank.
 According to him, he needed the money to "invite people
for a snack or dinner."
o The attitude of said respondent speaks ill of his ways of
business dealings and cannot be countenanced by this Court.
 It will be revolting to our sense of ethics to use it as basis
for awarding damages in favor of private respondent Carloto and
the Rural Bank of Labason, Inc.
Whether or not the CA erred in affirming RTC’s decision
ordering LBC to pay moral and exemplary damages despite
performance of the obligation—YES
 Respondents failed to show that petitioner LBC's late
delivery of the cashpack was motivated by personal malice or bad
faith, whether intentional or thru gross negligence.
 In fact, it was proved during the trial that the cashpack was
consigned on November 16, 1984, a Friday.
 It was sent to Cebu on November 19, 1984, the next
business day.
 Considering this circumstance, petitioner cannot be
charged with gross neglect of duty. Bad faith under the law can not
be presumed; it must be established by clearer and convincing
evidence.
 Again, the unbroken jurisprudence is that in breach of
contract cases where the defendant is not shown to have acted
fraudulently or in bad faith, liability for damages is limited to the
natural and probable consequences of the branch of the obligation
which the parties had foreseen or could reasonable have foreseen.
 The damages, however, will not include liability for moral
damages.
 Prescinding from these premises, the award of exemplary
damages made by the respondent court would have no legal leg to
support itself. Under Article 2232 of the Civil Code, in a contractual
or quasi-contractual relationship, exemplary damages may be
awarded only if the defendant had acted in "a wanton, fraudulent,
reckless, oppressive, or malevolent manner." The established facts
of not so warrant the characterization of the action of petitioner
LBC.
FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO
MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN
COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F.
AGO, respondents.
Facts:
Expos is a radio documentary program hosted by Carmelo Mel
Rima (Rima) and Hermogenes Jun Alegre (Alegre). Expos is aired
every morning over DZRC-AM which is owned by Filipinas
Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi
City, the Albay municipalities and other Bicol areas.
In the morning of 14 and 15 December 1989, Rima and Alegre
exposed various alleged complaints from students, teachers and
parents against Ago Medical and Educational Center-Bicol
Christian College of Medicine (AMEC) and its administrators.
Claiming that the broadcasts were defamatory, AMEC and Angelita
Ago (Ago), as Dean of AMECs College of Medicine, filed a complaint
for damages against FBNI, Rima and Alegre on 27 February 1990.
The complaint further alleged that AMEC is a reputable learning
institution. With the supposed expose, FBNI, Rima and Alegre
transmitted malicious imputations, and as such, destroyed
plaintiffs (AMEC and Ago) reputation. AMEC and Ago included
FBNI as defendant for allegedly failing to exercise due diligence in
the selection and supervision of its employees, particularly Rima
and Alegre.
On 14 December 1992, the trial court rendered a Decision ] finding
FBNI and Alegre liable for libel except Rima. In holding FBNI liable
for libel, the trial court found that FBNI failed to exercise diligence
in the selection and supervision of its employees.
The Court of Appeals affirmed the trial courts judgment with
modification. The appellate court made Rima solidarily liable with
FBNI and Alegre.
Issues:
1. Whether or not the broadcasts are libelous.
2. Whether or not AMEC is entitled to moral damages.
3. Whether or not the award of attorneys fees is proper.
Ruling:
1. A libel is a public and malicious imputation of a crime, or of
a vice or defect, real or imaginary, or any act or omission,
condition, status, or circumstance tending to cause the dishonor,
discredit, or contempt of a natural or juridical person, or to
blacken the memory of one who is dead.
Every defamatory imputation is presumed malicious. Rima and
Alegre failed to show adequately their good intention and
justifiable motive in airing the supposed gripes of the students. As
hosts of a documentary or public affairs program, Rima and Alegre
should have presented the public issues free from inaccurate and
misleading information. Hearing the students alleged complaints a
month before the expos, they had sufficient time to verify their
sources and information. However, Rima and Alegre hardly made a
thorough investigation of the students alleged gripes. Neither did
they inquire about nor confirm the purported irregularities in
AMEC from the Department of Education, Culture and Sports.
Alegre testified that he merely went to AMEC to verify his report
from an alleged AMEC official who refused to disclose any
information. Alegre simply relied on the words of the students
because they were many and not because there is proof that what
they are saying is true. This plainly shows Rima and Alegres
reckless disregard of whether their report was true or not.
Had the comments been an expression of opinion based on
established facts, it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the
facts. However, the comments of Rima and Alegre were not backed
up by facts. Therefore, the broadcasts are not privileged and
remain libelous per se.
The broadcasts also violate the Radio Code of the Kapisanan ng
mga Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the
Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free
from personal bias, prejudice and inaccurate and misleading
information. x x x Furthermore, the station shall strive to present
balanced discussion of issues. x x x.
xxx
7. The station shall be responsible at all times in the supervision of
public affairs, public issues and commentary programs so that
they conform to the provisions and standards of this code.
8. It shall be the responsibility of the newscaster, commentator,
host and announcer to protect public interest, general welfare and
good order in the presentation of public affairs and public issues.
[36]
 
The broadcasts fail to meet the standards prescribed in the Radio
Code, which lays down the code of ethical conduct governing
practitioners in the radio broadcast industry. The Radio Code is a
voluntary code of conduct imposed by the radio broadcast
industry on its own members. The Radio Code is a public warranty
by the radio broadcast industry that radio broadcast practitioners
are subject to a code by which their conduct are measured for
lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast
practitioners live up to the code of conduct of their profession, just
like other professionals. A professional code of conduct provides
the standards for determining whether a person has acted justly,
honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 19 of the Civil
Code. A professional code of conduct also provides the standards
for determining whether a person who willfully causes loss or
injury to another has acted in a manner contrary to morals or good
customs under Article 21 of the Civil Code.
2. FBNI contends that AMEC is not entitled to moral damages
because it is a corporation.
 A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical
suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock. The Court of Appeals
cites Mambulao Lumber Co. v. PNB, et al. to justify the award of
moral damages. However, the Courts statement in Mambulao that
a corporation may have a good reputation which, if besmirched,
may also be a ground for the award of moral damages is an obiter
dictum.
Nevertheless, AMECs claim for moral damages falls under item 7 of
Article 2219 of the Civil Code. This provision expressly authorizes
the recovery of moral damages in cases of libel, slander or any
other form of defamation. Article 2219(7) does not qualify
whether the plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly complain for
libel or any other form of defamation and claim for moral
damages.
Moreover, where the broadcast is libelous per se, the law implies
damages. In such a case, evidence of an honest mistake or the want
of character or reputation of the party libeled goes only in
mitigation of damages.[46] Neither in such a case is the plaintiff
required to introduce evidence of actual damages as a condition
precedent to the recovery of some damages. In this case, the
broadcasts are libelousper se. Thus, AMEC is entitled to moral
damages.
However, we find the award of P300,000 moral damages
unreasonable. The record shows that even though the broadcasts
were libelous per se, AMEC has not suffered any substantial or
material damage to its reputation. Therefore, we reduce the award
of moral damages from P300,000 to P150,000.
3. The award of attorney’s fees is not proper.
AMEC failed to justify satisfactorily its claim for attorney’s fees.
AMEC did not adduce evidence to warrant the award of attorney’s
fees. Moreover, both the trial and appellate courts failed to
explicitly state in their respective decisions the rationale for the
award of attorney’s fees.
 In Inter-Asia Investment Industries, Inc. v. Court of Appeals, we held
that:
[I]t is an accepted doctrine that the award thereof as an item of
damages is the exception rather than the rule, and counsels fees
are not to be awarded every time a party wins a suit. The power of
the court to award attorneys fees under Article 2208 of the Civil
Code demands factual, legal and equitable justification, without
which the award is a conclusion without a premise, its basis being
improperly left to speculation and conjecture. In all events, the
court must explicitly state in the text of the decision, and not only
in the decretal portion thereof, the legal reason for the award of
attorney’s fees.[51] (Emphasis supplied)
Petition denied.
COLLECTOR OF INTERNAL REVENUE vs. CLUB FILIPINO, INC.
DE CEBU
FACTS:
Club Filipino, Inc. de Cebu is a civic corporation with an original
authorized capital stock of P22,000.00, which was subsequently
increased to P200,000.00, among others, to it “provide, operate,
and maintain x x x all sorts of games not prohibited under general
laws and general ordinances; and develop and cultivate sports of
every kind and any denomination for recreation and healthy
training of its members and shareholders.”
The Club owns and operates a club house, a bowling alley, a golf
course, and a bar-restaurant for its members and their guests,
which was a necessary incident to the operation of the club. The
club is operated mainly with funds derived from membership fees
and dues.
As a result of a capital surplus, arising from the increased value
due to the revaluation of its real properties, the Club declared
stock dividends; but no actual cash dividends were distributed to
the stockholders.
A BIR agent discovered that the Club has never paid percentage
tax on the gross receipts of its bar and restaurant. The Collector of
Internal Revenue assessed against and demanded from the Club
the unpaid percentage tax on the gross receipts plus surcharges.
The Club requested for the cancellation of the assessment. The
request having been denied, the Club filed the instant petition for
review.
ISSUE:
Whether or not Club Filipino is a stock corporation.
HELD:
NO. It is a non-stock corporation.
The fact that the capital stock of the respondent Club is divided
into shares does not detract from the finding of the trial court that
it is not engaged in the business of operator of bar and restaurant.
What is determinative of whether or not the Club is engaged in
such business is its object or purpose, as stated in its articles and
by-laws. It is a familiar rule that the actual purpose is not
controlled by the corporate form or by the commercial aspect of
the business prosecuted, but may be shown by extrinsic evidence,
including the by-laws and the method of operation. From the
extrinsic evidence adduced, the Tax Court concluded that the Club
is not engaged in the business as a barkeeper and restaurateur.
Moreover, for a stock corporation to exist, two requisites must be
complied with, to wit: (1) a capital stock divided into shares and
(2) an authority to distribute to the holders of such shares,
dividends or allotments of the surplus profits on the basis of the
shares held (sec. 3, Act No. 1459). In the case at bar, nowhere in its
articles of incorporation or by-laws could be found an authority
for the distribution of its dividends or surplus profits. Strictly
speaking, it cannot, therefore, be considered a stock corporation,
within the contemplation of the corporation law.
PNOC Energy Development Corporation vs NLRC, 201 SCRA
487 (1991)
FACTS:
 Private respondent Danilo Mercado was employed by
petitioner Phil. National Oil Company-Energy Development Corp.
(PNOC-EDC).
 Mercado held various positions ranging from clerk, general
clerk to shipping clerk during his employment at its Cebu office
until his transfer to its establishment at Oriental Negros.
 Mercado was dismissed due to alleged serious acts of
dishonesty and violation of rules and regulations.
 Mercado purchased 1,400 pieces of nipa shingles from Mrs.
Leonardo Nodado for the total purchase price of Pl,680.00. Against
company policy, regulations and specific orders, Danilo Mercado
withdrew the nipa shingles from the supplier but paid the amount
of P1,000.00 only. Mercado appropriated the balance of P680.00
for his personal use;
 In the same transaction, the supplier agreed to give the
company a discount of P70.00 which Mercado did not report to the
company;
 Mercado was instructed to contract the services of Fred R.
Melon for the fabrication of rubber stamps, for the total amount of
P28.66. Mercado paid the amount of P20.00 to Fred R. Melon and
appropriated for his personal use the balance of P8.66.
 Mercado was absent from work without leave, without
proper turn-over of his work, causing disruption and delay of
work activities;
 Mercado went on vacation leave without prior leave,
against company policy, rules and regulations.
 Mercado filed for illegal dismissal, retirement benefits,
separation pay, unpaid wages, etc. against PNOC-EDC before the
NLRC.
 PNOC-EDC praying for the dismissal of the case on the
ground that the Labor Arbiter and/or the NLRC had no
jurisdiction.
 The Labor Arbiter ruled in favor of private respondent
Mercado.
 Petition for certiorari to set aside the Resolution of NLRC
which affirmed the decision of Labor Arbiter Vito J. Minoria.
ISSUE:
1. Whether or not matters of employment affecting the PNOC-
EDC, a government-owned and controlled corporation, are within
the jurisdiction of the Labor Arbiter and the NLRC.
2. Whether or not the Labor Arbiter and the NLRC are
justified in ordering the reinstatement of private respondent
RULING:
1. Yes. PNOC-EDC having been incorporated under the
General Corporation Law was held to be a GOCC whose employees
are subject to the provisions of the Labor Code.
The test in determining whether a government-owned or
controlled corporation is subject to the Civil Service Law are the
manner of its creation, such that government corporations created
by special charter are subject to its provisions while those
incorporated under the General Corporation Law are not within its
coverage.
The fact that the case arose at the time when the 1973
Constitution was still in effect, does not deprive the NLRC of
jurisdiction on the premise that it is the 1987 Constitution that
governs because it is the Constitution in place at the time of the
decision.
2. PNOC-EDC's accusations of dishonesty and violations of
company rules are not supported by evidence.
While it is true that loss of trust or breach of confidence is a valid
ground for dismissing an employee, such loss or breach of trust
must have some basis.
Petition is denied.
CASE TITLE:
Hacienda Luisita, Inc. VS. (PARC)
This case is a SPECIAL CIVIL ACTION in the Supreme Court. This
involves a Petition for Certiorari and Prohibition under Rule 65
with prayer for preliminary injunctive relief, HLI seeking to
question and reverse the PARC Resolutions issued on December
22, 2005 and May 3, 2006, and the implementing Notice of
Coverage dated January 2, 2006.
FACTS:
In 1955, Land Reform Act [RA 1400] was passed which set the
expropriation of all tenanted estates.
In 1957, the Spanish owners of the Compañ ia General de Tabacos
de Filipinas (Tabacalera) sold to Tarlac Development Corporation
(TADECO) Hacienda Luisita and their controlling interest in the
sugar mill within the hacienda, the Central Azucarera de Tarlac
(CAT), to be paid in Philippine pesos and in US dollars.
The Philippine Government, through the Central Bank of the
Philippines, aided the buyer to obtain a dollar loan from a US bank.
The GSIS Board of Trustees extended on November 27, 1957 a PhP
5.911M loan in favour of TADECO to pay the peso price with a
condition under GSIS Resolution No. 3203, later amended by
Resolution No. 356, Series of 1958, which states:
“…the lots comprising Hacienda Luisita shall be subdivided
by the applicant-corporation and sold at cost to the tenants,
should there be any, and whenever conditions should exist
warranting such action under the provisions of the Land
Tenure Act.”
On March 31, 1958, TADECO had fully paid the purchase price for
the acquisition of Hacienda Luisita.
On August 8, 1963, the Agricultural Land Reform Code (RA 3844)
was enacted, abolishing share tenancy and converting it to
leasehold tenancy. It also created the Land Band of the Philippines
(LBP). However, the law’s application was found to be limited to
specific areas in the Central Luzon.
Subsequently, Congress passed the Code of Agrarian Reform (RA
6389) declaring the entire country a land reform area and
automatically converting tenancy to leasehold tenancy in all areas
and reducing the retention limit from 75 Ha to 7 Ha.
A month after the declaration of Martial Law in September of
1972, President Marcos issued Presidential Decree No. 27 which
allows tenant-farmers to purchase the land they tilled or to change
from shared-tenancy to fixed-rent leasehold tenancy, as a way to
go about the “emancipation of the tillers from the bondage of the
soil”.
On May 7, 1980, the Martial Law Administration filed a suit before
the RTC of Manila against TADECO to surrender Hacienda Luisita
to the Ministry of Agrarian Reform (now the DAR) for its
distribution to farmers. The RTC ordered TADECO to surrender
the hacienda to the MAR.
Then during the time of President Corazon C. Aquino, after Marcos
was ousted, Proclamation No. 131, Series of 1987, was issued
instituting a CARP.
On July 22, 1987, EO 229 was issued to provide for mechanisms
for CARP implementation. It also created the PARC as its policy-
making body.
On March 17, 1988, the OSG moved to withdraw the government’s
case against TADECO, et al.
On May 18, 1988, the CA dismissed the case the Marcos
administration initially instituted and won against TADECO, et al.
However, the dismissal was conditioned that there be an approval
of a stock distribution plan (SDP) to be submitted, approved by
PARC, and implemented as an alternative mode of land
distribution, and failure to comply will cause the revival of
previous decision.
On June 15, 1988, the Comprehensive Agrarian Reform Law of
1988 (RA 6657) took effect, providing a new process of land
classification, acquisition, and distribution. This tested the
application of the law in the current case of Hacienda Luisita.
On August 23, 1988, HLI was formed as a spin-off corporation to
facilitate the SDP.
On March 22, 1989, a TADECO, via a Deed of Assignment and
Conveyance, transferred and conveyed to HLI the titles over the lot
in question, valued at PhP 196.630,000.00 (33.296% of the total
asset of PhP 590,554,220.00). In line with accommodating such
transfer, the HLI increased its capital share to PhP 400,000,000 at
PhP1/share, PhP 150,000,000 of which were to be issued only to
qualified and registered beneficiaries of the CARP, and the
remaining PhP250,000,000 to any stockholder of the corporation.
(Obviously, the controlling shares of FWBs are lower in this case.)
HLI guaranteed to the qualified beneficiaries of the SDP
production-sharing that “every year they will receive, on top of their
regular compensation, an amount that approximates 3% of the total
gross sale from the production of the agricultural land, whether it is
in the form of cash dividends or incentive bonuses or both.” The
production sharing is payable irrespective of whether HLI makes
money or not. HLI also assured each family beneficiary to be
guaranteed a homelot of not more than 240 sq. m. in the barrio or
barangay where they reside.
On May 9, 1989, about 93% of the FWBs accepted and signed the
proposed SDOP.
On May 11, 1989, SDOA was entered into by TADECO/HLI and
5,848 qualified FWBs.
On October 14, 1989, the referendum conducted by DAR showed
that 5,177 FWBs out of 5,315 participants opted to receive shares
in the HLI (that’s about 97.403575% of the participants), and only
132 chose actual land distribution.
On November 6, 1989, the DAR Secretary Mirriam Defensor-
Santiago (now deceased) proposed the revision of the SDP. On
November 14, 1989, TADECO told DAR Sec. MDS that the proposed
revision were already in place in the SDP and MOA. Hence, On
November 21, 1989, a Resolution No. 89-12-2 approved the SDP of
TADECO/HLI.
From 1989 to 2005, HLI claimed to have extended the following
benefits to FWBs:
(a) PhP 3 Billion worth of salaries, wages and fringe benefits;
(b) 59 Million shares of stock distribution for free to FWBs;
(c) PhP 150M, PhP 37.5M, PhP 2.4M, all representing 3% of the
gross produce, the sale of 500 Ha of converted agricultural land of
Hacienda Luisita, and the sale of 80 Ha at PhP 80M for SCTEX,
respectively.
(d) 240 sq.m. homelots distributed for free;
(e) Social service benefits
On August 15, 1995, HLI applied for conversion of the 500 Ha land
from agricultural to industrial, which was approved by DAR
Secretary Ernesto Garilao a year later, or on August 14, 1996,
conditioned on the payment of 3% of gross selling price to FWBs
and HLI’s continued compliance with its undertakings under the
SDP.
On December 13, 1996, HLI ceded 200 Ha to Luisita Realty Corp.
(LRC) at PhP 250 Million each in 1997 and 1998, and 300 Ha of its
converted areas to Centennary Holdings, Inc. (Centennary), who
later sold the same to LIPCO for PhP 750 Million, the latter
acquiring it for purpose of developing an industrial complex.
On November 25, 2004, LIPCO transferred portion of the lands
acquired to RCBC by way of dation en pago in payment of LIPCO’s
PhP 431,634,732.10 loan.
Another 80.51 Ha was later detached from Hacienda Luisita and
acquired by the government as part of the SCTEX complex. About
4,335.75 Ha out of the 4,915 Ha remained of the original area
ceded by TADECO to HLI.
With the prevailing situation, earlier in 2003, DAR received two
petitions seeking to renegotiate, and/or revoke the SDOA for
violation by the HLI of the SDOA’s terms.
In the first petition, Jose Julio Suniga and Windsor Andaya
(Supervisory Group of HLI) and 60 other supervisors alleged that
HLI failed to give their dividends, and their share in the gross sales
and proceeds of the sales of the converted area 500 Ha area. They
claimed that their lives have not improved contrary to the
guarantees of the SDOA.
In the second petition (Petisyon), they call for the revocation and
nullification of the SDOA and the distribution of the lands. The
Petisyon was filed by the AMBALA (composing about 80% of the
5,339 FWBs of Hacienda Luisita).
DAR constituted a Special Task Force to attend to the issues
relating to the SDP of HLI and the latter found that HLI failed to
comply with their undertakings.
On December 22, 2005, PARC affirmed the recommendation of
DAR to recall/revoke the SDOP of TADECO/HLI and the land be
placed under compulsory coverage or mandated land acquisition.
On January 2, 2006, HLI sought reconsideration. On the same day,
DAR issued a Notice of Coverage, which HLI received 2 days after.
On May 3, 2006, PARC’s Resolution denied MR by HLI.
But on June 14, 2006, the Court, acting on HLI’s motion, issued a
TRO, enjoining the implementation of PARC’s Resolution and the
notice of coverage.
On December 2, 2006, Mallari filed a manifestation and motion,
alleging that he broke up with AMBALA and formed FARM with
Renato Lalic, and thus prayed to be allowed to intervene. In this
moment, two factions were created due to shirt and re-shift of
allegiance, as Mallari would later return to create an AMBALA-
Noel Mallari faction, leaving Renato Lalic with the rest of the
members in FARM.
On October 30, 2007, RCBC and LIPCO intervened and alleged that
the assailed resolution effectively nullified the TCTs under their
respective names as the properties covered in the TCTs were
included in the January 2, 2006 Notice of Coverage. They claim
that the revocation of SDP cannot legally affect their rights as
innocent purchasers for value. They both asserted to have
acquired vested and indefeasible rights over certain portions of
the covered properties.
On August 31, 2010, the Court created a Mediation Panel in a bid
to resolve the dispute but no acceptable agreement was reached.
ISSUES:
(1) Whether or not petitioners for the revocation/nullification
of SDOA (herein respondents) are real party-in-interests;
(2) Whether or not PARC has jurisdiction to recall or revoke
HLI’s SDP;
(3) Whether or not Section 31 of RA 6657 is constitutional;
(4) Whether or not such recall or revocation is a valid or
proper action; and
(5) Whether or not the terms and conditions of the SDP, as
embodied in the SDOA is valid.
RULINGS:
FIRST ISSUE:
YES. The Supreme Court held that Supervisory Group, AMBALA
and their respective leaders are real parties-in-interest.
The SDOA identifies the “SDP qualified beneficiaries” as “the
farmworkers who appears in the annual payroll, inclusive of
the permanent and seasonal employees, who are regularly or
periodically employed by HLI.” Galang and the Supervisory
group who were admittedly employed by HLI comes within the
definition of real party-in-interest under Section 2, Rule 3 of the
Rules of Court, as one benefited or injured by the judgment in a
suit, and thus, entitled to sue.
Assuming arguendo that they are not regular farmworkers, Article
XIII of the Constitution categorized them as “other farmworkers”
entitled to “receive a just share of the fruits” of the land.
SECOND ISSUE:
YES. Although E0 229 expressly vested PARC with such authority
to approve plan for stock distribution, without explicitly vesting it
to revoke/recall an approved SDP, under the principle of
necessary implication, a basic postulate that what is implied
in a statute is as much a part of it as that which is expressed.
To simply state it, every statutory grant of power, right or
privilege is deemed to include all incidental power, right, or
privilege. Following the said doctrine, it may be stated that the
conferment of express power to approve SDP of agricultural land
of corporate owners necessarily includes the power to revoke or
recall the approval of the plan, for to deny PARC of such revocation
power, as in this case, would reduce it into a toothless agency of
CARP.
On a related issue, HLI claimed that subjecting the landholding to
compulsory distribution after the approval of its SDP results in the
impairment of obligation and contract, and as such, a breach of its
terms and conditions is not a PARC administrative matter, but one
that gives rise to a cause of action cognizable by regular courts.
The Supreme Court stressed that SDOA is a special contract
imbued with public interest, entered into pursuant to RA 6657 and
subject to the approval and administrative adjudication of its
issuing authority—PARC.
Contrary to the view of HLI, the rights, obligations, and remedies
of the parties to the SDOA embodying the SDP are governed by RA
6657 and not by the Corporation Code. HLI, as pointed by the
Court was made to comply with RA 6657, and not to shield itself
from the coverage of CARP and supplant or circumvent the
agrarian reform program. Also as between the Corporation Code, a
general law and RA 6657, a special law, the latter prevails –
generalia specialibus non derogant. What private respondents
questioned before the Dar was the proper implementation of SDP
and HLI’s compliance with RA 6657. Evidently, RA 6657 was the
applicable law in this case.
Also, contrary to the view of HLI that the inclusion of the
agricultural land of Hacienda Luisita under CARP coverage and the
eventual distribution of the land to FWBs amounts to the
dissolution of all corporate assets of HLI, and thus the Corporation
Code apply, the Court was not persuaded. The Court said that such
inclusion and eventual distribution will not automatically trigger
the dissolution of HLI since the value of agricultural lands in
relation to the total assets transferred and conveyed by TADECO
to HLI comprises only 33.296% (meaning it does not hold the
majority assets of the corporation to trigger such dissolution).
THIRD ISSUE:
In this issue on constitutionality of Section 31 of RA 6657, FARM
seeks to invalidate the said provision of the law because it allows
corporations to use stock distribution as its mode of distribution
or transfer instead of an outright agricultural land transfer, which
they believe impairs the fundamental right of farmers and
farmworkers envisioned under Section 4, Article XIII of the
Constitution. HLI counters this matter by saying that agrarian
reform is not only about transfer of land ownership to farmers and
other qualified beneficiaries.
Accordingly, the challenge on the constitutionality of Section 31 of
RA 6657 and its counterpart provision in EO 229 failed.
The essential requisites for the exercise of its power of judicial
review include the following:
(1) There is an actual case or controversy
(2) That the constitutional question is raised at the earliest
possible opportunity by the proper party or one with locus standi;
and
(3) The issue of constitutionality must be the very lis mota of
the case. [Garcia vs. Executive Secretary, 415 SCRA 44 (2009)]
The Supreme Court reasoned that the reason it failed was because
of failure of the intervenors to question its constitutionality in the
earliest opportunity, and instead, slept on their rights and received
benefits derived from the same. As early as November 21, 1989
when PARC approved the SDP of Hacienda Luisita or at least
within a reasonable time thereafter, its members received benefits
from the SDP without so much protest. It was only on December 4,
2003 or 14 years after approval of the SDP via PARC Resolution
No. 89-12-2 dated November 21, 1989 that said plan and
approving resolution was sought to be revoked. Furthermore,
AMBALA did NOT question the constitutionality of said provision
but focused on the flaws and gaps in the subsequent
implementation of the SDP. Even the public respondent Sol. Gen.
did not question it, and such question was only raised on May 3,
2007 when it filed its Supplemental Comment with the Court.
It has been stressed by the Supreme Court that the question on
constitutionality will not passed upon by the Court unless it is
raised at the first or earliest possible opportunity by the proper
party.
In terms of the lis mota of the case, the invalidity of the provision
was not alleged, but rather it is the alleged application in the SDP
that is flawed was raised.
The Supreme Court also noted that Section 5 of RA 9700
superseded Section 31 of RA 6657 vis-à -vis the stock distribution
component of said provision, where Section 5 of RA 9700
provides: “That after June 30, 2009, the mode of acquisition
shall be limited to voluntary offer to sell and compulsory
acquisition.” Thus, stock distribution is no longer an available
option under existing law. The issue has become moot and
academic.
The Supreme Court ruled that there appeared to have been no
breach of the fundamental law. Section 4, Article XIII of the 1987
Constitution reads:
“The State shall, by law, undertake an agrarian reform
program founded on the right of the farmers and regular
farmworkers, who are landless, to OWN directly or
COLLECTIVELY THE LANDS THEY TILL or, in the case of
other farmworkers, to receive a just share of the fruits
thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as
the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the
payment of just compensation.  In determining retention
limits, the State shall respect the right of small landowners. 
The State shall further provide incentives for voluntary
land-sharing.”
The law is clear – farmers and regular farmworkers have a right to
OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The
basic law allows two modes of land distribution—direct and
indirect ownership. No language is found in the 1987 Constitution
that disqualifies or prohibits corporations or cooperatives of
farmers from being the legal entity through which collective
ownership can be exercised. The term “collectively” is said to allow
indirect ownership of land and not just outright agricultural land
transfer. This is in recognition of the fact that land reform may
become successful even if it is done through the medium of
juridical entities composed of farmers.
Even in the definition of agrarian reform itself in RA 6657 allows
stock distribution— “the redistribution of lands… to farmers and
regular farmworkers who are landless… to lift the economic status
of the beneficiaries and all other arrangements alternative to
physical redistribution of land, such as production or profit
sharing, labour management and the distribution of shares of
stock which allow beneficiaries to receive a just share of the fruits
of the land they work.”
The SC believed that Sec. 31 of RA 6657 is NOT inconsistent with
the State’s commitment to farmers and farmworkers to advance
their interests under the policy of social justice. This is believed to
be the modality of the legislature for collective ownership by
which the imperatives of social justice may be approximated, if not
achieved.
Also as contended by FARM that stock certificates do not equate to
land ownership, still, the Corporation Code is clear that the FWB
becomes a stockholder who acquires an equitable interest in the
assets of the corporation, which includes the agricultural lands. A
share of stock typifies an aliquot part of the corporation’s
property, or right to share in its proceeds to the extent when
distributed according to law and equity and that its holder is not
the owner of any part of the capital of the corporation. However,
the FWBs will ultimately own the agricultural lands owned by the
corporation when the latter is eventually dissolved and liquidated.
The policy of agrarian reform is that control over the agricultural
land must always be in the hands of the farmers. The Court also
reasoned that there can be no guarantee of a successful
implementation of agrarian reform, whether there is actual
distribution or not. Accordingly, the principle of “land to the tiller
and the old pastoral model of ownership were non-human
juridical persons were prohibited from owning agricultural lands
are no longer realistic under existing conditions.
FOURTH ISSUE:
On the determination of the propriety of such revocation or recall
of HLI’s SDP by PARC for violating the agrarian reform policy
under Sec. 2 of RA 6657, as said plan fail to enhance the dignity
and improve the quality of lives of the FWBs through greater
productivity of agricultural lands, the SC disagreed.
The SC reasoned that Section 2 of RA 6657 states that improving
the economic status of FWBs is neither among the legal obligations
of HLI under the SDP nor an imperative imposition by RA 6657
and DAO 10, a violation of which would justify discarding the stock
distribution option. Nothing in that option agreement, law or
department order indicates otherwise.
Also, SC said that it’s a matter of common business sense that no
corporation could guarantee a profitable run all the time. As such
being the case, SDP cannot also guarantee, as indeed the SDOA
does not guarantee, a comfortable life for the FWBs.
The onerous condition of the FWBs’ economic status and
hardships can hardly be attributed to HLI and its SDP and provide
a valid ground for the plan’s revocation.
On the Conversion of Lands
In this issue of the conversion of 500 Ha to non-agricultural uses
as an infringement of Sec. 5 (a) of DAO 10, which reads: “a. that the
continued operation of the corporation with its agricultural land
intact and unfragmented is viable with potential for growth and
increased profitability”, the SC said that the PARC is wrong.
Said Sec. 5 (a) of DAO 10 does not exact from the corporate
landowner-applicant the undertaking to keep the farm intact and
unfragmented ad infinitum (forever). What is required is viability
of the corporate operations with or without its corporate land
remaining intact or unfragmented.”
On the 3% Production Share
On the matter of whether HLI complied with its undertaking to
give 3% shares of the gross production sales of the land, the SC
ruled that the Special Task Force was silent as to whether HLI has
failed to comply with the 3% production-sharing obligation or the
3% of the gross selling price of the converted land and the SCTEX
lot, since some FWBs admits to have received their share in the
gross production of the sales and in the sale of SCTEX lot while the
others claimed otherwise. The Court found this as a slight breach
that would not justify rescission of the contract.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for
corporations or other business associations owning or operating
farms which opted for land distribution, and not for corporations
which opted for stock distribution under Sec. 31 of RA 6657.
Concomitantly, said corporation are not obliged to provide it,
EXCEPT by stipulation, as in this case.
Under the SDP, HLI subdivided and allocated for free to qualified
family-beneficiaries 240 sq. m. homelots in the barrio or barangay
where they actually reside. The Court opined that 16 years have
elapse from the time the SDP was approved by PARC, and yet
FWBs alleged that not all were afforded homelots. Hence, SC ruled
that HLI has not yet fully complied with its undertaking to
distribute homelots to FWBs under the SDP.
On “Man Days” and the Mechanics of Stock Distribution
The SC found that the SDOA violated two provisions of DAO 10.
In Par. 3 of the SDOA, the distribution of the shares of stock to the
FWBs is contigent on the number of days FWBs have worked
during the year. This deviates from Sec. 4, DAO 10, which decrees
the distribution of equal number of shares to the FWBs as the
minimum ratio of shares of stock for purposes of compliance with
Section 21 of RA 6657.
Accordingly, Section 4 of DAO 10 gives two sets of shares of stocks
which a qualified beneficiary can acquire from the corporation
under the SDP. The first one is the mandatory ratio of equal
number of shares of stocks to be distributed to the FWBs which
contemplates “proportion of the capital stock of the
corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total
asset.”
The second partakes a gratuitous extra grant or an augmentation
share/s that the corporate landowner may give under an
additional stock distribution scheme, taking into account the rank,
seniority, salary, position, and like factors which the management,
in the exercise of its sound discretion, may deem desirable.
However, the Court found that by providing that number of shares
of the original 1989 FWBs to depend on the number of “man days”,
HLI violated the rule on stock distribution and effectively deprived
the FWBs of equal shares of stock in the corporation
notwithstanding the fact that these FWBs have given up their right
to the land that could have been distributed to them instead of
suffering such dilution regarding their due share entitlement.
Each of the 6,296 original FWBs is entitled to 18,804.32 HLI
shares. The original FWBs got less than the guaranteed 18,804.32
HLI shares per beneficiary, because the acquisition and
distribution of the HLI share per beneficiary needs to work at least
37 days in a fiscal year before the latter becomes entitled to HLI
shares. If it falls below 37 days, the FWB gets no share at year end.
The number of HLI shares distributed varies depending on the
number of days the FWBs were allowed to work in one year. Worst
is they even hired additional farmworkers which reached a
number of 10,502 which eventually diluted the 18,804.32 shares
as a result of the use of “man days” and hiring additional
farmworkers (as ‘kahati’ in the share obviously).
Another sub-issue pointed is the reliance of HLI to Section 26 of
RA 6657 which suggests that land awarded “shall be paid to by the
beneficiaries to the LBP in 30 annual amortizations.” To simply put
it, the beneficiaries are the ones obliged to pay the LBP (which
would really make it impossible for them to own it) and it is the
HLI who is obliged to distribute the shares of stocks among FWBs.
Exclusion from the coverage of land purchased by RCBC and
LIPCO (III)
On resolving the issue of whether the converted farm land
(allegedly) innocently purchased for value by RCBC and LIPCO
should be excluded from the PARC Resolution 2005-32-01, as
implemented by the DAR-issued Notice of Coverage dated January
2, 2006, which called for a mandatory CARP acquisition of the
lands subject of the SDP, the SC opined that although Section 44 of
PD 1529 gives the principle that one need not look at the four
corners of the title and may rely on what appears on it, the rule
admits to some exceptions, as when the party had knowledge of
the facts and circumstances that would impel a reasonably
cautious man to make inquiry, or when the purchaser has
knowledge of the defect of lack of title, or sufficient facts to make
inquiry into the status of the title of the property in litigation.
Obviously, a higher level of care and diligence is expected from
banks, their business being impressed with public interest.
But the Court ruled that facts prove that RCBC and LIPCO cannot
be claimed to have acted in bad faith to have acquired the lots that
were previously covered by SDP. The Court said that RCBC and
LIPCO honestly believed that the subject lots were validly
converted to commercial or industrial purposes and for which said
lots were taken out of the CARP coverage of PARC Resolution No.
89-12-2 and hence, can be legally and validly acquired by them,
and since Section 65 of RA 6657 allows conversion and disposition
of agricultural lands previously covered by CARP. Also DAR
notified all affected parties, especially the FWBs but the order
became final and executory after failure to interpose an appeal.
Since RCBC and LIPCO believed in good faith that the previous
registered owners could legally sell and convey the lot though
these were previously subject of CARP coverage. Ergo, RCBC and
LIPCO acted in good faith in acquiring the subject lots. This fact
cannot be disregarded by DAR, PARC, or even the SC.
As regards to the 80.51 ha land transferred to the government for
use as part of SCTEX, this is excluded from the compulsory
coverage considering that the transfer was made via the
government’s power of eminent domain.
As to the actual existence of a statute or executive act is, prior to
such a determination, an operative fact and may have
consequences which cannot justly be ignored; the past cannot
always be erased by a new judicial declaration.
In this case, it is not the SDOA dated May 11, 1989 which was
revoked, but rather, it is the PARC’s approval of the HLI’s Proposal
for Stock Distribution under CARP which embodied the SDP that
was nullified. It is the SDP that gave legal force an effect to the
stock distribution scheme under PARC Resolution No. 89-12-2 that
gave it its validity, and not the SDOA which merely gave its basis
and mechanics.
On PARC’s Resolutions effectively nullifying the Hacienda
Luisita’s SDP (IV)
The Court upheld the revocation of the questioned PARC
resolutions. The Court also recognized the rights of the original
6,296 qualified FWBs to choose whether they want to remain as
HLI stockholders or not. The Court reasoned that it cannot turn a
blind eye to the fact that the FWBs were said to have received
benefits from the said agreement. Also on August 6, 2010, HLI and
private respondents submitted a Compromise Agreement, in
which HLI gave the FWBs the option of acquiring a piece of
agricultural lands or remain as HLI stockholders, and which most
FWBs chose the latter.
With regards to the home lots already awarded, the FWBs are not
obliged to return it to HLI or pay for its value since it is part of the
SDP’s benefit granted to them. However, for those who did not
receive the home lot as of the revocation of the SDP on December
22, 2005 when PARC Resolution No. 2005-32-01 was issued, will
no longer be entitled to home lots. In case of distribution, the home
lots would then not be deducted.
In terms of the 3% proceeds of the 500-ha land and 80.51 ha
SCTEX lot to FWBs, DAR will move for the auditing of HLI’s books
to determine if the proceeds where utilized fof legitimate
corporate purpose and the remaining balance from the proceeds
of the sale shall be distributed to the qualified beneficiaries.
In view of HLI’s payment of rent to FWBs for the use of the land
from 1989, the Court said that this cannot be done as the FWBs are
also stockholders of HLI (a seemingly elite title), and the benefits
acquired by the corporation from its possession and use of the
land ultimately redounded to the FWBs benefit based on its
business operations in the form of salaries, and other fringe
benefits under the CBA. To allow payment of rent would
tantamount to double compensation.
HLI will continue to exist, not functioning under the SDP, as the
same was revoked already, but pursuant to the Corporation Code
as a private stock corporation.
HLI shall also be paid just compensation for the remaining
agricultural lands that will be transferred to DAR for land
distribution to the FWBs. The date of taking considered by the SC
is November 21, 1989, when PARC approved the HLI’s SDP per
PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for
the determination of just compensation, and NOT May 11, 1989,
when the SDOA was approved by PARC.
The petition is treated as pro hac vice (means for this case only) in
view of the peculiar facts and circumstances of the case.
THE INSTANT PETITION IS DENIED.
PARC Resolution No. 2005-32-01 dated December 22, 2005
(wherein PARC affirmed the recommendation of DAR to
recall/revoke the SDOP of TADECO/HLI and the land be placed
under compulsory coverage or mandated land acquisition) and
May 3, 2006 (wherein PARC denied MR by HLI) are AFFIRMED
with MODIFICATION that the original 6,296 qualified FWBs shall
have the option to remain as stockholders of HLI. Other FWBs who
do not belong to the said original qualified beneficiaries are NOT
entitled to land distribution and shall remain as HLI stockholders.
HLI is directed to pay the FWBs the considerations received from
the 500 Ha converted land sale and 80.51 ha SCTEX lot, wherein
the 3% gross sales from the production of agricultural land,
including expenditures for legitimate corporate purpose, such as
taxes and title transfer payments, shall be deducted from the total
amount of PhP 1,330,511,500 (3 comas!). Any unspent or unused
balance will be distributed to the original FWBs.
HLI is entitled to just compensation for the agricultural land that
will be transferred to DAR to be reckoned from November 21,
1989 and LBP are ordered to determine the compensation due to
HLI.
DAR’s compliance report is ordered to be submitted six months
from finality of judgment. TRO is lifted.
DISSENTING OPINION
Corona, C.J.:
One of the nice points given by the late CJ Corona (ousted in the
PNoy Administration) states, to wit:
“Agrarian reform is an essential element of social justice under the
1987 Constitution. It mandates that farmers and farmworkers
have the right to own the land they till, individually and
collectively, through cooperative or similar organizations. It aims
to liberate farmers and farmworkers from bondage to the soil, to
ensure that they do not remain slaves of the land but stewards
thereof.”
He also opined that “unless there is land distribution, there can be
no agrarian reform. Any program that gives farmers or
farmworkers anything less than ownership of land fails to conform
to the mandate of the Constitution. In other words, a program that
gives qualified beneficiaries stock certificates instead of land is not
agrarian reform.”
He believed that “actual land distribution is the essential
characteristic of a constitutional agrarian reform program.”
Accordingly, the “polar star” in land reform is that ‘the farmer has
a right to the land he tills”.
In the APRIL 24, 2012 RESOLUTION involving the same
Hacienda Luisita Case
On November 22, 2011, the Court recalled and set aside the option
to remain as stockholders of HLI, while maintaining that all
benefits received shall be respected with no obligation to refund
or return them.
On December 9, 2011, a Motion for Reconsideration/Clarification
by private respondents Mallari, Suniga, Supervisory Group of HLI,
and Andaya (Mallari, et al.
On December 16, 2011, a Motion to Clarify and Reconsider
Resolution of November 22, 2011 was filed by HLI.
HLI and Mallari, et al., invokes the following grounds:
A. WON SC erred in determining just compensation by
considering the date of taking as November 21, 1989 when PARC
approved the SDP (already revoked) since the Notice of Coverage
of January 2, 2006 may be considered as time FWBs owned and
possess the agricultural lands of Hacienda Luisita because it was
the only time when the latter was placed under Compulsory
Acquisition in view of failure to perform their obligations under
the SDP, or SDOA, when the owner is ACTUALLY deprived or
dispossessed of his property, and considering taking from
November 21, 1989 is a deprivation of landowner’s property
WITHOUT due process of law; and HLI is entitled to be paid
interest on the just compensation.
B. WON SC erred in reversing the decision of giving the FWBs
option to remain as stockholders or not since (1) it has been
decided; (2) that neither the Constitution nor the CARL requires
that FWBs should have control over the agricultural lands; and (3)
that the option is not shown to be detrimental to FWBs, but rather
found beneficial by the SC.
C. The proprietary of distributing the proceeds from the sale
of the 500ha and 80.51 SCTEX lot cannot be retained by HLI but
returned to the FWBs and that HLI is using the Corporation Code
to avoid liability to the FWBs because: (1) the proceeds belongs to
the corporation and not to either the HLI/TADECO or FWBs; and
(2) to allow return or proceeds to FWBs.
D. Just Compensation for the Homelots given to FWBs as it
does not form part of the 4,915.75 hectares covered by the SDP,
and hence, the value of these homelots should, with the revocation
of the SDP, be paid to Tadeco as the landowner.
ON JUST COMPENSATION:
The Court stressed that “just compensation has been defined as
the full and fair equivalent of the property taken from its owner by
the expropriator. The measure is not the takers gain, but the
owner’s loss. Hence, in determining just compensation, the price
or value of the property at the time it was taken from the owner
and appropriated by the government shall be the basis. If the
government takes possession of the land before the institution of
expropriation proceedings, the value should be fixed as of the time
of the taking of said possession, not of the filing of the complaint.”
The SC, citing Land Bank of the Philippines v. Livioc, said that taking
is when the landowner was deprived of the use and benefit of his
property, such as when the title is transferred to the Republic. It
also noted that taking also occurs when agricultural lands
are voluntarily offered by a landowner and approved by PARC for
CARP coverage through the stock distribution scheme, as in the
case of HLI earlier decided. Thus, HLI submitting its SDP for
approval is an acknowledgment on its part that the agricultural
lands of Hacienda Luisita are covered by CARP. However, the PARC
approval should be considered as the effective date of taking
because it was only during that time that the government officially
confirmed the CARP coverage of these lands.
Accordingly, Stock distribution and compulsory acquisition are
two modalities sharing the same end goal of having a more
equitable distribution of land ownership, without ignoring such
right to just compensation. Also, since it is only upon the approval
of the SDP that the agricultural lands actually came under CARP
coverage, such approval operates and takes the place of a notice of
coverage ordinarily issued under compulsory acquisition.
What the SC found notable, however, is that the divestment by
Tadeco of the agricultural lands of Hacienda Luisita and the giving
of the shares of stock for free is nothing but an enticement or
incentive for the FWBs to agree with the stock distribution option
scheme and not further push for land distribution. And the
stubborn fact is that the “man days” scheme of HLI impelled the
FWBs to work in the hacienda in exchange for such shares of stock.
The Court ruled that taking only when the landowner is deprived
of the use and benefit of his property is not incompatible with the
earlier conclusion that taking took place on November 21, 1989,
and since even from the start, TADECO seemed to already favour
Stock Distribution Scheme when complying with the CARP when it
organized the HLI as its spin-off corporation which facilitated
stock acquisition of FWBs. Tadeco assigned and conveyed 4,915.75
has to HLI the agricultural lands of Hacienda Luisita. These
agricultural lands constituted as the capital contribution of the
FWBs in HLI. This, in effect, deprived TADECO itself of the
ownership over these lands when it transferred the same to HLI.
When the agricultural lands of Hacienda Luisita were transferred
by Tadeco to HLI in order to comply with CARP through the stock
distribution option scheme under PARC Resolution No. 89-12-2
dated November 21, 1989, Tadeco was consequently dispossessed
of the ownership of the same.
Furthermore, adherence to the suggestion of HLI that the Notice of
Coverage issued on January 2, 2006 should be considered as date
of taking would in effect penalize the qualified FWBs twice for
acceding to the Stock Distribution Scheme, (1) depriving them of
the agricultural lands they should have gotten earlier, if it were not
for this SDP and (2) making them pay higher amortization for the
agricultural lands that should have been given to them decades
ago.
The SC maintained that, as it has in fact already ruled on its
reckoning date, that is, November 21, 1989, the date of issuance of
PARC Resolution No. 89-12-2, based on the above-mentioned
disquisitions.
On side note, the SC added that “even though the compensation
due to HLI will still be preliminarily determined by DAR and LBP,
subject to review by the RTC acting as a SAC, the fact that the
reckoning point of taking is already fixed at a certain date should
already hasten the proceedings and not further cause undue
hardship on the parties, especially the qualified FWBs.”
Option will not ensure control over agricultural lands
The Court agreed that the option given to the qualified FWBs
whether to remain as stockholders of HLI or opt for land
distribution is neither iniquitous nor prejudicial to the FWBs.
However, the Court is noted the policy on agrarian reform that
control over the agricultural land must always be in the hands of
the farmers. Contrary to the stance of HLI, both the Constitution
and RA 6657 intended the farmers, individually or collectively, to
have control over the agricultural lands of HLI; otherwise, all these
rhetoric about agrarian reform will be rendered for naught.
Sec. 4, Art. XIII of the 1987 Constitution provides:
Section 4. The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and
regular farmworkers who are landless, to own directly
or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To
this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such
priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the
payment of just compensation. In determining retention
limits, the State shall respect the right of small landowners.
The State shall further provide incentives for voluntary
land-sharing. (Emphasis supplied.)
Sec. 2 of RA 6657 also states:
SECTION 2. Declaration of Principles and Policies. - It is the
policy of the State to pursue a Comprehensive Agrarian
Reform Program (CARP). The welfare of the landless
farmers and farm workers will receive the highest
consideration to promote social justice and to move the
nation towards sound rural development and
industrialization, and the establishment of owner
cultivatorship of economic-sized farms as the basis of
Philippine agriculture.
The agrarian reform program is founded on the right of
farmers and regular farm workers, who are landless, to
own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the
fruits thereof.
As discussed by the SC, there is collective ownership as long as
there is a concerted group work by the farmers on the land,
regardless of whether the landowner is a cooperative, association
or corporation composed of farmers. However, the definition of
collective ownership should be read in light of the clear policy of
the law on agrarian reform, which is to emancipate the tiller from
the bondage of the soil and empower the common people.
“HLI’s insistent view that control need not be in the hands of
the farmers translates to allowing it to run roughshod against
the very reason for the enactment of agrarian reform laws
and leave the farmers in their shackles with sheer lip service
to look forward to.” (quotable phrase)
FWBs Entitled to Proceeds of Sale
The proceeds realized from the sale should accrue for the benefit
of the FWBs, minus deductions of the 3% of the proceeds of said
transfers that were paid to the FWBs, the taxes and expenses
relating to the transfer of titles to the transferees, and the
expenditures incurred by HLI and Centennary Holdings, Inc. for
legitimate corporate purposes, as prescribed in our November 22,
2011 Resolution.
HOMELOTS
The SC agreed to DISAGREE.
As reiterated in the earlier decision, the distribution of homelots is
required under RA 6657 only for corporations or business
associations owning or operating farms which opted for land
distribution. Corporations are not obliged to provide for homelots.
Nonetheless, HLI undertook to subdivide and allocate for free and
without charge among the qualified family-beneficiaries 240 sq.
m. of homelots to some, if not all of the qualified beneficiaries.
The Supreme Court, by a unanimous vote, resolved to maintain its
ruling that the FWBs shall retain ownership of the homelots given
to them with no obligation to pay for the value of said lots. Also,
since the SDP was already revoked with finality in th earlier
discussion of the decision, the Court directs the government
through the DAR to pay HLI the just compensation for said
homelots in consonance with Sec. 4, Article XIII of the 1987
Constitution that the taking of land for use in the agrarian reform
program is subject to the payment of just compensation.
The Motions of both parties were DENIED with qualification. The
July 5, 2011, Decision was modified by the November 21, 2011
Resolution which ordered the government, through the DAR, to
pay just compensation for the 240 sq. m. homelots distributed to
FWBs. This RESOLUTION is now declared FINAL and EXECUTORY.
Tuna Processing v. Philippine Kingford
FACTS:
Kanemitsu Yamaoka, co-patentee of a US Patent, Philippine Letters
Patent, and an Indonesian Patent, entered into a Memorandum of
Agreement (MOA) with five Philippine tuna processors including
Respondent Philippine Kingford, Inc. (KINGFORD).  The MOA
provides for the enforcing of the abovementioned patents,
granting licenses under the same, and collecting royalties, and for
the establishment of herein Petitioner Tuna Processors, Inc. (TPI).
Due to a series of events not mentioned in the Petition, the tuna
processors, including Respondent KINGFORD, withdrew from
Petitioner TPI and correspondingly reneged on their obligations.
Petitioner TPI submitted the dispute for arbitration before the
International Centre for Dispute Resolution in the State of
California, United States and won the case against Respondent
KINGFORD.
To enforce the award, Petitioner TPI filed a Petition for
Confirmation, Recognition, and Enforcement of Foreign Arbitral
Award before the RTC of Makati City. Respondent KINGFORD filed
a Motion to Dismiss, which the RTC denied for lack of merit.
Respondent KINGFORD then sought for the inhibition of the RTC
judge, Judge Alameda, and moved for the reconsideration of the
order denying the Motion. Judge Alameda inhibited himself
notwithstanding “[t]he unfounded allegations and unsubstantiated
assertions in the motion.”  Judge Ruiz, to which the case was re-
raffled, in turn, granted Respondent KINGFORDS’s Motion for
Reconsideration and dismissed the Petition on the ground that
Petitioner TPI lacked legal capacity to sue in the Philippines.
Petitioner TPI is a corporation established in the State of California
and not licensed to do business in the Philippines.
Hence, the present Petition for Review on Certiorari under Rule 45.
ISSUE:
Whether or not a foreign corporation not licensed to do business
in the Philippines, but which collects royalties from entities in the
Philippines, sue here to enforce a foreign arbitral award?
ARGUMENT:
Petitioner TPI contends that it is entitled to seek for the
recognition and enforcement of the subject foreign arbitral award
in accordance with RA No. 9285 (Alternative Dispute Resolution
Act of 2004), the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards drafted during the United Nations
Conference on International Commercial Arbitration in 1958 (New
York Convention), and the UNCITRAL Model Law on International
Commercial Arbitration (Model Law), as none of these specifically
requires that the party seeking for the enforcement should have
legal capacity to sue. 
RULING:
YES. Petitioner TPI, although not licensed to do business in the
Philippines, may seek recognition and enforcement of the foreign
arbitral award in accordance with the provisions of the Alternative
Dispute Resolution Act of 2004.  A foreign corporation’s capacity to
sue in the Philippines is not material insofar as the recognition and
enforcement of a foreign arbitral award is concerned.
The Resolution of the RTC is REVERSED and SET ASIDE.
RATIO DECIDENDI:
Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides
that the opposing party in an application for recognition and
enforcement of the arbitral award may raise only those grounds
that were enumerated under Article V of the New York Convention,
to wit:
Article V
1. Recognition and enforcement of the award may be refused, at
the request of the party against whom it is invoked, only if that
party furnishes to the competent authority where the recognition
and enforcement is sought, proof that:
a. The parties to the agreement referred to in Article II were, under
the law applicable to them, under some incapacity, or the said
agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law of the
country where the award was made;
b. The party against whom the award is invoked was not given
proper notice of the appointment of the arbitrator or of the
arbitration proceedings or was otherwise unable to present his
case;
c. The award deals with a difference not contemplated by or not
falling within the terms of the submission to arbitration, or it
contains decisions on matters beyond the scope of the submission
to arbitration, provided that, if the decisions on matters submitted
to arbitration can be separated from those not so submitted, that
part of the award which contains decisions on matters submitted
to arbitration may be recognized and enforced;
d. The composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance with the
law of the country where the arbitration took place; or
e. The award has not yet become binding on the parties, or has
been set aside or suspended by a competent authority of the
country in which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be
refused if the competent authority in the country where
recognition and enforcement is sought finds that:
a. The subject matter of the difference is not capable of settlement
by arbitration under the law of that country; or
b. The recognition or enforcement of the award would be contrary
to the public policy of that country.
Not one of the abovementioned exclusive grounds touched on the
capacity to sue of the party seeking the recognition and
enforcement of the award.
Pertinent provisions of the Special Rules of Court on Alternative
Dispute Resolution, which was promulgated by the Supreme Court,
likewise support this position.
Rule 13.1 of the Special Rules provides that “[a]ny party to a
foreign arbitration may petition the court to recognize and enforce
a foreign arbitral award.”  The contents of such petition are
enumerated in Rule 13.5.  Capacity to sue is not included. 
Oppositely, in the rule on local arbitral awards or arbitrations in
instances where “the place of arbitration is in the Philippines,” it is
specifically required that a petition “to determine any question
concerning the existence, validity and enforceability of such
arbitration agreement” available to the parties before the
commencement of arbitration and/or a petition for “judicial relief
from the ruling of the arbitral tribunal on a preliminary question
upholding or declining its jurisdiction” after arbitration has
already commenced should state “[t]he facts showing that the
persons named as petitioner or respondent have legal capacity to
sue or be sued.”
Indeed, it is in the best interest of justice that in the enforcement  
of a foreign arbitral award, the Court deny availment by the losing
party of the rule that bars foreign corporations not licensed to do
business in the Philippines from maintaining a suit in Philippine
courts.  When a party enters into a contract containing a foreign
arbitration clause and, as in this case, in fact submits itself to
arbitration, it   becomes bound by the contract, by the arbitration
and by the result of arbitration, conceding thereby the capacity of
the other party to enter into the contract, participate in the
arbitration and cause the implementation of the result.  Although
not on all fours with the instant case, also worthy to consider is the
wisdom of then Associate Justice Flerida Ruth P. Romero in her
Dissenting Opinion in Asset Privatization Trust v. Court of Appeals
[1998], to wit:
 xxx Arbitration, as an alternative mode of settlement, is gaining
adherents in legal and judicial circles here and abroad.  If its tested
mechanism can simply be ignored by an aggrieved party, one who,
it must be stressed, voluntarily and actively participated in the
arbitration proceedings from the very beginning, it will destroy
the very essence of mutuality inherent in consensual contracts.
Clearly, on the matter of capacity to sue, a foreign arbitral award
should be respected not because it is favored over domestic laws
and procedures, but because Republic Act No. 9285 has certainly
erased any conflict of law question.
Finally, even assuming, only for the sake of argument, that the
RTC correctly observed that the Model Law, not the New York
Convention, governs the subject arbitral award, Petitioner TPI may
still seek recognition and enforcement of the award in Philippine
court, since the Model Law prescribes substantially identical
exclusive grounds for refusing recognition or enforcement.
LINTONJUA, JR. vs. ETERNIT CORPORATION
Facts: The Eternit Corporation (EC) manufactures roofing
materials and pipe products. Ninety (90%) percent of the shares of
stocks of EC were owned by Eteroutremer S.A. Corporation
(ESAC), a corporation registered under the laws of Belgium.
Glanville was the General Manager and President of EC, while
Delsaux was the Regional Director for Asia of ESAC. In 1986,
because of the political situation in the Philippines the
management of ESAC wanted to stop its operations and to dispose
the land in Mandaluyong City. They engaged the services of
realtor/broker Lauro G. Marquez.
Marquez thereafter offered the land to Eduardo B. Litonjua, Jr. for
P27,000,000.00. Litonjua counter offered P20,000,000.00 cash.
Marquez apprised Glanville & Delsaux of the offer. Delsaux sent a
telex stating that, based on the "Belgian/Swiss decision," the final
offer was "US$1,000,000.00 and P2,500,000.00. The Litonjua
brothers deposited US$1,000,000.00 with the Security Bank &
Trust Company, and drafted an Escrow Agreement to expedite the
sale.
Meanwhile, with the assumption of Corazon C. Aquino as
President, the political situation improved. Marquez received a
letter from Delsaux that the ESAC Regional Office decided not to
proceed with the sale. When informed of this, the Litonjuas, filed a
complaint for specific performance and payment for damages on
account of the aborted sale. Both the trial court and appellate court
rendered judgment in favor of defendants and dismissed the
complaint.
The lower court declared that since the authority of the
agents/realtors was not in writing, the sale is void and not merely
unenforceable.
Issue: WON the appellate court committed grave error of law in
holding that Marquez needed a written authority from respondent
ETERNIT before the sale can be perfected.
Held: Respondents maintain that Glanville, Delsaux and Marquez
had no authority from the stockholders of EC and its Board of
Directors to offer the properties for sale to the petitioners.
Petitioners assert that there was no need for a written authority
from the Board of Directors of EC for Marquez to validly act as
broker. As broker, Marquez was not an ordinary agent because his
only job as a broker was to look for a buyer and to bring together
the parties to the transaction. He was not authorized to sell the
properties; hence, petitioners argue, Article 1874 of the New Civil
Code does not apply.
A corporation is a juridical person separate and distinct from its
stockholders and is not affected by the personal rights, obligations
and transactions of the latter. It may act only through its board of
directors or, when authorized by its board resolution, through its
officers or agents. The general principles of agency govern the
relation between the corporation and its officers or agents, subject
to the articles of incorporation, by-laws, or relevant provisions of
law.
Agency may be oral unless the law requires a specific form.
However, to create or convey real rights over immovable property,
a special power of attorney is necessary. Thus, when a sale of a
piece of land or any portion thereof is through an agent, the
authority of the latter shall be in writing, otherwise, the sale shall
be void.
In this case, the petitioners failed to adduce in evidence any
resolution of the Board of Directors of EC empowering Marquez,
Glanville or Delsaux as its agents, to sell, let alone offer for sale, for
and in its behalf, the eight parcels of land owned by it.
Moreover, the evidence of petitioners shows that Adams and
Glanville acted on the authority of Delsaux, who, in turn, acted on
the authority of ESAC, through its Committee for Asia, and the
Belgian/Swiss component of the management of ESAC. The offer of
Delsaux emanated only from the "Belgian/Swiss decision," and not
the entire management or Board of Directors of ESAC. While it is
true that petitioners accepted the counter-offer of ESAC, EC was
not a party to the transaction between them; hence, EC was not
bound by such acceptance. Decision of the lower court is affirmed.
Republic v. Parañaque
FACTS
This is a petition for review on certiorari assailing the Order of the
Regional Trial Court, Branch 195, Paranaque City (RTC), which
ruled that petitioner Philippine Reclamation Authority (PRA) is
a government-owned and controlled corporation (GOCC), a taxable
entity, and, therefore, not exempt from payment of real property
taxes.
The Public Estates Authority (PEA) is a government corporation
created by virtue of P.D. No. 1084 to provide a coordinated,
economical and efficient reclamation of lands, and the
administration and operation of lands belonging to, managed
and/or operated by, the government with the object of maximizing
their utilization and hastening their development consistent with
public interest. 
On October 26, 2004, then President Gloria Macapagal-Arroyo
issued E.O. No. 380 transforming PEA into PRA, which shall
perform all the powers and functions of the PEA relating to
reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the
foreshore and offshore areas of Manila Bay, including those
located in Parañ aque City. Parañ aque City Treasurer issued
Warrants of Levy on PRA’s reclaimed properties based on the
assessment for delinquent real property for tax years 2001 and
2002. 
PRA claimed that it is not a GOCC under the Administrative Code,
nor is it a GOCC under Section 16, Article XII of the
1987Constitution because it is not required to meet the test of
economic viability.
It is a government instrumentality vested with corporate powers
and performing an essential public service. It insists that it may
not be classified as a non-stock corporation because it has no
members and it is not organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers as provided in Section 88
of the Corporation Code.
Thus, PRA insists that, as an incorporated instrumentality of the
National Government, it is exempt from payment of real property
tax except when the beneficial use of the real property is granted
to a taxable person. PRA claims that based on Section 133(o) of the
LGC, local governments cannot tax the national government which
delegate to local governments the power to tax.
ISSUE
Whether or not Philippine Reclamation Authority (PRA) is an
incorporated instrumentality of the national government and is,
therefore, exempt from payment of real property tax under
sections 234(a) and 133(o) of Republic Act 7160
HELD
Yes, it is a Government Instrumentality.
In the case at bench, PRA is not a GOCC because it is neither a stock
nor a non-stock corporation. It cannot be considered as a stock
corporation because although it has a capital stock divided into no
par value shares as provided in Section 7 4 of P.D. No. 1084, it is not
authorized to distribute dividends, surplus allotments or profits to
stockholders. PRA is a government instrumentality vested with
corporate powers and performing an essential public service
pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. Being an incorporated government
instrumentality, it is exempt from payment of real property tax.
Many government instrumentalities are vested with corporate
powers but they do not become stock or non-stock corporations,
which is a necessary condition before an agency or instrumentality
is deemed a GOCC. The fundamental provision above authorizes
Congress to create GOCCs through special charters on two
conditions: 1) the GOCC must be established for the common good;
and 2) the GOCC must meet the test of economic viability. In this
case, PRA may have passed the first condition of common good but
failed the second one - economic viability. Undoubtedly, the
purpose behind the creation of PRA was not for economic or
commercial activities.
Clearly, respondent has no valid or legal basis in taxing the subject
reclaimed lands managed by PRA. On the other hand, Section
234(a) of the LGC, in relation to its Section 133(o), exempts PRA
from paying realty taxes and protects it from the taxing powers of
local government units.
Section 234(a) of the Local Government Code states that real
property owned by the Republic of the Philippines (the Republic)
is exempt from real property tax unless the beneficial use thereof
has been granted to a taxable person.
Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax
national government instrumentalities.
In this case, there is no proof that PRA granted the beneficial use of
the subject reclaimed lands to a taxable entity. There is no
showing on record either that PRA leased the subject reclaimed
properties to a private taxable entity.
Manila International Airport Authority vs. Court of Appeals,
Paranque City
FACTS:
MIAA received Final Notices of Real Estate Tax Delinquency from
the City of Parañ aque for the taxable years 1992 to 2001. MIAA’s
real estate tax delinquency was estimated at P624 million.
The City of Parañ aque, through its City Treasurer, issued notices of
levy and warrants of levy on the Airport Lands and Buildings. The
Mayor of the City of Parañ aque threatened to sell at public auction
the Airport Lands and Buildings should MIAA fail to pay the real
estate tax delinquency.
MIAA filed with the Court of Appeals an original petition for
prohibition and injunction, with prayer for preliminary injunction
or temporary restraining order. The petition sought to restrain the
City of Parañ aque from imposing real estate tax on, levying
against, and auctioning for public sale the Airport Lands and
Buildings.
Paranaque’s Contention: Section 193 of the Local Government
Code expressly withdrew the tax exemption privileges of
“government-owned and-controlled corporations” upon the
effectivity of the Local Government Code. Respondents also argue
that a basic rule of statutory construction is that the express
mention of one person, thing, or act excludes all others. An
international airport is not among the exceptions mentioned in
Section 193 of the Local Government Code. Thus, respondents
assert that MIAA cannot claim that the Airport Lands and
Buildings are exempt from real estate tax.
MIAA’s contention: Airport Lands and Buildings are owned by the
Republic. The government cannot tax itself. The reason for tax
exemption of public property is that its taxation would not inure to
any public advantage, since in such a case the tax debtor is also the
tax creditor.
ISSUE:
Whether Airport Lands and Buildings of MIAA are exempt from
real estate tax under existing laws?
RULING:   The Airport Lands and Buildings of MIAA are property of public
Yes. Ergo, the real estate tax assessments issued by the City of
Parañ aque, and all proceedings taken pursuant to such
assessments, are void.
1. MIAA is Not a Government-Owned or Controlled Corporation
MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from
local taxation.
MIAA is not a stock corporation because it has no capital stock
divided into shares. MIAA has no stockholders or voting shares.
MIAA is also not a non-stock corporation because it has no
members. A non-stock corporation must have members.
MIAA is a government instrumentality vested with corporate
powers to perform efficiently its governmental functions. MIAA is
like any other government instrumentality, the only difference is
that MIAA is vested with corporate powers.
When the law vests in a government instrumentality corporate
powers, the instrumentality does not become a corporation.
Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers. Thus,
MIAA exercises the governmental powers of eminent domain,
police authority and the levying of fees and charges. At the same
time, MIAA exercises “all the powers of a corporation under the
Corporation Law, insofar as these powers are not inconsistent
with the provisions of this Executive Order.”
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
dominion and therefore owned by the State or the Republic of the
Philippines.
No one can dispute that properties of public dominion mentioned
in Article 420 of the Civil Code, like “roads, canals, rivers, torrents,
ports and bridges constructed by the State,” are owned by the
State. The term “ports” includes seaports and airports. The MIAA
Airport Lands and Buildings constitute a “port” constructed by the
State. Under Article 420 of the Civil Code, the MIAA Airport Lands
and Buildings are properties of public dominion and thus owned
by the State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because
they are used by the public for international and domestic travel
and transportation. The fact that the MIAA collects terminal fees
and other charges from the public does not remove the character
of the Airport Lands and Buildings as properties for public use.
The charging of fees to the public does not determine the character
of the property whether it is of public dominion or not. Article 420
of the Civil Code defines property of public dominion as one
“intended for public use.” The terminal fees MIAA charges to
passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of
MIAA. The collection of such fees does not change the character of
MIAA as an airport for public use. Such fees are often termed
user’s tax. This means taxing those among the public who actually
use a public facility instead of taxing all the public including those
who never use the particular public facility.
d. Transfer to MIAA was Meant to Implement a Reorganization
The transfer of the Airport Lands and Buildings from the Bureau of
Air Transportation to MIAA was not meant to transfer beneficial
ownership of these assets from the Republic to MIAA. The purpose
was merely to reorganize a division in the Bureau of Air
Transportation into a separate and autonomous body. The
Republic remains the beneficial owner of the Airport Lands and
Buildings. MIAA itself is owned solely by the Republic. No party
claims any ownership rights over MIAA’s assets adverse to the
Republic.

b. Airport Lands and Buildings are Outside the Commerce of Man e. Real Property Owned by the Republic is Not Taxable

The Court has also ruled that property of public dominion, being
outside the commerce of man, cannot be the subject of an auction
sale.
Properties of public dominion, being for public use, are not subject
to levy, encumbrance or disposition through public or private sale.
Any encumbrance, levy on execution or auction sale of any
property of public dominion is void for being contrary to public
policy. Essential public services will stop if properties of public
dominion are subject to encumbrances, foreclosures and auction
sale. This will happen if the City of Parañ aque can foreclose and
compel the auction sale of the 600-hectare runway of the MIAA for
non-payment of real estate tax.
Sec 234 of the LGC provides that real property owned by the
Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person following are
exempted from payment of the real property tax.
However, portions of the Airport Lands and Buildings that MIAA
leases to private entities are not exempt from real estate tax. For
example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in

trust for the Republic. Section 48, Chapter 12, Book I of the
Administrative Code allows instrumentalities like MIAA to hold
title to real properties owned by the Republic. n MIAA’s case, its
status as a mere trustee of the Airport Lands and Buildings is
clearer because even its executive head cannot sign the deed of
conveyance on behalf of the Republic. Only the President of the
Republic can sign such deed of conveyance.