G.R. No. L-13250 October 29, 1971 Soriano Vda. de Cerdeira. Maria de la Estrella Soriano Vda.
Soriano Vda. de Cerdeira. Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is
THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
ANTONIO CAMPOS RUEDA, respondent..
Assistant Solicitor General Jose P. Alejandro and Special Attorney Jose G. Azurin, (O.S.G.) for
petitioner.
Ramirez and Ortigas for respondent.
FERNANDO, J.:
The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a decision of the
Court of Tax Appeals as to whether or not the requisites of statehood, or at least so much thereof as
may be necessary for the acquisition of an international personality, must be satisfied for a "foreign
country" to fall within the exemption of Section 122 of the National Internal Revenue Code1 is now
ripe for adjudication. The Court of Tax Appeals answered the question in the negative, and thus
reversed the action taken by petitioner Collector, who would hold respondent Antonio Campos Rueda,
as administrator of the estate of the late Estrella Soriano Vda. de Cerdeira, liable for the sum of
P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal
properties in the Philippines, the deceased, a Spanish national having been a resident of Tangier,
Morocco from 1931 up to the time of her death in 1955. In an earlier resolution promulgated May 30,
1962, this Court on the assumption that the need for resolving the principal question would be
obviated, referred the matter back to the Court of Tax Appeals to determine whether the alleged law of
Tangier did grant the reciprocal tax exemption required by the aforesaid Section 122. Then came an
order from the Court of Tax Appeals submitting copies of legislation of Tangier that would manifest
that the element of reciprocity was not lacking. It was not until July 29, 1969 that the case was
deemed submitted for decision. When the petition for review was filed on January 2, 1958, the basic
issue raised was impressed with an element of novelty. Four days thereafter, however, on January 6,
1958, it was held by this Court that the aforesaid provision does not require that the "foreign country"
possess an international personality to come within its terms.2 Accordingly, we have to affirm.
The decision of the Court of Tax Appeals, now under review, sets forth the background facts as
follows: "This is an appeal interposed by petitioner Antonio Campos Rueda as administrator of the
estate of the deceased Doña Maria de la Estrella Soriano Vda. de Cerdeira, from the decision of the
respondent Collector of Internal Revenue, assessing against and demanding from the former the sum
P161,874.95 as deficiency estate and inheritance taxes, including interest and penalties, on the transfer
of intangible personal properties situated in the Philippines and belonging to said Maria de la Estrella
1
a Spanish national, by reason of her marriage to a Spanish citizen and was a resident of Tangier,
Morocco from 1931 up to her death on January 2, 1955. At the time of her demise she left, among
others, intangible personal properties in the Philippines."3 Then came this portion: "On September 29,
1955, petitioner filed a provisional estate and inheritance tax return on all the properties of the late
Maria Cerdeira. On the same date, respondent, pending investigation, issued an assessment for state
and inheritance taxes in the respective amounts of P111,592.48 and P157,791.48, or a total of
P369,383.96 which tax liabilities were paid by petitioner ... . On November 17, 1955, an amended
return was filed ... wherein intangible personal properties with the value of P396,308.90 were claimed
as exempted from taxes. On November 23, 1955, respondent, pending investigation, issued another
assessment for estate and inheritance taxes in the amounts of P202,262.40 and P267,402.84,
respectively, or a total of P469,665.24 ... . In a letter dated January 11, 1956, respondent denied the
request for exemption on the ground that the law of Tangier is not reciprocal to Section 122 of the
National Internal Revenue Code. Hence, respondent demanded the payment of the sums of
P239,439.49 representing deficiency estate and inheritance taxes including ad valorem penalties,
surcharges, interests and compromise penalties ... . In a letter dated February 8, 1956, and received by
respondent on the following day, petitioner requested for the reconsideration of the decision denying
the claim for tax exemption of the intangible personal properties and the imposition of the 25% and
5% ad valorem penalties ... . However, respondent denied request, in his letter dated May 5, 1956 ...
and received by petitioner on May 21, 1956. Respondent premised the denial on the grounds that there
was no reciprocity [with Tangier, which was moreover] a mere principality, not a foreign country.
Consequently, respondent demanded the payment of the sums of P73,851.21 and P88,023.74
respectively, or a total of P161,874.95 as deficiency estate and inheritance taxes including surcharges,
interests and compromise penalties."4
The matter was then elevated to the Court of Tax Appeals. As there was no dispute between the parties
regarding the values of the properties and the mathematical correctness of the deficiency assessments,
the principal question as noted dealt with the reciprocity aspect as well as the insisting by the
Collector of Internal Revenue that Tangier was not a foreign country within the meaning of Section
122. In ruling against the contention of the Collector of Internal Revenue, the appealed decision
states: "In fine, we believe, and so hold, that the expression "foreign country", used in the last proviso
of Section 122 of the National Internal Revenue Code, refers to a government of that foreign power
which, although not an international person in the sense of international law, does not impose transfer
or death upon intangible person properties of our citizens not residing therein, or whose law allows a
similar exemption from such taxes. It is, therefore, not necessary that Tangier should have been
recognized by our Government order to entitle the petitioner to the exemption benefits of the proviso
of Section 122 of our Tax. Code."5
Hence appeal to this court by petitioner. The respective briefs of the parties duly submitted, but as
above indicated, instead of ruling definitely on the question, this Court, on May 30, 1962, resolve to
inquire further into the question of reciprocity and sent back the case to the Court of Tax Appeals for
the motion of evidence thereon. The dispositive portion of such resolution reads as follows: "While
section 122 of the Philippine Tax Code aforequoted speaks of 'intangible personal property' in both
subdivisions (a) and (b); the alleged laws of Tangier refer to 'bienes muebles situados en Tanger',
'bienes muebles radicantes en Tanger', 'movables' and 'movable property'. In order that this Court may
be able to determine whether the alleged laws of Tangier grant the reciprocal tax exemptions required
by Section 122 of the Tax Code, and without, for the time being, going into the merits of the issues
raised by the petitioner-appellant, the case is [remanded] to the Court of Tax Appeals for the reception
of evidence or proof on whether or not the words `bienes muebles', 'movables' and 'movable
properties as used in the Tangier laws, include or embrace 'intangible person property', as used in the
Tax Code."6 In line with the above resolution, the Court of Tax Appeals admitted evidence submitted
by the administrator petitioner Antonio Campos Rueda, consisting of exhibits of laws of Tangier to the
effect that "the transfers by reason of death of movable properties, corporeal or incorporeal, including
furniture and personal effects as well as of securities, bonds, shares, ..., were not subject, on that date
and in said zone, to the payment of any death tax, whatever might have been the nationality of the
deceased or his heirs and legatees." It was further noted in an order of such Court referring the matter
back to us that such were duly admitted in evidence during the hearing of the case on September 9,
1963. Respondent presented no evidence."7
The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue
Code. It reads thus: "That no tax shall be collected under this Title in respect of intangible personal
property (a) if the decedent at the time of his death was a resident of a foreign country which at the
time of his death did not impose a transfer tax or death tax of any character in respect of intangible
person property of the Philippines not residing in that foreign country, or (b) if the laws of the foreign
country of which the decedent was a resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country."8 The only obstacle therefore to a
definitive ruling is whether or not as vigorously insisted upon by petitioner the acquisition of internal
personality is a condition sine qua non to Tangier being considered a "foreign country". Deference to
the De Lara ruling, as was made clear in the opening paragraph of this opinion, calls for an affirmance
of the decision of the Court of Tax Appeals.
It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line
with Pound's formulation that it be a politically organized sovereign community independent of
outside control bound by penalties of nationhood, legally supreme within its territory, acting through a
government functioning under a regime of
law.9 It is thus a sovereign person with the people composing it viewed as an organized corporate
society under a government with the legal competence to exact obedience to its commands. 10 It has
been referred to as a body-politic organized by common consent for mutual defense and mutual safety
and to promote the general welfare.11 Correctly has it been described by Esmein as "the juridical
personification of the nation." 12 This is to view it in the light of its historical development. The stress
is on its being a nation, its people occupying a definite territory, politically organized, exercising by
means of its government its sovereign will over the individuals within it and maintaining its separate
international personality. Laski could speak of it then as a territorial society divided into government
2
and subjects, claiming within its allotted area a supremacy over all other institutions.13 McIver
similarly would point to the power entrusted to its government to maintain within its territory the
conditions of a legal order and to enter into international relations. 14 With the latter requisite satisfied,
international law do not exact independence as a condition of statehood. So Hyde did opine. 15
Even on the assumption then that Tangier is bereft of international personality, petitioner has not
successfully made out a case. It bears repeating that four days after the filing of this petition on
January 6, 1958 in Collector of Internal Revenue v. De Lara, 16 it was specifically held by us:
"Considering the State of California as a foreign country in relation to section 122 of our Tax Code we
believe and hold, as did the Tax Court, that the Ancilliary Administrator is entitled the exemption from
the inheritance tax on the intangible personal property found in the Philippines." 17 There can be no
doubt that California as a state in the American Union was in the alleged requisite of international
personality. Nonetheless, it was held to be a foreign country within the meaning of Section 122 of the
National Internal Revenue Code. 18
What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the doctrine
that even a tiny principality, that of Liechtenstein, hardly an international personality in the sense, did
fall under this exempt category. So it appears in an opinion of the Court by the then Acting Chief
Justicem Bengson who thereafter assumed that position in a permanent capacity, in Kiene v. Collector
of Internal Revenue. 19 As was therein noted: 'The Board found from the documents submitted to it —
proof of the laws of Liechtenstein — that said country does not impose estate, inheritance and gift
taxes on intangible property of Filipino citizens not residing in that country. Wherefore, the Board
declared that pursuant to the exemption above established, no estate or inheritance taxes were
collectible, Ludwig Kiene being a resident of Liechtestein when he passed away." 20 Then came this
definitive ruling: "The Collector — hereafter named the respondent — cites decisions of the United
States Supreme Court and of this Court, holding that intangible personal property in the Philippines
belonging to a non-resident foreigner, who died outside of this country is subject to the estate tax, in
disregard of the principle 'mobilia sequuntur personam'. Such property is admittedly taxable here.
Without the proviso above quoted, the shares of stock owned here by the Ludwig Kiene would be
concededly subject to estate and inheritance taxes. Nevertheless our Congress chose to make an
exemption where conditions are such that demand reciprocity — as in this case. And the exemption
must be honored." 21
WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is affirmed.
Without pronouncement as to costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Villamor and Makasiar, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
G.R. No. 166494 June 29, 2007
CARLOS SUPERDRUG CORP., doing business under the name and style "Carlos Superdrug,"
ELSIE M. CANO, doing business under the name and style "Advance Drug," Dr. SIMPLICIO
L. YAP, JR., doing business under the name and style "City Pharmacy," MELVIN S. DELA
SERNA, doing business under the name and style "Botica dela Serna," and LEYTE SERV-
WELL CORP., doing business under the name and style "Leyte Serv-Well Drugstore,"
petitioners,
vs.
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD), DEPARTMENT OF
HEALTH (DOH), DEPARTMENT OF FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ),
and DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT (DILG), respondents.
DECISION
AZCUNA, J.:
This is a petition1 for Prohibition with Prayer for Preliminary Injunction assailing the constitutionality
of Section 4(a) of Republic Act (R.A.) No. 9257,2 otherwise known as the "Expanded Senior Citizens
Act of 2003."
Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.
Public respondents, on the other hand, include the Department of Social Welfare and Development
(DSWD), the Department of Health (DOH), the Department of Finance (DOF), the Department of
Justice (DOJ), and the Department of Interior and Local Government (DILG) which have been
specifically tasked to monitor the drugstores’ compliance with the law; promulgate the implementing
rules and regulations for the effective implementation of the law; and prosecute and revoke the
licenses of erring drugstore establishments.
The antecedents are as follows:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432,3 was signed into law by President
Gloria Macapagal-Arroyo and it became effective on March 21, 2004. Section 4(a) of the Act states:
SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase
3
of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including
funeral and burial services for the death of senior citizens;
...
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based
on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall be
allowed as deduction from gross income for the same taxable year that the discount is granted.
Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.4
On May 28, 2004, the DSWD approved and adopted the Implementing Rules and Regulations of R.A.
No. 9257, Rule VI, Article 8 of which states:
Article 8. Tax Deduction of Establishments. – The establishment may claim the discounts granted
under Rule V, Section 4 – Discounts for Establishments;5 Section 9, Medical and Dental Services in
Private Facilities[,]6 and Sections 107 and 118 – Air, Sea and Land Transportation as tax deduction
based on the net cost of the goods sold or services rendered. Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended;
Provided, finally, that the implementation of the tax deduction shall be subject to the Revenue
Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department of
Finance (DOF).9
On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP)
concerning the meaning of a tax deduction under the Expanded Senior Citizens Act, the DOF, through
Director IV Ma. Lourdes B. Recente, clarified as follows:
1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction
(under the Expanded Senior Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent
(20%) discount from all establishments relative to the utilization of transportation services, hotels and
similar lodging establishment, restaurants and recreation centers and purchase of medicines anywhere
in the country, the costs of which may be claimed by the private establishments concerned as tax
credit.
Effectively, a tax credit is a peso-for-peso deduction from a taxpayer’s tax liability due to the
government of the amount of discounts such establishment has granted to a senior citizen. The
establishment recovers the full amount of discount given to a senior citizen and hence, the
government shoulders 100% of the discounts granted.
It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system,
necessitates that prior payments of taxes have been made and the taxpayer is attempting to recover
this tax payment from his/her income tax due. The tax credit scheme under R.A. No. 7432 is,
therefore, inapplicable since no tax payments have previously occurred.
1.2. The provision under R.A. No. 9257, on the other hand, provides that the establishment concerned
may claim the discounts under Section 4(a), (f), (g) and (h) as tax deduction from gross income,
based on the net cost of goods sold or services rendered.
Under this scheme, the establishment concerned is allowed to deduct from gross income, in
computing for its tax liability, the amount of discounts granted to senior citizens. Effectively, the
government loses in terms of foregone revenues an amount equivalent to the marginal tax rate
the said establishment is liable to pay the government. This will be an amount equivalent to
32% of the twenty percent (20%) discounts so granted. The establishment shoulders the
remaining portion of the granted discounts.
It may be necessary to note that while the burden on [the] government is slightly diminished in terms
of its percentage share on the discounts granted to senior citizens, the number of potential
establishments that may claim tax deductions, have however, been broadened. Aside from the
establishments that may claim tax credits under the old law, more establishments were added under
the new law such as: establishments providing medical and dental services, diagnostic and laboratory
services, including professional fees of attending doctors in all private hospitals and medical facilities,
operators of domestic air and sea transport services, public railways and skyways and bus transport
services.
A simple illustration might help amplify the points discussed above, as follows:
Tax Deduction Tax Credit
Gross Sales x x x x x x x x x x x x
Less : Cost of goods sold x x x x x x x x x x
Net Sales x x x x x x x x x x x x
4
Less: Operating Expenses:
Tax Deduction on Discounts x x x x --
Other deductions: x x x x x x x x
Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit -- ______x x
Net Tax Due -- x x
As shown above, under a tax deduction scheme, the tax deduction on discounts was subtracted from
Net Sales together with other deductions which are considered as operating expenses before the Tax
Due was computed based on the Net Taxable Income. On the other hand, under a tax credit scheme,
the amount of discounts which is the tax credit item, was deducted directly from the tax due amount.10
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and Guidelines
to Implement the Relevant Provisions of Republic Act 9257, otherwise known as the "Expanded Senior
Citizens Act of 2003"11 was issued by the DOH, providing the grant of twenty percent (20%) discount
in the purchase of unbranded generic medicines from all establishments dispensing medicines for the
exclusive use of the senior citizens.
On November 12, 2004, the DOH issued Administrative Order No 17712 amending A.O. No. 171.
Under A.O. No. 177, the twenty percent discount shall not be limited to the purchase of unbranded
generic medicines only, but shall extend to both prescription and non-prescription medicines whether
branded or generic. Thus, it stated that "[t]he grant of twenty percent (20%) discount shall be
provided in the purchase of medicines from all establishments dispensing medicines for the exclusive
use of the senior citizens."
ISSUE
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior Citizens Act based on
the following grounds:13
1) The law is confiscatory because it infringes Art. III, Sec. 9 of the Constitution which provides that
private property shall not be taken for public use without just compensation;
2) It violates the equal protection clause (Art. III, Sec. 1) enshrined in our Constitution which states
that "no person shall be deprived of life, liberty or property without due process of law, nor shall
any person be denied of the equal protection of the laws;" and
3) The 20% discount on medicines violates the constitutional guarantee in Article XIII, Section 11 that
makes "essential goods, health and other social services available to all people at affordable
cost."14
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of
private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines;
and 2) the law failed to provide a scheme whereby drugstores will be justly compensated for the
discount.
Examining petitioners’ arguments, it is apparent that what petitioners are ultimately questioning is the
validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent (20%)
discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse petitioners
for the discount privilege accorded to senior citizens. This is because the discount is treated as a
deduction, a tax-deductible expense that is subtracted from the gross income and results in a lower
taxable income. Stated otherwise, it is an amount that is allowed by law15 to reduce the income prior
to the application of the tax rate to compute the amount of tax which is due.16 Being a tax deduction,
the discount does not reduce taxes owed on a peso for peso basis but merely offers a fractional
reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private
establishments concerned. The discounts given would have entered the coffers and formed part of the
gross sales of the private establishments, were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of
private property for public use or benefit.17 This constitutes compensable taking for which petitioners
would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. The measure is not the taker’s gain but the owner’s loss. The word just is used to
intensify the meaning of the word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample.18
5
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation.19
Having said that, this raises the question of whether the State, in promoting the health and welfare of a
special group of citizens, can impose upon private establishments the burden of partly subsidizing a
government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to
nation-building, and to grant benefits and privileges to them for their improvement and well-being as
the State considers them an integral part of our society.20
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself.
Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. – Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10 in the Declaration of Principles
and State Policies provides: "The State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and
comprehensive approach to health development which shall endeavor to make essential goods, health
and other social services available to all the people at affordable cost. There shall be priority for the
needs of the underprivileged sick, elderly, disabled, women and children." Consonant with these
constitutional principles the following are the declared policies of this Act:
...
(f) To recognize the important role of the private sector in the improvement of the welfare of
senior citizens and to actively seek their partnership.21
To implement the above policy, the law grants a twenty percent discount to senior citizens for medical
and dental services, and diagnostic and laboratory fees; admission fees charged by theaters, concert
halls, circuses, carnivals, and other similar places of culture, leisure and amusement; fares for
domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of
senior citizens. As a form of reimbursement, the law provides that business establishments extending
the twenty percent discount to senior citizens may claim the discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits. 22 Accordingly, it has been described as "the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs."23 It is "[t]he
power vested in the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not
repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth,
and of the subjects of the same."24
For this reason, when the conditions so demand as determined by the legislature, property rights must
bow to the primacy of police power because property rights, though sheltered by due process, must
yield to general welfare.25
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.26
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is
unduly oppressive to their business, because petitioners have not taken time to calculate
correctly and come up with a financial report, so that they have not been able to show properly
whether or not the tax deduction scheme really works greatly to their disadvantage.27
In treating the discount as a tax deduction, petitioners insist that they will incur losses because,
referring to the DOF Opinion, for every ₱1.00 senior citizen discount that petitioners would give,
₱0.68 will be shouldered by them as only ₱0.32 will be refunded by the government by way of a tax
deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug
Norvasc as an example. According to the latter, it acquires Norvasc from the distributors at ₱37.57 per
tablet, and retails it at ₱39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens or
an amount equivalent to ₱7.92, then it would have to sell Norvasc at ₱31.68 which translates to a loss
from capital of ₱5.89 per tablet. Even if the government will allow a tax deduction, only ₱2.53 per
tablet will be refunded and not the full amount of the discount which is ₱7.92. In short, only 32% of
the 20% discount will be reimbursed to the drugstores.28
6
Petitioners’ computation is flawed. For purposes of reimbursement, the law states that the cost of
the discount shall be deducted from gross income,29 the amount of income derived from all
sources before deducting allowable expenses, which will result in net income. Here, petitioners
tried to show a loss on a per transaction basis, which should not be the case. An income
statement, showing an accounting of petitioners’ sales, expenses, and net profit (or loss) for a given
period could have accurately reflected the effect of the discount on their income. Absent any financial
statement, petitioners cannot substantiate their claim that they will be operating at a loss should they
give the discount. In addition, the computation was erroneously based on the assumption that their
customers consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income,
not on the amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of their
medicines given the cutthroat nature of the players in the industry. It is a business decision on the part
of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as alleged by
petitioners, is merely a result of this decision. Inasmuch as pricing is a property right, petitioners
cannot reproach the law for being oppressive, simply because they cannot afford to raise their
prices for fear of losing their customers to competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights, petitioners must accept the
realities of business and the State, in the exercise of police power, can intervene in the operations of a
business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as a reminder that the
right to property can be relinquished upon the command of the State for the promotion of public
good.30
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed
in invoking the active participation of the private sector, in order to achieve the purpose or objective
of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of R.A. No.
9257 is arbitrary, and that the continued implementation of the same would be unconscionably
detrimental to petitioners, the Court will refrain from quashing a legislative act.31
WHEREFORE, the petition is DISMISSED for lack of merit.
No costs.
SO ORDERED.

ADOLFO S. AZCUNA C E R T I F I CAT I O N

Associate Justice
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
WE CONCUR: the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
REYNATO S. PUNO
Chief Justice REYNATO S. PUNO
Chief Justice

(On Official Leave) (On Leave)

* LEONARDO A. QUISUMBING ** CONSUELO YNARES-
Associate Justice SANTIAGO
Associate Justice
ANGELINA SANDOVAL- ANTONIO T. CARPIO
GUTIERREZ Associate Justice
Associate Justice
MA. ALICIA AUSTRIA- RENATO C. CORONA
MARTINEZ Associate Justice
Associate Justice
CONCHITA CARPIO DANTE O. TINGA
MORALES Associate Justice
Associate Justice
MINITA V. CHICO-NAZARIO CANCIO C. GARCIA
Associate Justice Associate Justice
PRESBITERO J. VELASCO, ANTONIO EDUARDO B.
JR. NACHURA
Associate Justice Associate Justice

7
G.R. No. 118127 April 12, 2005
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila, HON.
JOSELITO L. ATIENZA, in his capacity as Vice-Mayor of the City of Manila and Presiding
Officer of the City Council of Manila, HON. ERNESTO A. NIEVA, HON. GONZALO P.
GONZALES, HON. AVELINO S. CAILIAN, HON. ROBERTO C. OCAMPO, HON.
ALBERTO DOMINGO, HON. HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA, JR.,
HON. ROMUALDO S. MARANAN, HON. NESTOR C. PONCE, JR., HON. HUMBERTO B.
BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON. ROMEO G. RIVERA, HON.
MANUEL M. ZARCAL, HON. PEDRO S. DE JESUS, HON. BERNARDITO C. ANG, HON.
MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON. VICTORIANO A.
MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P. NIETO, HON.
DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON. MA. PAZ E. HERRERA,
HON. JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG,
HON. ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON. MA. CORAZON R.
CABALLES, HON. CASIMIRO C. SISON, HON. BIENVINIDO M. ABANTE, JR., HON. MA.
LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F. RIVERA, HON.
LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their capacity as councilors of the
City of Manila, Petitioner,
vs.
HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE
TOURIST DEVELOPMENT CORPORATION, Respondents.
DECISION
TINGA, J.:
I know only that what is moral is what you feel good after and what is immoral is what you feel bad
after.
Ernest Hermingway
Death in the Afternoon, Ch. 1
It is a moral and political axiom that any dishonorable act, if performed by oneself, is less immoral
than if performed by someone else, who would be well-intentioned in his dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch. I
8
The Court's commitment to the protection of morals is secondary to its fealty to the fundamental law
of the land. It is foremost a guardian of the Constitution but not the conscience of individuals. And if
it need be, the Court will not hesitate to "make the hammer fall, and heavily" in the words of Justice
Laurel, and uphold the constitutional guarantees when faced with laws that, though not lacking in zeal
to promote morality, nevertheless fail to pass the test of constitutionality.
ISSUE
The pivotal issue in this Petition1 under Rule 45 (then Rule 42) of the Revised Rules on Civil
Procedure seeking the reversal of the Decision2 in Civil Case No. 93-66511 of the Regional Trial
Court (RTC) of Manila, Branch 18 (lower court),3 is the validity of Ordinance No. 7783 (the
Ordinance) of the City of Manila.4
The antecedents are as follows:
Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the
business of operating hotels, motels, hostels and lodging houses.5 It built and opened Victoria Court in
Malate which was licensed as a motel although duly accredited with the Department of Tourism as a
hotel.6 On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of
Preliminary Injunction and/or Temporary Restraining Order7 (RTC Petition) with the lower court
impleading as defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon.
Joselito L. Atienza, and the members of the City Council of Manila (City Council). MTDC
prayed that the Ordinance, insofar as it includes motels and inns as among its prohibited
establishments, be declared invalid and unconstitutional.8
Enacted by the City Council9 on 9 March 1993 and approved by petitioner City Mayor on 30 March
1993, the said Ordinance is entitled–
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES
PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, SERVICES AND
FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION
THEREOF, AND FOR OTHER PURPOSES.10
The Ordinance is reproduced in full, hereunder:
SECTION 1. Any provision of existing laws and ordinances to the contrary notwithstanding, no
person, partnership, corporation or entity shall, in the Ermita-Malate area bounded by Teodoro
M. Kalaw Sr. Street in the North, Taft Avenue in the East, Vito Cruz Street in the South and Roxas
Boulevard in the West, pursuant to P.D. 499 be allowed or authorized to contract and engage in,
any business providing certain forms of amusement, entertainment, services and facilities where
women are used as tools in entertainment and which tend to disturb the community, annoy the 1. Curio or antique shop
inhabitants, and adversely affect the social and moral welfare of the community, such as but not
limited to: 2. Souvenir Shops

1. Sauna Parlors 3. Handicrafts display centers

2. Massage Parlors 4. Art galleries

3. Karaoke Bars 5. Records and music shops

4. Beerhouses 6. Restaurants

5. Night Clubs 7. Coffee shops

6. Day Clubs 8. Flower shops

7. Super Clubs 9. Music lounge and sing-along restaurants, with well-defined activities for wholesome family
entertainment that cater to both local and foreign clientele.
8. Discotheques
10. Theaters engaged in the exhibition, not only of motion pictures but also of cultural shows, stage
9. Cabarets and theatrical plays, art exhibitions, concerts and the like.

10. Dance Halls
11. Motels
12. Inns
SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of the said officials are
prohibited from issuing permits, temporary or otherwise, or from granting licenses and
accepting payments for the operation of business enumerated in the preceding section.
SEC. 3. Owners and/or operator of establishments engaged in, or devoted to, the businesses
enumerated in Section 1 hereof are hereby given three (3) months from the date of approval of this
ordinance within which to wind up business operations or to transfer to any place outside of the
Ermita-Malate area or convert said businesses to other kinds of business allowable within the
area, such as but not limited to:
11. Businesses allowable within the law and medium intensity districts as provided for in the zoning
ordinances for Metropolitan Manila, except new warehouse or open-storage depot, dock or yard,
motor repair shop, gasoline service station, light industry with any machinery, or funeral
establishments.
SEC. 4. Any person violating any provisions of this ordinance, shall upon conviction, be
punished by imprisonment of one (1) year or fine of FIVE THOUSAND (P5,000.00) PESOS, or
both, at the discretion of the Court, PROVIDED, that in case of juridical person, the President, the
General Manager, or person-in-charge of operation shall be liable thereof; PROVIDED FURTHER,
that in case of subsequent violation and conviction, the premises of the erring establishment shall
be closed and padlocked permanently.
SEC. 5. This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session today, March 9, 1993.

9
Approved by His Honor, the Mayor on March 30, 1993. (Emphasis supplied)
In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its
enumeration of prohibited establishments, motels and inns such as MTDC's Victoria Court
considering that these were not establishments for "amusement" or "entertainment" and they were not
"services or facilities for entertainment," nor did they use women as "tools for entertainment," and
neither did they "disturb the community," "annoy the inhabitants" or "adversely affect the social and
moral welfare of the community.”11
ISSUE
MTDC further advanced that the Ordinance was invalid and unconstitutional for the following
reasons: (1) The City Council has no power to prohibit the operation of motels as Section 458 (a)
4 (iv)12 of the Local Government Code of 1991 (the Code) grants to the City Council only the
power to regulate the establishment, operation and maintenance of hotels, motels, inns, pension
houses, lodging houses and other similar establishments; (2) The Ordinance is void as it is
violative of Presidential Decree (P.D.) No. 49913 which specifically declared portions of the
Ermita-Malate area as a commercial zone with certain restrictions; (3) The Ordinance does not
constitute a proper exercise of police power as the compulsory closure of the motel business has
no reasonable relation to the legitimate municipal interests sought to be protected; (4) The
Ordinance constitutes an ex post facto law by punishing the operation of Victoria Court which
was a legitimate business prior to its enactment; (5) The Ordinance violates MTDC's
constitutional rights in that: (a) it is confiscatory and constitutes an invasion of plaintiff's property
rights; (b) the City Council has no power to find as a fact that a particular thing is a nuisance per se
nor does it have the power to extrajudicially destroy it; and (6) The Ordinance constitutes a denial
of equal protection under the law as no reasonable basis exists for prohibiting the operation of
motels and inns, but not pension houses, hotels, lodging houses or other similar establishments,
and for prohibiting said business in the Ermita-Malate area but not outside of this area.14
In their Answer15 dated 23 July 1993, petitioners City of Manila and Lim maintained that the City
Council had the power to "prohibit certain forms of entertainment in order to protect the social
and moral welfare of the community" as provided for in Section 458 (a) 4 (vii) of the Local
Government Code,16 which reads, thus:
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
....
10
(4) Regulate activities relative to the use of land, buildings and structures within the city in order to
promote the general welfare and for said purpose shall:
....
(vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement
facilities, including theatrical performances, circuses, billiard pools, public dancing schools, public
dance halls, sauna baths, massage parlors, and other places for entertainment or amusement;
regulate such other events or activities for amusement or entertainment, particularly those which tend
to disturb the community or annoy the inhabitants, or require the suspension or suppression of the
same; or, prohibit certain forms of amusement or entertainment in order to protect the social and
moral welfare of the community.
Citing Kwong Sing v. City of Manila,17 petitioners insisted that the power of regulation spoken of in
the above-quoted provision included the power to control, to govern and to restrain places of
exhibition and amusement.18
Petitioners likewise asserted that the Ordinance was enacted by the City Council of Manila to protect
the social and moral welfare of the community in conjunction with its police power as found in Article
III, Section 18(kk) of Republic Act No. 409,19 otherwise known as the Revised Charter of the City of
Manila (Revised Charter of Manila)20 which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
. . .
Section 18. Legislative powers. – The Municipal Board shall have the following legislative powers:
. . .
(kk) To enact all ordinances it may deem necessary and proper for the sanitation and safety, the
furtherance of the prosperity, and the promotion of the morality, peace, good order, comfort,
convenience, and general welfare of the city and its inhabitants, and such others as may be necessary
to carry into effect and discharge the powers and duties conferred by this chapter; and to fix penalties
for the violation of ordinances which shall not exceed two hundred pesos fine or six months'
imprisonment, or both such fine and imprisonment, for a single offense.
Further, the petitioners noted, the Ordinance had the presumption of validity; hence, private
respondent had the burden to prove its illegality or unconstitutionality.21
Petitioners also maintained that there was no inconsistency between P.D. 499 and the Ordinance
as the latter simply disauthorized certain forms of businesses and allowed the Ermita-Malate
area to remain a commercial zone.22 The Ordinance, the petitioners likewise claimed, cannot be
assailed as ex post facto as it was prospective in operation.23 The Ordinance also did not infringe the
equal protection clause and cannot be denounced as class legislation as there existed substantial and
real differences between the Ermita-Malate area and other places in the City of Manila.24
On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio) issued an ex-parte
temporary restraining order against the enforcement of the Ordinance.25 And on 16 July 1993,
again in an intrepid gesture, he granted the writ of preliminary injunction prayed for by
MTDC.26
After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision, enjoining the
petitioners from implementing the Ordinance. The dispositive portion of said Decision reads:27
WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3], Series of 1993, of
the City of Manila null and void, and making permanent the writ of preliminary injunction that
had been issued by this Court against the defendant. No costs.
SO ORDERED.28
Petitioners filed with the lower court a Notice of Appeal29 on 12 December 1994, manifesting that
they are elevating the case to this Court under then Rule 42 on pure questions of law.30
On 11 January 1995, petitioners filed the present Petition, alleging that the following errors were
committed by the lower court in its ruling: (1) It erred in concluding that the subject ordinance
is ultra vires, or otherwise, unfair, unreasonable and oppressive exercise of police power; (2) It
erred in holding that the questioned Ordinance contravenes P.D. 49931 which allows operators of
all kinds of commercial establishments, except those specified therein; and (3) It erred in
declaring the Ordinance void and unconstitutional.32
In the Petition and in its Memorandum,33 petitioners in essence repeat the assertions they made before
the lower court. They contend that the assailed Ordinance was enacted in the exercise of the inherent
and plenary power of the State and the general welfare clause exercised by local government units
provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and conjunctively, Section 458
(a) 4 (vii) of the Code.34 They allege that the Ordinance is a valid exercise of police power; it does not
contravene P.D. 499; and that it enjoys the presumption of validity.35
11
In its Memorandum36 dated 27 May 1996, private respondent maintains that the Ordinance is ultra
vires and that it is void for being repugnant to the general law. It reiterates that the questioned
Ordinance is not a valid exercise of police power; that it is violative of due process, confiscatory and
amounts to an arbitrary interference with its lawful business; that it is violative of the equal protection
clause; and that it confers on petitioner City Mayor or any officer unregulated discretion in the
execution of the Ordinance absent rules to guide and control his actions.
This is an opportune time to express the Court's deep sentiment and tenderness for the Ermita-Malate
area being its home for several decades. A long-time resident, the Court witnessed the area's many
turn of events. It relished its glory days and endured its days of infamy. Much as the Court harks back
to the resplendent era of the Old Manila and yearns to restore its lost grandeur, it believes that the
Ordinance is not the fitting means to that end. The Court is of the opinion, and so holds, that the
lower court did not err in declaring the Ordinance, as it did, ultra vires and therefore null and void.
The Ordinance is so replete with constitutional infirmities that almost every sentence thereof violates
a constitutional provision. The prohibitions and sanctions therein transgress the cardinal rights of
persons enshrined by the Constitution. The Court is called upon to shelter these rights from attempts
at rendering them worthless.
The tests of a valid ordinance are well established. A long line of decisions has held that for an
ordinance to be valid, it must not only be within the corporate powers of the local government unit to
enact and must be passed according to the procedure prescribed by law, it must also conform to the
following substantive requirements: (1) must not contravene the Constitution or any statute; (2)
must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not
prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6)
must not be unreasonable.37
Anent the first criterion, ordinances shall only be valid when they are not contrary to the Constitution
and to the laws.38 The Ordinance must satisfy two requirements: it must pass muster under the test of
constitutionality and the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The requirement that the
enactment must not violate existing law gives stress to the precept that local government units are able
to legislate only by virtue of their derivative legislative power, a delegation of legislative power from
the national legislature. The delegate cannot be superior to the principal or exercise powers higher
than those of the latter.39
This relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. The
national legislature is still the principal of the local government units, which cannot defy its will or
modify or violate it.40
The Ordinance was passed by the City Council in the exercise of its police power, an enactment of the
City Council acting as agent of Congress. Local government units, as agencies of the State, are
endowed with police power in order to effectively accomplish and carry out the declared objects of
their creation.41 This delegated police power is found in Section 16 of the Code, known as the general
welfare clause, viz:
SECTION 16. General Welfare. Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units shall ensure and
support, among other things, the preservation and enrichment of culture, promote health and safety,
enhance the right of the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their inhabitants.
Local government units exercise police power through their respective legislative bodies; in this case,
the sangguniang panlungsod or the city council. The Code empowers the legislative bodies to "enact
ordinances, approve resolutions and appropriate funds for the general welfare of the province/city/
municipality and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of the
corporate powers of the province/city/ municipality provided under the Code.42 The inquiry in this
Petition is concerned with the validity of the exercise of such delegated power.
The Ordinance contravenes
the Constitution
The police power of the City Council, however broad and far-reaching, is subordinate to the
constitutional limitations thereon; and is subject to the limitation that its exercise must be reasonable
and for the public good.43 In the case at bar, the enactment of the Ordinance was an invalid exercise of
delegated power as it is unconstitutional and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the
promotion of the general welfare are essential for the enjoyment by all the people of the blessings of
democracy.44
SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the fundamental
equality before the law of women and men.45
12
SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall
any person be denied the equal protection of laws.46
Sec. 9. Private property shall not be taken for public use without just compensation.47
A. The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is embodied in the fiat "(N)o person shall be deprived of
life, liberty or property without due process of law. . . ."48
There is no controlling and precise definition of due process. It furnishes though a standard to which
governmental action should conform in order that deprivation of life, liberty or property, in each
appropriate case, be valid. This standard is aptly described as a responsiveness to the supremacy of
reason, obedience to the dictates of justice,49 and as such it is a limitation upon the exercise of the
police power.50
The purpose of the guaranty is to prevent governmental encroachment against the life, liberty and
property of individuals; to secure the individual from the arbitrary exercise of the powers of the
government, unrestrained by the established principles of private rights and distributive justice; to
protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction
without a trial and conviction by the ordinary mode of judicial procedure; and to secure to all persons
equal and impartial justice and the benefit of the general law.51
The guaranty serves as a protection against arbitrary regulation, and private corporations and
partnerships are "persons" within the scope of the guaranty insofar as their property is concerned.52
This clause has been interpreted as imposing two separate limits on government, usually called
"procedural due process" and "substantive due process."
Procedural due process, as the phrase implies, refers to the procedures that the government must
follow before it deprives a person of life, liberty, or property. Classic procedural due process issues are
concerned with what kind of notice and what form of hearing the government must provide when it
takes a particular action.53
Substantive due process, as that phrase connotes, asks whether the government has an adequate
reason for taking away a person's life, liberty, or property. In other words, substantive due process
looks to whether there is a sufficient justification for the government's action.54 Case law in the United
States (U.S.) tells us that whether there is such a justification depends very much on the level of
scrutiny used.55 For example, if a law is in an area where only rational basis review is applied,
substantive due process is met so long as the law is rationally related to a legitimate government
purpose. But if it is an area where strict scrutiny is used, such as for protecting fundamental rights,
then the government will meet substantive due process only if it can prove that the law is necessary to
achieve a compelling government purpose.56
The police power granted to local government units must always be exercised with utmost observance
of the rights of the people to due process and equal protection of the law. Such power cannot be
exercised whimsically, arbitrarily or despotically57 as its exercise is subject to a qualification,
limitation or restriction demanded by the respect and regard due to the prescription of the fundamental
law, particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be
adversely affected only to the extent that may fairly be required by the legitimate demands of public
interest or public welfare.58 Due process requires the intrinsic validity of the law in interfering with
the rights of the person to his life, liberty and property.59
Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as the rationale for the enactment of the
Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear that
the interests of the public generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals.60 It must be evident that
no other alternative for the accomplishment of the purpose less intrusive of private rights can work. A
reasonable relation must exist between the purposes of the police measure and the means employed
for its accomplishment, for even under the guise of protecting the public interest, personal rights and
those pertaining to private property will not be permitted to be arbitrarily invaded.61
Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights62 a violation of the due process clause.
The Ordinance was enacted to address and arrest the social ills purportedly spawned by the
establishments in the Ermita-Malate area which are allegedly operated under the deceptive
veneer of legitimate, licensed and tax-paying nightclubs, bars, karaoke bars, girlie houses,
cocktail lounges, hotels and motels. Petitioners insist that even the Court in the case of Ermita-
Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila63 had already taken
judicial notice of the "alarming increase in the rate of prostitution, adultery and fornication in
Manila traceable in great part to existence of motels, which provide a necessary atmosphere for
clandestine entry, presence and exit and thus become the ideal haven for prostitutes and thrill-
seekers."64
13
The object of the Ordinance was, accordingly, the promotion and protection of the social and moral
values of the community. Granting for the sake of argument that the objectives of the Ordinance are
within the scope of the City Council's police powers, the means employed for the accomplishment
thereof were unreasonable and unduly oppressive.
It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable
regulations looking to the promotion of the moral and social values of the community. However, the
worthy aim of fostering public morals and the eradication of the community's social ills can be
achieved through means less restrictive of private rights; it can be attained by reasonable restrictions
rather than by an absolute prohibition. The closing down and transfer of businesses or their conversion
into businesses "allowed" under the Ordinance have no reasonable relation to the accomplishment of
its purposes. Otherwise stated, the prohibition of the enumerated establishments will not per se protect
and promote the social and moral welfare of the community; it will not in itself eradicate the alluded
social ills of prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and
establishments of the like which the City Council may lawfully prohibit,65 it is baseless and
insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars, night
clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is not
warranted under the accepted definitions of these terms. The enumerated establishments are lawful
pursuits which are not per se offensive to the moral welfare of the community.
That these are used as arenas to consummate illicit sexual affairs and as venues to further the illegal
prostitution is of no moment. We lay stress on the acrid truth that sexual immorality, being a human
frailty, may take place in the most innocent of places that it may even take place in the substitute
establishments enumerated under Section 3 of the Ordinance. If the flawed logic of the Ordinance
were to be followed, in the remote instance that an immoral sexual act transpires in a church cloister
or a court chamber, we would behold the spectacle of the City of Manila ordering the closure of the
church or court concerned. Every house, building, park, curb, street or even vehicles for that matter
will not be exempt from the prohibition. Simply because there are no "pure" places where there are
impure men. Indeed, even the Scripture and the Tradition of Christians churches continually recall the
presence and universality of sin in man's history.66
The problem, it needs to be pointed out, is not the establishment, which by its nature cannot be said to
be injurious to the health or comfort of the community and which in itself is amoral, but the
deplorable human activity that may occur within its premises. While a motel may be used as a venue
for immoral sexual activity, it cannot for that reason alone be punished. It cannot be classified as a
house of ill-repute or as a nuisance per se on a mere likelihood or a naked assumption. If that were so
and if that were allowed, then the Ermita-Malate area would not only be purged of its supposed social
ills, it would be extinguished of its soul as well as every human activity, reprehensible or not, in its
every nook and cranny would be laid bare to the estimation of the authorities.
The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as the
Ordinance may to shape morality, it should not foster the illusion that it can make a moral man out of
it because immorality is not a thing, a building or establishment; it is in the hearts of men. The City
Council instead should regulate human conduct that occurs inside the establishments, but not to the
detriment of liberty and privacy which are covenants, premiums and blessings of democracy.
While petitioners' earnestness at curbing clearly objectionable social ills is commendable, they
unwittingly punish even the proprietors and operators of "wholesome," "innocent" establishments. In
the instant case, there is a clear invasion of personal or property rights, personal in the case of those
individuals desirous of owning, operating and patronizing those motels and property in terms of the
investments made and the salaries to be paid to those therein employed. If the City of Manila so
desires to put an end to prostitution, fornication and other social ills, it can instead impose reasonable
regulations such as daily inspections of the establishments for any violation of the conditions of their
licenses or permits; it may exercise its authority to suspend or revoke their licenses for these
violations;67 and it may even impose increased license fees. In other words, there are other means to
reasonably accomplish the desired end.
Means employed are
constitutionally infirm
The Ordinance disallows the operation of sauna parlors, massage parlors, karaoke bars, beerhouses,
night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns in the Ermita-
Malate area. In Section 3 thereof, owners and/or operators of the enumerated establishments are given
three (3) months from the date of approval of the Ordinance within which "to wind up business
operations or to transfer to any place outside the Ermita-Malate area or convert said businesses to
other kinds of business allowable within the area." Further, it states in Section 4 that in cases of
subsequent violations of the provisions of the Ordinance, the "premises of the erring establishment
shall be closed and padlocked permanently."
It is readily apparent that the means employed by the Ordinance for the achievement of its purposes,
the governmental interference itself, infringes on the constitutional guarantees of a person's
fundamental right to liberty and property.
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to
exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into
mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right
of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such
restraint as are necessary for the common welfare."68 In accordance with this case, the rights of the
citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn his
livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the concept
of liberty.69
14
The U.S. Supreme Court in the case of Roth v. Board of Regents,70 sought to clarify the meaning of
"liberty." It said:
While the Court has not attempted to define with exactness the liberty. . . guaranteed [by the Fifth and
Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also the right
of the individual to contract, to engage in any of the common occupations of life, to acquire useful
knowledge, to marry, establish a home and bring up children, to worship God according to the dictates
of his own conscience, and generally to enjoy those privileges long recognized…as essential to the
orderly pursuit of happiness by free men. In a Constitution for a free people, there can be no doubt
that the meaning of "liberty" must be broad indeed.
In another case, it also confirmed that liberty protected by the due process clause includes personal
decisions relating to marriage, procreation, contraception, family relationships, child rearing, and
education. In explaining the respect the Constitution demands for the autonomy of the person in
making these choices, the U.S. Supreme Court explained:
These matters, involving the most intimate and personal choices a person may make in a lifetime,
choices central to personal dignity and autonomy, are central to the liberty protected by the Fourteenth
Amendment. At the heart of liberty is the right to define one's own concept of existence, of meaning,
of universe, and of the mystery of human life. Beliefs about these matters could not define the
attributes of personhood where they formed under compulsion of the State.71
Persons desirous to own, operate and patronize the enumerated establishments under Section 1 of the
Ordinance may seek autonomy for these purposes.
Motel patrons who are single and unmarried may invoke this right to autonomy to consummate their
bonds in intimate sexual conduct within the motel's premises be it stressed that their consensual
sexual behavior does not contravene any fundamental state policy as contained in the Constitution.72
Adults have a right to choose to forge such relationships with others in the confines of their own
private lives and still retain their dignity as free persons. The liberty protected by the Constitution
allows persons the right to make this choice.73 Their right to liberty under the due process clause gives
them the full right to engage in their conduct without intervention of the government, as long as they
do not run afoul of the law. Liberty should be the rule and restraint the exception.
Liberty in the constitutional sense not only means freedom from unlawful government restraint; it
must include privacy as well, if it is to be a repository of freedom. The right to be let alone is the
beginning of all freedom it is the most comprehensive of rights and the right most valued by
civilized men.74
The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc,75 borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are
indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations are
built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his
experience is private, and the will built out of that experience personal to himself. If he surrenders his
will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a master of
himself. I cannot believe that a man no longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which
should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy
independently of its identification with liberty; in itself it is fully deserving of constitutional
protection. Governmental powers should stop short of certain intrusions into the personal life of the
citizen.76
There is a great temptation to have an extended discussion on these civil liberties but the Court
chooses to exercise restraint and restrict itself to the issues presented when it should. The previous
pronouncements of the Court are not to be interpreted as a license for adults to engage in criminal
conduct. The reprehensibility of such conduct is not diminished. The Court only reaffirms and
guarantees their right to make this choice. Should they be prosecuted for their illegal conduct, they
should suffer the consequences of the choice they have made. That, ultimately, is their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and oppressive as it substantially divests the respondent of
the beneficial use of its property.77 The Ordinance in Section 1 thereof forbids the running of the
enumerated businesses in the Ermita-Malate area and in Section 3 instructs its owners/operators to
wind up business operations or to transfer outside the area or convert said businesses into allowed
businesses. An ordinance which permanently restricts the use of property that it can not be used for
any reasonable purpose goes beyond regulation and must be recognized as a taking of the property
without just compensation.78 It is intrusive and violative of the private property rights of individuals.
The Constitution expressly provides in Article III, Section 9, that "private property shall not be taken
for public use without just compensation." The provision is the most important protection of property
rights in the Constitution. This is a restriction on the general power of the government to take
property. The constitutional provision is about ensuring that the government does not confiscate the
property of some to give it to others. In part too, it is about loss spreading. If the government takes
away a person's property to benefit society, then society should pay. The principal purpose of the
15
guarantee is "to bar the Government from forcing some people alone to bear public burdens which, in
all fairness and justice, should be borne by the public as a whole.79
There are two different types of taking that can be identified. A "possessory" taking occurs when the
government confiscates or physically occupies property. A "regulatory" taking occurs when the
government's regulation leaves no reasonable economically viable use of the property.80
In the landmark case of Pennsylvania Coal v. Mahon,81 it was held that a taking also could be found if
government regulation of the use of property went "too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation
to support the act. While property may be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking.82
No formula or rule can be devised to answer the questions of what is too far and when regulation
becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of degree and
therefore cannot be disposed of by general propositions." On many other occasions as well, the U.S.
Supreme Court has said that the issue of when regulation constitutes a taking is a matter of
considering the facts in each case. The Court asks whether justice and fairness require that the
economic loss caused by public action must be compensated by the government and thus borne by the
public as a whole, or whether the loss should remain concentrated on those few persons subject to the
public action.83
What is crucial in judicial consideration of regulatory takings is that government regulation is a taking
if it leaves no reasonable economically viable use of property in a manner that interferes with
reasonable expectations for use.84 A regulation that permanently denies all economically beneficial or
productive use of land is, from the owner's point of view, equivalent to a "taking" unless principles of
nuisance or property law that existed when the owner acquired the land make the use prohibitable.85
When the owner of real property has been called upon to sacrifice all economically beneficial uses in
the name of the common good, that is, to leave his property economically idle, he has suffered a
taking.86
A regulation which denies all economically beneficial or productive use of land will require
compensation under the takings clause. Where a regulation places limitations on land that fall short of
eliminating all economically beneficial use, a taking nonetheless may have occurred, depending on a
complex of factors including the regulation's economic effect on the landowner, the extent to which
the regulation interferes with reasonable investment-backed expectations and the character of
government action. These inquiries are informed by the purpose of the takings clause which is to
prevent the government from forcing some people alone to bear public burdens which, in all fairness
and justice, should be borne by the public as a whole.87
A restriction on use of property may also constitute a "taking" if not reasonably necessary to the
effectuation of a substantial public purpose or if it has an unduly harsh impact on the distinct
investment-backed expectations of the owner.88
The Ordinance gives the owners and operators of the "prohibited" establishments three (3) months
from its approval within which to "wind up business operations or to transfer to any place outside of
the Ermita-Malate area or convert said businesses to other kinds of business allowable within the
area." The directive to "wind up business operations" amounts to a closure of the establishment, a
permanent deprivation of property, and is practically confiscatory. Unless the owner converts his
establishment to accommodate an "allowed" business, the structure which housed the previous
business will be left empty and gathering dust. Suppose he transfers it to another area, he will likewise
leave the entire establishment idle. Consideration must be given to the substantial amount of money
invested to build the edifices which the owner reasonably expects to be returned within a period of
time. It is apparent that the Ordinance leaves no reasonable economically viable use of property in a
manner that interferes with reasonable expectations for use.
The second and third options to transfer to any place outside of the Ermita-Malate area or to
convert into allowed businesses are confiscatory as well. The penalty of permanent closure in cases
of subsequent violations found in Section 4 of the Ordinance is also equivalent to a "taking" of private
property.
The second option instructs the owners to abandon their property and build another one outside the
Ermita-Malate area. In every sense, it qualifies as a taking without just compensation with an
additional burden imposed on the owner to build another establishment solely from his coffers. The
proffered solution does not put an end to the "problem," it merely relocates it. Not only is this
impractical, it is unreasonable, onerous and oppressive. The conversion into allowed enterprises is just
as ridiculous. How may the respondent convert a motel into a restaurant or a coffee shop, art gallery
or music lounge without essentially destroying its property? This is a taking of private property
without due process of law, nay, even without compensation.
The penalty of closure likewise constitutes unlawful taking that should be compensated by the
government. The burden on the owner to convert or transfer his business, otherwise it will be closed
permanently after a subsequent violation should be borne by the public as this end benefits them as a
whole.
Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A zoning ordinance,
although a valid exercise of police power, which limits a "wholesome" property to a use which can
not reasonably be made of it constitutes the taking of such property without just compensation.
Private property which is not noxious nor intended for noxious purposes may not, by zoning, be
destroyed without compensation. Such principle finds no support in the principles of justice as we
16
know them. The police powers of local government units which have always received broad and
liberal interpretation cannot be stretched to cover this particular taking.
Distinction should be made between destruction from necessity and eminent domain. It needs
restating that the property taken in the exercise of police power is destroyed because it is noxious or
intended for a noxious purpose while the property taken under the power of eminent domain is
intended for a public use or purpose and is therefore "wholesome."89 If it be of public benefit that a
"wholesome" property remain unused or relegated to a particular purpose, then certainly the public
should bear the cost of reasonable compensation for the condemnation of private property for public
use.90
Further, the Ordinance fails to set up any standard to guide or limit the petitioners' actions. It in no
way controls or guides the discretion vested in them. It provides no definition of the establishments
covered by it and it fails to set forth the conditions when the establishments come within its ambit of
prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted power to close down
establishments. Ordinances such as this, which make possible abuses in its execution, depending upon
no conditions or qualifications whatsoever other than the unregulated arbitrary will of the city
authorities as the touchstone by which its validity is to be tested, are unreasonable and invalid. The
Ordinance should have established a rule by which its impartial enforcement could be secured.91
Ordinances placing restrictions upon the lawful use of property must, in order to be valid and
constitutional, specify the rules and conditions to be observed and conduct to avoid; and must not
admit of the exercise, or of an opportunity for the exercise, of unbridled discretion by the law
enforcers in carrying out its provisions.92
Thus, in Coates v. City of Cincinnati,93 as cited in People v. Nazario,94 the U.S. Supreme Court
struck down an ordinance that had made it illegal for "three or more persons to assemble on any
sidewalk and there conduct themselves in a manner annoying to persons passing by." The ordinance
was nullified as it imposed no standard at all "because one may never know in advance what 'annoys
some people but does not annoy others.' "
Similarly, the Ordinance does not specify the standards to ascertain which establishments "tend to
disturb the community," "annoy the inhabitants," and "adversely affect the social and moral welfare of
the community." The cited case supports the nullification of the Ordinance for lack of comprehensible
standards to guide the law enforcers in carrying out its provisions.
Petitioners cannot therefore order the closure of the enumerated establishments without infringing the
due process clause. These lawful establishments may be regulated, but not prevented from carrying on
their business. This is a sweeping exercise of police power that is a result of a lack of imagination on
the part of the City Council and which amounts to an interference into personal and private rights
which the Court will not countenance. In this regard, we take a resolute stand to uphold the
constitutional guarantee of the right to liberty and property.
Worthy of note is an example derived from the U.S. of a reasonable regulation which is a far cry from
the ill-considered Ordinance enacted by the City Council.
In FW/PBS, INC. v. Dallas,95 the city of Dallas adopted a comprehensive ordinance regulating
"sexually oriented businesses," which are defined to include adult arcades, bookstores, video stores,
cabarets, motels, and theaters as well as escort agencies, nude model studio and sexual encounter
centers. Among other things, the ordinance required that such businesses be licensed. A group of
motel owners were among the three groups of businesses that filed separate suits challenging the
ordinance. The motel owners asserted that the city violated the due process clause by failing to
produce adequate support for its supposition that renting room for fewer than ten (10) hours resulted
in increased crime and other secondary effects. They likewise argued than the ten (10)-hour limitation
on the rental of motel rooms placed an unconstitutional burden on the right to freedom of association.
Anent the first contention, the U.S. Supreme Court held that the reasonableness of the legislative
judgment combined with a study which the city considered, was adequate to support the city's
determination that motels permitting room rentals for fewer than ten (10 ) hours should be included
within the licensing scheme. As regards the second point, the Court held that limiting motel room
rentals to ten (10) hours will have no discernible effect on personal bonds as those bonds that are
formed from the use of a motel room for fewer than ten (10) hours are not those that have played a
critical role in the culture and traditions of the nation by cultivating and transmitting shared ideals and
beliefs.
The ordinance challenged in the above-cited case merely regulated the targeted businesses. It imposed
reasonable restrictions; hence, its validity was upheld.
The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila,96 it
needs pointing out, is also different from this case in that what was involved therein was a measure
which regulated the mode in which motels may conduct business in order to put an end to practices
which could encourage vice and immorality. Necessarily, there was no valid objection on due process
or equal protection grounds as the ordinance did not prohibit motels. The Ordinance in this case
however is not a regulatory measure but is an exercise of an assumed power to prohibit.97
The foregoing premises show that the Ordinance is an unwarranted and unlawful curtailment of
property and personal rights of citizens. For being unreasonable and an undue restraint of trade, it
cannot, even under the guise of exercising police power, be upheld as valid.
B. The Ordinance violates Equal
Protection Clause
17
Equal protection requires that all persons or things similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed. Similar subjects, in other words, should not be treated
differently, so as to give undue favor to some and unjustly discriminate against others.98 The guarantee
means that no person or class of persons shall be denied the same protection of laws which is enjoyed
by other persons or other classes in like circumstances.99 The "equal protection of the laws is a pledge
of the protection of equal laws."100 It limits governmental discrimination. The equal protection clause
extends to artificial persons but only insofar as their property is concerned.101
The Court has explained the scope of the equal protection clause in this wise:
… What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure Administration: "The ideal
situation is for the law's benefits to be available to all, that none be placed outside the sphere of its
coverage. Only thus could chance and favor be excluded and the affairs of men governed by that
serene and impartial uniformity, which is of the very essence of the idea of law." There is recognition,
however, in the opinion that what in fact exists "cannot approximate the ideal. Nor is the law
susceptible to the reproach that it does not take into account the realities of the situation. The
constitutional guarantee then is not to be given a meaning that disregards what is, what does in fact
exist. To assure that the general welfare be promoted, which is the end of law, a regulatory measure
may cut into the rights to liberty and property. Those adversely affected may under such
circumstances invoke the equal protection clause only if they can show that the governmental act
assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of
hostility, or at the very least, discrimination that finds no support in reason." Classification is thus not
ruled out, it being sufficient to quote from the Tuason decision anew "that the laws operate equally
and uniformly on all persons under similar circumstances or that all persons must be treated in the
same manner, the conditions not being different, both in the privileges conferred and the liabilities
imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal
protection and security shall be given to every person under circumstances which, if not identical, are
analogous. If law be looked upon in terms of burden or charges, those that fall within a class should
be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the
rest.102
Legislative bodies are allowed to classify the subjects of legislation. If the classification is reasonable,
the law may operate only on some and not all of the people without violating the equal protection
clause.103 The classification must, as an indispensable requisite, not be arbitrary. To be valid, it must
conform to the following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only. general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
4) It must apply equally to all members of the class.104
. . .
In the Court's view, there are no substantial distinctions between motels, inns, pension houses, hotels,
lodging houses or other similar establishments. By definition, all are commercial establishments (4) Regulate activities relative to the use of land, buildings and structures within the city in order to
providing lodging and usually meals and other services for the public. No reason exists for prohibiting promote the general welfare and for said purpose shall:
motels and inns but not pension houses, hotels, lodging houses or other similar establishments. The
classification in the instant case is invalid as similar subjects are not similarly treated, both as to rights . . .
conferred and obligations imposed. It is arbitrary as it does not rest on substantial distinctions bearing
a just and fair relation to the purpose of the Ordinance.
(iv) Regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels,
motels, inns, pension houses, lodging houses, and other similar establishments, including tourist
The Court likewise cannot see the logic for prohibiting the business and operation of motels in the guides and transports . . . .
Ermita-Malate area but not outside of this area. A noxious establishment does not become any less
noxious if located outside the area.
While its power to regulate the establishment, operation and maintenance of any entertainment or
amusement facilities, and to prohibit certain forms of amusement or entertainment is provided under
The standard "where women are used as tools for entertainment" is also discriminatory as Section 458 (a) 4 (vii) of the Code, which reads as follows:
prostitution one of the hinted ills the Ordinance aims to banish is not a profession exclusive to
women. Both men and women have an equal propensity to engage in prostitution. It is not any less
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the
grave a sin when men engage in it. And why would the assumption that there is an ongoing immoral
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the
activity apply only when women are employed and be inapposite when men are in harness? This
general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper
discrimination based on gender violates equal protection as it is not substantially related to important
exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
government objectives.105 Thus, the discrimination is invalid.
. . .
Failing the test of constitutionality, the Ordinance likewise failed to pass the test of consistency with
prevailing laws.
(4) Regulate activities relative to the use of land, buildings and structures within the city in order to
promote the general welfare and for said purpose shall:
C. The Ordinance is repugnant
to general laws; it is ultra vires
. . .
The Ordinance is in contravention of the Code as the latter merely empowers local government units
to regulate, and not prohibit, the establishments enumerated in Section 1 thereof. (vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement
facilities, including theatrical performances, circuses, billiard pools, public dancing schools, public
dance halls, sauna baths, massage parlors, and other places for entertainment or amusement; regulate
The power of the City Council to regulate by ordinances the establishment, operation, and
such other events or activities for amusement or entertainment, particularly those which tend to
maintenance of motels, hotels and other similar establishments is found in Section 458 (a) 4 (iv),
disturb the community or annoy the inhabitants, or require the suspension or suppression of the same;
which provides that:
or, prohibit certain forms of amusement or entertainment in order to protect the social and moral
welfare of the community.
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the

18
Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging
houses, and other similar establishments, the only power of the City Council to legislate relative
thereto is to regulate them to promote the general welfare. The Code still withholds from cities the
power to suppress and prohibit altogether the establishment, operation and maintenance of such
establishments. It is well to recall the rulings of the Court in Kwong Sing v. City of Manila106 that:
The word "regulate," as used in subsection (l), section 2444 of the Administrative Code, means and
includes the power to control, to govern, and to restrain; but "regulate" should not be construed as
synonymous with "suppress" or "prohibit." Consequently, under the power to regulate laundries, the
municipal authorities could make proper police regulations as to the mode in which the employment
or business shall be exercised.107
And in People v. Esguerra,108 wherein the Court nullified an ordinance of the Municipality of
Tacloban which prohibited the selling, giving and dispensing of liquor ratiocinating that the
municipality is empowered only to regulate the same and not prohibit. The Court therein declared
that:
(A)s a general rule when a municipal corporation is specifically given authority or power to regulate
or to license and regulate the liquor traffic, power to prohibit is impliedly withheld.109
These doctrines still hold contrary to petitioners' assertion110 that they were modified by the Code
vesting upon City Councils prohibitory powers.
Similarly, the City Council exercises regulatory powers over public dancing schools, public dance
halls, sauna baths, massage parlors, and other places for entertainment or amusement as found in the
first clause of Section 458 (a) 4 (vii). Its powers to regulate, suppress and suspend "such other events
or activities for amusement or entertainment, particularly those which tend to disturb the community
or annoy the inhabitants" and to "prohibit certain forms of amusement or entertainment in order to
protect the social and moral welfare of the community" are stated in the second and third clauses,
respectively of the same Section. The several powers of the City Council as provided in Section 458
(a) 4 (vii) of the Code, it is pertinent to emphasize, are separated by semi-colons (;), the use of which
indicates that the clauses in which these powers are set forth are independent of each other albeit
closely related to justify being put together in a single enumeration or paragraph.111 These powers,
therefore, should not be confused, commingled or consolidated as to create a conglomerated and
unified power of regulation, suppression and prohibition.112
The Congress unequivocably specified the establishments and forms of amusement or entertainment
subject to regulation among which are beerhouses, hotels, motels, inns, pension houses, lodging
houses, and other similar establishments (Section 458 (a) 4 (iv)), public dancing schools, public dance
halls, sauna baths, massage parlors, and other places for entertainment or amusement (Section 458 (a)
19
4 (vii)). This enumeration therefore cannot be included as among "other events or activities for
amusement or entertainment, particularly those which tend to disturb the community or annoy the
inhabitants" or "certain forms of amusement or entertainment" which the City Council may suspend,
suppress or prohibit.
The rule is that the City Council has only such powers as are expressly granted to it and those which
are necessarily implied or incidental to the exercise thereof. By reason of its limited powers and the
nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising
out of the terms used in granting said powers must be construed against the City Council.113 Moreover,
it is a general rule in statutory construction that the express mention of one person, thing, or
consequence is tantamount to an express exclusion of all others. Expressio unius est exclusio alterium.
This maxim is based upon the rules of logic and the natural workings of human mind. It is particularly
applicable in the construction of such statutes as create new rights or remedies, impose penalties or
punishments, or otherwise come under the rule of strict construction.114
The argument that the City Council is empowered to enact the Ordinance by virtue of the general
welfare clause of the Code and of Art. 3, Sec. 18 (kk) of the Revised Charter of Manila is likewise
without merit. On the first point, the ruling of the Court in People v. Esguerra,115 is instructive. It held
that:
The powers conferred upon a municipal council in the general welfare clause, or section 2238 of the
Revised Administrative Code, refers to matters not covered by the other provisions of the same Code,
and therefore it can not be applied to intoxicating liquors, for the power to regulate the selling, giving
away and dispensing thereof is granted specifically by section 2242 (g) to municipal councils. To hold
that, under the general power granted by section 2238, a municipal council may enact the ordinance
in question, notwithstanding the provision of section 2242 (g), would be to make the latter superfluous
and nugatory, because the power to prohibit, includes the power to regulate, the selling, giving away
and dispensing of intoxicating liquors.
On the second point, it suffices to say that the Code being a later expression of the legislative will
must necessarily prevail and override the earlier law, the Revised Charter of Manila. Legis posteriores
priores contrarias abrogant, or later statute repeals prior ones which are repugnant thereto. As
between two laws on the same subject matter, which are irreconcilably inconsistent, that which is
passed later prevails, since it is the latest expression of legislative will.116 If there is an inconsistency
or repugnance between two statutes, both relating to the same subject matter, which cannot be
removed by any fair and reasonable method of interpretation, it is the latest expression of the
legislative will which must prevail and override the earlier.117
Implied repeals are those which take place when a subsequently enacted law contains provisions
contrary to those of an existing law but no provisions expressly repealing them. Such repeals have
been divided into two general classes: those which occur where an act is so inconsistent or
irreconcilable with an existing prior act that only one of the two can remain in force and those which
occur when an act covers the whole subject of an earlier act and is intended to be a substitute therefor.
The validity of such a repeal is sustained on the ground that the latest expression of the legislative will
should prevail.118
In addition, Section 534(f) of the Code states that "All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which
are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly."
Thus, submitting to petitioners' interpretation that the Revised Charter of Manila empowers the City
Council to prohibit motels, that portion of the Charter stating such must be considered repealed by the
Code as it is at variance with the latter's provisions granting the City Council mere regulatory powers.
It is well to point out that petitioners also cannot seek cover under the general welfare clause
authorizing the abatement of nuisances without judicial proceedings. That tenet applies to a nuisance
per se, or one which affects the immediate safety of persons and property and may be summarily
abated under the undefined law of necessity. It can not be said that motels are injurious to the rights of
property, health or comfort of the community. It is a legitimate business. If it be a nuisance per
accidens it may be so proven in a hearing conducted for that purpose. A motel is not per se a nuisance
warranting its summary abatement without judicial intervention.119
Notably, the City Council was conferred powers to prevent and prohibit certain activities and
establishments in another section of the Code which is reproduced as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government,
and in this connection, shall:
. . .
(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual
drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of
houses of ill repute, gambling and other prohibited games of chance, fraudulent devices and ways
to obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile
delinquency, the printing, distribution or exhibition of obscene or pornographic materials or
publications, and such other activities inimical to the welfare and morals of the inhabitants of the
city;
20
. . .
If it were the intention of Congress to confer upon the City Council the power to prohibit the
establishments enumerated in Section 1 of the Ordinance, it would have so declared in uncertain
terms by adding them to the list of the matters it may prohibit under the above-quoted Section. The
Ordinance now vainly attempts to lump these establishments with houses of ill-repute and expand the
City Council's powers in the second and third clauses of Section 458 (a) 4 (vii) of the Code in an
effort to overreach its prohibitory powers. It is evident that these establishments may only be
regulated in their establishment, operation and maintenance.
It is important to distinguish the punishable activities from the establishments themselves. That these
establishments are recognized legitimate enterprises can be gleaned from another Section of the Code.
Section 131 under the Title on Local Government Taxation expressly mentioned proprietors or
operators of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging houses as
among the "contractors" defined in paragraph (h) thereof. The same Section also defined
"amusement" as a "pleasurable diversion and entertainment," "synonymous to relaxation, avocation,
pastime or fun;" and "amusement places" to include "theaters, cinemas, concert halls, circuses and
other places of amusement where one seeks admission to entertain oneself by seeing or viewing the
show or performances." Thus, it can be inferred that the Code considers these establishments as
legitimate enterprises and activities. It is well to recall the maxim reddendo singula singulis which
means that words in different parts of a statute must be referred to their appropriate connection, giving
to each in its place, its proper force and effect, and, if possible, rendering none of them useless or
superfluous, even if strict grammatical construction demands otherwise. Likewise, where words under
consideration appear in different sections or are widely dispersed throughout an act the same principle
applies.120
Not only does the Ordinance contravene the Code, it likewise runs counter to the provisions of P.D.
499. As correctly argued by MTDC, the statute had already converted the residential Ermita-Malate
area into a commercial area. The decree allowed the establishment and operation of all kinds of
commercial establishments except warehouse or open storage depot, dump or yard, motor repair shop,
gasoline service station, light industry with any machinery or funeral establishment. The rule is that
for an ordinance to be valid and to have force and effect, it must not only be within the powers of the
council to enact but the same must not be in conflict with or repugnant to the general law.121 As
succinctly illustrated in Solicitor General v. Metropolitan Manila Authority:122
The requirement that the enactment must not violate existing law explains itself. Local political
subdivisions are able to legislate only by virtue of a valid delegation of legislative power from the
national legislature (except only that the power to create their own sources of revenue and to levy
taxes is conferred by the Constitution itself). They are mere agents vested with what is called the
power of subordinate legislation. As delegates of the Congress, the local government units cannot
contravene but must obey at all times the will of their principal. In the case before us, the enactment in
question, which are merely local in origin cannot prevail against the decree, which has the force and
effect of a statute.123
Petitioners contend that the Ordinance enjoys the presumption of validity. While this may be the rule,
it has already been held that although the presumption is always in favor of the validity or
reasonableness of the ordinance, such presumption must nevertheless be set aside when the invalidity
or unreasonableness appears on the face of the ordinance itself or is established by proper evidence.
The exercise of police power by the local government is valid unless it contravenes the fundamental
law of the land, or an act of the legislature, or unless it is against public policy or is unreasonable,
oppressive, partial, discriminating or in derogation of a common right.124
Conclusion
All considered, the Ordinance invades fundamental personal and property rights and impairs personal
privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is discriminatory and
unreasonable in its operation; it is not sufficiently detailed and explicit that abuses may attend the
enforcement of its sanctions. And not to be forgotten, the City Council under the Code had no power
to enact the Ordinance and is therefore ultra vires, null and void.
Concededly, the challenged Ordinance was enacted with the best of motives and shares the concern of
the public for the cleansing of the Ermita-Malate area of its social sins. Police power legislation of
such character deserves the full endorsement of the judiciary we reiterate our support for it. But
inspite of its virtuous aims, the enactment of the Ordinance has no statutory or constitutional authority
to stand on. Local legislative bodies, in this case, the City Council, cannot prohibit the operation of
the enumerated establishments under Section 1 thereof or order their transfer or conversion without
infringing the constitutional guarantees of due process and equal protection of laws not even under
the guise of police power.
WHEREFORE, the Petition is hereby DENIED and the decision of the Regional Trial Court
declaring the Ordinance void is AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-
Morales, Callejo, Sr., Azcuna, Chico-Nazario and Garcia, JJ., concur
Panganiban, J., in the result.
Ynares- Santiago, J., concur in the result only.
21
G.R. No. 142359 May 25, 2004
PASONG BAYABAS FARMERS ASSOCIATION, INC., represented by DOMINGO BANAAG,
JR., President; BERNARDO POBLETE, Vice-President, and its Members, petitioners,
vs.
The Honorable COURT OF APPEALS, CREDITO ASIATIC, INC., ERNESTO TANCHI, SR.,
GEN. DIONISIO OJEDA (deceased), ELENA P. BIGAY, and LANRICO MINISTERIO,
respondents.
x-----------------------------x
G.R. No. 142980 May 25, 2004
DEPARTMENT OF AGRARIAN REFORM (DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD), petitioners,
vs.
The Honorable COURT OF APPEALS, CREDITO ASIATIC, INC., ERNESTO TANCHI, SR.,
GEN. DIONISIO OJEDA (deceased), ELENA P. BIGAY, and LANRICO MINISTERIO,
respondents.
DECISION
CALLEJO, SR., J.:
Before the Court are petitions for review on certiorari of the Decision1 of the Court of Appeals, in
C.A.-G.R. SP No. 49363, which set aside and reversed the decision of the Department of
Agrarian Reform Adjudication Board (DARAB), in DARAB Case No. 5191, and reinstated the
decision of the Provincial Agrarian Reform Adjudication Board (PARAD) of Trece Martirez
City, in DARAB Case No. CA-0285-95 which, in turn, ordered the dismissal of the complaint for
Maintenance for Peaceful Possession and Cultivation with Damages with Prayer for the
Issuance of a Temporary Restraining Order/Preliminary Injunction of petitioner Pasong
Bayabas Farmers Association, Inc. (PBFAI).
The Antecedents
Sometime in 1964, Lakeview Development Corporation (LDC, for brevity) bought a parcel of land
with an area of 753,610 square meters (75.3610 hectares) located at Barrio Kabilang-Baybay,
Carmona, Cavite,2 covered by Transfer Certificate of Titles (TCT) No. T- 91584 and T-91585. On
September 20, 1977, the aforesaid titles were cancelled by TCT No. T-62972 issued to and in the
name of the LDC’s successor, the Credito Asiatic, Incorporated (CAI). The property was subsequently
subdivided into two parcels of land, one of which was covered by TCT No. 116658, with an area of
365,753 square meters, and the other covered by TCT No. 116659 with an area of 387,853 square
meters.4
Meanwhile, the LDC/CAI undertook to develop its 75-hectare property into a residential and
industrial estate, where industrial sites and a low cost housing project inceptually called the Tamanli
Housing Project would be established. The LDC applied with the Municipal Council of Carmona for
an ordinance approving the zoning and the subdivision of the property. The subdivision plan was
referred by the council to the National Planning Commission as mandated by Administrative
Order No. 152, Series of 1968. The Commission approved the plan and on May 30, 1976, the
Tanggapan Ng Sangguniang Bayan ng Karmona (Municipal Council of Carmona) approved
Kapasiyahang Bilang 30, granting the application and affirming the project. The resolution reads:
Kapasiyahang Bilang 30
Sapagkat, ang TAMANLI HOUSING PROJECT at LAKEVIEW DEVELOPMENT CORP. ay
nagharap ng kanilang kahilingan dito sa ating Kapulungan, sa pamamagitan ni G. BENJAMIN F.
GOMEZ, Chief, Physical Environmental Planning Service ng DLGCD, upang makapagpatayo sila ng
murang pabahay sa may Lote Blg. E-Psd-11882, na nasa Bo. Cabilang Baybay ng bayang ito at Lote
Blg. 4 (LRC) PCS 15453 saklaw ng bayang ito, ayon sa pagkakasunod-sunod;
SAPAGKAT, ang bagay na ito ay makatutulong ng malaki sa ating mga kababayan, dahil sa ito ay
nagbibigay ng murang pabahay;
SAPAGKAT, DAHIL DITO, sa mungkahi ni G. DOMINADOR ESPIRITU na pinangalawahan ni G.
MELQUIADES MAHABO, ay pinagtibay, tulad nang ito’y pinagtitibay, na pagtibayin ang kahilingan
ng Tamanli Housing Project at Lakeview Development Corp. na makapaglagay ng murang pabahay
dito sa ating bayan, sa isang pasubaling ang mga ito ay kailangang pumailalim sa hinihingi ng
Administrative Order No. 152, S-1968 ng Pangulo ng Bansang Pilipinas at sa umiiral ng mga
kautusan at patakaran ng ating Pamahalaang Pambansa at Pamahalaang Pambayan.5
Subsequently, after a consolidated survey was approved by the Bureau of Lands, the lots were
subdivided and the aforesaid titles were cancelled. TCT Nos. 144149, 144150 and T-144151 were
issued in lieu of the said titles.6 The CAI embarked on the development of the housing project into
three phases: First Phase, the Hakone Subdivision; Second Phase, the Sunshine Village & Casa
de Monteverde; and, Third Phase, the Mandarin Homes.7 The project was registered with the
National Housing Authority (NHA) as required by Presidential Decree No. 957 which issued, on July
7, 1977, a license in favor of the LDC to sell the subdivision lots.
22
The property was subdivided into 728 residential lots per the consolidation subdivision plan approved
by the Bureau of Lands, each with an average area of 240 square meters. Separate titles for each of the
728 lots were issued by the Register of Deeds of Cavite to and in the name of the CAI on September
20, 1977.
Meanwhile, the CAI secured a locational clearance for the project from the Human Settlements
Regulatory Commission (HSRC).8 Although the Municipal Council of Carmona had already approved
the conversion of the property into a residential area, nevertheless, the CAI filed an application under
Republic Act No. 3844 with the Office of the Minister of Agrarian Reform for the conversion of a
portion of the 75-hectare property consisting of 35.80 hectares covered by TCT No. 62972 located in
Barrio Kabilang-Baybay, Carmona, Cavite, from agricultural to residential. The property was to be
used for the Hakone Housing Project. The Minister referred the matter to the Regional Director for
investigation and recommendation and to the Ministry of Local Government and Community
Development.
On July 3, 1979, then Minister of Agrarian Reform Conrado F. Estrella issued an Order granting the
petition and approved the conversion of the 35.80 hectare portion of TCT-62972 into a residential
subdivision, pursuant to Rep. Act No. 3844, as amended. In so doing, it took into account the
resolution of the Municipal Council of Carmona, the recommendation of the Regional Director of the
Ministry of Agrarian Reform, the clearance from the HSRC as well as the Ministry of Local
Government and Community Development. The order in part reads:
Considering the parcel of land to be not covered by P.D. 27, it being untenanted and not devoted to
the production of palay and/or corn as reported by the Agrarian Reform Team Leader concerned and
favorably recommended for conversion by him and further, by the Regional Director for Region IV,
Pasig, Metro Manila, and considering further, that the parcel of land subject hereof was found to be
suitable for conversion to residential subdivision by the Ministry of Local Government and
Community Development and considering finally, that the herein petitioner was issued a locational
clearance by the Human Settlements Regulatory Commission, the instant request of the petitioner is
hereby GRANTED pursuant to the provisions of R.A. 3844, as amended, and P.D. 815.9
The grant was, however, subjected to the fulfillment of the following conditions:
1. Physical development shall commence within one (1) year from receipt hereof;
2. A setback of three (3) meters measured from the property lines to the edge of the normal high
waterline of the Pasong Bayabas and Patayod Rivers shall be observed pursuant to the Water Code
(P.D. 705);
3. Applicant-proponent shall undertake flood protective measures such as the construction of rip-rap
walls or terracing and cribbing along the river banks to avoid erosion and flood;
4. Clearance from the Laguna Lake Development Authority shall be secured since the proposed
project is within the Laguna Lake Basin; and
5. A permit to operate from the National Pollution Control Commission shall be secured and Anti-
Pollution laws (R.A. 3981, P.D. 984 and others) shall be strictly observed.
Failure, however, to comply with the aforestated terms and conditions, this Ministry shall
consider such violations as sufficient ground for the cancellation of the permit-order and this
Ministry by reason thereof may take any or all course of action mentioned in the Memorandum-
Agreement between this Ministry, the Ministry of Local Government and Community
Development and the Human Settlements Regulatory Commission in addition to the penalties
provided for in Presidential Decree 815, if so applicable.10
On March 14, 1980, the Sangguniang Panlalawigan ng Cavite (Provincial Board of Cavite) passed
Resolution No. 40 declaring the midland areas composed of Carmona, Dasmariñas, parts of Silang
and Trece Martirez (where the subject property is situated) and parts of Imus, as industrial areas.11
Under Batas Pambansa Blg. 76, approved on June 13, 1980, the resettlement areas under the
administration of the NHA in the barangays of San Gabriel, San Jose and a portion of Cabilang
Baybay, all in the Municipality of Carmona, were separated from the said municipality and constituted
into a new and independent municipality known as General Mariano Alvarez (GMA), Cavite.12 In
1983, Asiatic Development Corporation (ADC), a sister company of CAI, started developing the
property located in GMA covered by TCT No. 144150 into a residential housing project, called the
Sunshine Village Phase IV (originally Hakone) with an area of 20.05 hectares. The ADC also secured
in 198313 a preliminary approval and locational clearance from the HSRC for Sunshine Village Phase
IV.14
The CAI also secured the following for its Hakone Housing Project:
1. HLURB License to Sell No. 0613 on November 7, 1983
2. HSRC Development Permit on April 11, 1984
3. HLURB Preliminary Approval and Locational Clearance on November 11, 1985
4. HSRC Preliminary Approval and Locational Clearance on November 17, 1983
23
5. HSRC Certificate of Registration No. 1069 on February 1, 1985
6. HSRC License to Sell No. 1053 on March 18, 1985.15
In 1987, the CAI decided to continue with the development of its Hakone Housing Project and
contracted with E.M. Aragon Enterprises for the bulldozing of the property. However, the
project was stymied by a Complaint for Damages with Prayer for Temporary Restraining Order
and Preliminary Injunction filed on May 22, 1987 against the CAI in the Regional Trial Court of
Cavite.16 The case was docketed as Civil Case No. BCV-87-13 and was raffled to Branch 19.17
The plaintiffs alleged, inter alia, that while the defendant CAI was the owner of the 75.36-
hectare land covered by TCT-62972, they were the actual tillers of the land. The defendant had
surreptitiously applied for the conversion of the 35.8-hectare portion of the aforesaid property
from agricultural to residential and the same was granted by the Ministry of Agrarian Reform,
as can be gleaned from the July 3, 1979 Order of Agrarian Reform Minister Estrella. According
to the plaintiffs, they came to know of the conversion only in January 1987. Notwithstanding the
issuance of the order of conversion, Ramie Cabusbusan, the representative of the CAI, allowed
them to continue cultivating the aforementioned property. They were, however, required to pay
a rental of ₱400 a year per hectare. They paid the rental and continued to occupy and till the
aforesaid property pursuant to the agreement. On October 28, 1986 and November 11, 1986, the
plaintiffs, together with other tillers of the land, met Cabusbusan at the Municipal Branch of
the then Ministry of Agrarian Reform and reached an agreement that the plaintiffs would
remain in the peaceful possession of their farmholdings. Notwithstanding such agreement, the
defendant ordered the bulldozing of the property, by reason of which the plaintiffs suffered
actual damages. Furthermore, the plaintiffs alleged that the bulldozing was done without any
permit from the concerned public authorities.
The plaintiffs, thus, prayed that a temporary restraining order be issued against the CAI from
continuing with the bulldozing of the property, and that after due hearing, judgment be rendered in
their favor, ordering the defendants to refrain from implementing the July 3, 1979 Order of Agrarian
Reform Minister Estrella.18
In its answer to the complaint, the CAI admitted its ownership of the 753,610 square meter property
covered and described under TCT No. 62972 and the issuance of the Order of Conversion of the 35.8
hectare portion thereof. However, it denied that it allowed the plaintiffs to possess and cultivate the
landholding with fixed rentals therefor.19 The CAI prayed that the prayer for preliminary injunction be
denied and that judgment be issued dismissing the complaint and absolving it from any liability. It
counterclaimed for the amount paid by it to E.M. Aragon Enterprises for expenses for the rent of the
bulldozer and moral damages.20
Meanwhile, the CAI and six of the fourteen plaintiffs, namely, Medy Vinzon, Luz Alvarez, Godofredo
Inciong, Bernardo Poblete, Estelita Gaut and Victoria Valerio, entered into a compromise agreement
whereby the defendant donated parcels of land in consideration of the execution of deeds of
quitclaims and waivers. Conformably to the said agreement, the plaintiffs executed separate deeds of
quitclaim in favor of the CAI over the portion of the property which they claimed they occupied. The
six plaintiffs filed a Motion to Dismiss the complaint on June 19, 1989.21 On June 20, 1989, the RTC
of Cavite issued an Order dismissing the complaint but only insofar as the plaintiffs Vinzon, Alvarez,
Inciong, Poblete, Gaut and Valerio were concerned.22 With respect to the other eight (8) plaintiffs, the
court proceeded with the scheduled hearing.
The civil case notwithstanding, the CAI decided to proceed with the third phase of its project. It
developed its eleven-hectare property into a residential property called the Mandarin Homes. The CAI
applied for and was granted a separate Order of Conversion on January 2, 1990 by the Department of
Agrarian Reform (DAR).23 In 1991, the CAI started selling the houses in its Mandarin Homes
Project.24
In the meantime, the remaining plaintiffs in Civil Case No. BCV-87-13 entered into a compromise
agreement in which the CAI executed Deeds of Donation25 in their favor over parcels of land. The
said plaintiffs, in turn, executed quitclaims26 and waivers over the portions of the property which they
claimed they occupied. Thereafter, the plaintiffs and the CAI filed a motion to dismiss the complaint.
The trial court issued an Order granting the motion and dismissing the complaint on June 20, 1991.27
Consequently, all the plaintiffs were issued separate titles over the parcels of land donated to them by
the CAI which were declared, for taxation purposes, in the names of the latter.28
With the settlement of the civil case, the CAI continued with its development of the rest of the Hakone
Housing Project by causing a survey of the property. However, the CAI was stymied anew when, on
November 25, 1992, a Petition for Compulsory Coverage under Rep. Act No. 6657, otherwise known
as the Comprehensive Agrarian Reform Law (CARL) was filed before the DAR by seventeen (17)
individuals.29 They alleged that they were farmers of Bo. 14, Pasong Bayabas River, Barangay F. De
Castro, GMA, Cavite.30 The petitioners claimed that since 1961, they had been occupying a parcel of
public agricultural land originally owned by General Dionisio Ojeda with an area of twenty-seven
hectares, more or less, adjacent to Pasong Bayabas River. They tilled the said agricultural lands and
planted it with rice, corn, vegetables, root crops, fruit trees and raised small livestock for daily
survival.31
The petitioners requested that the DAR order an official survey of the aforesaid agricultural lands.
Pending resolution of their petition, the petitioners and twenty (20) others banded together and formed
a group called Pasong Bayabas Farmers Association, Inc. (PBFAI) affiliated with Kalipunan ng
Samahan ng Mamamayan, Inc. (KASAMA).32
24
On June 10, 1994, Domingo Banaag, in his capacity as President of PBFAI, filed a petition for
compulsory coverage of a portion of the CAI property covered by TCT No. 91585,33 with an area of
47 hectares under Rep. Act No. 6657. On August 18, 1994, Legal Officer Maria Laarni N. Morallos of
the DAR, in her Memorandum to Regional Director Percival C. Dalugdug, reported that the
Municipal Agrarian Reform Office (MARO) had taken preliminary steps for the compulsory coverage
of the property and, in fact, had interviewed its occupants. The processing was stalled, however,
because documents such as the titles and tax declarations covering the property had not yet been
submitted, and the formal application had yet to be made by the petitioners.34 She recommended that
the petition be indorsed to the MARO Office. Pending the resolution of the petition of the PBFAI, the
CAI decided to continue with its Hakone Housing Project and ordered a survey of the property on
October 6, 1995. The survey was completed on October 9, 1995. On October 14 and 15, 1995, the
CAI caused the bulldozing and other development activities, which resulted in the destruction of
plants and trees.
The PBFAI-KASAMA, representing the farmers-tenants, filed a complaint for Maintenance of
Peaceful Possession and Cultivation with Damages with Prayer for the Issuance of a Temporary
Restraining Order and Preliminary Injunction before the Department of Agrarian Reform Adjudication
Board (DARAB), Region IV, Trece Martirez City, Cavite, against the CAI, Tan Chi, Dionisio Ojeda,
Elena Bigay, Lanrico Ministerio and Alfredo Espiritu over a portion of the property of the CAI. The
case was docketed as DARAB Case No. CA-0285-95.35
The plaintiffs therein alleged that since 1961, its members had been in actual possession, as tenants of
General Dionisio Ojeda, of the 27-hectare property, located in Pasong Bayabas, Cabilang Baybay,
Carmona, Cavite36 covered by TCT No. T-69813 in the name of Pan Asiatic Commercial Co., Inc.;37
T-9158438 and T-69810 owned by the LDC. They applied for the compulsory coverage of the property
under CARL before the DAR in 1992, and on October 6, 1995, the CAI caused the survey of the
property. The CAI commenced the bulldozing activities on the property on October 14, 1995 without
any permit from the Department of Environment and Natural Resources (DENR) or from the Office
of the Barangay Captain. According to the petitioners, the said illegal bulldozing activities would
convert the land from agricultural to non-agricultural land, thereby depriving the members of the
PBFAI of their tenancy rights over the property. For this reason, the petitioners prayed that a
temporary restraining order be issued ex-parte to stop the bulldozing of the property, and that a
preliminary injunction or a status quo order be later issued to enjoin the same.
The complainants prayed that, after due proceedings, judgment be rendered in their favor, viz:
...
3. That the Defendants Tan Chi and Dionisio Ojeda, as the most responsible officers of the Defendant
Corporation be ordered to direct persons acting under their authority to respect the peaceful
possession and cultivation of the Plaintiffs, of the subject land;
4. That the Defendants Lanrico Ministerio and Alfredo Espiritu be ordered to respect and maintain the
peaceful tenancy of the Plaintiffs, of the subject land;
5. That the Defendants be ordered jointly and severally to pay to the Plaintiffs:
P500,000.00 as moral damages;
P250,000.00 by way of exemplary damages;
P50,000.00 in reimbursement of litigation expenses.
6. That the Defendants pay for the costs of this suit; and
7. That other reliefs and remedies be afforded to the Plaintiffs as may be just and equitable under the
premises.39
On October 27, 1995, Provincial Adjudicator Barbara P. Tan issued a Temporary Restraining Order
worded as follows:
WHEREFORE, premises considered let a TEMPORARY RESTRAINING ORDER hereby issue to
take effect for a period of twenty (20) days from receipt hereof;
1) Enjoining the defendant landowner and any/all persons acting for and in its behalf or under its
authority to cease and desist from further bulldozing the premises in question and committing acts of
dispossession or tending to disturb the peaceful possession and cultivation of the complainants of the
landholdings in question.
Meantime, let the hearing of the Preliminary Injunction incident be set on November 9, 1995 at 1:30
P.M.40
The defendants filed their Answer with Motion to Lift Restraining Order and Preliminary Injunction.41
Therein, they denied the personal circumstances of the plaintiffs and the personal circumstances of the
defendants Lanrico Ministerio and Alfredo Espiritu. The defendants admitted that the CAI was the
registered owner of the property, but specifically denied that the plaintiffs were recognized by the CAI
as tenants-occupants of the aforesaid property since 1961. They asserted that the CAI did not consent
to the cultivation of the property nor to the erection of the plaintiffs’ houses. They further averred that
the CAI had entered into a compromise agreement with the occupants of the property, the plaintiffs in
Civil Case No. BCV-87-13 in the RTC of Cavite. They also alleged that they secured a permit from
25
the Municipal Planning and Development Offices before bulldozing activities on the property were
ordered.
The defendants raised the following as their special and affirmative defenses: (a) the plaintiffs’
action is barred by the dismissal of their complaint in Civil Case No. BCV-87-13, per Order of
the RTC of Cavite, Branch 19, dated June 20, 1991; (b) the plaintiffs had waived their rights
and interests over the property when they executed deeds of waiver and quitclaim in favor of the
defendant CAI; (c) then Agrarian Reform Minister Estrella had issued an Order dated July 3,
1979, converting the property into a residential area and withdrawing the property from the
coverage of the CARL; (d) the defendant partitioned the development of the area into Phase I,
II, III and IV, while the residential property subject of the petition is in Phase IV thereof; (e)
before embarking in the development of the property, the respondent CAI secured the
following: (1) preliminary approval and locational clearance for phase IV; (2) development
permit for 844 units; (3) Certificate of Registration No. 1069 issued by the HSRC; and (4)
License to Sell No. 1053.42 Finally, the defendants contended that the property had an 18% slope
and was undeveloped; as such, it was exempt from the coverage of the CARL, under Section 10
of Rep. Act No. 6657.
As compulsory counterclaim, the defendants alleged that it had entered into an Equipment Rental
Requisition Contract with E.M. Aragon Enterprises for the bulldozing of the property, for which it
incurred the following expenses: an advance payment of ₱200,000; rental rate of ₱1,000 per hour for
8 hours a day plus transportation of ₱50,000; and, salaries of not less than ₱5,000 per month for the
mechanics and drivers. They prayed that after due proceedings, judgment be rendered dismissing the
plaintiffs’ complaint and absolving it of any liability.43
The plaintiffs, for their part, averred that Civil Case No. BCV-87-13 was not decided on the merits,
but was merely based upon a compromise agreement between the parties. Moreover, there was no
identity of parties between Civil Case No. BCV-87-13 and the present case, as the sole defendant was
the CAI, while of the plaintiffs in DARAB Case No. CA No. 0285-95, only Domingo Banaag and
Leoncio Banaag were the plaintiffs in Civil Case No. BCV-87-13. On the claim of the defendants that
the CAI was released and discharged from any and all liabilities of the plaintiffs by virtue of the
Deeds of Waiver and Quitclaim executed by the fourteen plaintiffs in Civil Case No. BCV-87-13, the
plaintiffs averred that only two of the plaintiffs, namely, Domingo Banaag and Leoncio Banaag were
among the thirty-seven (37) complainants-members of PBFAI who filed the petition before the
DARAB.
The plaintiffs posited that the conversion orders and other deeds issued by the HSRC and its
successor, the HLURB, were issued before the effectivity of Rep. Act No. 6657 when agricultural land
was limited to those planted with rice and corn crops. But upon the enactment of Rep. Act No. 6657,
the reclassification of agricultural lands included those planted with fruit-bearing trees, such as, the
subject property. Hence, Agrarian Reform Minister Estrella did not have the authority to exempt the
property from the coverage of Rep. Act No. 6657. The plaintiffs averred that the documents procured 1. Finding Plaintiffs Domingo Banaag, Conrado Banaag, Leoncio Banaag, Herminia Demillo,
by the respondents from the HSRC and the HLURB cannot be given probative weight, as the Myrna Javier, Elena, Layaban, Maria Layaban and Oscar Layaban to have abandoned and
authority to issue the said clearance/license is vested solely in the DAR. renounced their tenancy rights over the land in question and barred from instituting the instant
complaint on the ground of Res Judicata;
As to the defense that the property subject of the suit has some parts with an 18% slope, the plaintiffs
contended that what the law exempts are undeveloped parcels of land with an 18% slope. The entire 2. Finding the remaining Twenty-Nine (29) other Plaintiffs not bonafide tenants but mere
property, however, was fully developed and planted with fruit-bearing trees of varied kinds, with interlopers on the land in question and consequently not entitled to security of tenure;
houses of strong materials constructed thereon by the members of the PBFAI.
3. Ordering the instant complaint DISMISSED for lack of merit.
To determine the veracity of the conflicting claims of the parties, the Provincial Agrarian Reform
Adjudicator (PARAD) issued an Order on November 23, 1995, setting an ocular inspection of the No pronouncement as to damages, attorney’s fees, litigation expenses and cost of suit.48
property. The parties were required to submit their respective position papers.44 The ocular inspection
proceeded as scheduled. On December 12, 1995, the PARAD issued an Order45 containing the results
The PARAD held that the plaintiffs were bound by the order of dismissal of the RTC in Civil Case
of the inspection.
No. BCV-87-13. It declared that the plaintiffs in Civil Case No. BCV-87-13 were the kins, siblings or
spouses of the complainants in the case before it. Moreover, the complainants had executed deeds of
The individual tillages of the complainants were not inspected, and, as agreed upon, the physical quitclaim or waiver covering the portions of the property which they purportedly occupied. Thus, the
inventory thereof was to be undertaken by Brgy. Captain Lanrico Ministerio. The inventory was complainants had already waived their rights of possession and cultivation over the portions of the
designed to determine who among the petitioners were actual tillers, the area of tillage and the crops property which they claimed to be occupying.
produced thereon; and to determine the value of the improvements in connection with a possible pay
off, as the landowner had offered to reimburse the planters the value of their permanent
As to the remaining complainants, the PARAD ruled that they failed to prove that their cultivation and
improvements. The PARAD noted that the area over which the respondent CAI conducted quarrying
possession, were based on a valid agricultural tenancy. It held that the complainants were merely farm
activities had not been cultivated by any of the members of the PBFAI, and permitted the grading and
helpers of their relatives. However, the PARAD ruled that it had no jurisdiction to resolve the issues
leveling activities thereon.
of whether the property was covered by Rep. Act No. 6657 and exempted from the said coverage, or
whether the conversion of the property to non-agricultural was legal and efficacious; hence, the
On April 16, 1996, the PARAD issued an order directing the provincial sheriff of Cavite to conduct a PARAD declined to resolve the same.
physical inventory of the permanent improvements introduced by each of the complainants consisting
of fruits and other horticultural growths, in substitution of the Barangay Captain.
Aggrieved, the plaintiffs interposed an appeal to the Department of Agrarian Reform
Adjudication Board on the following grounds:
On July 15, 1996, the DAR Region IV issued a Cease and Desist Order against the respondents.46 The
defendants, in a Letter dated July 16, 1996, informed the DAR, Region IV Office, that the land subject
1. That errors in the findings of fact and conclusions of law were committed which, if not
of the cease and desist order was also subject of DARAB Case No. 0285-95 and, as such, was under
corrected, would cause grave and irreparable damage and injury to the plaintiffs/complainants-
the jurisdiction of PARAD Barbara Tan. The defendants, likewise, raised the issue of forum shopping,
appellants; and
per our ruling in Crisostomo v. SEC.47

2. That there is grave abuse of discretion on the part of the Provincial Agrarian Reform
After due hearings, PARAD Barbara P. Tan rendered a Decision on August 8, 1996 in DARAB Case
Adjudicator of Cavite.49
No. CA-0285-95 in favor of the defendants. The dispositive portion of the decision reads:

The appeal was docketed as DARAB Case No. 5191. The defendants, for their part, filed a motion
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
for reconsideration of the decision, on the ground that it failed to rule that the order of
conversion of then Agrarian Reform Minister Estrella merely confirmed the re-classification of
the property, from agricultural to residential, made by the Municipal Council of Carmona, the

26
HSRC and the HLURB as early as 1976, and that the PARAD failed to order the eviction of the
complainants despite its finding that some had abandoned their tenancy rights by entering into
a compromise settlement and executing quitclaims with the CAI. The respondents, thus, prayed:
…
a. That the subject property has been reclassified as residential land as early as 30 May 1976;
b. That the Certificate of Registration No. RS-0495, dated 9 July 1977 and License to Sell
LS-0449, dated 09 July 1977 were issued in compliance to NHA Circular No. 1, Series of 1976;
c. That the approval of the Consolidation Subdivision Plan and the consequent issuance of
individual titles by the Bureau of Lands were made in compliance of the requirements of NHA
Circular No. 1;
d. That the Order of Conversion dated 3 July 1979 was merely a confirmation of a 1976 valid re-
classification of the subject property from agricultural to residential and said Order is still valid
and subsisting;
e. That an Order of ejectment be issued against the complainants.
As a corollary, other reliefs which are just and proper under the premises are likewise prayed.50
The PARAD treated the motion as an appeal, and transmitted the same to the DARAB.51
On September 26, 1996, the plaintiffs Clarito Sanganbayan, Edgardo Uniforme and Francisco Joven,
in consideration of ₱40,000, executed quitclaims, waiving their rights from the property in suit.52
Likewise, plaintiffs Manuel Layaban, Dante Javier, Ederlinda dela Cruz, Conrado Banaag, Eduardo
Sabalsa, Diosdado Canaria, Herminia Demillo, Elizabeth Cristo, Buena Layaban, Elena Layaban,
Maria Layaban, Betty Banaag, Oscar Layaban, Carmelita Cañalete, Manuel Canaria, Alfredo Diaz,
Alejandro Sanganbayan, Soledad Alcantara, Felicisimo Galzote, Vivencio Boral, Edilberto Banaag
and Jose Canaria, executed quitclaims in favor of the CAI after receiving money from it.53
On October 16, 1996, the respondents filed a Motion to Lift Status Quo Order and Motion to
Dismiss54 alleging that the status quo order illegally extended the restraining order issued on
September 13, 1996. It was also alleged that the complainants-appellants were not qualified
beneficiaries of the CARL. The CAI asserted that the re-classification of the land use was valid and
legal, and concluded that since the property was not agricultural, it was not covered by the CARL and,
thus, beyond the jurisdiction of the DARAB. The CAI, thus, prayed:
27
WHEREFORE, premises considered, it is respectfully prayed that the status quo order be immediately
lifted and the writ of preliminary injunction applied for be denied for utter lack of merit by upholding
the Decision of the Honorable Provincial Adjudicator dated 8 August 1996 with a modification which
shall include an order of ejectment.55
In the meantime, more members of the PBFAI executed deeds of quitclaims on October 1, 1996,
October 9, 1996, November 18, 1996, February 28, 1997 and March 6, 1997, respectively, all in favor
of the respondent CAI over the property subject of their petition. All in all, during the period from
September 26 1996 to March 6, 1997,56 twenty- five complainants (members of PBFAI) executed
separate deeds of quitclaims in favor of the CAI.57 The foregoing notwithstanding, the DARAB
rendered a Decision on September 2, 1997 reversing the decision of PARAD. The dispositive portion
of the decision reads:
WHEREFORE, premises considered the challenged decision is hereby REVERSED and a new
judgment is hereby rendered as follows:
1. Declaring the subject landholding to be within the coverage of Section 4 of R.A. 6657;
2. Ordering the PARO, MARO and all DAR officials concerned to take the necessary steps for
the acquisition of the subject land pursuant to Administrative Order No. 9, Series of 1990; and
3. Ordering the PARO, MARO and all DAR officials concerned to distribute the subject land to
qualified farmer-beneficiaries pursuant to Administrative Order No. 10, series of 1990, giving
preference to the plaintiffs as actual occupants and cultivators of the subject land.58
The respondents-appellees filed a motion for reconsideration59 of the decision which was denied
by the DARAB in a Resolution dated August 28, 1998.60
The Case in the Court of Appeals
Aggrieved, the CAI filed a petition for review in the Court of Appeals under Rule 4561 of the Revised
Rules of Court seeking the reversal of the Resolution dated August 28, 1998. The following issues
were raised:
1. WHETHER OR NOT THE LAND IN SUIT IS COVERED BY CARP;
2. WHETHER OR NOT THE MEMBERS OF PBFAI NUMBERING 37 ARE LEGITIMATE
TENANTS THEREOF;
3. WHETHER OR NOT THE DARAB APPRECIATED THE FACTS AND LAW OF THE CASE;
4. WHETHER OR NOT THE DARAB IN THE EXERCISE OF ITS POWERS ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION.62
On March 15, 2000, the CA rendered a Decision reversing the decision of the DARAB and reinstating
the decision of the PARAD, to wit:
WHEREFORE, the petition is GIVEN DUE COURSE, the assailed DARAB Decision is hereby
REVERSED and SET ASIDE, while the PARO Decision is REINSTATED and AFFIRMED.63
The CA ruled that under Section 10 of Rep. Act No. 6657, all lands with eighteen percent (18%) slope
and over, except those already developed, shall be exempt from the coverage of the said Act. The CA
noted that the exception speaks of "18% in slope and undeveloped land." Per report of the PARAD,
the property subject of the suit has an 18% slope and was still undeveloped; hence, it falls within the
exemption.
Further, the CA held that as early as May 30, 1976, the Municipality of Carmona, Cavite, already
reclassified the land as residential in Resolution No. 30, when it allowed the LDC to build low-cost
housing projects in the subject area. According to the Court, the ruling in Fortich v. Corona64 and
reiterated in Province of Camarines Sur, et al. v. Court of Appeals,65 settled is the rule that local
government units need not obtain the approval of DAR to convert or reclassify lands from agricultural
to non-agricultural use. Thus, the subject land was validly declared residential since 1976 by
competent authority through Kapasiyahang Bilang 30. As such, the DARAB erred in ruling that the
land in suit was still covered by Rep. Act No. 6657. Consequently, since the subject land is not
agricultural and not covered by the CARL, the PBFAI members could not be considered tillers/
beneficiaries thereof.66
Aggrieved, the PBFAI filed a petition for review under Rule 45 of the Rules of Court on April 11,
2000 before this Court. For its part, DARAB filed a motion for extension of time to file a petition for
the reversal of the decision in CA-GR SP No. 49363. The same was docketed as G.R. No. 142980. On
May 11, 2000, the DARAB manifested that it was adopting as its own the petition for review filed by
PBFAI. In our Resolution dated June 28, 2000, we granted the motion of the DARAB and ordered the
consolidation of G.R. Nos. 142980 and 142359.
The Issues
The core issues for resolution are the following: (1) whether the property subject of the suit is
covered by Rep. Act No. 6657, the Agrarian Reform Law (CARL); (2) whether the DARAB had
original and appellate jurisdiction over the complaint of the petitioner PBFAI against the
28
private respondent; (3) whether the petitioners-members of the PBFAI have a cause of action
against the private respondent for possession and cultivation of the property in suit; (4) whether
the dismissal by the RTC of the complaint in Civil Case No. BCV-87-13 is a bar to the complaint
of the petitioners-members of the PBFAI; and (5) whether the appellate court committed a
reversible error in dismissing the petition for review in CA-G.R. SP No. 49363.
It is well-settled that in a petition for review on certiorari under Rule 45 of the Rules of Court, only
questions of law may be raised.67 We have time and again ruled that the factual findings of fact by
administrative agencies are generally accorded great respect, if not finality, by the courts68 because of
the special knowledge and expertise of administrative departments over matters falling under their
jurisdiction.69 However, due to the divergence of the findings of the PARAD, on the one hand, and the
DARAB on the other, and considering the findings of the DARAB and the Court of Appeals, we are
constrained to review the records and resolve the factual and the legal issues involved.
On the first and second issues, the petitioners contend that the property subject of the suit is
agricultural land; hence, covered by the CARL, more particularly, Rep. Act No. 6657. They assert that
the reclassification of the property made by the Municipal Council of Carmona, Cavite, under
Kapasiyahang Blg. 30 on May 30, 1976 was subject to the approval of the HSRC, now the HLURB,
as provided for by Section 5 of Executive Order No. 648.70 Since there was no such approval, the said
resolution of the Municipal Council of Carmona was ineffective. The petitioners aver that, the
appellate court’s reliance on the ruling of this Court in Province of Camarines Sur v. Court of Appeals,
et al.71 is misplaced because the said case involves the power of local government units to initiate
condemnation proceedings of properties for public use or purpose. They argue that under Section 65
of Rep. Act No. 6657, the DAR is vested with exclusive authority to reclassify a landholding from
agricultural to residential. The petitioners submit that the exclusive authority of the DAR is not
negated by Section 20 of Rep. Act No. 7160, otherwise known as the Local Government Code of
1991. They also insist that the conversion of the property under Kapasiyahang Blg. 30 of the
Municipal Council of Carmona on May 30, 1976, was subject to the approval of the DAR,
conformably to DOJ Opinion No. 44, Series of 1990. Moreover, the development of the property had
not yet been completed even after Rep. Act No. 6657 took effect. Hence, it was incumbent upon the
respondent to secure an exemption thereto, after complying with DAR Administrative Order No. 6,
Series of 1994.
In its Comment on the petition, the respondent CAI asserts that the property was validly reclassified
by the Municipal Council of Carmona on May 30, 1976, pursuant to its authority under Section 3,
Rep. Act No. 2264, otherwise known as the Local Autonomy Act of 1959. Until revoked, the
reclassification made by the council remained valid. Per DOJ Opinion No. 40, Series of 1990, the
private respondent was not required to secure clearance or approval from the DAR since the
reclassification took place on June 15, 1988, when Rep. Act No. 6657 took effect. The respondent
asserts that it had complied with all the requirements under P.D. No. 957, as amended.
The respondent contends that, aside from the Municipal Council of Carmona, the Secretary of
Agrarian Reform and administrative agencies of the government such as the NHA, the Bureau of
Lands, the HSRC, and the HLURB, found the property unsuitable for agricultural purposes. The
respondent asserts that the petitioners-individuals are mere squatters and not tenants on the property
of the private respondent. Hence, the PARAD had no jurisdiction over the petition of the PBFAI, as
well as the individual petitioners. Consequently, the DARAB had no appellate jurisdiction over the
appeals from the decision of the PARAD.
The Court’s Ruling
The contention of the petitioners has no merit.
Under Section 3(c) of Rep. Act No. 6657, agricultural lands refer to lands devoted to agriculture
as conferred in the said law and not classified as industrial land. Agricultural lands are only
those lands which are arable or suitable lands that do not include commercial, industrial and
residential lands.72 Section 4(e) of the law provides that it covers all private lands devoted to or
suitable for agriculture regardless of the agricultural products raised or that can be raised thereon.
Rep. Act No. 6657 took effect only on June 15, 1988. But long before the law took effect, the property
subject of the suit had already been reclassified and converted from agricultural to non-agricultural or
residential land by the following administrative agencies: (a) the Bureau of Lands, when it approved
the subdivision plan of the property consisting of 728 subdivision lots; (b) the National Planning
Commission which approved the subdivision plan subdivided by the LDC/CAI for the development of
the property into a low-cost housing project; (c) the Municipal Council of Carmona, Cavite, when it
approved Kapasiyahang Blg. 30 on May 30, 1976; (d) Agrarian Reform Minister Conrado F. Estrella,
on July 3, 1979, when he granted the application of the respondent for the development of the Hakone
Housing Project with an area of 35.80 hectares upon the recommendation of the Agrarian Reform
Team, Regional Director of Region IV, which found, after verification and investigation, that the
property was not covered by P.D. No. 27, it being untenanted and not devoted to the production of
palay/or corn and that the property was suitable for conversion to residential subdivision; (e) by the
Ministry of Local Government and Community Development; (f) the Human Settlements Regulatory
Commission which issued a location clearance, development permit, Certificate of Inspection and
License to Sell to the LDC/private respondent; and, (g) the Housing and Land Use Regulatory Board
which also issued to the respondent CAI/LDC a license to sell the subdivision lots.
In issuing a location clearance, a development permit, a certificate of inspection over the housing
project, and a license to sell the subdivision lots in favor of LDC/CAI pursuant to its charter, the
HSRC approved and confirmed the reclassification and conversion of the land made by the Municipal
Council of Carmona and Agrarian Reform Minister Estrella.
In Natalia Realty Inc. and Estate Developers and Investors Corp. v. Department of Agrarian Reform,
et al.,73 we held, thus:
29
We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides
that the CARL shall "cover, regardless of tenurial arrangement and commodity produced, all public
and private agricultural lands." As to what constitutes "agricultural land" it is referred to as "land
devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land. The deliberations of the Constitutional Commission confirm this
limitation. "Agricultural lands" are only those lands which are "arable and suitable agricultural lands"
and "do not include commercial, industrial and residential lands."
Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision
cannot in any language be considered as "agricultural lands." These lots were intended for residential
use. They ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan
Reservation. Even today, the areas in question continued to be developed as a low-cost housing
subdivision, albeit at a snail’s pace. This can readily be gleaned from the fact that SAMBA members
even instituted an action to restrain petitioners from continuing with such development. The enormity
of the resources needed for developing a subdivision may have delayed its completion but this does
not detract from the fact that these lands are still residential lands and outside the ambit of the CARL.
Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include
lands previously converted to non-agricultural uses prior to the effectivity of CARL by
government agencies other than respondent DAR. In its Revised Rules and Regulations Governing
Conversion of Private Agricultural Lands to Non-Agricultural Uses, DAR itself defined "agricultural
land" thus –
x x x Agricultural land refers to those devoted to agricultural activity as defined in R.A. 6657 and not
classified as mineral or forest by the Department of Environment and Natural Resources (DENR) and
its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the
Housing and Land Use Regulatory Board (HLURB) and its preceding competent authorities prior
to 15 June 1988 for residential, commercial or industrial use.74
Our ruling in Natalia Realty, Inc. v. DAR was reiterated in National Housing Authority v. Allarde,75
and Sta. Rosa Realty Development Corporation v. Court of Appeals,76 where we stated, viz:
The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an exercise of
its police power, not the power of eminent domain. "A zoning ordinance is defined as a local city or
municipal legislation which logically arranges, prescribed, defines and apportions a given political
subdivision into specific land uses as present and future projection of needs.
Section 3 of Rep. Act No. 2264,77 amending the Local Government Code, specifically empowers
municipal and/or city councils to adopt zoning and subdivision ordinances or regulations in
consultation with the National Planning Commission. A zoning ordinance prescribes, defines, and
apportions a given political subdivision into specific land uses as present and future projection of
needs.78 The power of the local government to convert or reclassify lands to residential lands to non-
agricultural lands reclassified is not subject to the approval of the Department of Agrarian Reform.79
Section 65 of Rep. Act No. 6657 relied upon by the petitioner applies only to applications by the
landlord or the beneficiary for the conversion of lands previously placed under the agrarian reform
law after the lapse of five years from its award. It does not apply to agricultural lands already
converted as residential lands prior to the passage of Rep. Act No. 6657.80
When Agrarian Reform Minister Conrado F. Estrella confirmed the reclassification of the property by
the Municipal Council of Carmona to non-agricultural land when he approved, on July 3, 1979, the
application of the private respondent/LDC for the conversion of 35.80 hectares of the property
covered by TCT No. 62972 into non-agricultural land, he did so pursuant to his authority under Rep.
Act No. 3844, as amended, by P.D. No. 815 and P.D. No. 946.81
It bears stressing that in his Order, the Agrarian Reform Minister declared that the property was not
tenanted and not devoted to the production of palay and/or corn, and that the land was suitable for
conversion to a residential subdivision. The order of the Minister was not reversed by the Office of the
President; as such, it became final and executory. By declaring, in its Decision of September 2, 1997,
that the property subject of the suit, was agricultural land, the petitioner DARAB thereby reversed the
Order of Agrarian Reform Minister Estrella, issued almost eighteen (18) years before, and nullified
Resolution No. 30 of the Municipal Council of Carmona, approved twenty-one (21) years earlier, on
May 30, 1976, as well as the issuances of the NHA, the HSRC, the HLURB, the Ministry of Local
Government and the National Planning Commission. Thus, the petitioner DARAB acted with grave
abuse of its discretion amounting to excess or lack of jurisdiction.
The failure of the respondent to complete the housing project before June 15, 1988, even if true, did
not have the effect of reverting the property as agricultural land.
The petitioners’ reliance on DOJ Opinion No. 44, Series of 1990 and DAR Administrative Order No.
6, Series of 1994 is misplaced. In the said opinion, the Secretary of Justice declared, viz:
Based on the foregoing premises, we reiterate the view that with respect to conversions of agricultural
lands covered by R.A. No. 6657 to non-agricultural uses, the authority of DAR to approve such
conversions may be exercised from the date of the law’s effectivity on June 15, 1988. This conclusion
is based on a liberal interpretation of R.A. No. 6657 in the light of DAR’s mandate and the extensive
coverage of the agrarian reform program.
Following the DOJ opinion, the DAR issued Administrative Order No. 6, Series of 1994, stating that
lands already classified as non-agricultural before the enactment of Rep. Act No. 6657 no longer
needed any conversion clearance:
30
I. Prefatory Statement
In order to streamline the issuance of exemption clearances, based on DOJ Opinion No. 44, the
following guidelines are being issued for the guidance of the DAR and the public in general.
II. Legal Basis
Sec. 3(c) of RA 6657 states that agricultural lands refers to the land devoted to agricultural activity as
defined in this act and not classified as mineral, forest, residential, commercial or industrial land.
Department of Justice Opinion No. 44, series of 1990 has ruled that, with respect to the conversion of
agricultural lands covered by RA No. 6657 to non-agricultural uses, the authority of DAR to approve
such conversion may be exercised from the date of its effectivity, on June 15, 1988. Thus, all lands
that are already classified as commercial, industrial, or residential before 15 June 1988 no longer need
any conversion clearance.
With our finding that the property subject of the suit was classified as residential land since 1976, the
DARAB had no original and appellate jurisdiction over the property subject of the action of the
petitioner PBFAI and its members. Consequently, the DARAB should have ordered the dismissal of
the complaint.
The jurisdiction of a tribunal or quasi-judicial body over the subject matter is determined by the
averments of the complaint/petition and the law extant at the time of the commencement of the suit/
complaint/petition.82 All proceedings before a tribunal or quasi-judicial agency bereft of jurisdiction
over the subject matter of the action are null and void.83
Section 1, Rule II of the Revised Rules of Procedure of the DARAB provides that:
SECTION 1. Primary. Original and appellate jurisdiction – The Agrarian Reform Adjudication Board
shall have primary jurisdiction, both original and appellate, to determine and adjudicate all agrarian
disputes, cases, controversies, and matters or incidents involving the implementation of the
Comprehensive Agrarian Reform Program under Republic Act No. 6657, Executive Order Nos. 229,
228 and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree
No. 27 and other agrarian laws and their implementing rules and regulations.
Section 3(d) of Rep. Act No. 6657 defines an agrarian dispute as:
(d) Agrarian Dispute refers to any controversy relating to tenurial arrangements, whether leasehold,
tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes concerning
farmworkers associations or representation of persons negotiating, fixing, maintaining, changing or
seeking to arrange terms or conditions of such tenurial arrangements.
It includes any controversy relating to compensation of lands acquired under this Act and other terms
and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian
reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and
beneficiary, landowner and tenant, or lessor and lessee.
In Monsanto v. Zerna,84 we held that for the DARAB to have jurisdiction over a case, there must exist
a tenancy relationship between the parties. In order for a tenancy agreement to take hold over a
dispute, it is essential to establish all the indispensable elements, to wit:
(1) The parties are the landowner and the tenant or agricultural lessee;
them have simply occupied the premises in suit without any specific area of tillage being primarily
mere farm helpers of their relatives. Banking on their application for CARP coverage still awaiting
action and disposition in some DAR operations office, these complainants have tenaciously held on to
their occupied areas in the hope of eventual redemption under the Comprehensive Agrarian Reform
Program. …86
Since the members of the petitioner PBFAI were not the tenants of the private respondent CAI, the
petitioners and its members had no cause of action against the private respondent for possession of the
landholding to maintain possession thereof and for damages. Besides, when the complaint was filed,
twenty-five (25) of the thirty-seven (37) members of the petitioners had already executed separate
deeds of quitclaim in favor of the private respondent CAI over the portions of the landholding they
respectively claimed, after receiving from the private respondent CAI varied sums of money. In
executing the said deeds, the members of the petitioner PBFAI thereby waived their respective claims
over the property. Hence, they have no right whatsoever to still remain in possession of the same.

(2) The subject matter of the relationship is an agricultural land;
(3) There is consent between the parties to the relationship;
(4) The purpose of the relationship is to bring about agricultural production;
(5) There is personal cultivation on the part of the tenant or agricultural lessee; and
IN LIGHT OF THE FOREGOING, the petitions are DENIED. The assailed decision of the
Court of Appeals is AFFIRMED WITH MODIFICATIONS. The complaint of the petitioner
PBFAI in DARAB Case No. CA-0285-95 is DISMISSED. The counterclaim of the private
respondent for damages in DARAB Case No. CA-0285-95 is, likewise, DISMISSED. The thirty-
seven (37) members of the petitioner PBFAI and all those occupying the property subject of the
complaint in DARAB Case No. CA-0285-95 in their behalf are ORDERED to vacate the
landholding.

(6) The harvest is shared between the landowner and the tenant or agricultural lessee.85 SO ORDERED.

There is no allegation in the complaint of the petitioner PBFAI in DARAB Case No. CA-0285-95 that
its members were tenants of the private respondent CAI. Neither did the petitioner adduce substantial
evidence that the private respondent was the landlord of its members from 1961, nor at any time for
that matter. Indeed, as found by the PARAD:

Moreover, their waiver of rights constitutes abandonment of their rights of possession and cultivation
which may yet be borne out of a legitimate tenancy relationship. Their re-entry or continuous
possession and cultivation of the land in question without the landowner’s knowledge and/or consent
negates the existence of tenancy relationship. Since security of tenure is a right to which only a bona
fide tenant farmer is entitled their lack of such tenurial status denies them of its exercise and
enjoyment.

As to the remaining twenty and more other complainants, it is unfortunate that they have not shown
that their cultivation, possession and enjoyment of the lands they claim to till have been by authority
of a valid contract of agricultural tenancy. On the contrary, as admitted in their complaint a number of

31
G.R. No. 158793 June 8, 2006
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON MOTORCYCLISTS
FEDERATION, INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL REGULATORY BOARD,
Respondents.
DECISION
CARPIO, J.:
This petition for review on certiorari1 seeks to reverse the Decision dated 10 March 2003 of the
Regional Trial Court, Branch 147, Makati City (RTC) in Civil Case No. 01-034, as well as the
RTC’s Order dated 16 June 2003 which denied petitioners’ Motion for Reconsideration.
Petitioners assert that Department of Public Works and Highways’ (DPWH) Department Order
No. 74 (DO 74), Department Order No. 215 (DO 215), and the Revised Rules and Regulations on
Limited Access Facilities of the Toll Regulatory Board (TRB) violate Republic Act No. 2000 (RA
2000) or the Limited Access Highway Act. Petitioners also seek to declare Department Order
No. 123 (DO 123) and Administrative Order No. 1 (AO 1)2 unconstitutional.
Antecedent Facts
The facts are not in dispute. As summarized by the Solicitor General, the facts are as follows:
1. On January 10, 2001, petitioners filed before the trial court a Petition for Declaratory
Judgment with Application for Temporary Restraining Order and Injunction docketed as Civil
Case No. 01-034. The petition sought the declaration of nullity of the following administrative
issuances for being inconsistent with the provisions of Republic Act 2000, entitled "Limited
Access Highway Act" enacted in 1957:
a. DPWH Administrative Order No. 1, Series of 1968;
b. DPWH Department Order No. 74, Series of 1993;
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated in 199[8] by the
DPWH thru the Toll Regulatory Board (TRB).
32
2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on June 25, 1998 Department
Order (DO) No. 215 declaring the Manila-Cavite (Coastal Road) Toll Expressway as limited
access facilities.
3. Accordingly, petitioners filed an Amended Petition on February 8, 2001 wherein petitioners sought
the declaration of nullity of the aforesaid administrative issuances. Moreover, petitioners prayed for
the issuance of a temporary restraining order and/or preliminary injunction to prevent the
enforcement of the total ban on motorcycles along the entire breadth of North and South Luzon
Expressways and the Manila-Cavite (Coastal Road) Toll Expressway under DO 215.
4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo Guadiz, after due hearing,
issued an order granting petitioners’ application for preliminary injunction. On July 16, 2001, a writ
of preliminary injunction was issued by the trial court, conditioned upon petitioners’ filing of
cash bond in the amount of P100,000.00, which petitioners subsequently complied with.
5. On July 18, 2001, the DPWH acting thru the TRB, issued Department Order No. 123 allowing
motorcycles with engine displacement of 400 cubic centimeters inside limited access facilities
(toll ways).
6. Upon the assumption of Honorable Presiding Judge Ma. Cristina Cornejo, both the petitioners and
respondents were required to file their respective Memoranda. Petitioners likewise filed [their]
Supplemental Memorandum. Thereafter, the case was deemed submitted for decision.
7. Consequently, on March 10, 2003, the trial court issued the assailed decision dismissing the petition
but declaring invalid DO 123. Petitioners moved for a reconsideration of the dismissal of their
petition; but it was denied by the trial court in its Order dated June 16, 2003.3
Hence, this petition.
The RTC’s Ruling
The dispositive portion of the RTC’s Decision dated 10 March 2003 reads:
WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to declare null and
void ab initio DPWH Department Order No. 74, Series of 1993, Administrative Order No. 1, and
Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated by the DPWH
thru the TRB, the presumed validity thereof not having been overcome; but the petition is
granted insofar as DPWH Department Order No. 123 is concerned, declaring the same to be
invalid for being violative of the equal protection clause of the Constitution.
SO ORDERED.4
The Issues
Petitioners seek a reversal and raise the following issues for resolution:
1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BY RES JUDICATA;
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS CONTRAVENE RA 2000;
AND
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5
The Ruling of the Court
The petition is partly meritorious.
Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res Judicata
Petitioners rely on the RTC’s Order dated 28 June 2001, which granted their prayer for a writ
of preliminary injunction. Since respondents did not appeal from that Order, petitioners argue
that the Order became "a final judgment" on the issues. Petitioners conclude that the RTC
erred when it subsequently dismissed their petition in its Decision dated 10 March 2003.
Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June 2001 was not an
adjudication on the merits of the case that would trigger res judicata. A preliminary injunction does
not serve as a final determination of the issues. It is a provisional remedy, which merely serves to
preserve the status quo until the court could hear the merits of the case.6 Thus, Section 9 of Rule 58 of
the 1997 Rules of Civil Procedure requires the issuance of a final injunction to confirm the
preliminary injunction should the court during trial determine that the acts complained of deserve to
be permanently enjoined. A preliminary injunction is a mere adjunct, an ancillary remedy which
exists only as an incident of the main proceeding.7
Validity of DO 74, DO 215 and the TRB Regulations
Petitioners claim that DO 74,8 DO 215,9 and the TRB’s Rules and Regulations issued under them
violate the provisions of RA 2000. They contend that the two issuances unduly expanded the power of
the DPWH in Section 4 of RA 2000 to regulate toll ways. Petitioners assert that the DPWH’s
regulatory authority is limited to acts like redesigning curbings or central dividing sections.
33
They claim that the DPWH is only allowed to re-design the physical structure of toll ways, and not
to determine "who or what can be qualified as toll way users."10
Section 4 of RA 200011 reads:
SEC. 4. Design of limited access facility. — The Department of Public Works and Communications
is authorized to so design any limited access facility and to so regulate, restrict, or prohibit access
as to best serve the traffic for which such facility is intended; and its determination of such design
shall be final. In this connection, it is authorized to divide and separate any limited access facility
into separate roadways by the construction of raised curbings, central dividing sections, or other
physical separations, or by designating such separate roadways by signs, markers, stripes, and the
proper lane for such traffic by appropriate signs, markers, stripes and other devices. No person,
shall have any right of ingress or egress to, from or across limited access facilities to or from abutting
lands, except at such designated points at which access may be permitted, upon such terms and
conditions as may be specified from time to time. (Emphasis supplied)
On 19 February 1968, Secretary Antonio V. Raquiza of the Department of Public Works and
Communications issued AO 1, which, among others, prohibited motorcycles on limited access
highways. The pertinent provisions of AO 1 read:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary [of] Public Works and Communications under
Section 3 of R.A. 2000, otherwise known as the Limited Access Highway Act, the following rules and
regulations governing limited access highways are hereby promulgated for the guidance of all
concerned:
xxxx
Section 3 – On limited access highways, it is unlawful for any person or group of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
x x x x12 (Emphasis supplied)
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public Works and
Highways issued DO 74:
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Tabang and the South
Luzon Expressway from Nichols to Alabang as Limited Access Facilities
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or
street especially designed for through traffic, and over, from, or to which owners or occupants of
abutting land or other persons have no right or easement or only a limited right or easement of
access, light, air or view by reason of the fact that their proper[t]y abuts upon such limited
access facility or for any other reason. Such highways or streets may be parkways, from which
trucks, buses, and other commerical [sic] vehicles shall be excluded; or they may be free ways
open to use by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and Communications (now
Department of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter,
improve, maintain, and provide limited access facilities for public use wherever it is of the
opinion that traffic conditions, present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works and Highways
hereby designates and declares the Balintawak to Tabang Sections of the North Luzon Expressway,
and the Nichols to Alabang Sections of the South Luzon Expressways, to be LIMITED ACCESS
HIGHWAYS/FACILITIES subject to such rules and regulations that may be imposed by the DPWH
thru the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after
consultation with the TRB and in coordination with the Philippine National Police (PNP), to close all
illegal openings along the said Limited Access Highways/Facilities. In this connection, the NCR is
instructed to organize its own enforcement and security group for the purpose of assuring the
continued closure of the right-of-way fences and the implementation of the rules and regulations that
may be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.13
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-5 Link Expressway,
from Zapote to Noveleta, of the Manila Cavite Toll Expressway as Limited Access Facility.
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or
street especially designed for through traffic, and over, from, or to which owners or occupants of
abutting land or other persons have no right or easement or only a limited right or easement of access,
light, air or view by reason of the fact that their property abuts upon such limited access facility or for
34
any other reason. Such highways or streets may be parkways, from which trucks, buses, and other
commercial vehicles shall be excluded; or they may be free ways open to use by all customary forms
of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and Communications (now
Department of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter,
improve, maintain, and provide limited access facilities for public use wherever it is of the opinion
that traffic conditions, present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works and
Highways hereby designates and declares the R-1 Expressway, C-5 Link Expressway and the
R-1 Extension Expressway Sections of the Manila Cavite Toll Expressway to be LIMITED
ACCESS HIGHWAYS/FACILITIES subject to such rules and regulations that may be imposed
by the DPWH thru the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after
consultation with the TRB and in coordination with the Philippine National Police (PNP), to close all
illegal openings along the said Limited Access Highways/Facilities. In this connection, the NCR is
instructed to organize its own enforcement and security group for the purpose of assuring the
continued closure of the right-of-way fences and the implementation of the rules and regulations that
may be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.14
The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to design limited
access facilities and to regulate, restrict, or prohibit access as to serve the traffic for which such
facilities are intended. According to the RTC, such authority to regulate, restrict, or prohibit
logically includes the determination of who and what can and cannot be permitted entry or
access into the limited access facilities. Thus, the RTC concluded that AO 1, DO 74, and the
Revised Rules and Regulations on Limited Access Facilities, which ban motorcycles’ entry or
access to the limited access facilities, are not inconsistent with RA 2000.
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957.
Section 4 of RA 2000 provides that "[t]he Department of Public Works and Communications is
authorized to so design any limited access facility and to so regulate, restrict, or prohibit access as to
best serve the traffic for which such facility is intended." The RTC construed this authorization to
regulate, restrict, or prohibit access to limited access facilities to apply to the Department of Public
Works and Highways (DPWH).
The RTC’s ruling is based on a wrong premise. The RTC assumed that the DPWH derived its
authority from its predecessor, the Department of Public Works and Communications, which is
expressly authorized to regulate, restrict, or prohibit access to limited access facilities under
Section 4 of RA 2000. However, such assumption fails to consider the evolution of the
Department of Public Works and Communications.
Under Act No. 2711, otherwise known as the Revised Administrative Code, approved on 10 March
1917, there were only seven executive departments, namely: the Department of the Interior, the
Department of Finance, the Department of Justice, the Department of Agriculture and
Commerce, the Department of Public Works and Communications, the Department of Public
Instruction, and the Department of Labor.15 On 20 June 1964, Republic Act No. 413616 created
the Land Transportation Commission under the Department of Public Works and
Communications. Later, the Department of Public Works and Communications was restructured into
the Department of Public Works, Transportation and Communications.
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau of Public Highways
from the Department of Public Works, Transportation and Communications and created it as a
department to be known as Department of Public Highways. Under Section 3 of PD 458, the
Department of Public Highways is "responsible for developing and implementing programs on the
construction and maintenance of roads, bridges and airport runways."
With the amendment of the 1973 Philippine Constitution in 1976, resulting in the shift in the form of
government, national agencies were renamed from Departments to Ministries. Thus, the Department
of Public Works, Transportation and Communications became the Ministry of Public Works,
Transportation and Communications.
On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order No. 546 (EO 546),
creating a Ministry of Public Works and a Ministry of Transportation and Communications.17
Under Section 1 of EO 546, the Ministry of Public Works assumed the public works functions of the
Ministry of Public Works, Transportation and Communications. The functions of the Ministry of
Public Works were the "construction, maintenance and repair of port works, harbor facilities,
lighthouses, navigational aids, shore protection works, airport buildings and associated facilities,
public buildings and school buildings, monuments and other related structures, as well as undertaking
harbor and river dredging works, reclamation of foreshore and swampland areas, water supply, and
flood control and drainage works."18
On the other hand, the Ministry of Transportation and Communications became the "primary
policy, planning, programming, coordinating, implementing, regulating and administrative entity of
the executive branch of the government in the promotion, development, and regulation of a
dependable and coordinated network of transportation and communication systems."19 The functions
of the Ministry of Transportation and Communications were:
35
a. Coordinate and supervise all activities of the Ministry relative to transportation and
communications;
b. Formulate and recommend national policies and guidelines for the preparation and
implementation of an integrated and comprehensive transportation and communications system
at the national, regional and local levels;
c. Establish and administer comprehensive and integrated programs for transportation and
communication, and for this purpose, may call on any agency, corporation, or organization, whether
government or private, whose development programs include transportation and communications as
an integral part to participate and assist in the preparation and implementation of such programs;
d. Regulate, whenever necessary, activities relative to transportation and communications and
prescribe and collect fees in the exercise of such power;
e. Assess, review and provide direction to transportation and communications research and
development programs of the government in coordination with other institutions concerned; and
f. Perform such other functions as may be necessary to carry into effect the provisions of this
Executive Order.20 (Emphasis supplied)
On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO 710), which merged the
Ministry of Public Works and the Ministry of Public Highways for "greater simplicity and economy in
operations."21 The restructured agency became known as the Ministry of Public Works and
Highways. Under Section 1 of EO 710 the functions of the Ministry of Public Works and the Ministry
of Public Highways22 were transferred to the Ministry of Public Works and Highways.
Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works
and Highways became the Department of Public Works and Highways (DPWH) and the former
Ministry of Transportation and Communications became the Department of Transportation and
Communications (DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5
April 1993 and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised
Rules and Regulations on Limited Access Facilities. However, on 23 July 1979, long before these
department orders and regulations were issued, the Ministry of Public Works, Transportation and
Communications was divided into two agencies – the Ministry of Public Works and the Ministry
of Transportation and Communications – by virtue of EO 546. The question is, which of these two
agencies is now authorized to regulate, restrict, or prohibit access to limited access facilities?23
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public works a. Motorcycles shall have an engine displacement of at least 400 cubic centimeters (cc) provided
functions of the Ministry of Public Works, Transportation and Communications. On the other that:
hand, among the functions of the Ministry of Transportation and Communications (now
Department of Transportation and Communications [DOTC]) were to (1) formulate and x x x x28 (Emphasis supplied)
recommend national policies and guidelines for the preparation and implementation of an integrated
and comprehensive transportation and communications systems at the national, regional, and local
The RTC’s Decision dated 10 March 2003 declared DO 123 unconstitutional on the ground that it
levels; and (2) regulate, whenever necessary, activities relative to transportation and communications
violates the equal protection clause by allowing only motorcycles with at least 400 cubic centimeters
and prescribe and collect fees in the exercise of such power. Clearly, under EO 546, it is the DOTC,
engine displacement to use the toll ways. The RTC reasoned that the creation of a distinction within
not the DPWH, which has authority to regulate, restrict, or prohibit access to limited access facilities.
the class of motorcycles was not based on real differences.
Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-A (EO 125-A),25
We need not pass upon the constitutionality of the classification of motorcycles under DO 123. As
which further reorganized the DOTC, the authority to administer and enforce all laws, rules and
previously discussed, the DPWH has no authority to regulate limited access highways since EO 546
regulations relative to transportation is clearly with the DOTC.26
has devolved this function to the DOTC. Thus, DO 123 is void for want of authority of the DPWH to
promulgate it.
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain
expressways as limited access facilities. Under the law, it is the DOTC which is authorized to
On the other hand, the assailed portion of AO 1 states:
administer and enforce all laws, rules and regulations in the field of transportation and to regulate
related activities.
Section 3. On limited access highways, it is unlawful for any person or group of persons to:
Since the DPWH has no authority to regulate activities relative to transportation, the TRB27 cannot
derive its power from the DPWH to issue regulations governing limited access facilities. The DPWH xxxx
cannot delegate a power or function which it does not possess in the first place. Since DO 74 and DO
215 are void, it follows that the rules implementing them are likewise void. (h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);

Whether AO 1 and DO 123 are Unconstitutional xxxx

DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO 123 reads in part:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary of Public Works and Highways under Section 3
of R.A. 2000, otherwise known as the Limited Access Highway Act, the following revised rules
and regulations governing limited access highways are hereby promulgated for the guidance of all
concerned:
Petitioners assail the DPWH’s failure to provide "scientific" and "objective" data on the danger
of having motorcycles plying our highways. They attack this exercise of police power as baseless
and unwarranted. Petitioners belabor the fact that there are studies that provide proof that
motorcycles are safe modes of transport. They also claim that AO 1 introduces an unreasonable
classification by singling-out motorcycles from other motorized modes of transport. Finally,
petitioners argue that AO 1 violates their right to travel.
Petitioners’ arguments do not convince us.

1. Administrative Order No. 1 dated February 19, 1968, issued by the Secretary of the then We emphasize that the Secretary of the Department of Public Works and Communications issued
Department of Public Works and Communications, is hereby amended by deleting the word AO 1 on 19 February 1968.
"motorcycles" mentioned in Section 3(h) thereof. Therefore, motorcycles are hereby allowed to
operate inside the toll roads and limited access highways, subject to the following:

36
Section 3 of RA 200029 authorized the issuance of the guidelines. In contrast, DPWH issued DO 74,
DO 215 and DO 123 after EO 546 devolved to the DOTC the authority to regulate limited access
highways.
We now discuss the constitutionality of AO 1. Administrative issuances have the force and effect of
law.30 They benefit from the same presumption of validity and constitutionality enjoyed by statutes.31
These two precepts place a heavy burden upon any party assailing governmental regulations. The
burden of proving unconstitutionality rests on such party.32 The burden becomes heavier when the
police power is at issue.
The use of public highways by motor vehicles is subject to regulation as an exercise of the police
power of the state.33 The police power is far-reaching in scope and is the "most essential, insistent and
illimitable" of all government powers.34 The tendency is to extend rather than to restrict the use of
police power. The sole standard in measuring its exercise is reasonableness.35 What is "reasonable" is
not subject to exact definition or scientific formulation. No all-embracing test of reasonableness
exists,36 for its determination rests upon human judgment applied to the facts and circumstances of
each particular case.37
We find that AO 1 does not impose unreasonable restrictions. It merely outlines several precautionary
measures, to which toll way users must adhere. These rules were designed to ensure public safety and
the uninhibited flow of traffic within limited access facilities. They cover several subjects, from what
lanes should be used by a certain vehicle, to maximum vehicle height. The prohibition of certain types
of vehicles is but one of these. None of these rules violates reason. The purpose of these rules and the
logic behind them are quite evident. A toll way is not an ordinary road. The special purpose for which
a toll way is constructed necessitates the imposition of guidelines in the manner of its use and
operation. Inevitably, such rules will restrict certain rights. But the mere fact that certain rights are
restricted does not invalidate the rules.
Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll ways.38 The
regulation affects the right to peaceably assemble. The exercise of police power involves restriction,
restriction being implicit in the power itself. Thus, the test of constitutionality of a police power
measure is limited to an inquiry on whether the restriction imposed on constitutional rights is
reasonable, and not whether it imposes a restriction on those rights.
None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The DPWH, through the
Solicitor General, maintains that the toll ways were not designed to accommodate motorcycles
and that their presence in the toll ways will compromise safety and traffic considerations. The
DPWH points out that the same study the petitioners rely on cites that the inability of other drivers to
detect motorcycles is the predominant cause of accidents.39 Arguably, prohibiting the use of
motorcycles in toll ways may not be the "best" measure to ensure the safety and comfort of those who
ply the toll ways.
37
However, the means by which the government chooses to act is not judged in terms of what is
"best," rather, on simply whether the act is reasonable. The validity of a police power measure
does not depend upon the absolute assurance that the purpose desired can in fact be probably fully
accomplished, or upon the certainty that it will best serve the purpose intended.40 Reason, not
scientific exactitude, is the measure of the validity of the governmental regulation. Arguments based
on what is "best" are arguments reserved for the Legislature’s discussion. Judicial intervention in such
matters will only be warranted if the assailed regulation is patently whimsical. We do not find the
situation in this case to be so.
Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right to use the limited
access facility. They are merely being required, just like the rest of the public, to adhere to the rules on
how to use the facility. AO 1 does not infringe upon petitioners’ right to travel but merely bars
motorcycles, bicycles, tricycles, pedicabs, and any non-
motorized vehicles as the mode of traveling along limited access highways.41 Several cheap,
accessible and practical alternative modes of transport are open to petitioners. There is nothing
oppressive in being required to take a bus or drive a car instead of one’s scooter, bicycle, calesa, or
motorcycle upon using a toll way.
Petitioners’ reliance on the studies they gathered is misplaced. Police power does not rely upon the
existence of definitive studies to support its use. Indeed, no requirement exists that the exercise of
police power must first be conclusively justified by research. The yardstick has always been simply
whether the government’s act is reasonable and not oppressive.42 The use of "reason" in this sense is
simply meant to guard against arbitrary and capricious government action. Scientific certainty and
conclusiveness, though desirable, may not be demanded in every situation. Otherwise, no government
will be able to act in situations demanding the exercise of its residual powers because it will be tied up
conducting studies.
A police power measure may be assailed upon proof that it unduly violates constitutional limitations
like due process and equal protection of the law.43 Petitioners’ attempt to seek redress from the
motorcycle ban under the aegis of equal protection must fail. Petitioners’ contention that AO 1
unreasonably singles out motorcycles is specious. To begin with, classification by itself is not
prohibited.44
A classification can only be assailed if it is deemed invidious, that is, it is not based on real or
substantial differences. As explained by Chief Justice Fernando in Bautista v. Juinio:45
x x x To assure that the general welfare be promoted, which is the end of law, a regulatory measure
may cut into the rights to liberty and property. Those adversely affected may under such
circumstances invoked the equal protection clause only if they can show that the governmental act
assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of
hostility, or at the very least, discrimination that finds no support in reason. It suffices then that the
laws operate equally and uniformly on all persons under similar circumstances or that all persons must
be treated in the same manner, the conditions not being different, both in the privileges conferred and
the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that
equal protection and security shall be given to every person under circumstances, which if not
identical is analogous. If law be looked upon in terms of burden or charges, those that fall within a
class should be treated in the same fashion, whatever restrictions cast on some in the group equally
binding the rest.
We find that it is neither warranted nor reasonable for petitioners to say that the only justifiable
classification among modes of transport is the motorized against the non-motorized. Not all motorized
vehicles are created equal. A 16-wheeler truck is substantially different from other light vehicles. The
first may be denied access to some roads where the latter are free to drive. Old vehicles may be
reasonably differentiated from newer models.46 We find that real and substantial differences exist
between a motorcycle and other forms of transport sufficient to justify its classification among those
prohibited from plying the toll ways. Amongst all types of motorized transport, it is obvious, even to a
child, that a motorcycle is quite different from a car, a bus or a truck. The most obvious and troubling
difference would be that a two-wheeled vehicle is less stable and more easily overturned than a four-
wheeled vehicle.
A classification based on practical convenience and common knowledge is not unconstitutional
simply because it may lack purely theoretical or scientific uniformity. Moreover, we take note that the
Philippines is home to a host of unique motorized modes of transport ranging from modified hand-
carts (kuliglig) to bicycle "sidecars" outfitted with a motor. To follow petitioners’ argument to its
logical conclusion would open up toll ways to all these contraptions. Both safety and traffic
considerations militate against any ruling that would bring about such a nightmare.
Petitioners complain that the prohibition on the use of motorcycles in toll ways unduly deprive them
of their right to travel.
We are not persuaded.
A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain
destinations, its use, operation, and maintenance require close regulation. Public interest and safety
require the imposition of certain restrictions on toll ways that do not apply to ordinary roads. As a
special kind of road, it is but reasonable that not all forms of transport could use it.
The right to travel does not mean the right to choose any vehicle in traversing a toll way. The right to
travel refers to the right to move from one place to another. Petitioners can traverse the toll way any
38
time they choose using private or public four-wheeled vehicles. Petitioners are not denied the right to
move from Point A to Point B along the toll way. Petitioners are free to access the toll way, much as
the rest of the public can. The mode by which petitioners wish to travel pertains to the manner of
using the toll way, a subject that can be validly limited by regulation.
Petitioners themselves admit that alternative routes are available to them. Their complaint is that these
routes are not the safest and most convenient. Even if their claim is true, it hardly qualifies as an
undue curtailment of their freedom of movement and travel. The right to travel does not entitle a
person to the best form of transport or to the most convenient route to his destination. The
obstructions found in normal streets, which petitioners complain of (i.e., potholes, manholes,
construction barriers, etc.), are not suffered by them alone.
Finally, petitioners assert that their possession of a driver’s license from the Land Transportation
Office (LTO) and the fact that their vehicles are registered with that office entitle them to use all kinds
of roads in the country. Again, petitioners are mistaken. There exists no absolute right to drive. On the
contrary, this privilege, is heavily regulated. Only a qualified group is allowed to drive motor vehicles:
those who pass the tests administered by the LTO. A driver’s license issued by the LTO merely allows
one to drive a particular mode of transport. It is not a license to drive or operate any form of
transportation on any type of road. Vehicle registration in the LTO on the other hand merely signifies
the roadworthiness of a vehicle. This does not preclude the government from prescribing which roads
are accessible to certain vehicles.
WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision dated 10 March
2003 of the Regional Trial Court, Branch 147, Makati City and its Order dated 16 June 2003 in
Civil Case No. 01-034. We declare VOID Department Order Nos. 74, 215, and 123 of the
Department of Public Works and Highways, and the Revised Rules and Regulations on Limited
Access Facilities of the Toll Regulatory Board. We declare VALID Administrative Order No. 1 of
the Department of Public Works and Communications.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice

REYNATO S. PUNO
Associate Justice
CONSUELO YNARES-
SANTIAGO
Associate Justice
MA. ALICIA AUSTRIA-
MARTINEZ
Associate Justice
CONCHITA CARPIO
MORALES
Associate Justice
ADOLFO S. AZCUNA
Associate Justice
MINITA V. CHICO-
NAZARIO
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
C E R T I F I CAT I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
LEONARDO A. the Court.
QUISUMBING
Asscociate Justice ARTEMIO V. PANGANIBAN
Chief Justice
ANGELINA SANDOVAL-
GUTIERREZ xxxx
Asscociate Justice
RENATO C. CORONA DISSENTING OPINION
Asscociate Justice
TINGA, J.:
I dissent from the opinion which has found favor with the majority holding that Department of
ROMEO J. CALLEJO, SR. Public Works and Highways (DPWH) Department Orders Nos. 74, 215 and 123 are void for
want of authority on the part of the DPWH to promulgate them.
Asscociate Justice
The fundamental question which seeks an answer from this Court is which between the DPWH and
the Department of Transportation and Communications (DOTC) has the charge of implementing
DANTE O. TINGA Republic Act No. 2000, otherwise known as the Limited Access Highway Act. These two departments
have mutually exclusive functions in the general scheme of government. The DPWH oversees the
Asscociate Justice construction, maintenance and operation of public works and infrastructure facilities, and administers
the highway system. The DOTC, on the other hand, directs the nation’s transportation and
communication network systems. To resolve this case, it is crucial for us to determine within which
sphere of functions the powers granted under the Limited Access Highway Act fall, i.e., whether the
CANCIO C. GARCIA Limited Access Highway Act involves the administration of the highway system or the
Asscociate Justice management of the transportation network.
After tracing the evolution of the Department of Public Works and Communications (DPWC) which
was originally given the authority under the Limited Access Highway Act to regulate, restrict or
prohibit access to limited access facilities, the ponencia concludes that this authority was eventually
bestowed upon the DOTC.
With due respect, I cannot share this conclusion. I shall explain.
39
The Limited Access Highway Act authorized the DPWC "to plan, designate, establish, regulate,
vacate, alter, improve, maintain, and provide limited access facilities for public use wherever it is of
the opinion that traffic conditions present or future, will justify such special facilities…"1 At the time
of the enactment of the Limited Access Highway Act in 1957, the Bureau of Public Highways (BPH)
had already been created as an office under the DPWC by RA 1192 in 1954.2
Under RA 1192, the Commissioner of Public Highways was directly responsible for administering
the Philippine Highway Act of 1953;3 preparing long-range programs of highway development,
improvement and construction; formulating uniform practices for the physical design of highway
facilities; directing research in matters of highway planning, location, design, construction and
maintenance, including the testing of materials and the proper and efficient use of highway
equipment; promoting sane economy in the expenditure of highway funds, utilization of supplies and
materials, preservation of property and equipment, and management operations; preparing annual
budgets of proposed expenditures for construction, reconstruction, and improvement work; and
supervising the signing of vouchers, orders for supplies, materials, and any other expenditures.
The task of administering the nation’s highways squarely fell on the shoulders of the Commissioner of
Public Highways as specified in RA 1192. Upon the enactment of the Limited Access Highway Act in
1957, it was also the BPH, headed by the Commissioner of Public Highways, which carried out the
functions of establishing and regulating the highways and streets to be used as limited access
facilities.
It is significant to note that the establishment of limited access facilities requires engineering
expertise, for which reason the Limited Access Highway Act specifically authorized the DPWC "to
divide and separate any limited access facility into separate roadways by the construction of raised
curbings, central dividing sections, or other physical separations, or by designating such separate
roadways by signs, markers, stripes, and the proper land for such traffic by appropriate signs, markers,
stripes, and other devices." The BPH, with its mandate to plan and administer the national highway
program and the Chief Highway Engineer4 at its disposal, was in the best position to establish and
regulate limited access facilities.
It is worth mentioning that even under the Revised Philippine Highway Act5 passed in 1972, the BPH
was designated as the agency of the DPWC "that has the charge of the administration of highways."
The Revised Philippine Highway Act primarily controls the disposition of the Highway Special Fund;
the manner of its apportionment and release; the selection and designation of highways or highway
projects to receive national aid; the expenditures for the administration, maintenance, improvement,
betterment and rehabilitation of highway projects; and the classification of highways, widths,
acquisition and use of rights of way. However, it also provides for the establishment of an
integrated system of highways, and vests in the Secretary of the DPWC the power to make rules
and regulations and make such recommendations as he may deem necessary to preserve and
protect the highways and insure traffic safety.6 I submit that the duty of highway administration
and management vested upon the BPH and succeeded to by the DPWH includes the duty to regulate
the use and enjoyment thereof.
In 1974, the BPH was separated from the Department of Public Works, Transportation and
Communications (DPWTC). It was expanded and restructured into the Department of Public
Highways (DPH) by virtue of Presidential Decree No. 458 (PD 458).7
With the shift in the form of government resulting from the amendment of the 1973 Constitution,
national agencies were renamed from departments to ministries. Thus, the DPWTC became the
Ministry of Public Works, Transportation and Communications (MPWTC) and the DPH became the
Ministry of Public Highways (MPH).
In 1979, President Marcos issued Executive Order No. 546 (EO 546)8 creating a Ministry of Public
Works (MPW) which assumed the public works functions of the MPWTC and was charged with the
"construction, maintenance and repair of port-works, harbor facilities, lighthouses, navigational aids,
shore protection works, airport buildings and associated facilities, public buildings and school
buildings, monuments and other related structures, as well as undertaking harbor and river dredging
works, reclamation of foreshore and swampland areas, water supply, and flood control and drainage
works."9
EO 546 also created a Ministry of Transportation and Communications (MOTC) declared as the
"primary policy, planning, programming, coordinating, implementing, regulating and administrative
entity of the executive branch of the government in the promotion, development, and regulation of a
dependable and coordinated network of transportation and communication systems…"10
The ponencia correctly noted that the MPW took over the public works functions of the MPWTC.
However, it omitted mention of the fact that even as these new ministries were created, the MPH
continued to exist and exercise the powers vested in it by RA 1192, including those under the Limited
Access Highway Act. Because of the MPH’s continued existence, at no time were these functions ever
transferred to or exercised by the MPW or even the MOTC. I vigorously reiterate that the creation of
these two ministries did not affect the existence of the MPH or result in the transfer of the functions of
the MPH to the MPW and the MOTC. The MPH continued to exist as a distinct entity with clearly-
delineated functions, including the duty of highway administration.
The MPW and the MPH were later abolished by EO 71011 which, instead, created a Ministry of Public
Works and Highways (MPWH) and transferred to the latter the functions of the abolished ministries.
The MPWH is now known as the DPWH, the government’s primary engineering and construction
arm, responsible for the planning, design, construction and maintenance of infrastructures such as
roads, bridges, flood control systems, water resource development projects and other public works.

40
The foregoing history of the DPWH, which has evolved from its predecessors, the BPH, DPH, MPH
and MPWH, I submit, supports my view that it is the DPWH, and not the DOTC, which has inherited
the functions previously exercised by the BPH, including those granted by the Limited Access
Highway Act.
The Limited Access Highway Act confers the authority to plan, designate, establish, regulate,
vacate, alter, improve, maintain, and provide limited access facilities for public use under Sec. 3
thereof, and the powers to design, regulate, restrict, or prohibit access to these limited access
facilities under Sec. 4. Although they appear in different sections of the law, the clear and
unmistakable intent was for all of these powers to be integrated in and exercised by just one
entity, the DPWC.
Instead of continuing with the integration of the mandate under the Limited Highway Act, the
ponencia essentially dichotomizes these functions covered by the mandate. While it appears to
concede that the functions of the DPWH includes the planning, design, construction, maintenance and
operation of infrastructure facilities, which should also include limited access facilities, in the same
breath it posits that the powers to regulate, restrict or prohibit access thereto have been devolved to
the DOTC. This is obvious from the way the ponencia focuses on the regulatory power of the DOTC
under the Administrative Code in furtherance of the view that the DPWH does not have the authority
to regulate, restrict or prohibit access to limited access facilities, and sidesteps a discussion on the
powers conferred under Section 3 of the Limited Access Highway Act which, by their very nature, can
only be exercised by the DPWH. I submit that this approach is inconsistent with the intent of the law
for the powers conferred therein to be exercised by only one entity.
Justice Carpio asserts that as the DOTC is empowered to administer and enforce all laws, rules and
regulations in the field of transportation and communications, so is it granted authority over limited
access facilities. I beg to differ.
The authority of the DOTC over land transportation is exercised by the Land Transportation Office
(LTO) and covers the inspection and registration of motor vehicles, issuance of licenses and permits,
enforcement of land transportation rules and regulations, and adjudication of traffic cases. These
functions have remained the same despite the changes in the names of the LTO and the
reorganizations it underwent.
The predecessor of the LTO is the Land Transportation Commission (LTC) created in 1964 by RA
4136.12 RA 4136 was amended by RA Nos. 5715 and 6374, PD Nos. 382, 843, 896, 1057, 1934, 1950
and 1958, and BP Blg. 43, 74 and 398, and is now known as the Land Transportation and Traffic
Code. Its provisions control the registration and operation of motor vehicles and the licensing of
owners, dealers, conductors, drivers, and similar matters.
41
The powers and duties of the former LTC Commissioner, now exercised by the LTO, are as follows:
(1) With the approval of the Secretary of Public Works and Communications, to issue rules and
regulations not in conflict with the provisions of this Act, prescribing the procedure for the
examination, licensing and bonding of drivers; the registration and re-registration of motor vehicles,
transfer of ownership, change of status; the replacement of lost certificates, licenses, badges, permits
or number plates; and to prescribe the minimum standards and specifications including allowable
gross weight, allowable length, width and height of motor vehicles, distribution of loads, allowable
loads on tires, change of tire sizes, body design or carrying capacity subsequent to registration and all
other special cases which may arise for which no specific provision is otherwise made in this Act.
(2) To compile and arrange all applications, certificates, permits, licenses, and to enter, note and
record thereon transfers, notifications, suspensions, revocations, or judgments of conviction rendered
by competent courts concerning violations of this Act, with the end in view of preserving and making
easily available such documents and records to public officers and private persons properly and
legitimately interested therein.
(3) To give public notice of the certificates, permits, licenses and badges issued, suspended or revoked
and/or motor vehicles transferred and/or drivers bonded under the provisions of this Act.
(4) The Commissioner of Land Transportation, with the approval of the Secretary of Public Works and
Communications, may designate as his deputy and agent any employee of the Land Transportation
Commission, or such other government employees as he may deem expedient to assist in the carrying
out the provisions of this Act.
(5) The Commissioner of Land Transportation and his deputies are hereby authorized to make arrests
for violations of the provisions of this Act in so far as motor vehicles are concerned; to issue subpoena
and subpoena duces tecum to compel the appearance of motor vehicle operators and drivers and/or
other persons or conductors; and to use all reasonable means within their powers to secure
enforcement of the provisions of this Act.
(6) The Commissioner of Land Transportation or his deputies may at any time examine and inspect
any motor vehicle to determine whether such motor vehicle is registered, or is unsightly, unsafe,
overloaded, improperly marked or equipped, or otherwise unfit to be operated because of possible
excessive damage to highways, bridges and/or culverts;
(7) The Philippine Constabulary and the city and municipal police forces are hereby given the
authority and the primary responsibility and duty to prevent violations of this Act, and to carry out the
police provisions hereof within their respective jurisdictions: Provided, That all apprehensions made
shall be submitted for final disposition to the Commissioner and his deputies within twenty-four hours
from the date of apprehension.
(8) All cases involving violations of this Act shall be endorsed immediately by the apprehending
officer to the Land Transportation Commission. Where such violations necessitate immediate action,
the same shall be endorsed in the traffic court, city or municipal court for summary investigation,
hearing and disposition, but in all such cases, appropriate notices of the apprehensions and
dispositions thereof shall be given to the Commissioner of Land Transportation by the law-
enforcement agency and the court concerned.
Notation of such dispositions shall be entered in the records, and a copy shall be mailed to the owner
and to the driver concerned.
Nowhere in this list of functions is there any indication that the LTO has the authority to establish and
regulate limited access facilities. The traffic rules and regulations which the LTO is tasked to enforce
pertains to traffic rules enumerated in the Land Transportation and Traffic Code, including speed limit
and keeping to the right, overtaking and passing a vehicle and turning at intersections, right of way
and signals, turning and parking, reckless driving, right of way for police and other emergency
vehicles, tampering with vehicles, hitching to a vehicle, driving or parking on sidewalk, driving while
under the influence of liquor or narcotic drug, obstruction of traffic and duty of driver in case of
accident.13
Significantly, even as it codified all laws relative to land transportation and traffic, the Land
Transportation and Traffic Code, as amended, makes no mention of or reference to the establishment
and regulation of limited access facilities, a tacit recognition of the DOTC’s lack of authority on the
matter.
Justice Carpio’s pronouncement that the Administrative Code of 1987 (Administrative Code) confers
upon the DOTC the authority to establish and regulate limited access facilities is an inference based
on an erroneous reading of the law. The Administrative Code does provide, among others, that the
DOTC shall administer and enforce all laws, rules and regulations in the field of transportation and
communications, and establish and prescribe the corresponding rules and regulations for enforcement
of laws governing land transportation. I submit, however, that if we were to interpret these provisions
correctly and apply them to the instant case, it is imperative that a distinction be drawn between the
power to regulate transportation and the power to regulate highways, the former being a DOTC
prerogative, and the latter an authority unquestionably belonging to the DPWH.
Transportation is defined as the movement of goods or persons from one place to another by a
carrier.14 And so it is that the powers vested in the DOTC refer to its authority over transportation
42
carriers and utilities and makes no mention at all of highways as clearly demonstrated by the Reply’s
enumeration of the DOTC’s powers under the Administrative Code.
In contrast, the Administrative Code makes several references to the DPWH’s authority over
highways, defined as roadways laid out or constructed to accommodate modes of travel and other
related purposes.15 It provides:
Sec. 3. Powers and Functions.—The Department, in order to carry out its mandate, shall:
(1) Provide technical services for the planning, design, construction, maintenance, or operation of
infrastructure facilities;
(2) Develop and implement effective codes, standards, and reasonable guidelines to ensure the safety
of all public and private structures in the country and assure efficiency and proper quality in the
construction of public works;
(3) Ascertain that all public works plans and project implementation designs are consistent with
current standards and guidelines;
(4) Identify, plan, secure funding for, program, design, construct or undertake prequalification,
bedding, and award of contracts of public works projects with the exception only of specialized
projects undertaken by Government corporate entities with established technical capability and as
directed by the President of the Philippines or as provided by law;
(5) Provide the works supervision function for all public works construction and ensure that actual
construction is done in accordance with approved government plans and specifications;
(6) Assist other agencies, including the local governments, in determining the most suitable entity to
undertake the actual construction of public works projects;
(7) Maintain or cause to be maintained all highways, flood control, and other public works
throughout the country except those that are the responsibility of other agencies as directed by the
President of the Philippines or as provided by law;
(8) Provide an integrated planning for highways, flood control and water resources development
systems, and other public works;
(9) Classify roads and highways into national, regional, provincial, city, municipal, and barangay
roads and highways, based on objective criteria it shall adopt; provide or authorize the conversion
of roads and highways from one category to another;
(10) Delegate, to any agency it determines to have adequate technical capability, any of the foregoing
powers and functions; and
(11) Perform such other functions as may be provided by law.
The foregoing references to the DPWH’s power over highways, and the concurrent absence of
any such reference in the DOTC, to my mind, are unmistakable indications of the
Administrative Code’s intention to recognize and acknowledge the DPWH’s exclusive
competence and jurisdiction in matters of highway administration and management.
Parenthetically, I should like to point out that the ponencia leaned heavily on the premise that EO 546
devolved the authority to regulate limited access highways to the DOTC. Justice Carpio merely took
off from my reference to the Administrative Code to support his view that the DPWH does not have
the power to regulate access to limited access facilities since this is not a function specified by the
Administrative Code.
classification, such as those that allow them to leave the country temporarily, re-enter without regard
to quotas, and dispense with visas or other formal documentation. The Court upheld the agency
interpretation saying that the Court’s conclusion reflects the administrative practice, dating back at
least to 1927 when the Bureau of Immigration was part of the Department of Labor, which is entitled
to great weight.
Similarly, in this case, the questioned department orders were issued between 1993-2001. Through all
these years, and even earlier in the case of Administrative Order No. 1 issued in 1968, the DPWH has
been exercising the functions under the Limited Access Highway Act. Judicial deference should be
accorded this long-standing practice consistently acquiesced to and recognized by the other executive
departments, including the DOTC.
FOR THE FOREGOING REASONS, I cannot concur with my colleagues in their judgment. I vote
for the dismissal of the petitions.
DANTE O. TINGA
Associate Justice

Apart from emphasizing yet again that the creation by EO 546 of the MPW and MOTC did not affect
the existence of and functions exercised by the MPH, I also accentuate the fact that the Administrative
Code did not repeal the Philippine Highway Act of 1953, as amended. Even as the Administrative
Code codified the powers and functions of the departments of the executive branch including the
DPWH and the DOTC, the authority to administer the nation’s highway system, which, I submit,
includes the power to establish and regulate limited access facilities, remained to be a function of the
DPWH. To reiterate, there is nothing in the Administrative Code which vests in the DOTC the
administration of the Limited Access Highway Act or the regulation of the use of highways.

Finally, since the DPWH has traditionally exercised the power and authority to establish and
regulate limited access facilities to the exclusion of and without objection from other
government agencies including the DOTC, I submit that we grant judicial imprimatur to its
jurisdiction absent any unequivocal conferment of authority on the DOTC.

A parallelism can be drawn between this case and another in which an administrative agency has
maintained its own interpretation of a particular statute. In Saxbe v. Bustos,16 for example, an
administrative construction of the Immigration and Naturalization Act classified a worker who lives in
Canada or Mexico and commutes to work in the United States either daily or seasonally as a variety
of "special immigrant" or an immigrant lawfully admitted for permanent residence who is returning
from a visit abroad. The United Farm Workers objected to the benefits given to alien workers of this

43
G.R. No. 145742. July 14, 2005
THE PHILIPPINE PORTS AUTHORITY, represented by its GENERAL MANAGER JUAN O.
PENA, Petitioners,
vs.
CIPRES STEVEDORING & ARRASTRE, INC., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. SP
No. 59553 entitled, "Cipres Stevedoring and Arrastre, Inc. (CISAI) v. The Honorable Alvin L.
Tan in his capacity as Presiding Judge, Regional Trial Court (RTC), Br. 44, Dumaguete City,
Philippine Ports Authority (PPA), Juan Peña2 & Benjamin Cecilio." Said decision declared as
null and void the Order dated 31 May 20003 of Judge Tan and directed the court a quo to issue a
writ of preliminary injunction enjoining petitioner "from conducting the scheduled public
bidding of cargo handling operations in the port of Dumaguete City" until the termination of
the main case.
The facts follow.
Petitioner PPA is a government entity created by virtue of Presidential Decree (P.D.) No. 857 and is
tasked to implement an integrated program for the planning, development, financing, and operation of
ports and port districts in the country.4
Respondent CISAI is a domestic corporation primarily engaged in stevedoring, arrastre, and
porterage business, including cargo handling and hauling services, in the province of Negros
Oriental and in the cities of Dumaguete and Bais. Since the commencement of its corporate
existence in 1976, respondent had been granted permits of varied durations to operate the cargo
handling operations in Dumaguete City. In 1991, petitioner awarded an eight-year contract5 to
respondent allowing the latter to pursue its business endeavor in the port of Dumaguete City.
This contract expired on 31 December 1998.
At about the time respondent was awarded an eight-year contract in 1991 or, on 12 June 1990,
PPA Administrative Order No. 03-90 (PPA AO No. 03-90) dated 14 May 1990 took effect.6 This
administrative order contained the guidelines and procedures in the selection and award of cargo
handling contracts in all government ports as well as cargo handling services that would be turned
over by petitioner to the private sector. Section 2 of said administrative order states:
44
Section 2. – Statement of Policies
As a general rule, cargo handling services in all government ports shall be awarded through the
system of public bidding, except in the following cases:
2.1 Cargo handling contractors in ports with existing or expired contracts whose performance is
satisfactory shall be granted renewal of their contracts.
2.2 Cargo handling operators issued one-year permits and have already been in operation for at
least six (6) months prior to the effectivity of this Order shall be audited, and if found
satisfactory, awarded contracts.
2.3 Cargo handling services in ports with low cargo volume and where handling operations are
primarily manual.7
On 29 May 1996, a Memorandum of Understanding (MOU)8 was entered into among the National
Union of Portworkers of the Philippines/Trade Union Congress of the Philippines,9 the Department of
Transportation and Communications,10 the PPA,11 the Department of Labor and Employment
(DOLE),12 and the Philippine Chamber of Arrastre and Stevedoring Operators (PCASO)13 relative to
the nationwide protests then being conducted by port workers. Among the items agreed upon by the
parties to the MOU were:
3. The DOTC Secretary shall immediately create a tripartite oversight committee to review,
assess and evaluate current and future issuances pertaining to Cargo Handling contracts,
portworkers’ contracts with employers, and the like. The oversight committee shall be
composed of equal representatives from the portworkers, the cargo handling operators and the
government including the PPA and the DOTC Undersecretary who shall act as Chairman.
4. Henceforth, all expiring Cargo Handling contracts shall be reviewed by the oversight
committee referred to in paragraph 3 above for recommendation to the PPA Board of Directors
as to whether the same shall be terminated and subjected to public bidding, or as may be
authorized upon consideration of paragraph 2 hereof.14
Following the expiration of its contract for cargo handling, respondent was able to continue with its
business by virtue of hold-over permits given by petitioner. The first of these permits expired on 17
January 200015 and the last was valid only until 18 April 2000.16 While respondent’s second hold-over
permit was still in effect, petitioner, through its General Manager Juan O. Peña, issued PPA AO No.
03-200017 dated 15 February 2000 which amended by substitution PPA AO No. 03-90. PPA AO No.
03-2000 expressly provides that all contract for cargo handling services of more than three (3) years
shall be awarded through public bidding. With respect to cargo handling permits for a period of three
(3) years and less in ports where the average yearly cargo throughout for the last five (5) years did not
surpass 30,000 metric tons and where the operations are mainly manual, the same shall be awarded
through comparative evaluation.
Pursuant to PPA AO No. 03-2000, petitioner set the deadline for the submission of the technical
and financial bids for the port of Dumaguete City at 12:00 noon of 05 July 2000; the opening of
the technical bids on 05 July 2000 at 1:00 p.m.; and the dropping of the financial bids on 28 July
2000 at 1:00 p.m. Contending that this action on the part of petitioner was in derogation of its
vested right over the operation of cargo handling enterprise in Dumaguete City, respondent
initiated an action for specific performance, injunction with application for preliminary
mandatory injunction and temporary restraining order before the RTC of Dumaguete City.18
This civil action was filed on 31 March 2000 and was raffled off to Branch 44 of said court
wherein it was docketed as Civil Case No. 12688.
Respondent alleged in its complaint that PPA AO No. 03-90 explicitly provides that cargo handling
contractors with existing or expired contracts but were able to obtain a "satisfactory" performance
rating were entitled to a renewal of their respective cargo handling contracts with petitioner; thus, as
respondent was given a rating of "very satisfactory"19 in 1998, it follows that its cargo handling
agreement should have been renewed after its expiration. Respondent likewise claimed that the
approval and implementation of PPA AO No. 03-2000 was plainly arbitrary as said administrative
order was:
19.1 Obviously unfair to plaintiff and port operators affected because it is an afterthought. It came
about after PCASO20 wrote a letter dated 04 February 2000 demanding for the renewal of the contract
of the members with a rating of Satisfactory…
19.2 Obviously prejudicial to the right to renew the contract vested upon plaintiff (respondent herein)
by virtue of Administrative Order No. 03-90 which was in force and effect during the period of
contractual relations between defendant PPA and plaintiff.
19.3 Obviously repugnant to the Memorandum of Understanding dated May 29, 1996, which has the
force of law between the contracting parties.
19.4 Obviously designed to justify non-compliance of a legal obligation created under Administrative
Order No. 03-90.
19.5 A scheme to accommodate political pressures.
19.6 Arbitrary because it did not treat all port operators alike. For instance the Asian Terminals, Inc.,
the operator of South Harbor, had a negotiated Contract.21
45
In addition, respondent stated in its complaint that in the event the bidding would take place as
scheduled, a substantial number of workers in the port of Dumaguete City faced the risk of
displacement. Moreover, the possibility existed that the contract for cargo handling in Dumaguete
City would be awarded to an incompetent and inexperienced participant in the bidding process unlike
respondent which had already invested substantial capital in its operations in the port of said city. To
further support its claim for a preliminary mandatory injunction, respondent alleged that a fellow
PCASO member, Vitas Port Arrastre Service Corporation, operating at Pier 18, Vitas, Tondo, Manila,
successfully obtained a writ of preliminary injunction from the RTC, Branch 46, Manila.22
Immediately after the filing of respondent’s complaint, the RTC, Branch 44 of Dumaguete City,
issued an order23 granting respondent’s prayer for a temporary restraining order. The
dispositive portion of the order reads:
WHEREFORE, premises considered, and considering the urgent nature of the plaintiff’s
complaint, that serious and irreparable damage or injury would be suffered by the plaintiff
unless said acts of the defendants complained of, is restrained; said defendants Philippine Ports
Authority, Manila, Juan O. Peña, Benjamin Cecilio, their agents, representatives or persons
acting in their behalves, are hereby ordered to cease and desist from further conducting the
scheduled public bidding and awards on April 7, 2000, and April 10, 2000, respectively within
twenty (20) days from receipt hereof…24
Petitioner thereafter filed a manifestation with urgent motion for reconsideration25 to the aforesaid
order of the trial court. Petitioner argued that the court a quo did not have the requisite jurisdiction to
issue the assailed temporary restraining order; that respondent was estopped from seeking refuge from
the court as it had already expressed its intention to join the bidding process involving the operation of
the cargo handling operations in the port of Dumaguete City; that respondent failed to exhaust
administrative remedies by not seeking relief from petitioner prior to initiating this action
before the court; and that it was in the best interest of the public if the bidding process proceeds
as scheduled because of the "internal squabbling" taking place within respondent corporation
which could affect the quality of its service. This motion was denied in the order of the court a
quo dated 24 April 2000.26
Petitioner seasonably sought the reconsideration27 of the trial court’s order of 24 April 2000 this time
arguing that:
1. PRESIDENTIAL DECREE NO. 1818 PROHIBITS COURTS FROM ISSUING THE
INJUNCTIVE WRIT IN ANY CASE, DISPUTE OR CONTROVERSY INVOLVING
STEVEDORING AND ARRASTRE CONTRACTS.
2. THE ORDER DATED APRIL 24, 2000 ADJUDICATES THE MERITS OF THE COMPLAINT
EVEN BEFORE THE PARTIES ARE HEARD.
3. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 VIOLATES THE LAW IN
CONTRACT MAKING.
4. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS BEYOND THE JURISDICTION
OF THE HONORABLE COURT.
5. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS AGAINST PUBLIC INTEREST.
6. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS VIOLATION OF THE 1997
RULES ON CIVIL PROCEDURE.
7. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS VIOLATIVE OF DUE
PROCESS.
8. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS UNSUPPORTED BY THE
FACTS OF THIS CASE.28
In its 31 May 2000 Order, the trial court set aside the injunctive writ it previously issued "to give way
to the pronouncements of P.D. No. 1818" as the "function of the PPA is vested with public interest."29
It was thereafter the turn of respondent to file its motion for reconsideration30 of the Order of the trial
court but the court a quo stood firm on its Order setting aside the injunctive writ it issued.31 From this
adverse ruling, respondent filed a petition for certiorari under Rule 65 before the Court of Appeals. In
said petition, respondent maintained that P.D. No. 1818 did not cover the restraining order and
preliminary injunction formerly issued by the RTC, Branch 44, Dumaguete City. According to
respondent, as there was no assurance that the would-be winner of the bidding process possessed the
capacity to operate the cargo handling services in Dumaguete City, there would have been a cessation
of the cargo handling operations in the port of said city following the expiration of respondent’s
second hold-over permit. This, respondent insisted, was not the situation contemplated by P.D. No.
1818 which was precisely issued to ensure that essential government projects such as stevedoring and
arrastre services would not be disrupted by the issuance of a temporary restraining order. In this case,
the restraining order and injunction issued by the trial court ensured the continuity of the cargo
handling operations in Dumaguete City. Respondent further argued that as what is involved in this
case is petitioner’s failure to comply with its obligation under PPA AO No. 03-90 and the validity of
PPA AO No. 03-2000, petitioner could not invoke P.D. No. 1818 which should only apply to matters
involving the exercise of discretion by administrative agencies.32
46
Respondent likewise claimed that the pre-qualification phase of the bidding procedure was attended
by the following irregularities:
1. Respondents (petitioner herein), then defendants (in Civil Case No. 12688), set October 15, 1999 as
the deadline for the submission of the pre-qualification documents of prospective bidders. However,
they pre-qualified DUMAGUETE KING PORTS & ILOILO QUEEN PORTS INC. (DUKIQ), which
incidentally tried to intervene in this case, on April 3, 1999, which was not a juridical entity as of said
date. It should be pointed out that it was only registered with the Securities and Exchange
Commission (SEC) on April 4, (2000)… This means that DUKIQ became only (sic) a juridical entity
only three days before the scheduled dropping of the bids on April 7, 2000 and seven (7) days before
the supposed opening of the bids on April 10, 2000. This is certainly irregular and only bolsters
petitioner’s (respondent herein) apprehensions that there exists a preferred bidder. Moreover, DUKIQ
was only issued a Mayor’s Permit on April 18, 2000… This is not also in accordance with the rules of
the bidding.
2. The composition of the Pre-qualification, Bids, Awards Committee (PBAC) as composed by the
respondents is not in conformity with AO 03-90.
3. PPA Administrative Orders 03-90 … and 03-2000… emanated from the same PPA Board
Resolution No. 912. It should be pointed out that AO 03-2000 was issued arbitrarily for the purpose of
evading the contractual obligation of respondents to renew the contracts of those cargo handling
operators which obtained a satisfactory performance rating from the PPA. In other words, the most
glaring irregularity committed by respondents here is the issuance of AO 03-2000, which is
diametrically opposed to and inconsistent with AO 03-90 and PPA Board Resolution 912. This is not
to mention that said AO 03-2000 will also deprive cargo handling operators in general, and CISAI, in
particular, of their proprietary rights.33
Further, respondent insisted that on the basis of the clear language of PPA AO No. 03-90, it was
entitled to the renewal of its cargo handling agreement as it was able to earn a "very satisfactory"
performance rating. The implementation, therefore, of PPA AO No. 03-2000 transgressed the
constitutional guarantee against non-impairment of contract and ignored respondent’s vested right to
the renewal of its cargo handling pact.
Relying on respondent’s allegation as regards the purported irregularities which occurred during the
pre-qualification part of the bidding process, the Court of Appeals nullified the 31 May 2000 Order of
the trial court. The decretal portion of the appellate court’s decision, now assailed before us, states:
WHEREFORE, premises considered the petition is GRANTED; and the assailed 31 May 2000
Order of the respondent Judge is hereby declared NULL and VOID. In lieu of the same, the
Court orders:
1. Subject to the posting of an injunction bond by herein petitioner in the amount to be
determined by the court a quo, respondent Court is directed to ISSUE a Writ of Preliminary
Injunction;
2. Respondent Philippine Ports Authority to (DESIST) from conducting the scheduled public
bidding of cargo handling operations in the port of Dumaguete City, effective until and after the
case a quo shall have been finally decided.34
Petitioner is now before us seeking the reversal of the aforementioned decision of the appellate court
on the following grounds:
IT WAS GRAVE ERROR FOR RESPONDENT COURT OF APPEALS [SECOND DIVISION]
TO ISSUE ITS QUESTIONED DECISION CONSIDERING THAT:
(i) P.D. NO. 1818, LATER AMENDED BY R.A. 8975 AND REITERATED IN ADMINISTRATIVE
CIRCULAR NO. 11.2000 OF THIS HONORABLE COURT, BANS THE ISSUANCE OF WRITS
OF PRELIMINARY PROHIBITORY INJUNCTIONS IN CASES INVOLVING GOVERNMENT
INFRASTRUCTURE PROJECTS AND SERVICE CONTRACTS, WHICH INCLUDES (SIC)
ARRASTRE AND STEVEDORING CONTRACTS.
(ii) CISAI HAS NO CLEAR LEGAL RIGHT TO AN INJUNCTIVE WRIT. IT ACQUIRED NO
VESTED RIGHTS TO ARRASTRE AND STEVEDORING OPERATIONS AT THE PORT OF
DUMAGUETE CITY AS ITS HOLD-OVER CAPACITY COULD BE REVOKED AT ANY GIVEN
TIME.
(iii) CISAI CANNOT COMPEL PPA TO RENEW ITS CONTRACT FOR CARGO HANDLING
SERVICES.35
In our resolution of 12 November 2003, we granted petitioner’s prayer for a temporary restraining
order.36
Petitioner insists that the decision of the Court of Appeals failed to take into consideration the
unequivocal language of Republic Act No. 8975 which amended P.D. No. 1818.
The main provision of P.D. No. 1818 provides:
SECTION 1. No court in the Philippines shall have jurisdiction to issue any restraining order,
preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy
involving an infrastructure project, or a mining, fishery, forest or other natural resource development
47
project of the government, or any public utility operated by the government, including among others
public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to
prohibit any person or persons, entity or government official from proceeding with, or continuing the
execution or implementation of any such project, or the operation of such public utility, or pursuing
any lawful activity necessary for such execution, implementation or operation.
On the other hand, the pertinent portion of Rep. Act No. 8975 states:
SEC. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. – No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government,
or any of its subdivision, officials or any person or entity, whether public or private, acting under the
government’s direction, to restrain, prohibit or compel the following acts:
…
(b) Bidding or awarding of contract/project of the national government as defined under Section 2
hereof; . . .37
Concededly, P.D. No. 1818 which was the law in force at the time of the institution of this case,
applies to the operation of arrastre and stevedoring contracts such as the one subject of the present
case. Notably, the Court of Appeals’ ruling was based solely on the perceived irregularities which
occurred during the pre-qualification phase of the bidding process. The veracity of these claimed
irregularities, however, are best left for the consideration of the trial court which has yet to rule on the
merits, if there be any, of the main case.
More than this, as the issue presented before us is whether the appellate court erred in issuing the writ
of preliminary injunction, we hew to the general principles on this subject.
A preliminary injunction is an order granted at any stage of an action prior to judgment of final order,
requiring a party, court, agency, or person to refrain from a particular act or acts.38 It is a preservative
remedy to ensure the protection of a party’s substantive rights or interests pending the final judgment
in the principal action. A plea for an injunctive writ lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided for otherwise, the outcome of a litigation would be
useless as far as the party applying for the writ is concerned.
At times referred to as the "Strong Arm of Equity,"39 we have consistently ruled that there is no power
the exercise of which is more delicate and which calls for greater circumspection than the issuance of
an injunction.40 It should only be extended in cases of great injury where courts of law cannot afford
an adequate or commensurate remedy in damages;41 "in cases of extreme urgency; where the right is
very clear; where considerations of relative inconvenience bear strongly in complainant’s favor; where
there is a willful and unlawful invasion of plaintiff’s right against his protest and remonstrance, the
injury being a continuing one, and where the effect of the mandatory injunction is rather to reestablish
and maintain a preexisting continuing relation between the parties, recently and arbitrarily interrupted
by the defendant, than to establish a new relation."42
For the writ to issue, two requisites must be present, namely, the existence of the right to be protected,
and that the facts against which the injunction is to be directed are violative of said right.43 It is
necessary that one must show an unquestionable right over the premises.44
Petitioner maintains that respondent’s claim of vested rights or proprietary rights over the cargo
handling services at the port of Dumaguete City is baseless. It insists that the contract for cargo
handling operations it formerly had with respondent did not amount to a property right; instead, it
should be considered as a mere privilege which can be recalled by the granting authority at anytime
when public welfare so requires.
On the other hand, respondent anchors its application for preliminary injunction on its alleged vested
right over the cargo handling services in the port of Dumaguete City pursuant to PPA AO No. 03-90.
It insists that under this administrative order, petitioner was bound to renew their cargo handling
services agreement as it was able to meet and, in fact, was able to surpass the "satisfactory"
performance rating requirement contained therein. Further, respondent posits the argument that PPA
AO No. 03-2000 was formulated by petitioner as a device by which it could avoid its obligation under
the superseded administrative order. Respondent, therefore, concludes that PPA AO No. 03-2000
contravenes the constitutional precept that "no law impairing obligations of contracts shall be
passed."45
We agree with petitioner and hold that respondent was not able to establish its claimed right over the
renewal of its cargo handling agreement with the former.
To begin with, stevedoring services are imbued with public interest and subject to the state’s police
power as we have declared in Anglo-Fil Trading Corporation v. Lazaro,46 to wit:
The Manila South Harbor is public property owned by the State. The operations of this premiere port
of the country, including stevedoring work, are affected with public interest. Stevedoring services are
subject to regulation and control for the public good and in the interest of general welfare.47
As "police power is so far-reaching in scope, that it has become almost impossible to limit its
sweep,"48 whatever proprietary right that respondent may have acquired must necessarily give way to
a valid exercise of police power, thus:49
48
4. In the interplay between such a fundamental right and police power, especially so where the
assailed governmental action deals with the use of one’s property, the latter is accorded much leeway.
That is settled law…50
In connection with the foregoing, we likewise find no arbitrariness nor irregularity on the part of
petitioner as far as PPA AO No. 03-2000 is concerned. It is worthwhile to remind respondent that
petitioner was created for the purpose of, among other things, promoting the growth of regional port
bodies. In furtherance of this objective, petitioner is empowered, after consultation with relevant
government agencies, to make port regulations particularly to make rules or regulation for the
planning, development, construction, maintenance, control, supervision and management of any port
or port district in the country.51 With this mandate, the decision to bid out the cargo holding services in
the ports around the country is properly within the province and discretion of petitioner which we
cannot simply set aside absent grave abuse of discretion on its part. The discretion to carry out this
policy necessarily required prior study and evaluation and this task is best left to the judgment of
petitioner. While there have been occasions when we have brushed aside actions on the part of
administrative agencies for being beyond the scope of their authority, the situation at the case at bar
does not fall within this exception.
As for respondent’s claim that PPA AO No. 03-2000 violated the constitutional provision of non-
impairment of contract, suffice it to state here that all contracts are "subject to the overriding
demands, needs, and interests of the greater number as the State may determine in the legitimate
exercise of its police power."52
Finally, it is settled that the sole object of a preliminary injunction, may it be prohibitory or
mandatory, is to preserve the status quo until the merits of the case can be heard and the final
judgment rendered.53 The status quo is the last actual peaceable uncontested status which preceded the
controversy.
In the case at bar, respondent sought the issuance of a writ for preliminary injunction in order to
prevent the "cessation of cargo handling services in the port of Dumaguete City to the detriment and
prejudice of the public, shipper, consignees and port workers."54 However, the factual backdrop of this
case establishes that respondent’s eight-year contract for cargo handling was already terminated and
its continued operation in the port of Dumaguete City was merely by virtue of a second hold-over
permit granted by petitioner through a letter dated 27 December 1999,55 the pertinent portion of which
reads:
This HOP56 extension shall be valid from January 18, 2000 up to April 18, 2000, unless sooner
withdrawn or cancelled or upon the award of the cargo handling contract thru public bidding.57
By its nature, the hold-over permit was merely temporary in nature and may be revoked by petitioner
at anytime. As we declared in the case of Anglo-Fil Trading Corporation,58 hold-over permits are
merely temporary and subject to the policy and guidelines as may be implemented by petitioner. The
temporary nature of the hold-over permit should have served as adequate notice to respondent that, at
any time, its authority to remain within the premises of the port of Dumaguete City may be
terminated. Unlike the contract for cargo handling services previously entered into by petitioner and
respondent, whose terms and conditions were agreed upon by the parties herein and which clearly
provided for a specific period of effectivity as well as a stipulation regarding the notice of violation,
the hold-over permit was unilaterally granted by petitioner pursuant to its authority under the law.
Based on the foregoing, it is clear that at the time of the institution of this suit, respondent no
longer possessed any contract for its continued operation in Dumaguete City and its stay in the
port of said city was by virtue of a mere permit extended by petitioner revocable at anytime by
the latter. Obviously, the writ of preliminary injunction issued by the Court of Appeals granted
respondent the authority to maintain its cargo handling services despite the absence of a valid
cargo handling agreement between respondent and petitioner. For this reason, we hold that the
Court of Appeals erred in ordering the court a quo to issue the writ of preliminary injunction in
favor of respondent.
WHEREFORE, premises considered, the present petition is GRANTED and the Decision of the
Court of Appeals dated 24 October 2000 is hereby REVERSED and SET ASIDE. The 31 May 2000
Order of the Regional Trial Court, Branch 44, Dumaguete City, setting aside the injuctive relief it
previously issued is hereby REINSTATED and the temporary restraining order We issued in our
Resolution dated 12 November 2003, enjoining, ordering, commanding and directing respondent from
implementing the aforesaid decision of the Court of Appeals, is hereby made PERMANENT. No
costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
49
G.R. No. 136349 January 23, 2006
LOURDES DE LA PAZ MASIKIP, Petitioner,
vs.
THE CITY OF PASIG, HON. MARIETTA A. LEGASPI, in her capacity as Presiding Judge of
the Regional Trial Court of Pasig City, Branch 165 and THE COURT OF APPEALS,
Respondents.
DECISION
SANDOVAL GUTIERREZ, J.:
Where the taking by the State of private property is done for the benefit of a small community which
seeks to have its own sports and recreational facility, notwithstanding that there is such a recreational
facility only a short distance away, such taking cannot be considered to be for public use. Its
expropriation is not valid. In this case, the Court defines what constitutes a genuine necessity for
public use.
This petition for review on certiorari assails the Decision1 of the Court of Appeals dated October
31, 1997 in CA-G.R. SP No. 41860 affirming the Order2 of the Regional Trial Court, Branch
165, Pasig City, dated May 7, 1996 in S.C.A. No. 873. Likewise assailed is the Resolution3 of the
same court dated November 20, 1998 denying petitioner’s Motion for Reconsideration.
The facts of the case are:
Petitioner Lourdes Dela Paz Masikip is the registered owner of a parcel of land with an area of
4,521 square meters located at Pag-Asa, Caniogan, Pasig City, Metro Manila.
In a letter dated January 6, 1994, the then Municipality of Pasig, now City of Pasig, respondent,
notified petitioner of its intention to expropriate a 1,500 square meter portion of her property to be
used for the "sports development and recreational activities" of the residents of Barangay
Caniogan. This was pursuant to Ordinance No. 42, Series of 1993 enacted by the then
Sangguniang Bayan of Pasig.
Again, on March 23, 1994, respondent wrote another letter to petitioner, but this time the purpose was
allegedly "in line with the program of the Municipal Government to provide land opportunities
to deserving poor sectors of our community."
On May 2, 1994, petitioner sent a reply to respondent stating that the intended expropriation of
her property is unconstitutional, invalid, and oppressive, as the area of her lot is neither
sufficient nor suitable to "provide land opportunities to deserving poor sectors of our
community."
In its letter of December 20, 1994, respondent reiterated that the purpose of the expropriation of
petitioner’s property is "to provide sports and recreational facilities to its poor residents."
Subsequently, on February 21, 1995, respondent filed with the trial court a complaint for
expropriation, docketed as SCA No. 873. Respondent prayed that the trial court, after due notice and
hearing, issue an order for the condemnation of the property; that commissioners be appointed for the
purpose of determining the just compensation; and that judgment be rendered based on the report of
the commissioners.
On April 25, 1995, petitioner filed a Motion to Dismiss the complaint on the following grounds:
I On May 7, 1996, the trial court issued an Order denying the Motion to Dismiss,5 on the ground that
PLAINTIFF HAS NO CAUSE OF ACTION FOR THE EXERCISE OF THE POWER OF
EMINENT DOMAIN, CONSIDERING THAT:
(A) THERE IS NO GENUINE NECESSITY FOR THE TAKING OF THE PROPERTY
SOUGHT TO BE EXPROPRIATED.
(B) PLAINTIFF HAS ARBITRARILY AND CAPRICIOUSLY CHOSEN THE PROPERTY
SOUGHT TO BE EXPROPRIATED.
(C) EVEN ASSUMING ARGUENDO THAT DEFENDANT’S PROPERTY MAY BE
EXPROPRIATED BY PLAINTIFF, THE FAIR MARKET VALUE OF THE PROPERTY TO
BE EXPROPRIATED FAR EXCEEDS SEVENTY-EIGHT THOUSAND PESOS (P78,000.00)
II
PLAINTIFF’S COMPLAINT IS DEFECTIVE IN FORM AND SUBSTANCE, CONSIDERING
THAT:
50
(A) PLAINTIFF FAILS TO ALLEGE WITH CERTAINTY THE PURPOSE OF THE
EXPROPRIATION.
(B) PLAINTIFF HAS FAILED TO COMPLY WITH THE PREREQUISITES LAID DOWN IN
SECTION 34, RULE VI OF THE RULES AND REGULATIONS IMPLEMENTING THE
LOCAL GOVERNMENT CODE; THUS, THE INSTANT EXPROPRIATION PROCEEDING
IS PREMATURE.
III
THE GRANTING OF THE EXPROPRIATION WOULD VIOLATE SECTION 261 (V) OF
THE OMNIBUS ELECTION CODE.
IV
PLAINTIFF CANNOT TAKE POSSESSION OF THE SUBJECT PROPERTY BY MERELY
DEPOSITING AN AMOUNT EQUAL TO FIFTEEN PERCENT (15%) OF THE VALUE OF
THE PROPERTY BASED ON THE CURRENT TAX DECLARATION OF THE SUBJECT
PROPERTY.4
there is a genuine necessity to expropriate the property for the sports and recreational activities
of the residents of Pasig. As to the issue of just compensation, the trial court held that the same is to
be determined in accordance with the Revised Rules of Court.
Petitioner filed a motion for reconsideration but it was denied by the trial court in its Order of July 31,
1996. Forthwith, it appointed the City Assessor and City Treasurer of Pasig City as commissioners to
ascertain the just compensation. This prompted petitioner to file with the Court of Appeals a special
civil action for certiorari, docketed as CA-G.R. SP No. 41860. On October 31, 1997, the Appellate
Court dismissed the petition for lack of merit. Petitioner’s Motion for Reconsideration was denied in a
Resolution dated November 20, 1998.
Hence, this petition anchored on the following grounds:
THE QUESTIONED DECISION DATED 31 OCTOBER 1997 (ATTACHMENT "A") AND
RESOLUTION DATED 20 NOVEMBER 1998 (ATTACHMENT "B") ARE CONTRARY TO LAW,
THE RULES OF COURT AND JURISPRUDENCE CONSIDERING THAT:
I
A. THERE IS NO EVIDENCE TO PROVE THAT THERE IS GENUINE NECESSITY FOR THE
TAKING OF THE PETITIONER’S PROPERTY.
B. THERE IS NO EVIDENCE TO PROVE THAT THE PUBLIC USE REQUIREMENT FOR THE
EXERCISE OF THE POWER OF EMINENT DOMAIN HAS BEEN COMPLIED WITH.
C. THERE IS NO EVIDENCE TO PROVE THAT RESPONDENT CITY OF PASIG HAS
COMPLIED WITH ALL CONDITIONS PRECEDENT FOR THE EXERCISE OF THE POWER OF
EMINENT DOMAIN.
THE COURT A QUO’S ORDER DATED 07 MAY 1996 AND 31 JULY 1996, WHICH WERE
AFFIRMED BY THE COURT OF APPEALS, EFFECTIVELY AMOUNT TO THE TAKING OF
PETITIONER’S PROPERTY WITHOUT DUE PROCESS OF LAW:
II
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING OF RULE ON ACTIONABLE
DOCUMENTS TO THE DOCUMENTS ATTACHED TO RESPONDENT CITY OF PASIG’S
COMPLAINT DATED 07 APRIL 1995 TO JUSTIFY THE COURT A QUO’S DENIAL OF
PETITIONER’S RESPONSIVE PLEADING TO THE COMPLAINT FOR EXPROPRIATION (THE
MOTION TO DISMISS DATED 21 APRIL 1995).
III
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE RULE ON HYPOTHETICAL
ADMISSION OF FACTS ALLEGED IN A COMPLAINT CONSIDERING THAT THE MOTION TO
DISMISS FILED BY PETITIONER IN THE EXPROPRIATION CASE BELOW WAS THE
RESPONSIVE PLEADING REQUIRED TO BE FILED UNDER THE THEN RULE 67 OF THE
RULES OF COURT AND NOT AN ORIDNARY MOTION TO DISMISS UNDER RULE 16 OF
THE RULES OF COURT.
The foregoing arguments may be synthesized into two main issues – one substantive and one
procedural. We will first address the procedural issue.
Petitioner filed her Motion to Dismiss the complaint for expropriation on April 25, 1995. It was
denied by the trial court on May 7, 1996. At that time, the rule on expropriation was governed by
Section 3, Rule 67 of the Revised Rules of Court which provides:
51
"SEC. 3. Defenses and objections. – Within the time specified in the summons, each defendant, in lieu
of an answer, shall present in a single motion to dismiss or for other appropriate relief, all his
objections and defenses to the right of the plaintiff to take his property for the use or purpose specified
in the complaint. All such objections and defenses not so presented are waived. A copy of the motion
shall be served on the plaintiff’s attorney of record and filed with the court with proof of service."
The motion to dismiss contemplated in the above Rule clearly constitutes the responsive pleading
which takes the place of an answer to the complaint for expropriation. Such motion is the pleading
that puts in issue the right of the plaintiff to expropriate the defendant’s property for the use specified
in the complaint. All that the law requires is that a copy of the said motion be served on plaintiff’s
attorney of record. It is the court that at its convenience will set the case for trial after the filing of the
said pleading.6
The Court of Appeals therefore erred in holding that the motion to dismiss filed by petitioner
hypothetically admitted the truth of the facts alleged in the complaint, "specifically that there is a
genuine necessity to expropriate petitioner’s property for public use." Pursuant to the above Rule, the
motion is a responsive pleading joining the issues. What the trial court should have done was to set
the case for the reception of evidence to determine whether there is indeed a genuine necessity for the
taking of the property, instead of summarily making a finding that the taking is for public use and
appointing commissioners to fix just compensation. This is especially so considering that the purpose
of the expropriation was squarely challenged and put in issue by petitioner in her motion to dismiss.
Significantly, the above Rule allowing a defendant in an expropriation case to file a motion to dismiss
in lieu of an answer was amended by the 1997 Rules of Civil Procedure, which took effect on July 1,
1997. Section 3, Rule 67 now expressly mandates that any objection or defense to the taking of the
property of a defendant must be set forth in an answer.
The fact that the Court of Appeals rendered its Decision in CA-G.R. SP No. 41860 on October 31,
after the 1997 Rules of Civil Procedure took effect, is of no moment. It is only fair that the Rule at the
time petitioner filed her motion to dismiss should govern. The new provision cannot be applied
retroactively to her prejudice.
We now proceed to address the substantive issue.
In the early case of US v. Toribio,7 this Court defined the power of eminent domain as "the right of a
government to take and appropriate private property to public use, whenever the public exigency
requires it, which can be done only on condition of providing a reasonable compensation therefor." It
has also been described as the power of the State or its instrumentalities to take private property for
public use and is inseparable from sovereignty and inherent in government.8
The power of eminent domain is lodged in the legislative branch of the government. It delegates the
exercise thereof to local government units, other public entities and public utility corporations,9
subject only to Constitutional limitations. Local governments have no inherent power of eminent
domain and may exercise it only when expressly authorized by statute.10 Section 19 of the Local
Government Code of 1991 (Republic Act No. 7160) prescribes the delegation by Congress of the
power of eminent domain to local government units and lays down the parameters for its exercise,
thus:
"SEC. 19. Eminent Domain. – A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, purpose or welfare for
the benefit of the poor and the landless, upon payment of just compensation, pursuant to the
provisions of the Constitution and pertinent laws: Provided, however, That, the power of eminent
domain may not be exercised unless a valid and definite offer has been previously made to the owner
and such offer was not accepted: Provided, further, That, the local government unit may immediately
take possession of the property upon the filing of expropriation proceedings and upon making a
deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property
based on the current tax declaration of the property to be expropriated: Provided, finally, That, the
amount to be paid for expropriated property shall be determined by the proper court, based on the fair
market value at the time of the taking of the property."
Judicial review of the exercise of eminent domain is limited to the following areas of concern: (a) the
adequacy of the compensation, (b) the necessity of the taking, and (c) the public use character of the
purpose of the taking.11
In this case, petitioner contends that respondent City of Pasig failed to establish a genuine necessity
which justifies the condemnation of her property. While she does not dispute the intended public
purpose, nonetheless, she insists that there must be a genuine necessity for the proposed use and
purposes. According to petitioner, there is already an established sports development and recreational
activity center at Rainforest Park in Pasig City, fully operational and being utilized by its residents,
including those from Barangay Caniogan. Respondent does not dispute this. Evidently, there is no
"genuine necessity" to justify the expropriation.
The right to take private property for public purposes necessarily originates from "the necessity" and
the taking must be limited to such necessity. In City of Manila v. Chinese Community of Manila,12 we
held that the very foundation of the right to exercise eminent domain is a genuine necessity and
that necessity must be of a public character. Moreover, the ascertainment of the necessity must
precede or accompany and not follow, the taking of the land. In City of Manila v. Arellano Law
College,13 we ruled that "necessity within the rule that the particular property to be expropriated must
be necessary, does not mean an absolute but only a reasonable or practical necessity, such as would
combine the greatest benefit to the public with the least inconvenience and expense to the condemning
party and the property owner consistent with such benefit."
52
Applying this standard, we hold that respondent City of Pasig has failed to establish that there is a
genuine necessity to expropriate petitioner’s property. Our scrutiny of the records shows that the
Certification14 issued by the Caniogan Barangay Council dated November 20, 1994, the basis for the
passage of Ordinance No. 42 s. 1993 authorizing the expropriation, indicates that the intended
beneficiary is the Melendres Compound Homeowners Association, a private, non-profit organization,
not the residents of Caniogan. It can be gleaned that the members of the said Association are desirous
of having their own private playground and recreational facility. Petitioner’s lot is the nearest vacant
space available. The purpose is, therefore, not clearly and categorically public. The necessity has not
been shown, especially considering that there exists an alternative facility for sports development and
community recreation in the area, which is the Rainforest Park, available to all residents of Pasig City,
including those of Caniogan.
The right to own and possess property is one of the most cherished rights of men. It is so fundamental
that it has been written into organic law of every nation where the rule of law prevails. Unless the
requisite of genuine necessity for the expropriation of one’s property is clearly established, it shall be
the duty of the courts to protect the rights of individuals to their private property. Important as the
power of eminent domain may be, the inviolable sanctity which the Constitution attaches to the
property of the individual requires not only that the purpose for the taking of private property be
specified. The genuine necessity for the taking, which must be of a public character, must also be
shown to exist.
WHEREFORE, the petition for review is GRANTED. The challenged Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 41860 are REVERSED. The complaint for expropriation
filed before the trial court by respondent City of Pasig, docketed as SCA No. 873, is ordered
DISMISSED.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairperson
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Asscociate Justice
 CANCIO C. GARCIA G.R. No. 155746 October 13, 2004
Associate Justice
DIOSDADO LAGCAO, DOROTEO LAGCAO and URSULA LAGCAO, petitioners,
ATT E S TAT I O N vs.
JUDGE GENEROSA G. LABRA, Branch 23, Regional Trial Court, Cebu, and the CITY OF
I attest that the conclusions in the above Decision were reached in consultation before the case was CEBU, respondent.
assigned to the writer of the opinion of the Court's Division.
DECISION
REYNATO S. PUNO
Associate Justice CORONA, J.:
Chairperson, Second Division
Before us is a petition for review of the decision dated July 1, 2002 of the Regional Trial Court,
C E R T I F I CAT I O N Branch 23, Cebu City1 upholding the validity of the City of Cebu’s Ordinance No. 1843, as well as the
lower court’s order dated August 26, 2002 denying petitioner’s motion for reconsideration.
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the In 1964, the Province of Cebu donated 210 lots to the City of Cebu. One of these lots was Lot
case was assigned to the writer of the opinion of the Court. 1029, situated in Capitol Hills, Cebu City, with an area of 4,048 square meters. In 1965,
petitioners purchased Lot 1029 on installment basis. But then, in late 1965, the 210 lots,
ARTEMIO V. PANGANIBAN including Lot 1029, reverted to the Province of Cebu. Consequently, the province tried to annul
Chief Justice the sale of Lot 1029 by the City of Cebu to the petitioners. This prompted the latter to sue the
province for specific performance and damages in the then Court of First Instance.

On July 9, 1986, the court a quo ruled in favor of petitioners and ordered the Province of Cebu
to execute the final deed of sale in favor of petitioners.

On June 11, 1992, the Court of Appeals affirmed the decision of the trial court. Pursuant to the
ruling of the appellate court, the Province of Cebu executed on June 17, 1994 a deed of absolute sale
over Lot 1029 in favor of petitioners. Thereafter, Transfer Certificate of Title (TCT) No. 129306
was issued in the name of petitioners and Crispina Lagcao.3

After acquiring title, petitioners tried to take possession of the lot only to discover that it was already
occupied by squatters. Thus, on June 15, 1997, petitioners instituted ejectment proceedings against the
squatters.

The Municipal Trial Court in Cities (MTCC), Branch 1, Cebu City, rendered a decision on April
1, 1998, ordering the squatters to vacate the lot. On appeal, the RTC affirmed the MTCC’s
decision and issued a writ of execution and order of demolition.1avvphi1

53
However, when the demolition order was about to be implemented, Cebu City Mayor Alvin Garcia
wrote two letters4 to the MTCC, requesting the deferment of the demolition on the ground that
the City was still looking for a relocation site for the squatters.
Acting on the mayor’s request, the MTCC issued two orders suspending the demolition for a period
of 120 days from February 22, 1999. Unfortunately for petitioners, during the suspension period, the
Sangguniang Panlungsod (SP) of Cebu City passed a resolution which identified Lot 1029 as a
socialized housing site pursuant to RA 7279.5
Then, on June 30, 1999, the SP of Cebu City passed Ordinance No. 17726 which included Lot
1029 among the identified sites for socialized housing.
On July, 19, 2000, Ordinance No. 18437 was enacted by the SP of Cebu City authorizing the
mayor of Cebu City to initiate expropriation proceedings for the acquisition of Lot 1029 which
was registered in the name of petitioners.
The intended acquisition was to be used for the benefit of the homeless after its subdivision and sale
to the actual occupants thereof. For this purpose, the ordinance appropriated the amount of
₱6,881,600 for the payment of the subject lot. This ordinance was approved by Mayor Garcia on
August 2, 2000.
On August 29, 2000, petitioners filed with the RTC an action for declaration of nullity of
Ordinance No. 1843 for being unconstitutional. The trial court rendered its decision on July 1,
2002 dismissing the complaint filed by petitioners whose subsequent motion for reconsideration
was likewise denied on August 26, 2002.
In this appeal, petitioners argue that Ordinance No. 1843 is unconstitutional as it sanctions the
expropriation of their property for the purpose of selling it to the squatters, an endeavor contrary to
the concept of "public use" contemplated in the Constitution.8 They allege that it will benefit only a
handful of people. The ordinance, according to petitioners, was obviously passed for politicking, the
squatters undeniably being a big source of votes.
In sum, this Court is being asked to resolve whether or not the intended expropriation by the City of
Cebu of a 4,048-square-meter parcel of land owned by petitioners contravenes the Constitution and
applicable laws.
Under Section 48 of RA 7160,9 otherwise known as the Local Government Code of 1991,10 local
legislative power shall be exercised by the Sangguniang Panlungsod of the city. The legislative acts of
the Sangguniang Panlungsod in the exercise of its lawmaking authority are denominated ordinances.
54
Local government units have no inherent power of eminent domain and can exercise it only when
expressly authorized by the legislature.11 By virtue of RA 7160, Congress conferred upon local
government units the power to expropriate. Ordinance No. 1843 was enacted pursuant to Section 19
of RA 7160:
SEC. 19. Eminent Domain. − A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare
for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the
provisions of the Constitution and pertinent laws xxx. (italics supplied).
Ordinance No. 1843 which authorized the expropriation of petitioners’ lot was enacted by the SP of
Cebu City to provide socialized housing for the homeless and low-income residents of the City.
However, while we recognize that housing is one of the most serious social problems of the country,
local government units do not possess unbridled authority to exercise their power of eminent domain
in seeking solutions to this problem.
There are two legal provisions which limit the exercise of this power: (1) no person shall be
deprived of life, liberty, or property without due process of law, nor shall any person be denied
the equal protection of the laws;12 and (2) private property shall not be taken for public use
without just compensation.13 Thus, the exercise by local government units of the power of eminent
domain is not absolute. In fact, Section 19 of RA 7160 itself explicitly states that such exercise
must comply with the provisions of the Constitution and pertinent laws.
The exercise of the power of eminent domain drastically affects a landowner’s right to private
property, which is as much a constitutionally-protected right necessary for the preservation and
enhancement of personal dignity and intimately connected with the rights to life and liberty.14
Whether directly exercised by the State or by its authorized agents, the exercise of eminent domain is
necessarily in derogation of private rights.15 For this reason, the need for a painstaking scrutiny cannot
be overemphasized.
The due process clause cannot be trampled upon each time an ordinance orders the expropriation of a
private individual’s property. The courts cannot even adopt a hands-off policy simply because public
use or public purpose is invoked by an ordinance, or just compensation has been fixed and
determined. In De Knecht vs. Bautista,16 we said:
It is obvious then that a land-owner is covered by the mantle of protection due process affords. It is a
mandate of reason. It frowns on arbitrariness, it is the antithesis of any governmental act that smacks
of whim or caprice. It negates state power to act in an oppressive manner. It is, as had been stressed so
often, the embodiment of the sporting idea of fair play. In that sense, it stands as a guaranty of justice.
That is the standard that must be met by any governmental agency in the exercise of whatever
competence is entrusted to it. As was so emphatically stressed by the present Chief Justice, "Acts of
Congress, as well as those of the Executive, can deny due process only under pain of nullity. xxx.
The foundation of the right to exercise eminent domain is genuine necessity and that necessity must
be of public character.17 Government may not capriciously or arbitrarily choose which private
property should be expropriated. In this case, there was no showing at all why petitioners’ property
was singled out for expropriation by the city ordinance or what necessity impelled the particular
choice or selection. Ordinance No. 1843 stated no reason for the choice of petitioners’ property as the
site of a socialized housing project.
Condemnation of private lands in an irrational or piecemeal fashion or the random expropriation of
small lots to accommodate no more than a few tenants or squatters is certainly not the condemnation
for public use contemplated by the Constitution. This is depriving a citizen of his property for the
convenience of a few without perceptible benefit to the public.18
RA 7279 is the law that governs the local expropriation of property for purposes of urban land reform
and housing. Sections 9 and 10 thereof provide:
SEC 9. Priorities in the Acquisition of Land. − Lands for socialized housing shall be acquired in the
following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies,
including government-owned or controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas or Priority Development, Zonal Improvement Program sites, and
Slum Improvement and Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS which have not yet been acquired;
and
(f) Privately-owned lands.
55
Where on-site development is found more practicable and advantageous to the beneficiaries, the
priorities mentioned in this section shall not apply. The local government units shall give budgetary
priority to on-site development of government lands. (Emphasis supplied).
SEC. 10. Modes of Land Acquisition. − The modes of acquiring lands for purposes of this Act shall
include, among others, community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the Government, joint venture agreement, negotiated purchase, and
expropriation: Provided, however, That expropriation shall be resorted to only when other modes
of acquisition have been exhausted: Provided further, That where expropriation is resorted to,
parcels of land owned by small property owners shall be exempted for purposes of this Act: xxx.
(Emphasis supplied).
In the recent case of Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes et al. vs. City of Manila,19
we ruled that the above-quoted provisions are strict limitations on the exercise of the power of
eminent domain by local government units, especially with respect to (1) the order of priority in
acquiring land for socialized housing and (2) the resort to expropriation proceedings as a means to
acquiring it. Private lands rank last in the order of priority for purposes of socialized housing. In the
same vein, expropriation proceedings may be resorted to only after the other modes of acquisition are
exhausted. Compliance with these conditions is mandatory because these are the only safeguards of
oftentimes helpless owners of private property against what may be a tyrannical violation of due
process when their property is forcibly taken from them allegedly for public use.
We have found nothing in the records indicating that the City of Cebu complied strictly with
Sections 9 and 10 of RA 7279. Ordinance No. 1843 sought to expropriate petitioners’ property
without any attempt to first acquire the lands listed in (a) to (e) of Section 9 of RA 7279.
Likewise, Cebu City failed to establish that the other modes of acquisition in Section 10 of RA
7279 were first exhausted. Moreover, prior to the passage of Ordinance No. 1843, there was no
evidence of a valid and definite offer to buy petitioners’ property as required by Section 19 of
RA 7160.20 We therefore find Ordinance No. 1843 to be constitutionally infirm for being
violative of the petitioners’ right to due process.
It should also be noted that, as early as 1998, petitioners had already obtained a favorable judgment of
eviction against the illegal occupants of their property. The judgment in this ejectment case had, in
fact, already attained finality, with a writ of execution and an order of demolition. But Mayor Garcia
requested the trial court to suspend the demolition on the pretext that the City was still searching for a
relocation site for the squatters. However, instead of looking for a relocation site during the
suspension period, the city council suddenly enacted Ordinance No. 1843 for the expropriation
of petitioners’ lot. It was trickery and bad faith, pure and simple. The unconscionable manner in
which the questioned ordinance was passed clearly indicated that respondent City transgressed the
Constitution, RA 7160 and RA 7279.
For an ordinance to be valid, it must not only be within the corporate powers of the city or Davide, Jr., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-
municipality to enact but must also be passed according to the procedure prescribed by law. It must be Martinez, Carpio Morales*, Callejo, Sr., Azcuna*, Tinga, and Chico-Nazario*, JJ., concur.
in accordance with certain well-established basic principles of a substantive nature. These principles
require that an ordinance (1) must not contravene the Constitution or any statute (2) must not be
unfair or oppressive (3) must not be partial or discriminatory (4) must not prohibit but may
regulate trade (5) must be general and consistent with public policy, and (6) must not be
unreasonable.21

Ordinance No. 1843 failed to comply with the foregoing substantive requirements. A clear case of
constitutional infirmity having been thus established, this Court is constrained to nullify the subject
ordinance. We recapitulate:

first, as earlier discussed, the questioned ordinance is repugnant to the pertinent provisions of the
Constitution, RA 7279 and RA 7160;

second, the precipitate manner in which it was enacted was plain oppression masquerading as a pro-
poor ordinance;

third, the fact that petitioners’ small property was singled out for expropriation for the purpose of
awarding it to no more than a few squatters indicated manifest partiality against petitioners, and

fourth, the ordinance failed to show that there was a reasonable relation between the end sought and
the means adopted. While the objective of the City of Cebu was to provide adequate housing to slum
dwellers, the means it employed in pursuit of such objective fell short of what was legal, sensible and
called for by the circumstances.

Indeed, experience has shown that the disregard of basic liberties and the use of short-sighted methods
in expropriation proceedings have not achieved the desired results. Over the years, the government
has tried to remedy the worsening squatter problem. Far from solving it, however, government’s kid-
glove approach has only resulted in the multiplication and proliferation of squatter colonies and
blighted areas. A pro-poor program that is well-studied, adequately funded, genuinely sincere and
truly respectful of everyone’s basic rights is what this problem calls for, not the improvident
enactment of politics-based ordinances targeting small private lots in no rational fashion.

WHEREFORE, the petition is hereby GRANTED. The July 1, 2002 decision of Branch 23 of the
Regional Trial Court of Cebu City is REVERSED and SET ASIDE.

SO ORDERED.

56
G.R. No. 163130 September 7, 2007
SAN ROQUE REALTY AND DEVELOPMENT CORPORATION, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES (through the Armed Forces of the Philippines), respondent.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of a Decision1 of the Court of Appeals (CA) in CA-G.R.
CV. No. 61758 ordering the cancellation of petitioner San Roque Realty Development
Corporation's (SRRDC's) Transfer Certificates of Title (TCT) Nos. 128197 and 128198, thereby
reversing the Decision2 of the Regional Trial Court (RTC) of Cebu City, Branch 12, in Civil
Case No. CEB-1843.
The facts, as found by the CA, are as follows:
The subject parcels of land are located at Lahug, Cebu City and were part of Lot No. 933. Lot No. 933
was covered by Transfer Certificate of Title No. 11946. It was originally owned by Ismael D.
Rosales, Pantaleon Cabrera and Francisco Racaza.
On 5 September 1938, subject parcels of land, together with seventeen (17) others, were the subject of
an expropriation proceeding initiated by the then Commonwealth of the Philippines docketed as Civil
Case No. 781.
On 19 October 1938, Judge Felix Martinez ordered the initial deposit of P9,500.00 as pre-condition
for the entry on the lands sought to be expropriated.
On 14 May 1940, a Decision was rendered (Exhibit "D," Records, pp. 204-214) condemning the
parcels of land. However, the title of the subject parcel of land was not transferred to the government.
Eventually, the land was subdivided and T.C.T. No. 11946 was cancelled and new titles were issued
by the Register of Deeds of Cebu. Two parcels covered by T.C.T. Nos. 128197 (Lot No. 933-B-3) and
128198 (Lot No. 933-B-4) were acquired by defendant-appellee.
In 1995, defendant-appellee begun construction of townhouses on the subject parcels of land.
57
On 22 February 1996, plaintiff-appellant filed the present case (Records, pp. 1-15) alleging that
it is the owner of the subject parcels of land by virtue of the 1938 Decision in the expropriation
case, thus, T.C.T. Nos. 128197 and 128198 are null and void. It argued that defendant-appellee,
had no right to possess the subject properties because it was not its lawful owner.
In its Answer (Records, pp. 28-38), defendant-appellee claimed that it was a buyer in good faith.
It also claimed that there was no valid expropriation because it was initiated by the executive
branch without legislative approval. It also alleged that the expropriation was never
consummated because the government did not actually enter the land nor were the owners paid
any compensation.3
The appellate court then quotes, verbatim, the evidence and positions of the parties, as found by the
trial court, viz.:
Plaintiff alleged that the Republic of the Philippines is the absolute owner of Lot No. 933 of Cebu
Cadastre (covered by Transfer Certificate of Title 11946), a part and parcel of the Camp Lapu-lapu
military reservation; that said parcel of land was originally private property registered in the names of
Francisco Racaza, Pantaleon Cabrera and Josefina Martinez; that on October 19, 1938, plaintiff (then
Commonwealth now Republic of the Philippines) instituted condemnation proceeding against the
owners of eighteen (18) parcels of land including Lot 933 in Banilad Estate Lahug (Exhibits "A" and
"A-1") before the Court of First Instance of the Province of Cebu, 8th Judicial District, that the
purpose of expropriation was to carry out the development program of the Philippine Army as
provided in the National Defense Act, i.e., military reservation; that sometime in October 1938, Judge
Felix Martinez ordered plaintiff to make an initial deposit of P9,500.00 with any depository of the
latter payable to the Provincial Treasurer as pre-condition for the entry on the lands sought to be
expropriated (Exhibit "B"); that, accordingly, plaintiff deposited said amount with the Philippine
National Bank to the credit of the Provincial Treasurer (Exhibit "C"); that said amount was
subsequently disbursed in full but due to the destruction of the vouchers, journal and cash book in the
Office of the Provincial Treasurer during the last World War, the names of the payees could not
reasonably be ascertained (Exhibit "P"); that on May 14, 1940, Judge Martinez issued a Decision
condemning the properties in favor of plaintiffs and, at the same time, fixing the just compensation
thereof (Exhibits "D" and "E"); that defendant San Roque’s predecessors namely Ismael D. Rosales,
Pantaleon Cabrera and Francisco Racaza interposed and (sic) Exception and Notice of Intention to
Appeal and filed their corresponding appeal bond (Exhibits "N" & "O"); that naturally, the filing held
temporarily in abeyance the finality of the Decision and prevented plaintiff from recording the
Decision with the Register of Deeds; that plaintiffs, nonetheless, started using the expropriated
properties including Lot 933, devoting the properties to military use; that to show use of subject
properties, plaintiff submitted (1) the historical account of the National Historical Commission
embodied in a metal marker located in Lot 932 adjacent to Lot 933 (TSN, January 21, 1997, pp. 6-7;
9; Exhibits "I," "I-1," "I-2;" (2) the testimonial accounts of Sgt. Suralta, Barangay Captain Rosales, Lt.
Colonel Infante and Col. Reynaldo Correa; and, (3) the remnant of the Lahug Airport, particularly its
runway (originally devoted exclusively for military airport and landing field as can be gleaned from
Executive Orders 73, 75 and 154 dated December 3, 1936, August 12, 1947 and June 24, 1938,
respectively) situated on Lot 933 itself; that survey maps of defendant and plaintiff have shown the
exact location of the runway; that Lot 933 was devoted to military use by plaintiff not only for
building structures but also military training of the Riverine Battalion (Lot 932, as per testimony of
M/Sgt. Renato Suralta); that these training continued up to the present (TSN, January 27, 1997, pp.
4-8); that the area where Park Vista is being built was used as training ground (TSN, April 3, 1997, p.
2). Plaintiff further alleged that defendant San Roque secured Certificates of Title in its favor to the
prejudice of plaintiff specifically TCT Nos. 128197 and 128198 covering Lot No. 933-B-3 of the
subdivision plan Psd-114779 and Lot 933-B-4 of the subdivision plan Psd-27-023209, respectively;
that subject parcels of land belong to plaintiff and registration thereof in the name of defendant San
Roque is null and void. Consequently, defendant San Roque’s possession and ownership over the
subject property are without legal basis.
On the other hand, defendant San Roque alleged that subject parcels of land have been covered by the
Torrens System for decades and any transactions involving the same including the alleged
expropriation should have been registered and annotated on the Transfer Certificates of Title; that
there has been no registration much less annotation of said expropriation on TCTs issued to defendant
San Roque nor any [of] its predecessors-in-interest. (Exhibits "20" to "24," "25," "25-A" to "25-C,"
Exhibits "2," "2-A" to "2-C," "3," "3-A" and "3-B"); that plaintiff never secured a title in its name,
never actually took possession of subject parcels of land from the date of the Decision in Civil Case
No. 781 up to the present; that despite the fact that defendant San Roque’s Park Vista Project is within
viewing and walking distance from Camp Lapu-lapu, it was able to introduce substantial
improvements (Exhibits "36," "36-A" to "36-Q") with no action being taken by plaintiff; that there are
other developments on Lot 933 such as the Cebu Civic and Trade Center which include areas within
the military camp as well (Exhibits "36-R" to "36-V," "38," "38-A" to "38-R"); that plaintiff’s only
proof of its claim is the Camp Lapu-lapu Development Plan (Exhibit "F") which is a private survey of
plaintiff; that plaintiff knew and was fully aware of all transactions involving Lot No. 933 up to this
date; that defendant San Roque is an innocent purchaser for value and, therefore, entitled to the
protection of the law as it has every right to rely on the correctness of the certificates of title issued
therefor; that defendant San Roque and its predecessors-in-interest have been in open, notorious and
continuous possession and enjoyment of subject property(ies) since 1930; that there is a presumption
of regularity in the issuance of subject TCT Nos. 128197 and 128198 by defendant Register of Deeds;
that the alleged Camp Lapu-lapu Development Plan, in the absence of any Transfer Certificate of Title
in plaintiff’s name, cannot prevail over defendant San Roque’s Transfer Certificate of Title; that
defendant San Roque’s (sic) commenced development of subject parcels of land as early as 1993 and
started construction in April 1994 upon issuance of titles in its name, two and a half years prior to
institution of the instant case; that it has been paying real taxes since the acquisition of subject
properties (Exhibits "4," "4-A" and "4-B," "5," "5-A" and "5-B," "26" to "35"); that all requirements
for such development, such as securing permits and licenses from government agencies were
complied with (Exhibits "9" to "18-C"); that it was only on 24 July 1995 that plaintiff initiated steps to
recover possession starting with the letter dated 24 July 1995 (Exhibit "1," "6," "7" and "8") and even
58
addressed to a wrong entity; that it took plaintiff fifty-six (56) years (counted from the Decision dated
14 May 1940) to take action to secure its "claimed" ownership and possession; that private ownership
of portions of Lot 933 have been affirmed by the appellate court by ordering the City Government of
Cebu to pay the private landowner for the portion used for the expansion of Geongson Road in the
case of Perpetua Magno, et al. versus City of Cebu, CA-G.R. No. 40604-CV (Exhibits "51" to "55,"
"55-A" to "55-C"); that in fact, the plaintiff paid rental for another allegedly expropriated property in
the case of another expropriated Lot 934 subject of the case of Segura v. CAA, et al., CA-G.R. No.
12728-CV (Exh. "56," "56-A" to "56-B"); that the alleged expropriation of Lot 933 was never
consummated as plaintiff never entered, much less take possession, of subject parcels of land and ever
paid any compensation to the original owners despite its being a requisite for valid exercise of the
power of eminent domain; that there is nother (sic) on record which will show that compensation for
the expropriated lots was ever paid to, much less received by the landowners/predecessors-in-interest
of defendant San Roque; that plaintiff abandoned the public use, much less did it do so within a
reasonable time, the Lahug Airport had long transferred to Mactan and the areas said airport used to
occupy are now being developed by or on long term lease to private entities; that alleged initial
deposit of P9,500.00 payable to Provincial Treasurer does not specify for which property the same
was intended for; that if indeed plaintiff actually entered subject property and introduced
improvements thereon it would not have been possible for defendant San Roque or its predecessors-
in-interest to have actually possessed and enjoyed the property from 1938 up to the present to the
exclusion of plaintiff; that the expropriation requires legislative action and thus the alleged
expropriation of Lot 933 is null and void; that City Ordinances have classified Lot 933 and
neighboring lots initially as residential and presently as commercial (Exhibits "39," "40," "41"); and,
finally that the AFP-Viscom is not the proper party to initiate much less institute suit even assuming
the alleged expropriation is valid as the expropriated lots were placed under the control and
supervision of the Civil Aeronautics Board.4
On August 25, 1998, the RTC rendered a Decision5 dismissing the Republic's complaint and
upholding SRRDC's ownership over the subject properties as supported by SRRDC's actual
possession thereof and its unqualified title thereto. The RTC ruled that SRRDC's ownership is
borne out by the original owner's title to Lot No. 933 and the subsequent transferees’ respective
titles all of which bore no annotation of the fact of expropriation and did not indicate the
Republic's favorable lien. It also found that there was no valid expropriation since the records
are bereft of a showing that consideration was paid for the subject properties.6
Aggrieved, the Republic appealed the decision to the CA insisting on its absolute ownership over
the subject properties grounded on the following: (1) the CFI Decision in the expropriation case,
Civil Case No. 781; (2) the ruling of this Court in Valdehueza v. Republic;7 and (3) the
expropriated properties, including Lot No. 933, are devoted to public use.
The CA reversed the RTC Decision on the finding that the appeal from the CFI Decision in the
expropriation case was never perfected by the original owners of the subject properties,8 and
thus, the expropriation of Lot No. 933 became final and binding on the original owners, and
SRRDC, which merely stepped into the latter's shoes, is similarly bound.9 The CA further held
that laches and estoppel cannot work against the Republic despite its failure from 1940 to
register Lot No. 933 in its name, or to record the decree of expropriation on the title.10
Accordingly, the CA found no necessity to rule on the applicability of Valdehueza v. Republic in
the case.11
Hence, the instant petition.
In this appeal, SRRDC assigned the following errors:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE VALIDITY OF THE
EXPROPRIATION PROCEEDINGS IN CIVIL CASE NO. 781 MAY NO LONGER BE
QUESTIONED. RESPONDENT'S OWN (REBUTTAL) EVIDENCE SHOWS THAT THE
DECISION IN CIVIL CASE NO. 781 IS NOT YET FINAL. FURTHERMORE, THE CONDUCT OF
EXPROPRIATION PROCEEDINGS ALONE DOES NOT CONFER TITLE UPON RESPONDENT.
II.
THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAD A BETTER
RIGHT TO THE SUBJECT PROPERTIES. THE SUBJECT PROPERTIES BEING UNDER THE
TORRENS SYSTEM, PETITIONER'S RIGHT AS THE REGISTERED OWNER FAR
OUTWEIGHS RESPONDENT'S. ASIDE FROM THE FACT THAT ITS CLAIM IS OF DOUBTFUL
VALIDITY, RESPONDENT, FOR SEVERAL DECADES, FAILED TO REGISTER ITS INTEREST,
IF ANY, OVER THE SUBJECT PROPERTIES.
III.
THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT IS NOT GUILTY OF
LACHES DESPITE THE FACT THAT IT FAILED TO ASSERT ITS RIGHT, IF ANY, OVER THE
SUBJECT PROPERTIES FOR 56 LONG YEARS.
IV.
THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS NOT A BUYER IN
GOOD FAITH.12
59
At the outset, we note that issues of ownership and possession of several lots included in the 18
parcels of land covering the Banilad Friar Lands Estate had been the subject of earlier controversies
which we already had occasion to rule upon. Lot Nos. 932 and 939 were the subject of Valdehueza v.
Republic13 which is ubiquitously invoked by the Republic in this case. Republic v. Lim14 dealt with the
special circumstances surrounding the incomplete and ineffectual expropriation of Lot No. 932. On
the other hand, Federated Realty Corporation v. Court of Appeals15 preliminarily determined the state
of ownership and possession of a portion of Lot No. 933, particularly Lot 3, covered by TCT No.
119929.
In Valdehueza, we held that the registered lot owners were not entitled to recover possession of the
expropriated lots considering that the titles contained annotations of the right of the National Airports
Corporation (now CAA) to pay for and acquire said lots.16
In Republic v. Lim,17 we rejected the Republic’s invocation of our Decision in Valdehueza to retain
ownership over said lots, and upheld the principle that title to the expropriated property shall pass
from the owner to the expropriator only upon full payment of just compensation.18 We struck down
the Republic’s claim of ownership over Lot No. 932 in light of its blatant disregard of the explicit
order in Valdehueza to effect payment of just compensation.
In Federated Realty Corporation v. Court of Appeals19 we upheld Federated Realty Corporation’s
(FRC’s) clear and unmistakable right, as the title holder, to the lot in question, necessitating the
issuance of a writ of injunction to prevent serious damage to its interests.20 Even as the Republic
invoked Valdehueza and the CFI Decision in Civil Case No. 781 to defeat the rights of the registered
owner and actual possessor, we applied the settled principle in land registration that a certificate of
title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the
person named therein.21
It is against this backdrop that we resolve the main issue at bench: the ownership of Lot Nos. 933-B-3
and 933-B-4. To do so, however, we must answer a number of fundamental questions.
First, was there a valid and complete expropriation of the 18 parcels of land, inclusive of subject Lot
No. 933? Corollary thereto, did the CFI Decision in Civil Case No. 781 attain finality and, as such,
now evade review?
To these questions, the CA responded in the affirmative. It found that no timely appeal had been filed
by the original owners of Lot No. 933, and thus, the CFI Decision became final. Accordingly, the CA
ruled that the validity of the expropriation, including the authority to expropriate, was no longer open
to question. Therefore, the appellate court saw no necessity to delve into the applicability of
Valdehueza.
We cannot subscribe to the CA’s ruling.
In its effort to simplify the issues, the CA disregarded relevant facts and ignored the evidence,
noteworthy among which is that when the Republic filed its complaint with the RTC, it alleged that
the CFI Decision in Civil Case No. 781 had long become final and executory. However, this assertion
would compound the Republic’s predicament, because the Republic could not adequately explain its
failure to register its ownership over the subject property or, at least, annotate its lien on the title.
Trying to extricate itself from this quandary, the Republic belatedly presented a copy of an Exception
and Notice of Intention to Appeal dated July 9, 1940, to show that an appeal filed by the original
owners of Lot No. 933 effectively prevented the Republic from registering its title, or even only
annotating its lien, over the property.
The CA’s categorical pronouncement that the CFI Decision had become final as no appeal was
perfected by SRRDC’s predecessor-in-interest is, therefore, contradicted by the Republic’s own
allegation that an appeal had been filed by the original owners of Lot No. 933. Not only did the CA
fail to resolve the issue of the Republic’s failure to register the property in its name, it also did not
give any explanation as to why title and continuous possession of the property remained with SRRDC
and its predecessors-in-interest for fifty-six years. The CA ruling that disregards these established
facts and neglects to reconcile the contradiction mentioned above does not deserve concurrence by
this Court.
Furthermore, as correctly pointed out by SRRDC, even if the appellate court adverted to our finding
in Valdehueza on the finality of the expropriation over the lots subject of that case, still, SRRDC and
its predecessors-in-interest would not be bound. The reference to the finality of the CFI Decision in
Civil Case No. 781 in Valdehueza applies to different parties and separate parcels of land. We
confirmed this in Federated Realty Corporation v. CA,22 and noted that our decision in Valdehueza
and in Republic v. Lim23 did not involve the ownership of Lot No. 933 which was not subject of those
cases.
Second, assuming that the CFI Decision in Civil Case No. 781 is final and executory, and that the
expropriation proceedings before that court had been completed, did the Republic pay just
compensation for Lot No. 933?
Regrettably, the CA did not dispose of this issue.
The Republic submits that the P9,500.00 initial deposit it made was disbursed in full to the owners of
the 18 lots subject of expropriation, and assumes that the owners of Lot No. 933 were among the
recipients of such disbursement. The Republic admits that records of payment were destroyed by fire
during World War II, and it cannot be ascertained who received the money. It would rely simply on
60
the presumption that official duty had been regularly performed in assuming that the owners of the 18
lots expropriated were adequately paid.
We are not convinced.
The Republic’s bare contention and assumption cannot defeat SRRDC’s apparent ownership over the
subject properties. As we have previously found in Valdehueza, Republic v. Lim24 and Federated
Realty Corporation v. CA,25 by the very admission of the Republic, there was no record of payment of
compensation to the land owners.
In Republic v. Lim,26 we emphasized that no piece of land can be finally and irrevocably taken from an
unwilling owner until compensation is paid.27 Without full payment of just compensation, there can be
no transfer of title from the landowner to the expropriator.28 Thus, we ruled that the Republic’s failure
to pay just compensation precluded the perfection of its title over Lot No. 932.29 In fact, we went even
further and recognized the right of the unpaid owner to recover the property if within five years from
the decision of the expropriation court the expropriator fails to effect payment of just compensation.
Time and again, we have declared that eminent domain cases are to be strictly construed against the
expropriator.30 The payment of just compensation for private property taken for public use is an
indispensable requisite for the exercise of the State’s sovereign power of eminent domain. Failure to
observe this requirement renders the taking ineffectual, notwithstanding the avowed public purpose.
To disregard this limitation on the exercise of governmental power to expropriate is to ride roughshod
over private rights.
From the records of this case and our previous findings in the related cases, the Republic manifestly
failed to present clear and convincing evidence of full payment of just compensation and receipt
thereof by the property owners.31 Notably, the CFI Decision in Civil Case No. 781 makes no mention
of the initial deposit allegedly made by the Republic.32 Furthermore, based on the CFI Decision fixing
the amount of just compensation for some of the lots, the initial deposit, if it was indeed disbursed,
would still not adequately recompense all the owners of the 18 expropriated lots.33 More importantly,
if the Republic had actually made full payment of just compensation, in the ordinary course of things,
it would have led to the cancellation of title, or at least, the annotation of the lien in favor of the
government on the certificate of title covering Lot No. 933.34
In Federated Realty Corporation v. CA,35 we expounded on the registration requirement in
expropriation proceedings as provided in the law in force at the time of the CFI Decision, thus:
The registration with the Registry of Deeds of the Republic’s interest arising from the exercise of its
power of eminent domain is in consonance with Section 88 of Act No. 496 or the Land Registration
Act (now Section 85 of P.D. 1529 also known as the Property Registration Decree), to wit:
SEC. 88. Whenever any land of a registered owner, or any right or interest therein, is taken by From the foregoing, it is clear that it was incumbent upon the Republic to cause the registration of the
eminent domain, the Government or municipality or corporation or other authority exercising such subject properties in its name or record the decree of expropriation on the title. Yet, not only did the
right shall file for registration in the proper province a description of the registered land so taken, Republic fail to register the subject properties in its name, it failed to do so for fifty-six (56) years.
giving the name of such owner thereof, referring by number and place of registration in the
registration book to each certificate of title, and stating what amount or interest in the land is taken, This brings us to the third question that begs resolution: Is the Republic, by its failure or neglect to
and for what purpose. A memorandum of the right or interest taken, shall be made on each certificate assert its claim, barred by laches?
of title by the register of deeds, and where the fee simple is taken a new certificate shall be entered to
the owner for the land remaining to him after such taking, and a new certificate shall be entered to the
Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which
Government, municipality, corporation, or other authority exercising such right for the land so taken.
by exercising due diligence could or should have been done earlier; it is negligence or omission to
All fees on account of any memorandum of registration or entry of new certificate shall be paid by the
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it
authority taking the land.
either has abandoned it or declined to assert it.37
Furthermore, Section 251 of the Code of Civil Procedure, the law in force at the time of the
The general rule is that the State cannot be put in estoppel or laches by the mistakes or errors of its
Commonwealth case likewise provides for the recording of the judgment of expropriation in the
officials or agents.38 This rule, however, admits of exceptions. One exception is when the strict
Registry of Deeds. Said provision reads, to wit:
application of the rule will defeat the effectiveness of a policy adopted to protect the public39 such as
the Torrens system.
SEC. 251. Final Judgment, Its Record and Effect. – The record of the final judgment in such action
shall state definitely by metes and bounds and adequate description. The particular land or interest in
In Republic v. Court of Appeals,40 we ruled that the immunity of government from laches and estoppel
land condemned to the public use, and the nature of the public use. A certified copy of the record of
is not absolute, and the government’s silence or inaction for nearly twenty (20) years (starting from
judgment shall be recorded in the office of the registrar of deeds for the province in which the
the issuance of St. Jude’s titles in 1966 up to the filing of the Complaint in 1985) to correct and
estate is situated, and its effect shall be to vest in the plaintiff for the public use stated the land
recover the alleged increase in the land area of St. Jude was tantamount to laches.
and estate so described. (Emphasis supplied)

In the case at bench, the Republic failed to register the subject properties in its name and incurred in
There is no showing that the Republic complied with the aforestated registration requirement. Without
laches spanning more than five-and-a-half (5 ½) decades. Even if we were to accede to the Republic’s
such compliance, it cannot be said that FRC had notice of the Republic’s adverse claim sufficient to
contention that the Exception and Notice of Intention to Appeal filed by the original owners of Lot
consider the former in bad faith, for the law gives the public the right to rely on the face of the Torrens
No. 933 initially prevented it from registering said property in its name, we would still be hard
title and to dispense with the need of further inquiry, except only when one has actual knowledge of
pressed to find justification for the Republic’s silence and inaction for an excessively long time.
facts and circumstances that should impel a reasonably cautious man to inquire further into its
integrity. Such is the very essence of our Torrens system as ruled in Legarda v. Saleeby, 31 Phil. 590,
thus: Very telling of the Republic’s silence and inaction, whether intentional or by sheer negligence, is the
testimony of Antonio L. Infante, the Republic’s witness in the proceedings before the RTC.41 On
cross-examination, he testified that several surveys42 were conducted on a number of expropriated
The real purpose of the system is to quiet title of land; to put a stop forever to any question of the
lots, including Lot No. 933.43 The results of these surveys showed that Lot No. 933 was still registered
legality of the title, except claims which were noted at the time of registration, in the certificate, or
in the name of the original owners.44 As such, Infante recommended in his report that legal action be
which may arise subsequent thereto. That being the purpose of the law, it would seem that once a title
taken.45 Yet, despite the aforesaid recommendation, title to Lot No. 933 remained registered in the
is registered, the owner may rest secure, without the necessity of waiting in the portals of the courts,
name of the original owners, and subsequently its transferees. This silence and unexplained inaction
or sitting in the "mirador de su casa," to avoid the possibility of losing his land. x x x The certificate,
by the Republic clearly constitute laches.
in the absence of fraud, is the evidence of title and shows exactly the real interest of its owner. The
title once registered, with very few exceptions, should not thereafter be impugned, except in some
direct proceeding permitted by law. Otherwise, all security in registered titles would be lost.36 A fourth basic question is whether or not SRRDC is a buyer in good faith.

61
The CA found SRRDC wanting in good faith because it should be imputed with constructive
knowledge, or at least, sufficiently warned that the Republic had claims over the property in view of
indications that the subject land belonged to a military reservation.
Contrary to the CA’s findings, however, Infante testified that there were no facilities installed by the
AFP on Lot No. 933, although sometime in 1984 to 1985, there began some illegal construction
thereon.46 He was uncertain as to whether a criminal case was filed against those responsible for the
illegal construction, and simply referred to an arrangement between the AFP and an Amores Realty
which prevented the former from filing a case against the latter.47
Significantly, the records also reveal that the Republic’s possession of the 18 expropriated lots pertain
only to the lots adjacent to Lot No. 933. At most, the Lahug Airport runway traverses only a portion of
Lot No. 933 situated in Lot No. 933-A, and not Lot No. 933-B which is the subject of this case. Even
if these lots were originally part of Lot No. 933, the lack of annotation on the title of the decree of
expropriation, and its eventual segregation into several lots covered by separate titles enabled SRRDC
to purchase the subject properties, for value, free from any lien, and without knowledge of the
Republic’s adverse claim of ownership.
The trial court correctly held that title registered under the Torrens system is notice to the world.48
Every person dealing with registered land may safely rely on the correctness of its certificate of title
and the law will not oblige him to go beyond what appears on the face thereof to determine the
condition of the property.49
The conveyance history of the subject properties is clearly shown on the titles of SRRDC’s
predecessors-in-interest. Absent a showing that SRRDC had any participation, voluntary or otherwise,
in the transfers by the original owners of Lot No. 933, prior to its eventual acquisition of the same, we
affirm that SRRDC is a buyer in good faith and an innocent purchaser for value.
An innocent purchaser for value is one who, relying on the certificate of title, bought the property
from the registered owner, without notice that some other person has a right to, or interest in, such
property, and pays a full and fair price for the same, at the time of such purchase, or before he has
notice of the claim or interest of some other person in the property.50
Likewise, Section 32 of Presidential Decree No. 152951 provides:
SECTION 32. Review of decree of registration; Innocent purchaser for value. – The decree of
registration shall not be reopened or revised by reason of absence, minority, or other disability of any
person adversely affected thereby, nor by any proceeding in any court for reversing judgments,
subject, however, to the right of any person, including the government and the branches thereof,
deprived of land or of any estate or interest therein by such adjudication or confirmation of title
62
obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year from and after the date of the entry of such
decree of registration, but in no case shall such petition be entertained by the court where an innocent
purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced.
Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it
shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the certificate of title
issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case
may pursue his remedy by action for damages against the applicant or any other persons responsible
for the fraud.
In the instant case, the Republic’s adverse claim of ownership over the subject properties may have
given SRRDC’s predecessors-in-interest, the sellers, voidable title to the subject properties. However,
we stress that prior to SRRDC’s acquisition of the subject properties, Lot No. 933 had already been
subdivided and covered by separate titles of the subsequent transferees. These titles, including the
titles to the subject properties, had not been voided at the time of the sale to SRRDC in 1994. As such,
SRRDC acquired good title to the subject properties, having purchased them in good faith, for value,
and without notice of the seller’s defect of title, if any.
Finally, there is a recent development that has sealed the fate of the Republic in its claim of ownership
over the subject properties. This is the passage of Republic Act No. 9443 (RA 9443), entitled "AN
ACT CONFIRMING AND DECLARING, SUBJECT TO CERTAIN EXCEPTIONS, THE
VALIDITY OF EXISTING TRANSFER CERTIFICATES OF TITLE AND RECONSTITUTED
CERTIFICATES OF TITLE COVERING THE BANILAD FRIAR LANDS ESTATE, SITUATED IN
THE FIRST DISTRICT OF THE CITY OF CEBU."52 The law confirms and declares valid all
existing TCTs and Reconstituted Certificates of Title duly issued by the Register of Deeds of Cebu
Province and/or Cebu City covering any portion of the Banilad Friar Lands Estate.53 Thus, by
legislative fiat, SRRDC’s titles covering Lot Nos. 933B-3 and 933B-4 must be recognized as valid
and subsisting.
In fine, we hold that the operative facts in the case at bar, to wit: (1) the incomplete expropriation of
Lot No. 933 in view of Republic’s failure to prove payment in full of just compensation; (2) the
registration under the Torrens system of the subject properties in the name of SRRDC and its
predecessors-in-interest; (3) the estoppel and laches of the Republic for 56 years; (4) the status of
SRRDC as an innocent purchaser for value; and (5) the passage of R.A. No. 9443, all warrant the
reversal of the CA Decision.
WHEREFORE, premises considered, the petition is GRANTED. The August 15, 2003 Decision of
the Court of Appeals is hereby REVERSED and the August 25, 1998 Decision of the Regional Trial
Court is REINSTATED. TCT Nos. 128197 and 128198, in the name of petitioner San Roque Realty G.R. No. 179334 April 21, 2015
and Development Corporation, are upheld and declared valid.
SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and
SO ORDERED. DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
Ynares-Santiago, Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur. SPOUSES HERACLEO and RAMONA TECSON, Respondents.

RESOLUTION

PERALTA, J.:

For resolution is the Motion for Reconsideration1 filed by respondents-movants spouses Heracleo and
Ramona Tecson imploring the Court to take a second look at its July 1, 2013 Decision, the dispositive
portion of which reads:

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the
subject property owned by respondents shall be P0.70 instead of ₱1,500.00 per square meter, with
interest at six percent (6%) per annum from the date of taking in 1940 instead of March 17, 1995,
until full payment.2

In view of the contrasting opinions of the members of the Third Division on the instant motion, and
the transcendental importance of the issue raised herein, the members of the Third Division opted to
refer the issue to the En Banc for resolution.

For a proper perspective, we briefly state the factual background of the case.

In 1940, the Department of Public Works and Highways (DPWH) took respondents-movants' subject
property without the benefit of expropriation proceedings for the construction of the MacArthur
Highway. In a letter dated December 15, 1994,respondents-movants demanded the payment of the fair
market value of the subject parcel of land. Celestino R. Contreras (Contreras), then District Engineer
of the First Bulacan Engineering District of the DPWH, offered to pay for the subject land at the rate
of Seventy Centavos (P0.70) per square meter, per Resolution of the Provincial Appraisal Committee
(PAC) of Bulacan. Unsatisfied with the offer, respondents-movants demanded the return of their
property, or the payment of compensation at the current fair market value.3 Hence, the complaint for
recovery of possession with damages filed by respondents-movants. Respondents-movants were able
to obtain favorable decisions in the Regional Trial Court (RTC) and the Court of Appeals (CA), with
the subject property valued at One Thousand Five Hundred Pesos (₱1,500.00) per square meter, with
interest at six percent (6%) per annum.

63
Petitioners thus elevated the matter to this Court in a petition for review on certiorari. The only issue
resolved by the Court in the assailed decision is the amount of just compensation which respondents-
movants are entitled to receive from the government for the taking of their property. Both the RTC
and the CA valued the property at One Thousand Five Hundred Pesos (₱1,500.00) per square meter,
plus six percent (6%) interest from the time of the filing of the complaint until full payment. We,
however, did not agree with both courts and ruled instead that just compensation should be based on
the value of the property at the time of taking in 1940, which is Seventy Centavos (P0.70) per square
meter.4 In addition, and by way of compensation, we likewise awarded an interest of six percent (6%)
per annum from 1940 until full payment.5
Aggrieved, respondents-movants hereby move for the reconsideration of said decision on the
following grounds:
A. THE HONORABLE COURT MAY LOOK INTO THE "JUSTNESS" OF THE MISERABLE
AMOUNT OF COMPENSATION BEING AWARDED TO THE HEREIN RESPONDENTS; and
B. THE HONORABLE COURT MAY SETTLE FOR A HAPPY MIDDLE GROUND IN THE
NAME OF DOCTRINAL PRECISION AND SUBSTANTIAL JUSTICE.6
Citing the views of Justices Presbitero J. Velasco, Jr. and Marvic Mario Victor F. Leonen in their
Dissenting and Concurring Opinion and Separate Opinion, respectively, respondents-movants insist
that gross injustice will result if the amount that will be awarded today will be based simply on the
value of the property at the time of the actual taking. Hence, as proposed by Justice Leonen, they
suggest that a happy middle ground be achieved by meeting the need for doctrinal precision and the
thirst for substantial justice.7
We maintain our conclusions in the assailed July 1, 2013 Decision with modification on the amount of
interest awarded, as well as the additional grant of exemplary damages and attorney's fees.
At the outset, it should be stressed that the matter of the validity of the State's exercise of the power of
eminent domain has long been settled. In fact, in our assailed decision, We have affirmed the ruling of
the CA that the pre-trial order issued on May 17, 2001 has limited the issues as follows: (1) whether
or not the respondents-movants are entitled to just compensation; (2) whether or not the valuation
would be based on the corresponding value at the time of the taking or at the time of the filing of the
action; and (3) whether or not the respondents-movants are entitled to damages.8 Moreover, it was
held that for failure of respondents-movants to question the lack of expropriation proceedings for a
long period of time, they are deemed to have waived and are estopped from assailing the power of the
government to expropriate or the public use for which the power was exercised.9 What is, therefore,
left for determination in the instant Motion for Reconsideration, in accordance with our Decision
dated July 1, 2013, is the propriety of the amount awarded to respondents as just compensation.
64
At this juncture, We hold that the reckoning date for property valuation in determining the amount of
just compensation had already been addressed and squarely answered in the assailed decision. To be
sure, the justness of the award had been taken into consideration in arriving at our earlier conclusion.
We have in the past been confronted with the same issues under similar factual and procedural
circumstances. We find no reason to depart from the doctrines laid down in the earlier cases as we
adopted in the assailed decision. In this regard, we reiterate the doctrines laid down in the cases of
Forfom Development Corporation (Forfom) v. Philippine National Railways (PNR),10 Eusebio v.
Luis,11 Manila International Airport Authority v. Rodriguez,12 and Republic v. Sarabia.13
In Forfom, PNR entered the property of Forfom in January 1973 for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings. In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio, respondent's parcel of land was taken in 1980 by the City of Pasig
and used as a municipal road without the appropriate expropriation proceedings. In1996, respondent
filed a complaint for reconveyance and/or damages against the city government and the mayor. In
MIAA, in the early 1970s, petitioner implemented expansion programs for its runway, necessitating
the acquisition and occupation of some of the properties surrounding its premises. As to respondent's
property, no expropriation proceedings were initiated. In 1997, respondent initiated a case for accion
reivindicatoria with damages against petitioner. In Republic, sometime in 1956, the Air
Transportation Office (ATO) took possession and control of a portion of a lot situated in Aklan,
registered in the name of respondent, without initiating expropriation proceedings. Several structures
were erected thereon, including the control tower, the Kalibo crash fire rescue station, the Kalibo
airport terminal, and the Headquarters of the PNP Aviation Security Group. In 1995,several stores and
restaurants were constructed on the remaining portion of the lot. In 1997, respondent filed a complaint
for recovery of possession with damages against the storeowners wherein ATO intervened claiming
that the storeowners were its lessees.
These cases stemmed from similar background, that is, government took control and possession of the
subject properties for public use without initiating expropriation proceedings and without payment of
just compensation; while the landowners failed for a long period of time to question such government
act and later instituted actions for recovery of possession with damages. In these cases, the Court has
uniformly ruled that the fair market value of the property at the time of taking is controlling for
purposes of computing just compensation.
In Forfom, the payment of just compensation was reckoned from the time of taking in 1973; in
Eusebio, the Court fixed the just compensation by determining the value of the property at the time of
taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis for the
award of compensation to the owner; and, in Republic, the Court was convinced that the taking
occurred in 1956 and was thus the basis in fixing just compensation.
As in the aforementioned cases, just compensation due respondents-movants in this case should,
therefore, be fixed not as of the time of payment but at the time of taking in 1940 which is Seventy
Centavos (P0.70) per square meter, and not One Thousand Five Hundred Pesos (₱1,500.00) per
square meter, as valued by the RTC and CA.
While disparity in the above amounts is obvious and may appear inequitable to respondents-movants
as they would be receiving such outdated valuation after a very long period, it should be noted that the
purpose of just compensation is not to reward the owner for the property taken but to compensate him
for the loss thereof. As such, the true measure of the property, as upheld by a plethora of cases, is the
market value at the time of the taking, when the loss resulted. This principle was plainly laid down in
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines,14 to wit:
x x x In Land Bank of the Philippines v. Orilla, a valuation case under our agrarian reform law, this
Court had occasion to state:
Constitutionally, "just compensation" is the sum equivalent to the market value of the property,
broadly described as the price fixed by the seller in open market in the usual and ordinary course of
legal action and competition, or the fair value of the property as between the one who receives and the
one who desires to sell, it being fixed at the time of the actual taking by the government. Just
compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. It has been repeatedly stressed by this Court that the true measure is not the
taker's gain but the owner's loss. The word "just" is used to modify the meaning of the word
"compensation" to convey the idea that the equivalent to be given for the property to be taken
shall be real, substantial, full and ample. [Emphasis supplied.]15
Indeed, the State is not obliged to pay premium to the property owner for appropriating the latter's
property; it is only bound to make good the loss sustained by the landowner, with due consideration of
the circumstances availing at the time the property was taken. More, the concept of just compensation
does not imply fairness to the property owner alone. Compensation must also be just to the public,
which ultimately bears the cost of expropriation.16
Notwithstanding the foregoing, we recognize that the owner's loss is not only his property but also its
income-generating potential.17 Thus, when property is taken, full compensation of its value must
immediately be paid to achieve a fair exchange for the property and the potential income lost.18
Accordingly, in Apo, we held that the rationale for imposing the interest is to compensate the
petitioners for the income they would have made had they been properly compensated for their
properties at the time of the taking.19 Thus:
65
We recognized in Republic v. Court of Appeals the need for prompt payment and the necessity of the
payment of interest to compensate for any delay in the payment of compensation for property already
taken. We ruled in this case that:
The constitutional limitation of "just compensation" is considered to be the sum equivalent to the
market value of the property, broadly described to be the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition or the fair value of the property as
between one who receives, and one who desires to sell, i[f] fixed at the time of the actual taking by
the government. Thus, if property is taken for public use before compensation is deposited with the
court having jurisdiction over the case, the final compensation must include interest[s] on its just
value to be computed from the time the property is taken to the time when compensation is actually
paid or deposited with the court. In fine, between the taking of the property and the actual payment,
legal interest[s] accrue in order to place the owner in a position as good as (but not better than) the
position he was in before the taking occurred.[Emphasis supplied]20
In other words, the just compensation due to the landowners amounts to an effective forbearance on
the part of the State-a proper subject of interest computed from the time the property was taken until
the full amount of just compensation is paid-in order to eradicate the issue of the constant variability
of the value of the currency over time.21 In the Court's own words:
The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of
the property to be computed from the time petitioner instituted condemnation proceedings and "took"
the property in September 1969. This allowance of interest on the amount found to be the value of
the property as of the time of the taking computed, being an effective forbearance, at 12% per
annum should help eliminate the issue of the constant fluctuation and inflation of the value of the
currency over time x x x.22
On this score, a review of the history of the pertinent laws, rules and regulations, as well as the
issuances of the Central Bank (CB)or Bangko Sentral ng Pilipinas (BSP)is imperative in arriving at
the proper amount of interest to be awarded herein.
On May 1, 1916, Act No. 265523 took effect prescribing an interest rate of six percent (6%) or such
rate as may be prescribed by the Central Bank Monetary Board (CB-MB)for loans or forbearance of
money, in the absence of express stipulation as to such rate of interest, to wit:
Section 1. The rate of interest for the loan or forbearance of any money goods, or credits and the rate
allowed in judgments, in the absence of express contract as to such rate of interest, shall be six per
centum per annum or such rate as may be prescribed by the Monetary Board of the Central Bank
of the Philippines for that purpose in accordance with the authority hereby granted.
Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the
for the loan or renewal thereof or the forbearance of any money, goods or credits, and to change such rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be
rate or rates whenever warranted by prevailing economic and social conditions. six percent (6%) per annum.

In the exercise of the authority herein granted, the Monetary Board may prescribe higher maximum Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
rates for loans of low priority, such as consumer loans or renewals thereof as well as such loans made Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
by pawnshops finance companies and other similar credit institutions although the rates prescribed for Institutions are hereby amended accordingly.
these institutions need not necessarily be uniform. The Monetary Board is also authorized to prescribe
different maximum rate or rates for different types of borrowings, including deposits and deposit This Circular shall take effect on 01 July 2013.29
substitutes, or loans of financial intermediaries.24
Accordingly, the prevailing interest rate for loans and forbearance of money is six percent (6%) per
Under the aforesaid law, any amount of interest paid or stipulated to be paid in excess of that fixed by annum, in the absence of an express contract as to such rate of interest.
law is considered usurious, therefore unlawful.25
In summary, the interest rates applicable to loans and forbearance of money, in the absence of an
On July 29, 1974, the CB-MB, pursuant to the authority granted to it under the aforequoted provision, express contract as to such rate of interest, for the period of 1940 to present are as follows:
issued Resolution No. 1622.1âwphi1 On even date, Circular No. 416 was issued, implementing MB
Resolution No. 1622, increasing the rate of interest for loans and forbearance of money to twelve
percent (12%) per annum, thus:
Law, Rule and Regulations, Date of Effectivity Interest Rate
By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended, otherwise known BSP Issuance
as the "Usury Law," the Monetary Board, in its Resolution No. 1622 dated July 29, 1974, has
prescribed that the rate of interest for the loan or forbearance of any money, goods or credits and Act No. 2655 May 1, 1916 6%
the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be
twelve per cent (12%) per annum.26 CB Circular No. 416 July 29, 1974 12%
The foregoing rate was sustained in CB Circular No. 90527 which took effect on December 22, 1982,
particularly Section 2 thereof, which states:
CB Circular No. 905 December 22, 1982 12%

Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of express contract as to such rate of interest, shall continue to
be twelve per cent (12%) per annum.28
Recently, the BSP Monetary Board (BSP-MB),in its Resolution No. 796 dated May 16, 2013,
approved the amendment of Section 2 of Circular No. 905, Series of 1982, and accordingly, issued
Circular No. 799, Series of 2013, effective July 1, 2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section
2 of Circular No. 905, Series of 1982:
CB Circular No. 799 July 1, 2013 6%
It is important to note, however, that interest shall be compounded at the time judicial demand is made
pursuant to Article 221230 of the Civil Code of the Philippines, and sustained in Eastern Shipping
Lines v. Court of Appeals,31 then later on in Nacar v. Gallery Frames,32 save for the reduction of
interest rate to 6% for loans or forbearance of money, thus:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.
In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default,

66
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the No. 799 and the case of Nacar. Such interest is imposed by reason of the Court's decision and takes
Civil Code.33 the nature of a judicial debt.

Applying the foregoing law and jurisprudence, respondents-movants are entitled to interest in the Clearly, the award of interest on the value of the land at the time of taking in 1940 until full payment
amount of One Million Seven Hundred Eighteen Thousand Eight Hundred Forty-Eight Pesos is adequate compensation to respondents-movants for the deprivation of their property without the
and Thirty-Two Centavos (₱1,718,848.32) as of September 30, 2014,34 computed as follows: benefit of expropriation proceedings. Such interest, however meager or enormous it may be, cannot be
inequitable and unconscionable because it resulted directly from the application of law and
jurisprudence-standards that have taken into account fairness and equity insetting the interest rates due
January 1, 194035 to July 28, 1974 P 10,553.4937 for the use or forbearance of money.41 Thus, adding the interest computed to the market value of the
property at the time of taking signifies the real, substantial, full and ample value of the property.
Verily, the same constitutes due compliance with the constitutional mandate on eminent domain and
July 29, 1974 to March 16, 1995 26,126.3138 serves as a basic measure of fairness. In addition to the foregoing interest, additional compensation
shall be awarded to respondents-movants by way of exemplary damages and attorney's fees in view of
March 17, 199536to June 30, 2013 232,070.3339 the government's taking without the benefit of expropriation proceedings. As held in Eusebio v.
Luis,42 an irregularity in an expropriation proceeding cannot ensue without consequence. Thus, the
July 1, 2013 to September 30, 2014 250,098.1940 Court held that the government agency's illegal occupation of the owner's property for a very long
period of time surely resulted in pecuniary loss to the owner, to wit:
Market Value of the Property at the time of However, in taking respondents' property without the benefit of expropriation proceedings and
taking including interest P 518,848.32 without payment of just compensation, the City of Pasig clearly acted in utter disregard of
respondents' proprietary rights. Such conduct cannot be countenanced by the Court. For said illegal
Market value of the property at the time of taking, the City of Pasig should definitely be held liable for damages to respondents. Again, in
Manila International Airport Authority v. Rodriguez, the Court held that the government agency's
taking including interest P 518,848.32 illegal occupation of the owner's property for a very long period of time surely resulted in pecuniary
loss to the owner. The Court held as follows:
Add: Exemplary damages 1,000.000.00
Such pecuniary loss entitles him to adequate compensation in the form of actual or
Attorney's fees 200,000.00 compensatory damages, which in this case should be the legal interest (6%) on the value of the
land at the time of taking, from said point up to full payment by the MIAA. This is based on the
Total Amount of Interest due to Respondents- principle that interest "runs as a matter of law and follows from the right of the landowner to be
placed in as good position as money can accomplish, as of the date of the taking."
Movants as of September 30, 2014 ₱1,718,848.16
The award of interest renders unwarranted the grant of back rentals as extended by the courts
below. In Republic v. Lara, et al., the Court ruled that the indemnity for rentals is inconsistent with a
Considering that respondents-movants only resorted to judicial demand for the payment of the fair
property owner's right to be paid legal interest on the value of the property, for if the condemn or is to
market value of the land on March 17, 1995, it is only then that the interest earned shall itself earn
pay the compensation due to the owners from the time of the actual taking of their property, the
interest.
payment of such compensation is deemed to retro act to the actual taking of the property; and, hence,
there is no basis for claiming rentals from the time of actual taking. More explicitly, the Court held in
Lastly, from finality of the Court's Resolution on reconsideration until full payment, the total amount Republic v. Garcellano that:
due to respondents-movants shall earn a straight six percent (6%) legal interest, pursuant to Circular

67
The uniform rule of this Court, however, is that this compensation must be, not in the form of
rentals, but by way of 'interest from the date that the company [or entity] exercising the right of
eminent domain take possession of the condemned lands, and the amounts granted by the court
shall cease to earn interest only from the moment they are paid to the owners or deposited in
court x x x.
xxxx
For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of
expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and
negotiating with any of the owners of the property. To our mind, these are wanton and irresponsible
acts which should be suppressed and corrected. Hence, the award of exemplary damages and
attorneys fees is in order. However, while Rodriguez is entitled to such exemplary damages and
attorney's fees, the award granted by the courts below should be equitably reduced. We hold that
Rodriguez is entitled only to ₱200,000.00 as exemplary damages, and attorney's fees equivalent to one
percent (1%) of the amount due.43
Similarly, in Republic v. CA,44 We held that the failure of the government to initiate an expropriation
proceeding to the prejudice of the landowner may be corrected with the awarding of exemplary
damages, attorney's fees and costs of litigation. Thus:
The Court will not award attorney's fees in light of respondent's choice not to appeal the CA Decision
striking down the award. However, we find it proper to award temperate and exemplary damages in
light of NIA's misuse of its power of eminent domain. Any arm of the State that exercises the
delegated power of eminent domain must wield that power with circumspection and utmost regard for
procedural requirements. A government instrumentality that fails to observe the constitutional
guarantees of just compensation and due process abuses the authority delegated to it, and is liable to
the property owner for damages.
Temperate or moderate damages may be recovered if pecuniary loss has been suffered but the amount
cannot be proved with certainty from the nature of the case.1âwphi1 Here, the trial and appellate
courts found that the owners were unable to plant palay on 96,655 square meters of the Property for
an unspecified period during and after NIA's construction of the canals in 1972. The passage of time,
however, has made it impossible to determine these losses with any certainty. NIA also deprived the
owners of the Property of possession of a substantial portion of their land since 1972. Considering the
particular circumstances of this case, an award of ₱150,000 as temperate damages is reasonable.
NIA's irresponsible exercise of its eminent domain powers also deserves censure. For more than three
decades, NIA has been charging irrigation fees from respondent and other landowners for the use of
the canals built on the Property, without reimbursing respondent a single cent for the loss and damage.
68
NIA exhibits a disturbingly cavalier attitude towards respondent's property rights, rights to due
process of law and to equal protection of the laws. Worse, this is not the first time NIA has
disregarded the rights of private property owners by refusing to pay just compensation promptly. To
dissuade NIA from continuing this practice and to set an example for other agencies exercising
eminent domain powers, NIA is directed to pay respondent exemplary damages of ₱250,000.45
Applying the aforequoted doctrines to the present case, considering that respondents-movants were
deprived of beneficial ownership over their property for more than seventy (70) years without the
benefit of a timely expropriation proceedings, and to serve as a deterrent to the State from failing to
institute such proceedings within the prescribed period under the law, a grant of exemplary damages
in the amount of One Million Pesos (₱1,000,000.00) is fair and reasonable. Moreover, an award for
attorney's fees in the amount of Two Hundred Thousand Pesos (₱200,000.00) in favor of respondents-
movants is in order.
In sum, respondents-movants shall be entitled to an aggregate amount of One Million Seven
Hundred Eighteen Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos
(₱1,718,848.32) as just compensation as of September 30, 2014, computed as follows:
Market value of the property at the time P 518,848.32
of taking in 1940 including interest
Add: Exemplary Damages 1,000,000.00
Attorney's fees 200,000.00
Total Amount due to Respondents-
movants as of September 30, 2014 ₱1,718,848.32
This Court is not unaware that at present, stringent laws and rules are put in place to ensure that
owners of real property acquired for national government infrastructure projects are promptly paid
just compensation. Specifically, Section 4 of Republic Act No. 8974 (R.A. 8974),46 which took effect
on November 26, 2000, provides sufficient guidelines for implementing an expropriation proceeding,
to wit:
Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real
property for the right-of-way or location for any national government infrastructure project through
expropriation, the appropriate implementing agency shall initiate the expropriation proceedings before
the proper court under the following guidelines:
(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency
shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred
percent (100%) of the value of the property based on the current relevant zonal valuation of the
Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as
determined under Section 7 hereof;
(b) In provinces, cities, municipalities and other areas where there is no zonal valuation, the BIR is
hereby mandated within the period of sixty (60) days from the date of the expropriation case, to come
up with a zonal valuation for said area; and
(c) In case the completion of a government infrastructure project is of utmost urgency and importance,
and there is no existing valuation of the area concerned, the implementing agency shall immediately
pay the owner of the property its proffered value taking into consideration the standards prescribed in
Section 5 hereof.
Upon compliance with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of the
project.
Before the court can issue a Writ of Possession, the implementing agency shall present to the court a
certificate of availability of funds from the proper official concerned.
In the event that the owner of the property contests the implementing agency's proffered value, the
court shall determine the just compensation to be paid the owner within sixty (60) days from the date
of filing of the expropriation case. When the decision of the court becomes final and executory, the
implementing agency shall pay the owner the difference between the amount already paid and the just
compensation as determined by the court.
Failure to comply with the foregoing directives shall subject the government official or employee
concerned to administrative, civil and/or criminal sanctions, thus:
Section 11. Sanctions. - Violation of any provisions of this Act shall subject the government official or
employee concerned to appropriate administrative, civil and/or criminal sanctions, including
suspension and/or dismissal from the government service and forfeiture of benefits. While the
foregoing provisions, being substantive in nature or disturbs substantive rights, cannot be retroactively
applied to the present case, We trust that this established mechanism will surely deter hasty
acquisition of private properties in the future without the benefit of immediate payment of the value of
69
the property in accordance with Section 4 of R.A. 8974. This effectively addresses J. Velasco's
concerns that sustaining our earlier rulings on the matter would be licensing the government to
dispense with constitutional requirements in taking private properties. Moreover, any gap on the
procedural aspect of the expropriation proceedings will be remedied by the aforequoted provisions.
In effect, R.A. 8974 enshrines a new approach towards eminent domain that reconciles the inherent
unease attending expropriation proceedings with a position of fundamental equity.47
Despite the foregoing developments, however, We emphasize that the government's failure, to initiate
the necessary expropriation proceedings prior to actual taking cannot simply invalidate the State's
exercise of its eminent domain power, given that the property subject of expropriation is indubitably
devoted for public use, and public policy imposes upon the public utility the obligation to continue its
services to the public. To hastily nullify said expropriation in the guise of lack of due process would
certainly diminish or weaken one of the State's inherent powers, the ultimate objective of which is to
serve the greater good. Thus, the non-filing of the case for expropriation will not necessarily lead to
the return of the property to the landowner. What is left to the landowner is the right of
compensation.48
All told, We hold that putting to rest the issue on the validity of the exercise of eminent domain is
neither tantamount to condoning the acts of the DPWH in disregarding the property rights of
respondents-movants nor giving premium to the government's failure to institute an expropriation
proceeding. This Court had steadfastly adhered to the doctrine that its first and fundamental duty is
the application of the law according to its express terms, interpretation being called for only when
such literal application is impossible.49 To entertain other formula for computing just compensation,
contrary to those established by law and jurisprudence, would open varying interpretation of
economic policies - a matter which this Court has no competence to take cognizance of. Time and
again, we have held that no process of interpretation or construction need be resorted to where a
provision of law peremptorily calls for application.50 Equity and equitable principles only come into
full play when a gap exists in the law and jurisprudence.51 As we have shown above, established
rulings of this Court are in place for full application to the case at bar, hence, should be upheld.
WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
 MARIA LOURDES P.A. SERENO C E R T I F I CAT I O N
Chief Justice
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Resolution were reached in consultation before the case was assigned to the writer of the opinion of
(Pls. See Dissenting Opinion) the Court.
ANTONIO T. CARPIO
PRESBITERO J. VELASCO,
Associate Justice MARIA LOURDES P.A. SERENO
JR. Chief Justice
Associate Justice
TERESITA J. LEONARDO- Pls. See Separate
DE CASTRO Concurring Opinion
Associate Justice ARTURO D. BRION
Associate Justice
No part due to prior MARIANO C. DEL
participation in the CA CASTILLO
LUCAS P. BERSAMIN* Associate Justice
Associate Justice
MARTIN S. VILLARAMA, JOSE PORTUGAL PEREZ
JR. Associate Justice
Associate Justice
JOSE CATRAL MENDOZA BIENVENIDO L. REYES
Associate Justice Associate Justice

No part due to prior See dissenting opinion

participation in the CA MARVIC M.V.F. LEONEN
ESTELA M. PERLAS- Associate Justice
BERNABE*
FRANCIS H. JARDELEZA
Associate Justice

70
G.R. No. 137152 January 29, 2001
CITY OF MANDALUYONG, petitioner,
vs.
ANTONIO N., FRANCISCO N., THELMA N., EUSEBIO N., RODOLFO N., all surnamed
AGUILAR, respondents.
PUNO, J.:
This is a petition for review under Rule 45 of the Rules of Court of the Orders dated September 17,
1998 and December 29, 1998 of the Regional Trial Court, Branch 168, Pasig City1 dismissing the
petitioner's Amended Complaint in SCA No. 1427 for expropriation of two (2) parcels of land in
Mandaluyong City. 1âwphi1.nêt
The antecedent facts are as follows:
On August 4, 1997, petitioner filed with the Regional Trial Court, Branch 168, Pasig City a complaint
for expropriation entitled "City of Mandaluyong, plaintiff v. Antonio N., Francisco N, Thelma N,
Eusebio N, Rodolfo N., all surnamed Aguilar, defendants." Petitioner sought to expropriate three (3)
adjoining parcels of land with an aggregate area of 1,847 square meters registered under Transfer
Certificates of Title Nos. 59780, 63766 and 63767 in the names of the defendants, herein respondents,
located at 9 de Febrero Street, Barangay Mauwag, City of Mandaluyong; on a portion of the 3 lots,
respondents constructed residential houses several decades ago which they had since leased out to
tenants until the present; on the vacant portion of the lots, other families constructed residential
structures which they likewise occupied; in 1983, the lots were classified by Resolution No. 125 of
the Board of the Housing and Urban Development Coordinating Council as an Area for Priority
Development for urban land reform under Proclamation Nos. 1967 and 2284 of then President
Marcos; as a result of this classification, the tenants and occupants of the lots offered to purchase the
land from respondents, but the latter refused to sell; on November 7, 1996, the Sangguniang
Panlungsod of petitioner, upon petition of the Kapitbisig, an association of tenants and occupants of
the subject land, adopted Resolution No. 516, Series of 1996 authorizing Mayor Benjamin Abalos of
the City of Mandaluyong to initiate action for the expropriation of the subject lots and construction of
a medium-rise condominium for qualified occupants of the land; on January 10, 1996, Mayor Abalos
sent a letter to respondents offering to purchase the said property at P3,000.00 per square meter;
respondents did not answer the letter. Petitioner thus prayed for the expropriation of the said lots and
the fixing of just compensation at the fair market value of P3,000.00 per square meter.2
In their answer, respondents, except Eusebio N. Aguilar who died in 1995, denied having received a
copy of Mayor Abalos' offer to purchase their lots. They alleged that the expropriation of their land is
arbitrary and capricious, and is not for a public purpose; the subject lots are their only real property
71
and are too small for expropriation, while petitioner has several properties inventoried for socialized
housing; the fair market value of P3,000.00 per square meter is arbitrary because the zonal valuation
set by the Bureau of Internal Revenue is P7,000.00 per square meter. As counterclaim, respondents
prayed for damages of P21 million.3
Respondents filed a "Motion for Preliminary Hearing" claiming that the defenses alleged in their
Answer are valid grounds for dismissal of the complaint for lack of jurisdiction over the person of the
defendants and lack of cause of action. Respondents prayed that the affirmative defenses be set for
preliminary hearing and that the complaint be dismissed.4 Petitioner replied.
On November 5, 1997, petitioner filed an Amended Complaint and named as an additional defendant
Virginia N. Aguilar and, at the same time, substituted Eusebio Aguilar with his heirs. Petitioner also
excluded from expropriation TCT No. 59870 and thereby reduced the area sought to be expropriated
from three (3) parcels of land to two (2) parcels totalling 1,636 square meters under TCT Nos. 63766
and 63767.5
The Amended Complaint was admitted by the trial court on December 18, 1997. Respondents, who,
with the exception of Virginia Aguilar and the Heirs of Eusebio Aguilar had yet to be served with
summons and copies of the Amended Complaint, filed a "Manifestation and Motion" adopting their
"Answer with Counterclaim" and "Motion for Preliminary Hearing" as their answer to the Amended
Complaint.6
The motion was granted. At the hearing of February 25, 1998, respondents presented Antonio Aguilar
who testified and identified several documentary evidence. Petitioner did not present any evidence.
Thereafter, both parties filed their respective memoranda.7
On September 17, 1998, the trial court issued an order dismissing the Amended Complaint after
declaring respondents as "small property owners" whose land is exempt from expropriation under
Republic Act No. 7279. The court also found that the expropriation was not for a public purpose for
petitioner's failure to present any evidence that the intended beneficiaries of the expropriation are
landless and homeless residents of Mandaluyong. The court thus disposed of as follows:
"WHEREFORE, the Amended Complaint is hereby ordered dismissed without pronouncement as to
cost.
SO ORDERED."8
Petitioner moved for reconsideration. On December 29, 1998, the court denied the motion. Hence this
petition.
Petitioner claims that the trial court erred
"IN UPHOLDING RESPONDENT'S CONTENTION THAT THEY QUALIFY AS SMALL
PROPERTY OWNERS AND ARE THUS EXEMPT FROM EXPROPRIATION."9
Petitioner mainly claims that the size of the lots in litigation does not exempt the same from
expropriation in view of the fact that the said lots have been declared to be within the Area for Priority
Development (APD) No. 5 of Mandaluyong by virtue of Proclamation No. 1967, as amended by
Proclamation No. 2284 in relation to Presidential Decree No. 1517.10 This declaration allegedly
authorizes petitioner to expropriate the property, ipso facto, regardless of the area of the land.
Presidential Decree (P.D.) No. 1517, the Urban Land Reform Act, was issued by then President
Marcos in 1978. The decree adopted as a State policy the liberation of human communities from
blight, congestion and hazard, and promotion of their development and modernization, the optimum
use of land as a national resource for public welfare.11 Pursuant to this law, Proclamation No. 1893
was issued in 1979 declaring the entire Metro Manila as Urban Land Reform Zone for purposes of
urban land reform. This was amended in 1980 by Proclamation No. 1967 and in 1983 by Proclamation
No. 2284 which identified and specified 245 sites in Metro Manila as Areas for Priority Development
and Urban Land Reform Zones.
In 1992, the Congress of the Philippines passed Republic Act No. 7279, the "Urban Development and
Housing Act of 1992." The law lays down as a policy that the state, in cooperation with the private
sector, undertake a comprehensive and continuing Urban Development and Housing Program; uplift
the conditions of the underprivileged and homeless citizens in urban, areas and resettlement areas by
making available to them decent housing at affordable cost, basic services and employment
opportunities and provide for the rational use and development of urban land to bring about, among
others, equitable utilization of residential lands; encourage more effective people's participation in the
urban development process and improve the capability of local government units in undertaking urban
development and housing programs and projects.12 Towards this end, all city and municipal
governments are mandated to conduct an inventory of all lands and improvements within their
respective localities, and in coordination with the National Housing Authority, the Housing and Land
Use Regulatory Board, the National Mapping Resource Information Authority, and the Land
Management Bureau, identify lands for socialized housing and resettlement areas for the immediate
and future needs of the underprivileged and homeless in the urban areas, acquire the lands, and
dispose of said lands to the beneficiaries of the program.13
The acquisition of lands for socialized housing is governed by several provisions in the law. Section 9
of R.A. 7279 provides:
72
"Sec. 9. Priorities in the Acquisition of Land. — Lands for socialized housing shall be acquired in the
following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies,
including government-owned or controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas for Priority Development, Zonal Improvement Program sites, and
Slum Improvement and Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS Sites which have not yet been
acquired;
(f) Privately-owned lands.
Where on-site development is found more practicable and advantageous to the beneficiaries, the
priorities mentioned in this section shall not apply. The local government units shall give budgetary
priority to on-site development of government lands."
Lands for socialized housing are to be acquired in the following order: (1) government lands; (2)
alienable lands of the public domain; (3) unregistered or abandoned or idle lands; (4) lands within the
declared Areas for Priority Development (APD), Zonal Improvement Program (ZIP) sites, Slum
Improvement and Resettlement (SIR) sites which have not yet been acquired; (5) BLISS sites which
have not yet been acquired; and (6) privately-owned lands.
There is no dispute that the two lots in litigation are privately-owned and therefore last in the order of
priority acquisition. However, the law also provides that lands within the declared APD's which have
not yet been acquired by the government are fourth in the order of priority. According to petitioner,
since the subject lots lie within the declared APD, this fact mandates that the lots be given priority in
acquisition.14
Section 9, however, is not a single provision that can be read separate from the other provisions of the
law. It must be read together with Section 10 of R.A. 7279 which also provides:
"Section 10. Modes of Land Acquisition. — The modes of acquiring lands for purposes of this Act
shall include, among others, community mortgage, land swapping, land assembly or consolidation,
land banking, donation to the Government, joint-venture agreement, negotiated purchase, and
expropriation: Provided, however, That expropriation shall be resorted to only when other modes
of acquisition have been exhausted: Provided, further, That where expropriation is resorted to,
parcels of land owned by small property owners shall be exempted for purposes of this Act:
Provided, finally, That abandoned property, as herein defined, shall be reverted and escheated to the
State in a proceeding analogous to the procedure laid down in Rule 91 of the Rules of Court.15
For the purposes of socialized housing, government-owned and foreclosed properties shall be
acquired by the local government units, or by the National Housing Authority primarily through
negotiated purchase: Provided, That qualified beneficiaries who are actual occupants of the land shall
be given the right of first refusal."
Lands for socialized housing under R.A. 7279 are to be acquired in several modes. Among these
modes are the following: (1) community mortgage; (2) land swapping, (3) land assembly or
consolidation; (4) land banking; (5) donation to the government; (6) joint venture agreement; (7)
negotiated purchase; and (8) expropriation. The mode of expropriation is subject to two conditions:
(a) it shall be resorted to only when the other modes of acquisition have been exhausted; (b) parcels of
land owned by small property owners are exempt from such acquisition.
Section 9 of R.A. 7279 speaks of priorities in the acquisition of lands. It enumerates the type of lands
to be acquired and the heirarchy in their acquisition. Section 10 deals with the modes of land
acquisition or the process of acquiring lands for socialized housing. These are two different things.
They mean that the type of lands that may be acquired in the order of priority in Section 9 are
to be acquired only in the modes authorized under Section 10. The acquisition of the lands in the
priority list must be made subject to the modes and conditions set forth in the next provision. In other
words, land that lies within the APD, such as in the instant case, may be acquired only in the modes
under, and subject to the conditions of, Section 10.
Petitioner claims that it had faithfully observed the different modes of land acquisition for socialized
housing under R.A. 7279 and adhered to the priorities in the acquisition for socialized housing under
said law.16 It, however, did not state with particularity whether it exhausted the other modes of
acquisition in Section 9 of the law before it decided to expropriate the subject lots. The law states
"expropriation shall be resorted to when other modes of acquisition have been exhausted." Petitioner
alleged only one mode of acquisition, i.e., by negotiated purchase. Petitioner, through the City Mayor,
tried to purchase the lots from respondents but the latter refused to sell.17 As to the other modes of
acquisition, no mention has been made. Not even Resolution No. 516, Series of 1996 of the
Sangguniang Panlungsod authorizing the Mayor of Mandaluyong to effect the expropriation of the
subject property states whether the city government tried to acquire the same by community
mortgage, land swapping, land assembly or consolidation, land banking, donation to the government,
or joint venture agreement under Section 9 of the law.
73
Section 9 also exempts from expropriation parcels of land owned by small property owners.18
Petitioner argues that the exercise of the power of eminent domain is not anymore conditioned on the
size of the land sought to be expropriated.19 By the expanded notion of public use, present
jurisprudence has established the concept that expropriation is not anymore confined to the vast tracts
of land and landed estates, but also covers small parcels of land.20 That only a few could actually
benefit from the expropriation of the property does not diminish its public use character.21 It simply is
not possible to provide, in one instance, land and shelter for all who need them.22
While we adhere to the expanded notion of public use, the passage of R.A. No. 7279, the "Urban
Development and Housing Act of 1992" introduced a limitation on the size of the land sought to be
expropriated for socialized housing. The law expressly exempted "small property owners" from
expropriation of their land for urban land reform. R.A. No. 7279 originated as Senate Bill No. 234
authored by Senator Joey Lina23 and House Bill No. 34310. Senate Bill No. 234 then provided that
one of those lands not covered by the urban land reform and housing program was "land actually used
by small property owners within the just and equitable retention limit as provided under this Act."24
"Small property owners" were defined in Senate Bill No. 234 as:
"4. Small Property Owners — are those whose rights are protected under Section 9, Article XIII of the
Constitution of the Philippines, who own small parcels of land within the fair and just retention limit
provided under this Act and which are adequate to meet the reasonable needs of the small property
owner's family and their means of livelihood.25
The exemption from expropriation of lands of small-property owners was never questioned on the
Senate floor.26 This exemption, although with a modified definition, was actually retained in the
consolidation of Senate Bill No. 234 and House Bill No. 34310 which became R.A. No. 7279.27
The question now is whether respondents qualify as "small property owners" as defined in Section 3
(q) of R.A. 7279. Section 3 (q) provides:
"Section 3 x x x (q). "Small property owners" refers to those whose only real property consists of
residential lands not exceeding three hundred square meters (300 sq.m.) in highly urbanized cities and
eight hundred square meters (800 sq.m.) in other urban areas."
"Small-property owners" are defined by two elements: (1) those owners of real property whose
property consists of residential lands with an area of not more than 300 square meters in highly
urbanized cities and 800 square meters in other urban areas; and (2) that they do not own real property
other than the same.
The case at bar involves two (2) residential lots in Mandaluyong City, a highly urbanized city. The lot
under TCT No. 63766 is 687 square meters in area and the second under TCT No. 63767 is 949
square meters, both totalling 1,636 square meters in area. TCT No. 63766 was issued in the names of
herein five (5) respondents, viz:
"FRANCISCO N. AGUILAR, widower; THELMA N. AGUILAR, single; EUSEBIO N. AGUILAR,
JR., widower; RODOLFO N. AGUILAR, single and ANTONIO N. AGUILAR, married to Teresita
Puig; all of legal age, Filipinos."28
TCT No. 63767 was issued in the names of the five (5) respondents plus Virginia Aguilar, thus:
"FRANCISCO N. AGUILAR, widower; THELMA N. AGUILAR, single; EUSEBIO N. AGUILAR,
JR., widower; RODOLFO N. AGUILAR, single and ANTONIO N. AGUILAR, married to Teresita
Puig; and VIRGINIA N. AGUILAR, single, all of legal age, Filipinos."29
Respondent Antonio Aguilar testified that he and the other registered owners are all siblings who
inherited the subject property by intestate succession from their parents.30 Their father died in 1945
and their mother in 1976.31 Both TCT's were issued in the siblings' names on September 2, 1987.31 In
1986, however, the siblings agreed to extrajudicially partition the lots among themselves, but no
action was taken by them to this end. It was only eleven (11) years later, on November 28, 1997 that a
survey of the two lots was made33 and on February 10, 1998, a consolidation subdivision plan was
approved by the Lands Management Service of the Department of Environment and Natural
Resources.34 The co-owners signed a Partition Agreement on February 24, 199835 and on May 21,
1998, TCT Nos. 63766 and 63767 were cancelled and new titles issued in the names of the individual
owners pursuant to the Partition Agreement.
Petitioner argues that the consolidation of the subject lots and their partition was made more than six
(6) months after the complaint for expropriation was filed on August 4, 1997, hence, the partition was
made in bad faith, for the purpose of circumventing the provisions of R.A. 7279.36
At the time of filing of the complaint for expropriation, the lots subject of this case were owned in
common by respondents; Under a co-ownership, the ownership of an undivided thing or right belongs
to different persons.37 During the existence of the co-ownership, no individual can claim title to any
definite portion of the community property until the partition thereof; and prior to the partition, all that
the co-owner has is an ideal or abstract quota or proportionate share in the entire land or thing.38
Article 493 of the Civil Code however provides that:
"Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another
person in its enjoyment, except when personal rights are involved. But the effect of the alienation or
the mortgage, with respect to the co-owners shall be limited to the portion which may be allotted to
him in the division upon termination of the co-ownership.39
74
Before partition in a co-ownership, every co-owner has the absolute ownership of his undivided
interest in the common property. The co-owner is free to alienate, assign or mortgage his interest,
except as to purely personal rights.40 He may also validly lease his undivided interest to a third party
independently of the other co-owners.41 The effect of any such transfer is limited to the portion which
may be awarded to him upon the partition of the property.42
Article 493 therefore gives the owner of an undivided interest in the property the right to freely sell
and dispose of his undivided interest.43 The co-owner, however, has no right to sell or alienate a
concrete specific or determinate part of the thing owned in common, because his right over the thing
is represented by a quota or ideal portion without any physical adjudication.44 If the co-owner sells a
concrete portion, this, nonetheless, does not render the sale void. Such a sale affects only his own
share, subject to the results of the partition but not those of the other co-owners who did not consent
to the sale.45
In the instant case, the titles to the subject lots were issued in respondents' names as co-owners in
1987—ten (10) years before the expropriation case was filed in 1997. As co-owners, all that the
respondents had was an ideal or abstract quota or proportionate share in the lots. This, however, did
not mean that they could not separately exercise any rights over the lots. Each respondent had the full
ownership of his undivided interest in the property. He could freely sell or dispose of his interest
independently of the other co-owners. And this interest could have even been attached by his
creditors.46 The partition in 1998, six (6) months after the filing of the expropriation case, terminated
the co-ownership by converting into certain and definite parts the respective undivided shares of the
co-owners.47 The subject property is not a thing essentially indivisible. The rights of the co-owners to
have the property partitioned and their share in the same delivered to them cannot be questioned for
"[n]o co-owner shall be obliged to remain in the co-ownership."48 The partition was merely a
necessary incident of the co-ownership;49 and absent any evidence to the contrary, this partition is
presumed to have been done in good faith.
Upon partition, four (4) co-owners, namely, Francisco, Thelma, Rodolfo and Antonio Aguilar each
had a share of 300 square meters under TCT Nos. 13849, 13852, 13850, 13851.50 Eusebio Aguilar's
share was 347 square meters under TCT No. 1385351 while Virginia Aguilar's was 89 square meters
under TCT No. 13854.52
It is noted that Virginia Aguilar, although granted 89 square meters only of the subject lots, is, at the
same time, the sole registered owner of TCT No. 59780, one of the three (3) titles initially sought to
be expropriated in the original complaint. TCT No. 59780, with a land area of 211 square meters, was
dropped in the amended complaint. Eusebio Aguilar was granted 347 square meters, which is 47
square meters more than the maximum of 300 square meters set by R.A. 7279 for small property
owners. In TCT No. 13853, Eusebio's title, however, appears the following annotation:
"... subject to x x x, and to the prov. of Sec. 4 Rule 74 of the Rules of Court with respect to the SO ORDERED.
inheritance left by the deceased Eusebio N. Aguilar."53
Davide, Jr., Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
Eusebio died on March 23, 1995,54 and, according to Antonio's testimony, the former was survived by
five (5) children.55 Where there are several co-owners, and some of them die, the heirs of those who
die, with respect to that part belonging to the deceased, become also co-owners of the property
together with those who survive.56 After Eusebio died, his five heirs became co-owners of his 347
square-meter portion. Dividing the 347 square meters among the five entitled each heir to 69.4 square
meters of the land subject of litigation.

Consequently, the share of each co-owner did not exceed the 300 square meter limit set in R.A. 7279.
The second question, however, is whether the subject property is the only real property of respondents
for them to comply with the second requisite for small property owners.

Antonio Aguilar testified that he and most of the original co-owners do not reside on the subject
property but in their ancestral home in Paco, Manila.57 Respondents therefore appear to own real
property other than the lots in litigation. Nonetheless, the records do not show that the ancestral home
in Paco, Manila and the land on which it stands are owned by respondents or anyone of them.
Petitioner did not present any title or proof of this fact despite Antonio Aguilar's testimony.

On the other hand, respondents claim that the subject lots are their only real property58 and that they,
particularly two of the five heirs of Eusebio Aguilar, are merely renting their houses and therefore do
not own any other real property in Metro Manila.59 To prove this, they submitted certifications from
the offices of the City and Municipal Assessors in Metro Manila attesting to the fact that they have no
registered real property declared for taxation purposes in the respective cities. Respondents were
certified by the City Assessor of Manila;60 Quezon City;61 Makati City;62 Pasay City;63 Paranaque;64
Caloocan City;65 Pasig City;66 Muntinlupa;67 Marikina;68 and the then municipality of Las Piñas69 and
the municipality of San Juan del Monte70 as having no real property registered for taxation in their
individual names.1âwphi1.nêt

Finally, this court notes that the subject lots are now in the possession of respondents. Antonio Aguilar
testified that he and the other co-owners filed ejectment cases against the occupants of the land before
the Metropolitan Trial Court, Mandaluyong, Branches 59 and 60. Orders of eviction were issued and
executed on September 17, 1997 which resulted in the eviction of the tenants and other occupants
from the land in question.71

IN VIEW WHEREOF, the petition is DENIED and the orders dated September 17. 1998 and
December 29, 1998 of the Regional Trial Court, Branch 168, Pasig City in SCA No. 1427 are
AFFIRMED.

75
G.R. No. 168770 February 9, 2011
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and
CIELO OUANO MARTINEZ, Petitioners,
vs.
THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL
AIRPORT AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF CEBU,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 168812
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA), Petitioner,
vs.
RICARDO L. INOCIAN, in his personal capacity and as Attorney-in-Fact of OLYMPIA E.
ESTEVES, EMILIA E. BACALLA, RESTITUTA E. MONTANA, and RAUL L. INOCIAN; and
ALETHA SUICO MAGAT, in her personal capacity and as Attorney-in-Fact of PHILIP M.
SUICO, DORIS S. DELA CRUZ, JAMES M. SUICO, EDWARD M. SUICO, ROSELYN
SUICO-LAWSIN, REX M. SUICO, KHARLA SUICO-GUTIERREZ, ALBERT
CHIONGBIAN, and JOHNNY CHAN, Respondents.
DECISION
VELASCO, JR., J.:
At the center of these two (2) Petitions for Review on Certiorari under Rule 45 is the issue of the right
of the former owners of lots acquired for the expansion of the Lahug Airport in Cebu City to
repurchase or secure reconveyance of their respective properties.
In the first petition, docketed as G.R. No. 168770, petitioners Anunciacion vda. de Ouano, Mario
Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez (the Ouanos) seek to nullify the Decision1
dated September 3, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 78027, affirming the
Order dated December 9, 2002 of the Regional Trial Court (RTC), Branch 57 in Cebu City, in Civil
Case No. CEB-20743, a suit to compel the Republic of the Philippines and/or the Mactan-Cebu
International Airport Authority (MCIAA) to reconvey to the Ouanos a parcel of land.
The second petition, docketed as G.R. No. 168812, has the MCIAA seeking principally to annul and
set aside the Decision2 and Resolution3 dated January 14, 2005 and June 29, 2005, respectively, of the
76
CA in CA-G.R. CV No. 64356, sustaining the RTC, Branch 13 in Cebu City in its Decision of
October 7, 1988 in Civil Case No. CEB-18370.
Per its October 19, 2005 Resolution, the Court ordered the consolidation of both cases.
Except for the names of the parties and the specific lot designation involved, the relevant factual
antecedents which gave rise to these consolidated petitions are, for the most part, as set forth in the
Court’s Decision4 of October 15, 2003, as reiterated in a Resolution5 dated August 9, 2005, in G.R.
No. 156273 entitled Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport
Authority (Heirs of Moreno), and in other earlier related cases.6
In 1949, the National Airport Corporation (NAC), MCIAA’s predecessor agency, pursued a program
to expand the Lahug Airport in Cebu City. Through its team of negotiators, NAC met and negotiated
with the owners of the properties situated around the airport, which included Lot Nos. 744-A, 745-A,
746, 747, 761-A, 762-A, 763-A, 942, and 947 of the Banilad Estate. As the landowners would later
claim, the government negotiating team, as a sweetener, assured them that they could repurchase their
respective lands should the Lahug Airport expansion project do not push through or once the Lahug
Airport closes or its operations transferred to Mactan-Cebu Airport. Some of the landowners accepted
the assurance and executed deeds of sale with a right of repurchase. Others, however, including the
owners of the aforementioned lots, refused to sell because the purchase price offered was viewed as
way below market, forcing the hand of the Republic, represented by the then Civil Aeronautics
Administration (CAA), as successor agency of the NAC, to file a complaint for the expropriation of
Lot Nos. 744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947, among others, docketed as
Civil Case No. R-1881 entitled Republic v. Damian Ouano, et al.
On December 29, 1961, the then Court of First Instance (CFI) of Cebu rendered judgment for the
Republic, disposing, in part, as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered:
1. Declaring the expropriation of Lots Nos. 75, 76, 76, 89, 90, 91, 92, 105, 106, 107, 108, 104, 921-A,
88, 93, 913-B, 72, 77, 916, 777-A, 918, 919, 920, 764-A, 988, 744-A, 745-A, 746, 747, 762-A, 763-
A, 951, 942, 720-A, x x x and 947, included in the Lahug Airport, Cebu City, justified in and in lawful
exercise of the right of eminent domain.
xxxx
3. After the payment of the foregoing financial obligation to the landowners, directing the latter to
deliver to the plaintiff the corresponding Transfer Certificates of Title to their respective lots; and
upon the presentation of the said titles to the Register of Deeds, ordering the latter to cancel the same
and to issue, in lieu thereof, new Transfer Certificates of Title in the name of the plaintiff.7
In view of the adverted buy-back assurance made by the government, the owners of the lots no longer
appealed the decision of the trial court.8 Following the finality of the judgment of condemnation,
certificates of title for the covered parcels of land were issued in the name of the Republic which,
pursuant to Republic Act No. 6958,9 were subsequently transferred to MCIAA.
At the end of 1991, or soon after the transfer of the aforesaid lots to MCIAA, Lahug Airport
completely ceased operations, Mactan Airport having opened to accommodate incoming and outgoing
commercial flights. On the ground, the expropriated lots were never utilized for the purpose they were
taken as no expansion of Lahug Airport was undertaken. This development prompted the former lot
owners to formally demand from the government that they be allowed to exercise their promised right
to repurchase. The demands went unheeded. Civil suits followed.
G.R. No. 168812 (MCIAA Petition)
On February 8, 1996, Ricardo L. Inocian and four others (all children of Isabel Limbaga who
originally owned six [6] of the lots expropriated); and Aletha Suico Magat and seven others,
successors-in-interest of Santiago Suico, the original owner of two (2) of the condemned lots
(collectively, the Inocians), filed before the RTC in Cebu City a complaint for reconveyance of real
properties and damages against MCIAA. The complaint, docketed as Civil Case No. CEB-18370,
was eventually raffled to Branch 13 of the court.
On September 29, 1997, one Albert Chiongbian (Chiongbian), alleging to be the owner of Lot Nos.
761-A and 762-A but which the Inocians were now claiming, moved and was later allowed to
intervene.
During the pre-trial, MCIAA admitted the following facts:
1. That the properties, which are the subject matter of Civil Case No. CEB-18370, are also the
properties involved in Civil Case R-1881;
2. That the purpose of the expropriation was for the expansion of the old Lahug Airport; that the
Lahug Airport was not expanded;
3. That the old Lahug Airport was closed sometime in June 1992;
77
4. That the price paid to the lot owners in the expropriation case is found in the decision of the court;
and
5. That some properties were reconveyed by the MCIAA because the previous owners were able to
secure express waivers or riders wherein the government agreed to return the properties should the
expansion of the Lahug Airport not materialize.
During trial, the Inocians adduced evidence which included the testimony of Ricardo Inocian
(Inocian) and Asterio Uy (Uy). Uy, an employee of the CAA, testified that he was a member of the
team which negotiated for the acquisition of certain lots in Lahug for the proposed expansion of the
Lahug Airport. He recalled that he acted as the interpreter/spokesman of the team since he could speak
the Cebuano dialect. He stated that the other members of the team of negotiators were Atty. Pedro
Ocampo, Atty. Lansang, and Atty. Saligumba. He recounted that, in the course of the negotiation, their
team assured the landowners that their landholdings would be reconveyed to them in the event the
Lahug Airport would be abandoned or if its operation were transferred to the Mactan Airport. Some
landowners opted to sell, while others were of a different bent owing to the inadequacy of the offered
price.
Inocian testified that he and his mother, Isabel Lambaga, attended a meeting called by the NAC team
of negotiators sometime in 1947 or 1949 where he and the other landowners were given the assurance
that they could repurchase their lands at the same price in the event the Lahug Airport ceases to
operate. He further testified that they rejected the NAC’s offer. However, he said that they no longer
appealed the decree of expropriation due to the repurchase assurance adverted to.
The MCIAA presented Michael Bacarizas (Bacarizas), who started working for MCIAA as legal
assistant in 1996. He testified that, in the course of doing research work on the lots subject of Civil
Case No. CEB-18370, he discovered that the same lots were covered by the decision in Civil Case
No. R-1881. He also found out that the said decision did not expressly contain any condition on the
matter of repurchase.
Ruling of the RTC
On October 7, 1998, the RTC rendered a Decision in Civil Case No. CEB-18370, the dispositive
portion of which reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered directing defendant Mactan
Cebu International Airport Authority (MCIAA) to reconvey (free from liens and encumbrances) to
plaintiffs Ricardo Inocian, Olimpia E. Esteves, Emilia E. Bacalla, Restituta E. Montana and Raul
Inocian Lots No. 744-A, 745-A, 746, 762-A, 747, 761-A and to plaintiffs Aletha Suico Magat, Philip
M. Suico, Doris S. dela Cruz, James M. Suico, Edward M. Suico, Roselyn S. Lawsin, Rex M. Suico
and Kharla Suico-Gutierrez Lots No. 942 and 947, after plaintiffs shall have paid MCIAA the sums
indicated in the decision in Civil Case No. R-1881. Defendant MCIAA is likewise directed to pay the
aforementioned plaintiffs the sum or P50,000.00 as and for attorney’s fees and P10,000.00 for
litigation expenses.
Albert Chiongbian’s intervention should be, as it is hereby DENIED for utter lack of factual basis.
With costs against defendant MCIAA.10
Therefrom, MCIAA went to the CA on appeal, docketed as CA-G.R. CV No. 64356.
Ruling of the CA
On January 14, 2005, the CA rendered judgment for the Inocians, declaring them entitled to the
reconveyance of the questioned lots as the successors-in-interest of the late Isabel Limbaga and
Santiago Suico, as the case may be, who were the former registered owners of the said lots. The
decretal portion of the CA’s Decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us
DISMISSING the appeal filed in this case and AFFFIRMING the decision rendered by the court a
quo on October 7, 1998 in Civil Case No. CEB-18370.
SO ORDERED.
The CA, citing and reproducing excerpts from Heirs of Moreno,11 virtually held that the decision in
Civil Case No. R-1881 was conditional, stating "that the expropriation of [plaintiff-appellees’] lots for
the proposed expansion of the Lahug Airport was ordered by the CFI of Cebu under the impression
that Lahug Airport would continue in operation."12 The condition, as may be deduced from the CFI’s
decision, was that should MCIAA, or its precursor agency, discontinue altogether with the operation
of Lahug Airport, then the owners of the lots expropriated may, if so minded, demand of MCIAA to
make good its verbal assurance to allow the repurchase of the properties. To the CA, this assurance, a
demandable agreement of repurchase by itself, has been adequately established.
On September 21, 2005, the MCIAA filed with Us a petition for review of the CA’s Decision,
docketed as G.R. No. 168812.
G.R. No. 168770 (Ouano Petition)
78
Soon after the MCIAA jettisoned the Lahug Airport expansion project, informal settlers entered and
occupied Lot No. 763-A which, before its expropriation, belonged to the Ouanos. The Ouanos then
formally asked to be allowed to exercise their right to repurchase the aforementioned lot, but the
MCIAA ignored the demand. On August 18, 1997, the Ouanos instituted a complaint before the Cebu
City RTC against the Republic and the MCIAA for reconveyance, docketed as Civil Case No.
CEB-20743.
Answering, the Republic and MCIAA averred that the Ouanos no longer have enforceable rights
whatsoever over the condemned Lot No. 763-A, the decision in Civil Case No. R-1881 not having
found any reversionary condition.
Ruling of the RTC
By a Decision dated November 28, 2000, the RTC, Branch 57 in Cebu City ruled in favor of the
Ouanos, disposing as follows:
WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the
plaintiffs, Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and Cielo Ouano
Martinez and against the Republic of the Philippines and Mactan Cebu International Airport Authority
(MCIAA) to restore to plaintiffs, the possession and ownership of their land, Lot No. 763-A upon
payment of the expropriation price to defendants; and
2. Ordering the Register of Deeds to effect the transfer of the Certificate of Title from defendant
Republic of the Philippines on Lot 763-A, canceling TCT No. 52004 in the name of defendant
Republic of the Philippines and to issue a new title on the same lot in the names of Anunciacion Vda.
De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez.
No pronouncement as to costs.13
Acting on the motion of the Republic and MCIAA for reconsideration, however, the RTC, Branch 57
in Cebu City, presided this time by Judge Enriqueta L. Belarmino, issued, on December 9, 2002, an
Order14 that reversed its earlier decision of November 28, 2000 and dismissed the Ouanos’ complaint.
Ruling of the CA
In time, the Ouanos interposed an appeal to the CA, docketed as CA-G.R. CV No. 78027. Eventually,
the appellate court rendered a Decision15 dated September 3, 2004, denying the appeal, thus:
WHEREFORE, premises considered, the Order dated December 9, 2002, of the Regional Trial
Court, 7th Judicial Region, Branch 57, Cebu City, in Civil Case No. CEB-20743, is hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Explaining its case disposition, the CA stated that the decision in Civil Case No. R-1881 did not state
any condition that Lot No. 763-A of the Ouanos––and all covered lots for that matter––would be
returned to them or that they could repurchase the same property if it were to be used for purposes
other than for the Lahug Airport. The appellate court also went on to declare the inapplicability of the
Court’s pronouncement in MCIAA v. Court of Appeals, RTC, Branch 9, Cebu City, Melba Limbago, et
al.,16 to support the Ouanos’ cause, since the affected landowners in that case, unlike the Ouanos,
parted with their property not through expropriation but via a sale and purchase transaction.
The Ouanos filed a motion for reconsideration of the CA’s Decision, but was denied per the CA’s May
26, 2005 Resolution.17 Hence, they filed this petition in G.R. No. 168770.
The Issues
G.R. No. 168812
GROUNDS FOR ALLOWANCE OF THE PETITION
l. THE ASSAILED ISSUANCES ILLEGALLY STRIPPED THE REPUBLIC OF ITS ABSOLUTE
AND UNCONDITIONAL TITLE TO THE SUBJECT EXPROPRIATED PROPERTIES.
ll. THE IMPUNGED DISPOSITIONS INVALIDLY OVERTURNED THIS HONORABLE
COURT’S FINAL RULINGS IN FERY V. MUNICIPALITY OF CABANATUAN, MCIAA V.
COURT OF APPEALS AND REYES V. NATIONAL HOUSING AUTHORITY.
lll. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THIS HONORABLE COURT’S
RULING IN MORENO, ALBEIT IT HAS NOT YET ATTAINED FINALITY.18
G.R. No. 168770
Questions of law presented in this Petition
Whether or not the testimonial evidence of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissbale under the Statute of Frauds.
79
Whether or not under the ruling of this Honorable Court in the heirs of Moreno Case, and pursuant to
the principles enunciated therein, petitioners herein are entitiled to recover their litigated property.
Reasons for Allowances of this Petition
Respondents did not object during trial to the admissibility of petitioners’ testimonial evidence under
the Statute of Frauds and have thus waived such objection and are now barred from raising the same.
In any event, the Statute of Frauds is not applicable herein. Consequently, petitioners’ evidence is
admissible and should be duly given weight and credence, as initially held by the trial court in its
original Decision.19
While their respective actions against MCIAA below ended differently, the Ouanos and the Inocians’
proffered arguments presented before this Court run along parallel lines, both asserting entitlement to
recover the litigated property on the strength of the Court’s ruling in Heirs of Moreno. MCIAA has,
however, formulated in its Consolidated Memorandum the key interrelated issues in these
consolidated cases, as follows:
I
WHETHER ABANDONMENT OF THE PUBLIC USE FOR WHICH THE SUBJECT
PROPERTIES WERE EXPROPRIATED ENTITLES PETITIONERS OUANOS, ET AL. AND
RESPONDENTS INOCIAN, ET AL. TO REACQUIRE THEM.
II
WHETHER PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. ARE
ENTITLED TO RECONVEYANCE OF THE SUBJECT PROPERTIES SIMPLY ON THE BASIS
OF AN ALLEGED VERBAL PROMISE OR ASSURANCE OF SOME NAC OFFICIALS THAT
THE SUBJECT PROPERTIES WILL BE RETUNRED IF THE AIRPORT PROJECT WOULD BE
ABANDONED.
The Court’s Ruling
The Republic and MCIAA’s petition in G.R. No. 168812 is bereft of merit, while the Ouano petition
in G.R. No. 168770 is meritorious.
At the outset, three (3) fairly established factual premises ought to be emphasized:
First, the MCIAA and/or its predecessor agency had not actually used the lots subject of the final
decree of expropriation in Civil Case No. R-1881 for the purpose they were originally taken by the
government, i.e., for the expansion and development of Lahug Airport.
Second, the Lahug Airport had been closed and abandoned. A significant portion of it had, in fact,
been purchased by a private corporation for development as a commercial complex.20
Third, it has been preponderantly established by evidence that the NAC, through its team of
negotiators, had given assurance to the affected landowners that they would be entitled to repurchase
their respective lots in the event they are no longer used for airport purposes.21 "No less than Asterio
Uy," the Court noted in Heirs of Moreno, "one of the members of the CAA Mactan Legal Team, which
interceded for the acquisition of the lots for the Lahug Airport’s expansion, affirmed that persistent
assurances were given to the landowners to the effect that as soon as the Lahug Airport is abandoned
or transferred to Mactan, the lot owners would be able to reacquire their properties."22 In Civil Case
No. CEB-20743, Exhibit "G," the transcript of the deposition23 of Anunciacion vda. de Ouano
covering the assurance made had been formally offered in evidence and duly considered in the initial
decision of the RTC Cebu City. In Civil Case No. CEB-18370, the trial court, on the basis of
testimonial evidence, and later the CA, recognized the reversionary rights of the suing former lot
owners or their successors in interest24 and resolved the case accordingly. In point with respect to the
representation and promise of the government to return the lots taken should the planned airport
expansion do not materialize is what the Court said in Heirs of Moreno, thus:
This is a difficult case calling for a difficult but just solution. To begin with there exists an undeniable
historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of
the properties covered by the Lahug Airport expansion scheme that they could repurchase their
properties at the termination of the airport’s venue. Some acted on this assurance and sold their
properties; other landowners held out and waited for the exercise of eminent domain to take its course
until finally coming to terms with respondent’s predecessors that they would not appeal nor block
further judgment of condemnation if the right of repurchase was extended to them. A handful failed to
prove that they acted on such assurance when they parted with ownership of their land.25 (Emphasis
supplied; citations omitted.)
For perspective, Heirs of Moreno––later followed by MCIAA v. Tudtud (Tudtud)26 and the
consolidated cases at bar––is cast under the same factual setting and centered on the expropriation of
privately-owned lots for the public purpose of expanding the Lahug Airport and the alleged promise
of reconveyance given by the negotiating NAC officials to the private lot owners. All the lots being
claimed by the former owners or successors-in-interest of the former owners in the Heirs of Moreno,
Tudtud, and the present cases were similarly adjudged condemned in favor of the Republic in Civil
Case No. R-1881. All the claimants sought was or is to have the condemned lots reconveyed to them
upon the payment of the condemnation price since the public purpose of the expropriation was never
80
met. Indeed, the expropriated lots were never used and were, in fact, abandoned by the expropriating
government agencies.
In all then, the issues and supporting arguments presented by both sets of petitioners in these
consolidated cases have already previously been passed upon, discussed at length, and practically
peremptorily resolved in Heirs of Moreno and the November 2008 Tudtud ruling. The Ouanos, as
petitioners in G.R. No. 168770, and the Inocians, as respondents in G.R. No. 168812, are similarly
situated as the heirs of Moreno in Heirs of Moreno and Benjamin Tudtud in Tudtud. Be that as it may,
there is no reason why the ratio decidendi in Heirs of Moreno and Tudtud should not be made to apply
to petitioners Ouanos and respondents Inocians such that they shall be entitled to recover their or their
predecessors’ respective properties under the same manner and arrangement as the heirs of Moreno
and Tudtud. Stare decisis et non quieta movere (to adhere to precedents, and not to unsettle things
which are established).27
Just like in Tudtud and earlier in Heirs of Moreno, MCIAA would foist the theory that the judgment of
condemnation in Civil Case No. R-1881 was without qualification and was unconditional. It would, in
fact, draw attention to the fallo of the expropriation court’s decision to prove that there is nothing in
the decision indicating that the government gave assurance or undertook to reconvey the covered lots
in case the Lahug airport expansion project is aborted. Elaborating on this angle, MCIAA argues that
the claim of the Ouanos and the Inocians regarding the alleged verbal assurance of the NAC
negotiating team that they can reacquire their landholdings is barred by the Statute of Frauds.28
Under the rule on the Statute of Frauds, as expressed in Article 1403 of the Civil Code, a contract for
the sale or acquisition of real property shall be unenforceable unless the same or some note of the
contract be in writing and subscribed by the party charged. Subject to defined exceptions, evidence of
the agreement cannot be received without the writing, or secondary evidence of its contents.
MCIAA’s invocation of the Statute of Frauds is misplaced primarily because the statute applies only
to executory and not to completed, executed, or partially consummated contracts.29 Carbonnel v.
Poncio, et al., quoting Chief Justice Moran, explains the rationale behind this rule, thusly:
x x x "The reason is simple. In executory contracts there is a wide field for fraud because unless they
may be in writing there is no palpable evidence of the intention of the contracting parties. The statute
has been precisely been enacted to prevent fraud." x x x However, if a contract has been totally or
partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would
enable the defendant to keep the benefits already derived by him from the transaction in litigation, and
at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him
thereby.30 (Emphasis in the original.)
Analyzing the situation of the cases at bar, there can be no serious objection to the proposition that the
agreement package between the government and the private lot owners was already partially
performed by the government through the acquisition of the lots for the expansion of the Lahug
airport. The parties, however, failed to accomplish the more important condition in the CFI decision
decreeing the expropriation of the lots litigated upon: the expansion of the Lahug Airport. The
project––the public purpose behind the forced property taking––was, in fact, never pursued and, as a
consequence, the lots expropriated were abandoned. Be that as it may, the two groups of landowners
can, in an action to compel MCIAA to make good its oral undertaking to allow repurchase, adduce
parol evidence to prove the transaction.
At any rate, the objection on the admissibility of evidence on the basis of the Statute of Frauds may be
waived if not timely raised. Records tend to support the conclusion that MCIAA did not, as the
Ouanos and the Inocians posit, object to the introduction of parol evidence to prove its commitment to
allow the former landowners to repurchase their respective properties upon the occurrence of certain
events.
In a bid to deny the lot owners the right to repurchase, MCIAA, citing cases,31 points to the
dispositive part of the decision in Civil Case R-1881 which, as couched, granted the Republic absolute
title to the parcels of land declared expropriated. The MCIAA is correct about the unconditional tone
of the dispositive portion of the decision, but that actuality would not carry the day for the agency.
Addressing the matter of the otherwise absolute tenor of the CFI’s disposition in Civil Case No.
R-1881, the Court, in Heirs of Moreno, after taking stock of the ensuing portion of the body of the
CFI’s decision, said:
As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although
Mactan Airport is being constructed, it does not take away the actual usefulness and importance of the
Lahug Airport: it is handling the air traffic of both civilian and military. From it aircrafts fly to
Mindanao and Visayas and pass thru it on their flights to the North and Manila. Then, no evidence was
adduced to show how soon is the Mactan Airport to be placed in operation and whether the Lahug
Airport will be closed immediately thereafter. It is up to the other departments of the Government to
determine said matters. The Court cannot substitute its judgments for those of the said departments or
agencies. In the absence of such showing, the court will presume that the Lahug Airport will continue
to be in operation.32 (Emphasis supplied.)
We went on to state as follows:
While the trial court in Civil Case No. R-1881 could have simply acknowledged the presence of
public purpose for the exercise of eminent domain regardless of the survival of the Lahug Airport, the
trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon its
understanding that ‘Lahug Airport will continue to be in operation’. Verily, these meaningful
statements in the body of the Decision warrant the conclusion that the expropriated properties would
81
remain to be so until it was confirmed that Lahug Airport was no longer ‘in operation’. This inference
further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the
expropriated lots were not being used for any airport expansion project, the rights vis-à-vis the
expropriated lots x x x as between the State and their former owners, petitioners herein, must be
equitably adjusted; and (b) the foregoing unmistakable declarations in the body of the Decision should
merge with and become an intrinsic part of the fallo thereof which under the premises is clearly
inadequate since the dispositive portion is not in accord with the findings as contained in the body
thereof.33
Not to be overlooked of course is what the Court said in its Resolution disposing of MCIAA’s motion
to reconsider the original ruling in Heirs of Moreno. In that resolution, We stated that the fallo of the
decision in Civil Case R-1881 should be viewed and understood in connection with the entire text,
which contemplated a return of the property taken if the airport expansion project were abandoned.
For ease of reference, following is what the Court wrote:
Moreover, we do not subscribe to the [MCIAA’s] contention that since the possibility of the Lahug
Airport’s closure was actually considered by the trial court, a stipulation on reversion or repurchase
was so material that it should not have been discounted by the court a quo in its decision in Civil Case
No. R-1881, if, in fact, there was one. We find it proper to cite, once more, this Court’s ruling that the
fallo of the decision in Civil Case No. R-1881 must be read in reference to the other portions of the
decision in which it forms a part. A reading of the Court’s judgment must not be confined to the
dispositive portion alone; rather it should be meaningfully construed in unanimity with the ratio
decidendi thereof to grasp the true intent and meaning of a decision.34
The Court has, to be sure, taken stock of Fery v. Municipality of Cabanatuan,35 a case MCIAA cites at
every possible turn, where the Court made these observations:
If, for example, land is expropriated for a particular purpose, with the condition that when that
purpose is ended or abandoned the property shall return to its former owner, then of course, when the
purpose is terminated or abandoned, the former owner reacquires the property so expropriated. x x x
If, upon the contrary, however the decree of expropriation gives to the entity a fee simple title, then, of
course, the land becomes the absolute property of the expropriator x x x and in that case the non-user
does not have the effect of defeating the title acquired by the expropriation proceedings x x x.
Fery notwithstanding, MCIAA cannot really rightfully say that it has absolute title to the lots decreed
expropriated in Civil Case No. R-1881. The correct lesson of Fery is captured by what the Court said
in that case, thus: "the government acquires only such rights in expropriated parcels of land as may be
allowed by the character of its title over the properties." In light of our disposition in Heirs of Moreno
and Tudtud, the statement immediately adverted to means that in the event the particular public use for
which a parcel of land is expropriated is abandoned, the owner shall not be entitled to recover or
repurchase it as a matter of right, unless such recovery or repurchase is expressed in or irresistibly
deducible from the condemnation judgment. But as has been determined below, the decision in Civil
Case No. R-1881 enjoined MCIAA, as a condition of approving expropriation, to allow recovery or
repurchase upon abandonment of the Lahug airport project. To borrow from our underlying decision
in Heirs of Moreno, "[n]o doubt, the return or repurchase of the condemned properties of petitioners
could readily be justified as the manifest legal effect of consequence of the trial court’s underlying
presumption that ‘Lahug Airport will continue to be in operation’ when it granted the complaint for
eminent domain and the airport discontinued its activities."36
Providing added support to the Ouanos and the Inocians’ right to repurchase is what in Heirs of
Moreno was referred to as constructive trust, one that is akin to the implied trust expressed in Art.
1454 of the Civil Code,37 the purpose of which is to prevent unjust enrichment.38 In the case at bench,
the Ouanos and the Inocians parted with their respective lots in favor of the MCIAA, the latter
obliging itself to use the realties for the expansion of Lahug Airport; failing to keep its end of the
bargain, MCIAA can be compelled by the former landowners to reconvey the parcels of land to them,
otherwise, they would be denied the use of their properties upon a state of affairs that was not
conceived nor contemplated when the expropriation was authorized. In effect, the government merely
held the properties condemned in trust until the proposed public use or purpose for which the lots
were condemned was actually consummated by the government. Since the government failed to
perform the obligation that is the basis of the transfer of the property, then the lot owners Ouanos and
Inocians can demand the reconveyance of their old properties after the payment of the condemnation
price.
Constructive trusts are fictions of equity that courts use as devices to remedy any situation in which
the holder of the legal title, MCIAA in this case, may not, in good conscience, retain the beneficial
interest. We add, however, as in Heirs of Moreno, that the party seeking the aid of equity––the
landowners in this instance, in establishing the trust––must himself do equity in a manner as the court
may deem just and reasonable.
The Court, in the recent MCIAA v. Lozada, Sr., revisited and abandoned the Fery ruling that the
former owner is not entitled to reversion of the property even if the public purpose were not pursued
and were abandoned, thus:
On this note, we take this opportunity to revisit our ruling in Fery, which involved an expropriation
suit commenced upon parcels of land to be used as a site for a public market. Instead of putting up a
public market, respondent Cabanatuan constructed residential houses for lease on the area. Claiming
that the municipality lost its right to the property taken since it did not pursue its public purpose,
petitioner Juan Fery, the former owner of the lots expropriated, sought to recover his properties.
However, as he had admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to the
lands in question, judgment was rendered in favor of the municipality, following American
jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY. Co., McConihay v. Theodore
Wright, and Reichling v. Covington Lumber Co., all uniformly holding that the transfer to a third party
82
of the expropriated real property, which necessarily resulted in the abandonment of the particular
public purpose for which the property was taken, is not a ground for the recovery of the same by its
previous owner, the title of the expropriating agency being one of fee simple.1avvphi1
Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private
property shall not be taken for public use without just compensation. It is well settled that the taking
of private property by the Governments power of eminent domain is subject to two mandatory
requirements: (1) that it is for a particular public purpose; and (2) that just compensation be paid to
the property owner. These requirements partake of the nature of implied conditions that should be
complied with to enable the condemnor to keep the property expropriated.
More particularly, with respect to the element of public use, the expropriator should commit to use the
property pursuant to the purpose stated in the petition for expropriation filed, failing which, it should
file another petition for the new purpose. If not, it is then incumbent upon the expropriator to return
the said property to its private owner, if the latter desires to reacquire the same. Otherwise, the
judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the
proper exercise of the power of eminent domain, namely, the particular public purpose for which the
property will be devoted. Accordingly, the private property owner would be denied due process of
law, and the judgment would violate the property owners right to justice, fairness, and equity.
In light of these premises, we now expressly hold that the taking of private property, consequent to the
Governments exercise of its power of eminent domain, is always subject to the condition that the
property be devoted to the specific public purpose for which it was taken. Corollarily, if this particular
purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the former
owners, if they so desire, may seek the reversion of the property, subject to the return of the amount of
just compensation received. In such a case, the exercise of the power of eminent domain has become
improper for lack of the required factual justification.39 (Emphasis supplied.)
Clinging to Fery, specifically the fee simple concept underpinning it, is no longer compelling,
considering the ensuing inequity such application entails. Too, the Court resolved Fery not under the
cover of any of the Philippine Constitutions, each decreeing that private property shall not be taken
for public use without just compensation. The twin elements of just compensation and public purpose
are, by themselves, direct limitations to the exercise of eminent domain, arguing, in a way, against the
notion of fee simple title.1avvphi1 The fee does not vest until payment of just compensation.40
In esse, expropriation is forced private property taking, the landowner being really without a ghost of
a chance to defeat the case of the expropriating agency. In other words, in expropriation, the private
owner is deprived of property against his will. Withal, the mandatory requirement of due process
ought to be strictly followed, such that the state must show, at the minimum, a genuine need, an
exacting public purpose to take private property, the purpose to be specifically alleged or least
reasonably deducible from the complaint.
Public use, as an eminent domain concept, has now acquired an expansive meaning to include any use
that is of "usefulness, utility, or advantage, or what is productive of general benefit [of the public]."41
If the genuine public necessity—the very reason or condition as it were—allowing, at the first
instance, the expropriation of a private land ceases or disappears, then there is no more cogent point
for the government’s retention of the expropriated land. The same legal situation should hold if the
government devotes the property to another public use very much different from the original or
deviates from the declared purpose to benefit another private person. It has been said that the direct
use by the state of its power to oblige landowners to renounce their productive possession to another
citizen, who will use it predominantly for that citizen’s own private gain, is offensive to our laws.42
A condemnor should commit to use the property pursuant to the purpose stated in the petition for
expropriation, failing which it should file another petition for the new purpose. If not, then it behooves
the condemnor to return the said property to its private owner, if the latter so desires. The government
cannot plausibly keep the property it expropriated in any manner it pleases and, in the process,
dishonor the judgment of expropriation. This is not in keeping with the idea of fair play,
The notion, therefore, that the government, via expropriation proceedings, acquires unrestricted
ownership over or a fee simple title to the covered land, is no longer tenable. We suggested as much in
Heirs of Moreno and in Tudtud and more recently in Lozada, Sr. Expropriated lands should be
differentiated from a piece of land, ownership of which was absolutely transferred by way of an
unconditional purchase and sale contract freely entered by two parties, one without obligation to buy
and the other without the duty to sell. In that case, the fee simple concept really comes into play.
There is really no occasion to apply the "fee simple concept" if the transfer is conditional. The taking
of a private land in expropriation proceedings is always conditioned on its continued devotion to its
public purpose. As a necessary corollary, once the purpose is terminated or peremptorily abandoned,
then the former owner, if he so desires, may seek its reversion, subject of course to the return, at the
very least, of the just compensation received.
To be compelled to renounce dominion over a piece of land is, in itself, an already bitter pill to
swallow for the owner. But to be asked to sacrifice for the common good and yield ownership to the
government which reneges on its assurance that the private property shall be for a public purpose may
be too much. But it would be worse if the power of eminent domain were deliberately used as a
subterfuge to benefit another with influence and power in the political process, including development
firms. The mischief thus depicted is not at all far-fetched with the continued application of Fery. Even
as the Court deliberates on these consolidated cases, there is an uncontroverted allegation that the
MCIAA is poised to sell, if it has not yet sold, the areas in question to Cebu Property Ventures, Inc.
This provides an added dimension to abandon Fery.
Given the foregoing disquisitions, equity and justice demand the reconveyance by MCIAA of the
litigated lands in question to the Ouanos and Inocians. In the same token, justice and fair play also
dictate that the Ouanos and Inocian return to MCIAA what they received as just compensation for the
83
expropriation of their respective properties plus legal interest to be computed from default, which in
this case should run from the time MCIAA complies with the reconveyance obligation.43 They must
likewise pay MCIAA the necessary expenses it might have incurred in sustaining their respective lots
and the monetary value of its services in managing the lots in question to the extent that they, as
private owners, were benefited thereby.
In accordance with Art. 1187 of the Civil Code on mutual compensation, MCIAA may keep whatever
income or fruits it may have obtained from the parcels of land expropriated. In turn, the Ouanos and
Inocians need not require the accounting of interests earned by the amounts they received as just
compensation.44
Following Art. 1189 of the Civil Code providing that "[i]f the thing is improved by its nature, or by
time, the improvement shall inure to the benefit of the creditor x x x," the Ouanos and Inocians do not
have to settle the appreciation of the values of their respective lots as part of the reconveyance
process, since the value increase is merely the natural effect of nature and time.
Finally, We delete the award of PhP 50,000 and PhP 10,000, as attorney’s fees and litigation expenses,
respectively, made in favor of the Inocians by the Cebu City RTC in its judgment in Civil Case No.
CEB-18370, as later affirmed by the CA. As a matter of sound policy, no premium should be set on
the right to litigate where there is no doubt about the bona fides of the exercise of such right,45 as here,
albeit the decision of MCIAA to resist the former landowners’ claim eventually turned out to be
untenable.
WHEREFORE, the petition in G.R. No. 168770 is GRANTED. Accordingly, the CA Decision dated
September 3, 2004 in CA-G.R. CV No. 78027 is REVERSED and SET ASIDE. Mactan-Cebu
International Airport Authority is ordered to reconvey subject Lot No. 763-A to petitioners
Anunciacion vda. de Ouano, Mario P. Ouano, Leticia Ouano Arnaiz, and Cielo Ouano Martinez. The
Register of Deeds of Cebu City is ordered to effect the necessary cancellation of title and transfer it in
the name of the petitioners within fifteen (15) days from finality of judgment.
The petition of the Mactan-Cebu International Airport Authority in G.R. No. 168812 is DENIED, and
the CA’s Decision and Resolution dated January 14, 2005 and June 29, 2005, respectively, in CA-G.R.
CV No. 64356 are AFFIRMED, except insofar as they awarded attorney’s fees and litigation
expenses that are hereby DELETED. Accordingly, Mactan-Cebu International Airport Authority is
ordered to reconvey to respondents Ricardo L. Inocian, Olympia E. Esteves, Emilia E. Bacalla,
Restituta E. Montana, and Raul L. Inocian the litigated Lot Nos. 744-A, 745-A, 746, 762-A, 747, and
761-A; and to respondents Aletha Suico Magat, Philip M. Suico, Dolores S. dela Cruz, James M.
Suico, Edward M. Suico, Roselyn S. Lawsin, Rex M. Suico, and Kharla Suico-Gutierrez the litigated
Lot Nos. 942 and 947. The Register of Deeds of Cebu City is ordered to effect the necessary
cancellation of title and transfer it in the name of respondents within a period of fifteen (15) days from
finality of judgment.
The foregoing dispositions are subject to QUALIFICATIONS, to apply to these consolidated RENATO C. CORONA
petitions, when appropriate, as follows: Chief Justice

(1) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L Inocian, et al. in G.R. No.
168812 are ordered to return to the MCIAA the just compensation they or their predecessors-in-
interest received for the expropriation of their respective lots as stated in Civil Case No. R-1881,
within a period of sixty (60) days from finality of judgment;

(2) The MCIAA shall be entitled to RETAIN whatever fruits and income it may have obtained from
the subject expropriated lots without any obligation to refund the same to the lot owners; and

(3) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L. Inocian, et al. in G.R. No.
168812 shall RETAIN whatever interests the amounts they received as just compensation may have
earned in the meantime without any obligation to refund the same to MCIAA.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE MARIANO C. DEL CASTILLO

CASTRO Associate Justice
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice

C E R T I F I CAT I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Court’s Division.

84
G.R. No. 137285 January 16, 2001
ESTATE SALUD JIMENEZ, petitioner,
vs.
PHILIPPINES EXPORT PROCESSING ZONE, respondent.
DELEON, JR., J.:
Before us is a petition for review on certiorari of the Decision1 and the Resolution2 of the Court of
Appeals3 dated March 25, 1998 and January 14, 1999, respectively, which ordered the Presiding Judge
of the Regional trial Court of Cavite City, Branch 17, to proceed with the hearing of the expropriation
proceedings regarding the determination of just compensation for Lot 1406-B while setting aside the
Orders dated August 4, 19974 and November 3, 1997 of the said Regional Trial Court which ordered
the peaceful turnover to petitioner Estate of Salud Jimenez of said Lot 1406-B.
The facts are as follows:
On may 15, 1981, private respondent Philippines Export Processing Zone (PEZA), then called as the
Export Processing Zone Authority (EPZA), initiated before the Regional Trial Court of Cavite
expropriation proceedings5 on three (3) parcels of irrigated riceland in Rosario, Cavite. One of the
lots, Lot 1406 (A and B) of the San Francisco de Malabon Estate, with an approximate area of 29,008
square meters, is registered in the name of Salud Jimenez under TCT No. T-113498 of the Registry of
Deeds of Cavite.
More than ten (10) years later6, the said trial court in an Order7 dated July 11, 1991 upheld the right of
private respondent PEZA to expropriate, among others, Lot 1406 (A and B). Reconsideration of the
said order was sought by petitioner contending that said lot would only be transferred to a private
corporation, Philippines Vinyl Corp., and hence would not be utilized for a public purpose.
In an Order8 dated October 25, 19997, the trial court reconsidered the Order dated July 11, 1991 and
released Lot 1406-A from expropriation while the expropriation of Lot 1406-B was maintained.
Finding the said order unacceptable, private respondent PEZA interposed an appeal to the Court of
Appeals.
Meanwhile, petitioner wrote a letter to private respondent offering two (2) proposals, namely:
1. Withdrawal of private respondent's appeal with respect to Lot 1406-A I consideration of the waiver
of claim for damages and lass of income for the possession of said lot by private respondent.
85
2. The swap of Lot 1406-B with Lot 434 covered by TCT No. T-14772 since private respondent has
no money yet to pay for the lot.
Private respondent's Board approved the "proposal" and the compromise agreement was signed by
private respondent through its then administrator Tagumpay Jadiniano assisted by Government
Corporate Counsel Oscar I. Garcia. Said compromise agreement9 dated January 4, 1993 is quoted
hereunder:
1. That plaintiff agrees to withdraw its appeal from the Order of the Honorable Court dated October
25, 1991 which released lot 1406-A from the expropriation proceedings. On the other hand, defendant
Estate of Salud Jimenez agrees to waive, quit claim and forfeit its claim for damages and loss of
income which it sustained by person of the possession of said lot by plaintiff from 1981 up to the
present.
2. That the parties agree that defendant Estate of Salud Jimenez shall transfer lot 1406-B with an area
of 13,118 square meters which forms part of the lot registered under TCT No. 113498 of the Registry
of Deeds of Cavite to the name of the plaintiff and the same shall be swapped and exchanged with lot
434 with an area of 14,167 square meters and covered by Transfer Certificate of Title No. 14772 of
the Registry of Deeds of Cavite which lot will be transferred to the name of Estate of Salud
Jimenez.1âwphi1.nêt
3. That the swap arrangement recognized the fact that the lot 1406-B covered by TCT No. T-113498
of the state of defendant Salud Jimenez is considered expropriated in favor of the government based
on Order of the Honorable Court dated July 11, 1991. However, instead of being paid the just
compensation for said lot, the estate of said defendant shall be paid with lot 434 covered by TCT No.
T-14772.
4. That the parties agree that they will abide by the terms of the foregoing agreement in good faith and
the Decision to be rendered based on this Compromise Agreement is immediately final and executory.
The Court of Appeals remanded the case to the trial court for the approval of the said compromise
agreement entered into between the parties, consequent with the withdrawal of the appeal with the
Court of Appeals. In the Order10 dated August 23, 1993, the trial court approved the compromise
agreement.
However, private respondent failed to transfer the title of Lot 434 to petitioner inasmuch as it was not
the registered owner of the covering TCT No. T-14772 but Progressive Realty Estate, Inc. Thus, on
March 13, 1997, petitioner Estate filed a "Motion to Partially Annul the Order dated August 23,
1993."11
In the Order12 dated August 4, 1997, the trial court annulled the said compromise agreement entered
into between the parties and directed private respondent to peacefully turn over Lot 1406-A to the
petitioner. Disagreeing with the said Order of the trial court, respondent PEZA moved13 for its
reconsideration. The same proved futile since the trial court denied reconsideration in its Order14
dated November 3, 1997.
On December 4, 1997, the trial court, at the instance15 of petitioner, corrected the Orders dated August
4, 1997 and November 3, 1997 by declaring that it is Lot 1406-B and Lot 1406-A that should be
surrendered and returned to petitioner.
On November 27, 1997, respondent interposed before the Court of Appeals a petition for certiorari
and prohibition16 seeking to nullify the Orders dated August 4, 1997 and November 3, 1997 of the
court. Petitioner filed its Comment17 on January 16, 1998.
Acting on the petition, the Court of Appeals in a Decision18 dated March 25, 1998 upheld the
rescission of the compromise agreement, ratiocinating thus:
A judicial compromise may be enforced by a writ of execution, and if a party fails or refuses to abide
by the compromise, the other party may regard it as rescinded and insist upon his original demand.
This is in accordance with Article 2041 of the Civil Code, which provides:
If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the
compromise or regard it as rescinded and insist upon his original demand."
The Supreme Court had the occasion to explain this provision of law in the case of Leonor v. Syip (1
SCRA 1215). It ruled that the language of the above mentioned provision denotes that no action for
rescission is required and that the aggrieved party by the breach of compromise agreement, may
regard the compromise agreement already rescinded, to wit:
It is worthy of notice, in this connection, that, unlike article 2039 of the same Code, which speaks of
"a cause of annulment or rescission of the compromise" and provides that "the compromise may be
annulled or rescinded" for the cause therein specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned not a "cause" for rescission, or the right
to "demand" rescission, of a compromise, but the authority, not only to "regard it as rescinded," but,
also, to 'insist upon his original demand." The language of this Article 2041, particularly when
contrasted with that of Article 2039, denotes that no action for rescission is required in said Article
2041, and that to party aggrieved by the breach of a compromise agreement may, if he chooses, bring
the suit contemplated or involved in his original demand, as if there had never been any compromise
agreement, without bringing an action for rescission thereof. He need not seek a judicial declaration of
rescission, for he may "regard" the compromise agreement already, "rescinded".
86
Nonetheless, it held that:
Having upheld the rescission of the compromise agreement, what is then the status of the
expropriation proceedings? As succinctly discussed in the case of Leonor vs. Sycip, the aggrieved
party may insist on his original demand as if there had never been any compromise agreement. This
means that the situation of the parties will revert back to status before the execution of the
compromise agreement, that is, the second stage of the expropriation proceedings, which is the
determination of the just compensation.19
xxx
Thus, the appellate court partially granted the petition by setting aside the order of the trial court
regarding "the peaceful turn over to the Estate of Salud Jimenez of Lot No. 1406-B" and instead
ordered the trial judge to "proceed with the hearing of the expropriation proceedings regarding the
determination of just compensation over Lot 1406-B."20
Petitioner sought21 reconsideration of the Decision dated March 25, 1998. However, public respondent
in a resolution22 dated January 14, 1999 denied petitioner's motion for reconsideration.
Hence, this petition anchored on the following assignment of errors, to wit:
I
THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN
GIVING DUE COURSE TO THE SPECIAL CIVIL ACTION FILED BY RESPONDENT
PEZA IN CA-G.R. SP. NO. 46112 WHEN IT WAS MADE SUBSTITUTE FOR LOST APPEAL
IN CLEAR CONTRAVENTION OF THE HONORABLE COURT'S RULING IN SEMPIO VS.
COURT OF APPEALS (263 SCRA 617) AND ONGSITCO VS. COURT OF APPEALS (255
SCRA 703) AND DESPITE THE FACT THAT THE ORDER OF THE CAVITE REGIONAL
TRIAL COURT IS ALREADY FINAL AND EXECUTORY.
II
GRANTING IN GRATIA ARGUMENTI THAT THE SPECIAL CIVIL ACTION OF
CERTIONRARI IS PROPER, THE COURT OF APPEALS NEVERTHELESS WRONGLY
INTERPRETED THE PHRASE "ORIGINAL DEMAND" CONTAINED IN ARTICLE 2041
OF PETITIONER ESTATE IS THE RETURN OF THE SUBJECT LOT (LOT 1406-B)
WHICH IS SOUGHT TO BE EXPROPRIATED AND NOT THE DETERMINATION OF
JUST COMPENSATION FOR THE LOT. FURTHERMORE, EVEN IF THE
INTERPRETATION OF THE COURT OF APPEALS OR THE IMPORT OF THE PHRASE
IN QUESTION IS CORRECT, IT IS ARTICLE 2039 OF THE CIVIL CODE AND NOT
ARTICLE 2041 WHICH IS APPLICABLE TO COMPROMISE AGREEMENTS APPROVED
BY THE COURTS.23
We rule in favor of the respondent.
Petitioner contends that the Court of Appeals erred in entertaining the petition for certiorari files by
respondent under Rule 65 of the Rules of Court, the same being actually a substitute for lost appeal. It
appeared that on August 11, 1997, respondent received the Order of the trial court dated August 4,
1997 annulling the compromise agreement. On August 26, 1997, that last day for the filling of a
notice of appeal, respondent filed instead a motion for reconsideration. The Order of the trial court
denying the motion for reconsideration was received by respondent on November 23, 1997. The
reglementary period to appeal therefore lapsed on November 24, 1997. On November 27, 1997,
however, respondent filed with the Court of Appeals a petition for certiorari docketed as CA-G.R. SP.
No. 46112. Petitioner claims that appeal is the proper remedy inasmuch as the Order dated August 4,
1997 of the Regional Trial Court is a final order that completely disposes of the case. Besides,
according to petitioner, respondent is estopped in asserting that certiorari is the proper remedy
inasmuch as it invoked the fifteen (15) day reglementary period for appeal when if filed a motion for
reconsideration on August 26, 1997 and not the sixty (60) day period for filing for certiorari under
Rule 65 of the Rules of Court.
The Court of Appeal did not err in entertaining the petition for certiorari under Rule 65 of The Rules
of Court. A petition for certiorari is the proper remedy when any tribunal, board, or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any plain,
speedy, and adequate remedy at law.24 Grave abuse of discretion is defined as the capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction. An error of judgment
committed in the exercise of its legitimate jurisdiction is not the same as "grave abuse of discretion."
An abuse of discretion is not sufficient by itself to justify the issuance of a writ of certiorari. The
abuse must be grave and patent, and it must be shown that the discretion was exercised arbitrarily and
despotically.25
As a general rule, a petition for certiorari will not lie if an appeal is the proper remedy thereto such as
when an error of judgment as well as of procedure are involved. As long as a court acts within its
jurisdiction and does not gravely abuse its discretion in the exercise thereof, any supposed error
committed by it will amount to nothing more than an error of judgment reviewable by a timely appeal
and not assailable by a special civil action of certiorari. However, in certain exceptional cases, where
the rigid application of such rule will result in a manifest failure or miscarriage of justice, the
provisions of the Rules of Court which are technical rules may be relaxed. Certiorari has been deemed
to be justified, for instance, in order to prevent irreparable damage and injury to a party where the trial
judge has capriciously and whimsically exercised his judgment, or where there may be danger of clear
87
failure of justice, or where and ordinary appeal would simply be inadequate to relieve a party form the
injurious effects of the judgment complained of.26
Expropriation proceedings involve two (2) phases. The first phase ends either with an order of
expropriation (when the right of plaintiff to take the land and the public purpose to which they are to
be devoted are upheld) or an order of dismissal. Either order would be a final one since if finally
disposes of the case. The second phase concerns the determination of just compensation to be
ascertained by three (3) commissioners. It ends with an order fixing the amount to be paid to the
dependant. Inasmuch as it leaves nothing more to be done, this order finally disposes of the second
stage. To both orders the remedy therefrom is an appeal.27
In the case at bar, the first phase was terminated when the July 11, 1991 order of expropriation
became final and the parties subsequently entered into a compromise agreement regarding the mode
of payment of just compensation. When respondent failed to abide by the terms of the compromise
agreement, petitioner filed and action to partially rescind the same. Obviously, the trial could only
validly order the rescission of the compromise agreement anent the payment of just compensation
inasmuch as that was the subject of the compromise. However, on August 4, 1991, the trial court
gravely abused its discretion when it ordered the return of Lot 1406-B. It, in effect, annulled the Order
of Expropriation dated July 11, 1991 which was already final and executory.
We affirm the appellate court's reliance on the cases of Aguilar v. Tan28 and Bautista v. Sarmiento29
wherein it was ruled that the remedies of certiorari and appeal are not mutually exclusive remedies in
certain exceptional cases, such as when there is grave abuse of discretion, or when public welfare so
requires. The trial court gravely abused its discretion by setting aside the order of expropriation which
has long become final and executory and by ordering the return of Lot 1406-B to the petitioner. Its
action was clearly beyond its jurisdiction for it cannot modify a final and executory order. A final and
executory order can only be annulled by petition to annual the same on the ground of extrinsic fraud
and lack of jurisdiction30 or a petition for relief from a final order or judgment under Rule 38 of the
Rules of Court. However, no petition to that effect was filed. Hence, though an order completely and
finally disposes of the case, if appeal is not a plain, speedy and adequate remedy at law of the interest
of substantial justice requires, a petition for certiorari may be availed of upon showing of lack or
excess of jurisdiction or grave abuse of discretion on the part of the trial court.
According to petitioner the rule that a petition for certiorari can be availed of despite the fact that the
proper remedy is an appeal only apples in cases where the petition is filed within the reglementary
period for appeal. Inasmuch as the petition in the case at bar was filed after the fifteen (15) day
regulatory period to appeal, said exceptional rule as enshrined in the cases of Aguilar v. Tan31 and
Bautista v. Sarmiento32 is not applicable. We find this interpretation too restrictive. The said cases do
not set as a condition sine qua non the filing of a petition for certiorari within the fifteen (15) day
period to appeal in order for the said petition to be entertained by the court. To espouse petitioner's
contention would render inutile the sixty (60) day period to file a petition for certiorari under Rule 65.
In Republic v. Court of Appeals33, which also involved an expropriation case where the parties entered
in a compromise agreement on just compensation, this Court entertained the petition for certiorari
despite the existence of an appeal and despite its being filed after the lapse of the fifteen (15) day
period to appeal the same. We ruled that the Court has not too infrequently given due course to a
petition for certiorari, even when the proper remedy would have been an appeal, where valid and
compelling considerations would warrant such a recourse.34 If compelled to return the subject parcel
of land, the respondent would divert its budget already allocated for economic development in order
to pay petitioner the rental payments from the lessee banks. Re-adjusting its budget would hamper and
disrupt the operation of the economic zone. We believe that the grave abuse of discretion committed
by the trial court and the consequent disruption in the operation of the economic zone constitutes valid
and compelling reasons to entertain the petition.
Petitioner next argues that the instances cited under Section 1 of Rule 41 of the Rules of Court35
whereby an appeal is not allowed are exclusive grounds for a petition for certiorari. Inasmuch as the
August 4, 1997 Order rescinding the compromise agreement does not fall under any of the instances
enumerated therein, a petition for certiorari will not prosper. This reasoning is severely flawed. The
said section is not phrased to make the instances mentioned therein the sole grounds for a petition for
certiorari. It only states that Rule 65 may be availed of under the grounds mentioned therein, but it
never intended said enumeration to be exclusive. It must be remembered that a wide breadth of
discretion is granted a court of justice in certiorari proceeding.36
In the second assignment of error, petitioner assails the interpretation by the Court of appeals of the
phrase "original demand" in Article 2041 of the New Civil Code vis-à-vis the case at bar. Article 2041
provides that, "if one of the parties fails or refuses to abide by the compromise, the other party may
either enforce the compromise or regard it as rescinded and insist upon his "original demand"
According to petitioner, the appellate court erred in interpreting "original demand" as the fixing of just
compensation. Petitioner claims that the original demand is the return of Lot 1406-B as stated in
petitioner's motion to dismiss37 the complaint for expropriation inasmuch as the incorporation of the
expropriation order in the compromise agreement subjected the said order to rescission. Since the
order of expropriation was rescinded, the authority of respondent to expropriate and the purpose of
expropriation have again become subject to dispute.
Petitioner cites cases38 which provide that upon the failure to pay by the lessee, the lessor can ask for
the return of the lot and the ejectment of the former, this being the lessor's original demand in the
complaint. We find said cases to be inapplicable to this instant case for the reason that the case at bar
is not a simple ejectment case. This is an expropriation case which involves two (2) orders: an
expropriation order and an order fixing just compensation. Once the first order becomes final and no
appeal thereto is taken, the authority to expropriate and its public use cannot anymore be questioned.
Contrary to petitioner's contention, the incorporation of the expropriation order in the compromise
agreement did not subject said to rescission but instead constituted an admission by petitioner of
88
respondent's authority to expropriate the subject parcel of land and the public purpose for which it was
expropriated. This is evident from paragraph three (3) of the compromise agreement which states that
the "swap arrangement recognizes the fact that Lot 1406-B covered by TCT No. T-113498 of the
estate of defendant Salud Jimenez is considered expropriated in favor of the government based on the
Order of the Honorable Court dated July 11, 1991." It is crystal clear from the contents of the
agreement that the parties limited the compromise agreement to matter of just compensation to
petitioner. Said expropriate order is not closely intertwined with the issue of payment such that failure
to pay by respondent will also nullify the right of respondent to expropriate. No statement to this
effect was mentioned in the agreement. The Order was mentioned in the agreement only to clarify
what was subject to payment.1âwphi1.nêt
This court therefore finds that the Court of Appeals did not err in interpreting "original demand" to
mean the fixing of just compensation. The authority of respondent and the nature of the purpose
thereof have been put to rest when the Expropriation Order dated July 11, 1991 became final and was
duly admitted by petitioner in the compromise agreement. The only issue for consideration is the
manner and amount of payment due to petitioner. In fact, aside from the withdrawal of private
respondent's appeal to the Court of Appeals concerning Lot 1406-A, the matter of payment of just
compensation was the only subject of the compromise agreement dated January 4, 1993. Under the
compromise agreement, petitioner was supposed to receive respondent's Lot No. 434 in exchange for
Lot 1406-B. When respondent failed to fulfill its obligation to deliver Lot 434, petitioner can again
demand for the payment but not the return of the expropriated Lot 1406-B. This interpretation by the
Court of Appeals is in according with Section 4 to 8, Rule 67 of the Rules of Court.
We also find as inapplicable the ruling in Gatchalian v. Arlegui39 , a case cited by petitioner, where we
held that even a final judgment can still be compromised so long as it is full satisfied. As already
stated, the expropriation order was not the subject of the compromise agreement. It was only the mode
of payment which was the subject of the compromise agreement. Hence, the Order of Expropriation
dated July 11, 1991 can no longer be annulled.
After having invoked the provisions of Article 2041, petitioner inconsistently contends that said
article does not apply to the case at bar inasmuch as it is only applicable to cases where a compromise
has not been approved by a court. In the case at bar, the trial court approved the compromise
agreement. Petitioner insists that Articles 2038, 2039 and 1330 of the New Civil Code should apply.
Said articles provide that:
Article 2038. A compromise, in which there is mistake, fraud, violence, intimidation, undue influence,
or falsity of documents, is subject to the provisions of Article 1330 of this Code.
However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue
of the compromise, has withdrawn from a litigation already commenced.
Article 2039. When the parties compromise generally on all differences which they might have with
each other, the discovery of documents referring to one or more but not to all of the questions settled
shall not itself be a cause for annulment or rescission of the compromise, unless said documents have
been concealed by one of the parties.
But the compromise may be annulled or rescinded if it refers only to one thing to which one of the
parties has no right, as shown by the newly discovered documents.(n)"
Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.40
The applicability of the above-quoted legal provisions will not change the outcome of the subject of
the rescission. Since the compromise agreement was only about the mode of payment by swapping of
lots and not about the right and purpose to expropriate the subject Lot 1406-B, only the originally
agreed for of compensation that is by cash payment, was rescinded.
This court holds that respondent has the legal authority to expropriate the subject Lot 1406-B and that
the same was for a valid public purpose. In Sumulong v. Guerrero41 , this Court has ruled that,
the "public use" requirement for a valid exercise of the power of eminent domain is a flexible and
evolving concept influenced by changing conditions. In this jurisdiction, the statutory and judicial
trend has been summarized as follows:
this court has ruled that the taking to be valid must be for public use. There was a time when it was
felt that a literal meaning should be attached to such a requirement. Whatever project is undertaken
must be for the public to enjoy as in the case of streets or parks. Otherwise expropriation is not
allowable. It is not anymore. As long as the purpose of the taking is public, then the power of eminent
domain comes into play…It is accurate to beneficially employed for the general welfare satisfies the
requirement of public use. [Heirs of Juancho Ardona v. Reyes, 125 SCRA 220 (1983) at 234-235
quoting E. Fernando, the Constitution of the Philippines 523-4(2nd Ed. 1977)
The term "public use" has acquired a more comprehensive coverage. To the literal import of the term
signifying strict use or employment by the public has been added the broader notion of indirect public
benefit or advantage.
In Manosca v. Court of Appeals, this Court has also held that what ultimately emerged is a concept of
public use which is just as abroad as "public welfare."42
Respondent PEZA expropriated the subject parcel of land pursuant to Proclamation No. 1980 dated
May 30, 1980 issued by former President Ferdinand Marcos. Meanwhile, the power of eminent
89
domain of respondent is contained in its original charter, Presidential Decree No. 66, which provides
that:
Section 23. Eminent Domain. – For the acquisition of rights of way, or of any property for the
establishment of export processing zones, or of low-cost housing projects for the employees working
in such zones, or for the protection of watershed areas, or for the construction of dams, reservoirs,
wharves, piers, docks, quays, warehouses and other terminal facilities, structures and approaches
thereto, the Authority shall have the right and power to acquire the same by purchase, by negotiation,
or by condemnation proceedings. Should the authority elect to exercise the right of eminent domain,
comdemnation proceedings shall be maintained by and in the name of the Authority and it may
proceed in the manner provided for by law. (italics supplied)
Accordingly, subject Lot 1406-B was expropriated "for the construction…of terminal facilities,
structures and approaches thereto." The authority is broad enough to give the respondent substantial
leeway in deciding for what public use the expropriated property would be utilized. Pursuant to this
broad authority, respondent leased a portion of the lot to commercial banks while the rest was made a
transportation terminal. Said public purposes were even reaffirmed by Republic Act No. 7916, a law
amending respondent PEZA's original charter, which provides that:
Sec. 7 ECOZONE to be a Decentralized Agro-Industrial, industrial, Commercial/Trading, Tourist,
Investment and financial Community. Within the framework of the Constitution, the interest of
national sovereignty and territorial integrity of the Republic, ECOZONE shall be developed, as much
as possible, into a decentralized, self-reliant and self-sustaining industrial, commercial/trading, agro-
industrial, tourist, banking, financial and investment center with minimum government intervention.
Each ECOZONE shall be provided with transportation, telecommunications and other facilities
needed to generate linkage with industries and employment opportunities for its own habitants and
those of nearby towns and cities.
The ECOZONE shall administer itself on economic, financial, industrial, tourism development and
such other matters within the exclusive competence of the national government. (italics supplied)
Among the powers of PEZA enumerated by the same law are:
Sec.12. Functions and Powers of PEZA Board. ---- The Philippines Economic Zone Authority (PEZA)
Board shall have the following function and powers:
(a) Set the general policies on the establishment and operations of the ECOZONE, Industrial estate,
exports processing zones, free trade zones, and the like:
xxx
(b) Regulate and undertake the establishment, operation and maintenance of utilities, other services
and infrastructure in the ECOZONE, such as heat, light and power, water supply, telecommunications,
transport, toll roads and bridges, port services, etc. and to fix just, reasonable and competitive rates,
fares, charges and fees thereof.43
In Manila Railroad Co. v. Mitchel44 , this Court has ruled that in the exercise of eminent domain, only
as much land can be taken as is necessary for the legitimate purpose of the condemnation, the term
"necessary", in this connection, does not mean absolutely indispensable but requires only a reasonable
necessity of the taking for the stated purpose, growth and future needs of the enterprise. The
respondent cannot attain a self-sustaining and viable ECOZONE if inevitable needs in the expansion
in the surrounding areas are hampered by the mere refusal of the private landowners to part with their
properties. The purpose of creating an ECOZONE and other facilities is better served if respondent
directly owns the areas subject of the expansion program.
The contention of petitioner that the leasing of the subject lot to banks and building terminals was not
expressly mentioned in the original charter of respondent PEZA and that it was only after PEZA
devoted the lot to said purpose the Republic Act No. 7916 took effect, is not impressed with merit. It
should be pointed out that Presidential Decree No. 66 created the respondent PEZA to be a viable
commercial, industrial and investment area. According to the comprehensive wording of Presidential
Decree No. 66, the said decree did not intend to limit respondent PEZA to the establishment of an
export processing zone but it was also bestowed with authority to expropriate parcels of land "for the
construction … of terminal facilities, structures and approaches thereto." Republic Act No. 7916
simply particularized the broad language employed by Presidential Decree No. 66 by specifying the
purposes for which PEZA shall devote the condemned lots, that is, for the construction and operation
of an industrial estate, an export processing zone, free trade zones, and the like. The expropriation of
Lot 1406-B for the purpose of being leased to banks and for the construction of a terminal has the
purpose of making banking and transportation facilities easily accessible to the persons working at the
industries located in PEZA. The expropriation of adjacent areas therefore comes as a matter of
necessity to bring life to the purpose of the law. In such a manner, PEZA's goal of being a major force
in the economic development of the country would be realized. Furthermore, this Court has already
ruled that:
…(T)he Legislature may directly determine the necessity for appropriating private property for a
particular improvement for public use, and it may select the exact location of the improvement. In
such a case, it is well-settled that the utility of the proposed improvement, the existence of the public
necessity for its construction, the expediency of constructing it, the suitableness of the location
selected, are all questions exclusively for the legislature to determine, and the courts have no power to
interfere or to substitute their own for those of the representatives of the people.
90
In the absence of some constitutional or statutory provision to the contrary, the necessity and
expediency of exercising the right of eminent domain are questions essentially political and not
judicial in their character.45
Inasmuch as both Presidential Decree No. 66 and Republic Act No. 7916, bestow respondent with
authority to develop terminal facilities and banking centers, this Court will not question the
respondent's lease of certain portions of the expropriated lot to banks, as well as the construction of
terminal facilities.
Petitioner contends that respondent is bound by the representations of its Chief Civil Engineer when
the latter testified before the trial court that the lot was to be devoted for the construction of
government offices. Anent this issue, suffice it to say that PEZA can vary the purpose for which a
condemned lot will be devoted to provided that the same is for public use. Petitioner cannot impose or
dictate on the respondent what facilities to establish for as long as the same are for public purpose.
Lastly, petitioner appeals to the sense of justice and equity to this Court in restoring the said lot to its
possession. From the time of the filing of the expropriation case in 1981 up to the present, respondent
has not yet remunerated the petitioner although respondent has already received earnings from the
rental payments by lessees of the subject property.
We have rules that the concept of just compensation embraces not only the correct determination of
the amount to be paid to the owners of the land, but also the payment of the land within a reasonable
time from its taking. Without prompt payment, compensation cannot be considered "just" inasmuch as
the property owner is made to suffer the consequences of being immediately deprived of his land
while being made to wait for a decade or more before actually receiving the amount necessary to cope
with his loss.46 Payment of just compensation should follow as a matter of right immediately after the
order of expropriation is issued. Any delay in payment must be counted from said order. However, the
delay to constitute a violation of due process must be unreasonable and inexcusable: it must be
deliberately done by a party in order to defeat the ends of justice.
We find that respondent capriciously evaded its duty of giving what is due to petitioner. In the case at
bar, the expropriation order was issued by the trial court in 1991. The compromise agreement between
the parties was approved by the trial court in 1993. However, from 1993 up to the present, respondent
has failed in its obligation to pay petitioner to the prejudice of the latter. Respondent caused damage
to petitioner in making the latter to expect that it had a good title to the property to be swapped with
Lot 1406-B; and meanwhile, respondent has been reaping benefits from the lease or rental income of
the said expropriated lot. We cannot tolerate this oppressive exercise of the power of eminent domain
by respondent. As we have ruled in Cosculluela vs. Court of Appeals:47
In the present case, the irrigation project was completed and has been in operation since 1976. The
project is benefiting the farmers specifically and the community in general. Obviously, the petitioner's
land cannot be returned to him. However, it is high time that the petitioner be paid what was due him
eleven years ago. It is high time that the petitioner be paid what was due him eleven years ago. It is
arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a
person's property, allow the judgment of the court to become final and executory and then refuse to
pay on the ground that there are no appropriations for the property earlier taken and profitably used.
We condemn in the strongest possible terms the cavalier attitude of government officials who adopt
such a despotic and irresponsible stance.
Though the respondent has committed a misdeed to petitioner, we cannot, however, grant the
petitioner's prayer for the return of the expropriated Lot No. 1406-B. The Order of expropriation dated
July 11, 1991, has long become final and executory. Petitioner cited Provincial Government of
Sorsogon v. Rosa E. Vda. De Villaroya48 to support its contention that it is entitled to a return of the lot
where this court ruled that "under ordinary circumstance, immediate return of the owners of the
unpaid property is the obvious remedy." However, the said statement was not the ruling in that case.
As in order cases where there was no prompt payment by the government, this Court declared in
Sorsogon that "the Provincial Government of Sorsogon is expected to immediately pay as directed
should any further delay be encountered, the trial court is directed to seize any patrimonial property or
cash saving of the province in the amount necessary to implement this decision." However, this Court
also stressed and declared in that case that "In cases where land is taken for public use, public interest,
however, must be considered."
In view of all the foregoing, justice and equity dictate that this case be remanded to the trial court for
hearing of the expropriation proceedings on the determination of just compensation for Lot 1406-B
and for its prompt payment to the petitioner.
WHEREFORE, the instant petition is hereby denied. The Regional Trial Court of Cavite City is
hereby ordered to proceed with the hearing of the expropriation proceedings, docketed as Civil Case
No. N-4029, regarding the determination of just compensation for Lot 1406-B, covered and described
in TCT No. T-113498-Cavite, and to resolve the same with dispatch.
SO ORDERED.
Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.
Footnote
1 Penned by Associate Justice Quirino D. Abad Santos, Jr. and concurred in by Associated Justice Ruben T. Reyes and Hilarion L. Aquino, in CA-
G.R.SP. No. 46112, Rollo, pp. 61-70.
G.R. No. 147511 January 20, 2003
MARINA Z. REYES; ALFREDO A. FRANCISCO; ANGELITA Z. GARCIA; ALFREDO Z.
FRANCISCO, JR; ARMANDO Z. FRANCISCO; ALMA C. FRANCISCO; EUGENIA Z.
LUNA; CLARITA Z. ZABALLERO, LEONARDO Z. ZABALLERO, JR, and TEODORO Z.
ZABALLERO, in substitution of LEONARDO M. ZABALLERO; AUGUSTO M.
ZABALLERO; FRINE A. ZABALLERO; ELENA FRONDA ZABALLERO; VICTOR
GREGORIO F. ZABALLERO; MARIA ELENA F. ZABALLERO; LOURDES ZABALLERO-
LAVA; SOCORRO EMILIA ZABALLERO-YAP; and TERESITA F. ZABALLERO, petitioners,
vs.
NATIONAL HOUSING AUTHORITY, respondent.
PUNO, J.:
This is an appeal by certiorari from the decision of the Court of Appeals in CA-GR CV No. 51641
dated September 29, 20001 affirming the judgment of the Regional Trial Court of Quezon City,
Branch 79 which dismissed the complaint for forfeiture of rights filed by herein petitioners, as well as
the Resolution dated March 13, 2001 denying petitioners' motion for reconsideration.
Records show that in 1977, respondent National Housing Authority (NHA) filed separate complaints
for the expropriation of sugarcane lands, particularly Lot Nos. 6450, 6448-E, 6198-A and 6199 of the
cadastral survey of Dasmariñas, Cavite belonging to the petitioners, before the then Court of First
Instance of Cavite, and docketed as Civil Case Nos. T.G.-392, T.G.-396 and T.G.-417. The stated
public purpose of the expropriation was the expansion of the Dasmariñas Resettlement Project to
accommodate the squatters who were relocated from the Metropolitan Manila area. The trial court
rendered judgment ordering the expropriation of these lots and the payment of just compensation.
This was affirmed by the Supreme Court in a decision rendered on October 29, 1987 in the case of
NHA vs. Zaballero2 and which became final on November 26, 1987.3
On February 24, 1989, the expropriation court (now Branch 18, Regional Trial Court of Tagaytay
City) issued an Order4 the dispositive portion of which reads:
"WHEREFORE, and resolving thus, let an Alias Writ of Execution be immediately issued and that:
(1) The Register of Deeds of the Province of Cavite is hereby ordered to transfer, in the name of the
plaintiff National Housing Authority, the following:
(a) Transfer Certificate No. RT-638 containing an area of 79,167 square meters situated in Barrio
Bangkal, Dasmariñas, Cavite;

91
(b) Transfer Certificate of Title No. T-55702 containing an area of 20,872 square meters situated in
Barrio Bangkal, Dasmariñas, Cavite;
(c) Transfer Certificate of Title No. RT-639 and RT-4641 covering Lot Nos. 6198-A and 6199 with an
aggregate area of 159,985 square meters also situated in Barrio Bangkal, Dasmariñas, Cavite.
(2) Plaintiff National Housing Authority is likewise hereby ordered, under pain of contempt, to
immediately pay the defendants, the amounts stated in the Writ of Execution as the adjudicated
compensation of their expropriated properties, which process was received by it according to the
records, on September 26, 1988, segregating therefrom, and in separate check, the lawyer's fees in
favor of Atty. Bobby P. Yuseco, in the amount of P322,123.05, as sustained by their contract as
gleaned from the records, with no other deduction, paying on its own (NHA) account, the necessary
legal expenses incident to the registration or issuance of new certificates of title, pursuant to the
provisions of the Property Registration Law (PD 1529);
(3) Defendants, however, are directed to pay the corresponding capital gains tax on the subject
properties, directing them additionally, to coordinate with the plaintiff NHA in this regard, in order to
facilitate the termination of this case, put an end to this controversy and consign the same to its final
rest."
For the alleged failure of respondent NHA to comply with the above order, petitioners filed on April
28, 1992 a complaint5 for forfeiture of rights before the Regional Trial Court of Quezon City, Branch
79, in Civil Case No. Q-92-12093. They alleged that respondent NHA had not relocated squatters
from the Metropolitan Manila area on the expropriated lands in violation of the stated public purpose
for expropriation and had not paid the just compensation fixed by the court. They prayed that
respondent NHA be enjoined from disposing and alienating the expropriated properties and that
judgment be rendered forfeiting all its rights and interests under the expropriation judgment. In its
Answer,6 respondent NHA averred that it had already paid a substantial amount to herein petitioners
and that the expropriation judgment could not be executed in view of several issues raised by
respondent NHA before the expropriation court (now Branch 18, RTC, Tagaytay City) concerning
capital gains tax, registration fees and other expenses for the transfer of title to respondent NHA, as
well as the claims for attorney's fees of Atty. Joaquin Yuseco, Jr., collaborating counsel for petitioners.
Ocular inspections7 conducted by the trial court on the subject properties show that:
"1. 80% of Lot No. 6198-A with an area of 120,146 square meters is already occupied by relocatees
whose houses are made of light materials with very few houses partly made of hollow blocks. The
relocatees were relocated only on (sic) March of 1994;
92
2. Most of the area covered by Lot No. 2075 is almost occupied by houses and structures, most of
which are made of concrete materials. These houses are not being occupied by squatters relocated to
the said lot by the defendant NHA;
3. Lot No. 6199 is also occupied by concrete houses and structures but likewise there are no relocatees
in said lot. A large area of the same is still unoccupied."
On September 29, 1995, the trial court rendered judgment dismissing the complaint. Finding that the
failure of respondent NHA to pay just compensation and of petitioners to pay capital gains tax are
both unjustified and unreasonable, the trial court held that: (1) respondent NHA is not deemed to have
abandoned the public purpose for which the subject properties were expropriated because the
relocation of squatters involves a long and tedious process. It ruled that respondent NHA actually
pursued the public purpose of the expropriation when it entered into a contract with Arceo C. Cruz
involving the construction of low cost housing on the expropriated lots to be sold to qualified low
income beneficiaries; (2) there is no condition imposed in the expropriation judgment that the subject
properties shall revert back to its original owners in case the purpose of expropriation is terminated or
abandoned; (3) the payment of just compensation is independent of the obligation of herein petitioners
to pay capital gains tax; and (4) in the payment of just compensation, the basis should be the value at
the time the property was taken. On appeal, the Court of Appeals affirmed the decision of the trial
court.
Petitioners are now before us raising the following assignment of errors:
"1. The Honorable Court of Appeals had decided a question of substance not in accord with justice
and equity when it ruled that, as the judgment of the expropriation court did not contain a condition
that should the expropriated property be not used for the intended purpose it would revert to the
condemnee, the action to declare the forfeiture of rights under the expropriation judgment can not
prosper;
2. The Honorable Court of Appeals decided a question of substance not in accord with jurisprudence,
justice and equity when it ruled that the non-payment is not a ground for forfeiture;
3. The Honorable Court of Appeals erred in not declaring the judgment of expropriation forfeited in
light of the failure of respondent to use the expropriated property for the intended purpose but for a
totally different purpose."
The petition is not impressed with merit.
Petitioners contend that respondent NHA violated the stated public purpose for the expansion of the
Dasmariñas Resettlement Project when it failed to relocate the squatters from the Metro Manila area,
as borne out by the ocular inspection conducted by the trial court which showed that most of the
expropriated properties remain unoccupied. Petitioners likewise question the public nature of the use
by respondent NHA when it entered into a contract for the construction of low cost housing units,
which is allegedly different from the stated public purpose in the expropriation proceedings. Hence, it
is claimed that respondent NHA has forfeited its rights and interests by virtue of the expropriation
judgment and the expropriated properties should now be returned to herein petitioners. We are not
persuaded.
The 1987 Constitution explicitly provides for the exercise of the power of eminent domain over
private properties upon payment of just compensation. More specifically, section 9, Article III states
that private property shall not be taken for public use without just compensation. The constitutional
restraints are public use and just compensation.
Petitioners cannot insist on a restrictive view of the eminent domain provision of the Constitution by
contending that the contract for low cost housing is a deviation from the stated public use. It is now
settled doctrine that the concept of public use is no longer limited to traditional purposes. Here, as
elsewhere, the idea that "public use" is strictly limited to clear cases of "use by the public" has been
abandoned. The term "public use" has now been held to be synonymous with "public interest," "public
benefit," "public welfare," and "public convenience."8 The rationale for this new approach is well
explained in the case of Heirs of Juancho Ardona, et al. vs. Reyes, et al.,9 to wit:
"The restrictive view of public use may be appropriate for a nation which circumscribes the scope of
government activities and public concerns and which possesses big and correctly located public lands
that obviate the need to take private property for public purposes. Neither circumstance applies to the
Philippines. We have never been a laissez faire State. And the necessities which impel the exertion of
sovereign power are all too often found in areas of scarce public land or limited government
resources.
xxx xxx xxx
The taking to be valid must be for public use. There was a time when it was felt that a literal meaning
should be attached to such a requirement. Whatever project is undertaken must be for the public to
enjoy, as in the case of streets or parks. Otherwise, expropriation is not allowable. It is not anymore.
As long as the purpose of the taking is public, then the power of eminent domain comes into play. As
just noted, the constitution in at least two cases, to remove any doubt, determines what is public use.
One is the expropriation of lands to be subdivided into small lots for resale at cost to individuals. The
other is in the transfer, through the exercise of this power, of utilities and other private enterprise to
the government. It is accurate to state then that at present whatever may be beneficially employed
for the general welfare satisfies the requirement of public use." (emphasis supplied)
93
The act of respondent NHA in entering into a contract with a real estate developer for the construction
of low cost housing on the expropriated lots to be sold to qualified low income beneficiaries cannot be
taken to mean as a deviation from the stated public purpose of their taking. Jurisprudence has it that
the expropriation of private land for slum clearance and urban development is for a public purpose
even if the developed area is later sold to private homeowners, commercials firms, entertainment and
service companies, and other private concerns.10
Moreover, the Constitution itself allows the State to undertake, for the common good and in
cooperation with the private sector, a continuing program of urban land reform and housing
which will make at affordable cost decent housing and basic services to underprivileged and homeless
citizens in urban centers and resettlement areas.11 The expropriation of private property for the
purpose of socialized housing for the marginalized sector is in furtherance of the social justice
provision under Section 1, Article XIII of the Constitution which provides that:
"SECTION 1. The Congress shall give highest priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the
common good.
To this end, the State shall require the acquisition, ownership, use and disposition of property and its
increments."
It follows that the low cost housing project of respondent NHA on the expropriated lots is compliant
with the "public use" requirement.
We likewise do not subscribe to petitioners' contention that the stated public purpose was abandoned
when respondent NHA failed to occupy the expropriated lots by relocating squatters from the Metro
Manila area. The expropriation judgment declared that respondent NHA has a lawful right to take
petitioners properties "for the public use or purpose of expanding the Dasmariñas Resettlement
Project." The taking here is absolute, without any condition, restriction or qualification. Contrary to
petitioners' submission, the ruling enunciated in the early case of Fery vs. Municipality of
Cabanatuan,12 is still good and sound doctrine, viz.:
"x x x If, for example, land is expropriated for a particular purpose, with the condition that when that
purpose is ended or abandoned the property shall return to its former owner, then, of course, when the
purpose is terminated or abandoned the former owner reacquires the property so expropriated. x x x
If, upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then,
of course, the land becomes the absolute property of the expropriator x x x.
When land has been acquired for public use in fee simple unconditionally, either by the exercise
of eminent domain or by purchase, the former owner retains no rights in the land, and the
public use may be abandoned, or the land may be devoted to a different use, without any
impairment of the estate or title acquired, or any reversion to the former owner."
Petitioners further aver that the continued failure of respondent NHA to pay just compensation for a
long period of time justifies the forfeiture of its rights and interests over the expropriated lots. They
demand the return of the expropriated lots. Respondent NHA justifies the delay to pay just
compensation by reason of the failure of petitioners to pay the capital gains tax and to surrender the
owners' duplicate certificates of title.
In the recent case of Republic of the Philippines vs. Court of Appeals, et al.,13 the Court ruled that
non-payment of just compensation does not entitle the private landowners to recover possession of
their expropriated lots. Thus:
"Thus, in Valdehueza vs. Republic where the private landowners had remained unpaid ten years after
the termination of the expropriation proceedings, this Court ruled –
'The points in dispute are whether such payment can still be made and, if so, in what amount. Said lots
have been the subject of expropriation proceedings. By final and executory judgment in said
proceedings, they were condemned for public use, as part of an airport, and ordered sold to the
government. x x x. It follows that both by virtue of the judgment, long final, in the expropriation suit,
as well as the annotations upon their title certificates, plaintiffs are not entitled to recover possession
of their expropriated lots – which are still devoted to the public use for which they were expropriated
– but only to demand the market value of the same.
Said relief may be granted under plaintiffs' prayer for such other remedies, which may be deemed just
and equitable under the premises.'
The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City where the recovery of
possession of property taken for public use prayed for by the unpaid landowner was denied even
while no requisite expropriation proceedings were first instituted. The landowner was merely given
the relief of recovering compensation for his property computed at its market value at the time it was
taken and appropriated by the State.
The judgment rendered by the Bulacan RTC in 1979 on the expropriation proceedings provides not
only for the payment of just compensation to herein respondents but likewise adjudges the
property condemned in favor of petitioner over which parties, as well as their privies, are
bound. Petitioner has occupied, utilized and, for all intents and purposes, exercised dominion
over the property pursuant to the judgment. The exercise of such rights vested to it as the
94
condemnee indeed has amounted to at least a partial compliance or satisfaction of the 1979
judgment, thereby preempting any claim of bar by prescription on grounds of non-execution. In
arguing for the return of their property on the basis of non-payment, respondents ignore the
fact that the right of the expropriating authority is far from that of an unpaid seller in ordinary
sales, to which the remedy of rescission might perhaps apply. An in rem proceeding,
condemnation acts upon the property. After condemnation, the paramount title is in the public
under a new and independent title; thus, by giving notice to all claimants to a disputed title,
condemnation proceedings provide a judicial process for securing better title against all the world than
may be obtained by voluntary conveyance." (emphasis supplied)
We, however, likewise find the refusal of respondent NHA to pay just compensation, allegedly for
failure of petitioners to pay capital gains tax and surrender the owners' duplicate certificates of title, to
be unfounded and unjustified.
First, under the expropriation judgment the payment of just compensation is not subject to any
condition. Second, it is a recognized rule that although the right to enter upon and appropriate the land
to public use is completed prior to payment, title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just compensation. In the case of Association
of Small Landowners in the Phils., Inc., et al. vs. Secretary of Agrarian Reform,14 it was held that:
"Title to property which is the subject of condemnation proceedings does not vest the condemnor until
the judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the
date on which the petition under the Eminent Domain Act, or the commissioner's report under the
Local Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is complete at the time of
entry, title to the property taken remains in the owner until payment is actually made.
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the decisions
appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, it was held that 'actual
payment to the owner of the condemned property was a condition precedent to the investment of the
title to the property in the State' albeit 'not to the appropriation of it to public use.' In Rexford v.
Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee
did not vest in the State until the payment of the compensation although the authority to enter upon
and appropriate the land was complete prior to the payment. Kennedy further said that 'both on
principle and authority the rule is x x x that the right to enter on and use the property is complete,
as soon as the property is actually appropriated under the authority of law for a public use, but
that the title does not pass from the owner without his consent, until just compensation has been
made to him.'"
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that: WHEREFORE, the appealed judgment is modified as follows:

If the laws which we have exhibited or cited in the preceding discussion are attentively examined it 1. Ordering respondent National Housing Authority to pay petitioners the amount of P1,218,574.35
will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford with legal interest thereon at 12% per annum computed from the taking of the expropriated properties
absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling in 1997 until the amount due shall have been fully paid;
owner until compensation is paid. x x x." (emphasis supplied)
2. Ordering petitioners to pay the capital gains tax; and
With respect to the amount of the just compensation still due and demandable from respondent NHA,
the lower courts erred in not awarding interest computed from the time the property is actually taken 3. Ordering petitioners to surrender to respondent National Housing Authority the owners' duplicate
to the time when compensation is actually paid or deposited in court. In Republic, et al. vs. Court of certificates of title of the expropriated properties upon full payment of just compensation.
Appeals, et al.,15 the Court imposed interest at 12% per annum in order to help eliminate the issue of
the constant fluctuation and inflation of the value of the currency over time, thus:
SO ORDERED.
"The constitutional limitation of 'just compensation' is considered to be the sum equivalent to the
Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.
market value of the property, broadly described to be the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition or the fair value of the property as
between one who receives, and one who desires to sell, it being fixed at the time of the actual taking
by the government. Thus, if property is taken for public use before compensation is deposited with the
court having jurisdiction over the case, the final compensation must include interests on its just value
to be computed from the time the property is taken to the time when compensation is actually paid or
deposited with the court. In fine, between the taking of the property and the actual payment, legal
interests accrue in order to place the owner in a position as good as (but not better than) the position
he was in before the taking occurred.

x x x This allowance of interest on the amount found to be the value of the property as of the time of
the taking computed, being an effective forbearance, at 12% per annum should help eliminate the
issue of the constant fluctuation and inflation of the value of the currency over time. Article 1250 of
the Civil Code, providing that, in case of extraordinary inflation or deflation, the value of the currency
at the time of the establishment of the obligation shall be the basis for the payment when no
agreement to the contrary is stipulated, has strict application only to contractual obligations. In other
words, a contractual agreement is needed for the effects of extraordinary inflation to be taken into
account to alter the value of the currency."

Records show that there is an outstanding balance of P1,218,574.35 that ought to be paid to
petitioners.16 It is not disputed that respondent NHA took actual possession of the expropriated
properties in 1977.17 Perforce, while petitioners are not entitled to the return of the expropriated
property, they are entitled to be paid the balance of P1,218,574.35 with legal interest thereon at 12%
per annum computed from the taking of the property in 1977 until the due amount shall have been
fully paid.

95
G.R. No. 175983 April 16, 2009
METROPOLITAN CEBU WATER DISTRICT (MCWD), Petitioner,
vs.
J. KING AND SONS COMPANY, INC., Respondent.
DECISION
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the reversal of the decision2 and resolution3 of the Court
of Appeals in CA-G.R. CEB-SP No. 00810. The Court of Appeals’ decision nullified the orders4 and
the writ of possession5 issued by the Regional Trial Court (RTC) of Cebu City, Branch 23, allowing
petitioner to take possession of respondent’s property.
Petitioner Metropolitan Cebu Water District is a government-owned and controlled corporation
created pursuant to Presidential Decree No. 198, as amended. Among its purposes are to acquire,
install, improve, maintain and operate water supply and distribution systems within the boundaries of
the District.6
Petitioner wanted to acquire a five (5)-square meter lot occupied by its production well. The lot is part
of respondent’s property covered by TCT No. 168605 and located in Banilad, Cebu City. Petitioner
initiated negotiations7 with respondent J. King and Sons Company, Inc. for the voluntary sale of the
latter’s property. Respondent did not acquiesce to petitioner’s proposal. After the negotiations had
failed, petitioner pursuant to its charter8 initiated
expropriation proceedings through Board Resolution No. 015-20049 which was duly approved by the
Local Water Utilities Administration (LWUA).10 On 10 November 2004, petitioner filed a complaint11
to expropriate the five (5)-square meter portion of respondent’s property.
On 7 February 2005, petitioner filed a motion12 for the issuance of a writ of possession. Petitioner
wanted to tender the amount to respondent during a rescheduled hearing which petitioner’s counsel
had failed to attend.13 Petitioner deposited14 with the Clerk of Court the amount of ₱17,500.00
equivalent to one hundred percent (100%) of the current zonal value of the property which the Bureau
of Internal Revenue had pegged at ₱3,500.00 per square meter.15 Subsequently, the trial court granted
the motion16 and issued the writ of possession.17 Respondent moved for reconsideration but the
motion was denied.18
96
Respondent filed a petition19 for certiorari under Rule 65 with the Court of Appeals. It sought the
issuance of a temporary restraining order (TRO) which the Court of Appeals granted.20 Thus,
petitioner was not able to gain entry to the lot.21
On 26 July 2006, the Court of Appeals rendered the assailed decision22 granting respondent’s petition.
It ruled that the board resolution which authorized the filing of the expropriation complaint lacked
exactitude and particularity which made it invalid; that there was no genuine necessity for the
expropriation of the five (5)-square meter lot and; that the reliance on Republic Act (R.A.) No. 8974
in fixing the value of the property contravenes the judicial determination of just compensation.
Petitioner moved23 for reconsideration but the motion was rejected.24
Hence, this petition.
The issues raised by petitioner can be summarized as follows:
1. Whether there was sufficient authority from the petitioner’s board of directors to institute the
expropriation complaint; and
2. Whether the procedure in obtaining a writ of possession was properly observed.
Eminent domain is the right of the state to acquire private property for public use upon payment of
just compensation.25 The power of eminent domain is inseparable in sovereignty being essential to the
existence of the State and inherent in government. Its exercise is proscribed by only two
Constitutional requirements: first, that there must be just compensation, and second, that no person
shall be deprived of life, liberty or property without due process of law26 .
As an inherent sovereign prerogative, the power to expropriate pertains to the legislature. However,
Congress may, as in fact it often does, delegate the exercise of the power to government agencies,
public officials and quasi-public entities. Petitioner is one of the numerous government offices so
empowered. Under its charter, P.D. No. 198, as amended,27 petitioner is explicitly granted the power
of eminent domain.
On 7 November 2000, Congress enacted R.A. No. 8974, entitled "An Act To Facilitate The
Acquisition Of Right-Of-Way, Site Or Location For National Government Infrastructure Projects And
For Other Purposes." Section 2 thereof defines national government projects as follows:
Sec. 2. National Government Projects.—The term "national government projects" shall refer to all
national government infrastructure, engineering works and service contracts, including projects
undertaken by government-owned and -controlled corporations, all projects covered by Republic Act
No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer
Law, and other related and necessary activities, such as site acquisition, supply and/or installation of
equipment and materials, implementation, construction, completion, operation, maintenance,
improvement, repair and rehabilitation, regardless of source of funding." (emphasis ours)
R.A. No. 8974 includes projects undertaken by government owned and controlled corporations,28 such
as petitioner. Moreover, the Implementing Rules and Regulations of R.A. No. 8974 explicitly includes
water supply, sewerage, and waste management facilities among the national government projects
covered by the law.29 It is beyond question, therefore, that R.A. No. 8974 applies to the expropriation
subject of this case.
The Court of Appeals held that the board resolution authorizing the expropriation lacked exactitude
and particularity. It described the board resolution as akin to a general warrant in criminal law and as
such declared it invalid. Respondent reiterates the same argument in its comment and adds that
petitioner’s exercise of the power of eminent domain was not reviewed by the LWUA.
A corporation does not have powers beyond those expressly conferred upon it by its enabling law.
Petitioner’s charter provides that it has the powers, rights and privileges given to private corporations
under existing laws, in addition to the powers granted in it.30 All the powers, privileges, and duties of
the district shall be exercised and performed by and through the board and that any executive,
administrative or ministerial power may be delegated and redelegated by the board to any of its
officers or agents for such
purpose.31 Being a corporation, petitioner can exercise its powers only through its board of directors.
For petitioner to exercise its power of eminent domain, two requirements should be met, namely: first,
its board of directors passed a resolution authorizing the expropriation, and; second, the exercise of
the power of eminent domain was subjected to review by the LWUA. In this case, petitioner’s board
of directors approved on 27 February 2004, Board Resolution No. 015-200432 authorizing its general
manager to file expropriation and other cases. Moreover, the LWUA did review and gave its stamp of
approval to the filing of a complaint for the expropriation of respondent’s lot. Specifically, the LWUA
through its Administrator, Lorenzo H. Jamora, wrote petitioner’s manager, Armando H. Paredes, a
letter dated 28 February 200533 authorizing petitioner to file the expropriation case "against the owner
of the five-square meter portion of Lot No. 921-A covered by TCT No. 168805, pursuant to Section
25 of P.D. No. 198, as amended."
The letter not only explicitly debunks respondent’s claim that there was no authorization from LWUA
but it also identifies the lot sought to be expropriated with sufficient particularity.
It is settled that the validity of a complaint may be questioned immediately upon its filing through a
motion to dismiss or raised thereafter as an affirmative defense. However, there is no need to further
97
belabor the issue since it is established that petitioner has the legal capacity to institute the
expropriation complaint.
Anent the second issue involving the issuance of a writ of possession, a discussion on the various
stages in an expropriation proceeding is necessary.
The general rule is that upon filing of the expropriation complaint, the plaintiff has the right to take or
enter into possession of the real property involved if he deposits with the authorized government
depositary an amount equivalent to the assessed value of the property for purposes of taxation. An
exception to this procedure is provided by R.A. No. 897434 . It requires the payment of one hundred
percent (100%) of the zonal value of the property to be expropriated to entitle the plaintiff to a writ of
possession.
In an expropriation proceeding there are two stages, first, is the determination of the validity of the
expropriation, and second is the determination of just compensation.35 In Tan v. Republic,36 we
explained the two (2) stages in an expropriation proceeding to wit:
(1) Determination of the authority of the plaintiff to exercise the power of eminent domain and the
propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of
dismissal of the action, with condemnation declaring that the plaintiff has a lawful right to take the
property sought to be condemned for the public use or purpose described in the complaint, upon
payment of just compensation. An order of expropriation is final. An order of dismissal, if this be
ordained, would be a final one, as it finally disposes of the action and leaves nothing more to be done
by the courts on the merits. The order of expropriation would also be a final one for after its issuance,
no objection to the right of condemnation shall be heard. The order of expropriation may be appealed
by any party aggrieved thereby by filing a record on appeal.
(2) Determination by the court of the just compensation for the property sought to be taken with the
assistance of not more than three (3) commissioners. The order fixing the just compensation on the
basis of the evidence before the court and findings of the commissioners would likewise be a final
one, as it would leave nothing more to be done by the court regarding the issue. A second and separate
appeal may be taken from this order fixing the just compensation.37
Thus, the determination of the necessity of the expropriation is a justiciable question which can only
be resolved during the first stage of an expropriation proceeding. Respondent’s claim that the
expropriated property is too small to be considered for public use can only be resolved during that
stage.
Further, the Court of Appeals ruled that Section 4 of R.A. No. 8974 runs counter to the express
mandate of Section 2 of Rule 67.38 It held that the law undermined the principle that the determination
of just compensation is a judicial function. However, this Court has already settled the issue. In
Republic v. Gingoyon,39 this Court held that:
It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the
scheme of "immediate payment" in cases involving national government infrastructure projects.
xxx
It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is
well within the province of the legislature to fix the standard, which it did through the enactment of
Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the amount of just
compensation in expropriation cases relating to national government infrastructure projects, as well as
the manner of payment thereof.
At the same time, Section 14 of the Implementing Rules recognizes the continued applicability of
Rule 67 on procedural aspects when it provides "all matters regarding defenses and objections to the
complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the
parties, and such other incidents affecting the complaint shall be resolved under the provisions on
expropriation of Rule 67 of the Rules of Court.40
R.A. No. 8974 does not take away from the courts the power to judicially determine the amount of
just compensation. The law merely sets the minimum price of the property as the provisional value.
Thus,
the amount of just compensation must still be determined by the courts according to the standards set
forth in Section 541 of R.A. No. 8974.
R.A. No. 8974 provides a different scheme for the obtention of a writ of possession. The law does not
require a deposit with a government bank; instead it requires the government to immediately pay the
property owner.42 The provisional character of this payment means that it is not yet final, yet,
sufficient under the law to entitle the Government to the writ of possession over the expropriated
property.43 The provisional payment is a prerequisite44 and a trigger45 for the issuance of the writ of
possession. In Gingoyon,46 we held that:
It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the
scheme of "immediate payment" in cases involving national government infrastructure projects.47
xxx
98
Rep. Act. No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no
amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards
eminent domain that reconciles the inherent unease attending expropriation proceedings with a
position of fundamental equity. While expropriation proceedings have always demanded just
compensation in exchange for private property, the previous deposit requirement impeded immediate
compensation to the private owner, especially in cases wherein the determination of the final amount
of compensation would prove highly disputed. Under the new modality prescribed by Rep. Act. No.
8974, the private owner sees immediate monetary recompense, with the same degree of speed as the
taking of his/her property.481avvphi1
Petitioner was supposed to tender the provisional payment directly to respondent during a hearing
which it had failed to attend. Petitioner, then, deposited the provisional payment with the court. The
trial court did not commit an error in accepting the deposit and in issuing the writ of possession. The
deposit of the provisional amount with the court is equivalent to payment.
Indeed, Section 4 of R.A. No. 8974 is emphatic to the effect that "upon compliance with the
guidelines…the court shall immediately issue to the implementing agency an order to take possession
of the property and start the implementation of the project."49 Under this statutory provision, when the
government, its agencies or government-owned and controlled corporations, make the required
provisional payment, the trial court has a ministerial duty to issue a writ of possession. In Capitol
Steel Corporation v. PHIVIDEC Industrial Authority,50 we held that:
Upon compliance with the requirements, a petitioner in an expropriation case…is entitled to a writ of
possession as a matter of right and it becomes the ministerial duty of the trial court to forthwith issue
the writ of possession. No hearing is required and the court neither exercises its discretion or
judgment in determining the amount of the provisional value of the properties to be expropriated as
the legislature has fixed the amount under Section 4 of R.A. No. 8974.51 (emphasis ours)
It is mandatory on the trial court’s part to issue the writ of possession and on the sheriff’s part to
deliver possession of respondent’s property to petitioner pursuant to the writ.
WHEREFORE, the Court of Appeals’ Decision dated 26 July 2006 and Resolution dated 28
September 2006 are REVERSED. The ORDERS of the Regional Trial Court dated 01 April 2005 and
9 May 2005 are hereby REINSTATED. The Regional Trial Court is further DIRECTED to
immediately REMIT the amount of ₱17,500.00 to respondent and to REQUIRE the sheriff to
implement the writ of possession. The case is REMANDED to the trial court for further proceedings.
SO ORDERED.
DANTE O. TINGA G.R. No. 154411 June 19, 2003
Associate Justice
NATIONAL HOUSING AUTHORITY, Petitioner,
WE CONCUR: vs.
HEIRS OF ISIDRO GUIVELONDO, court of appeals, HON. ISAIAS DICDICAN, Presiding
LEONARDO A. QUISUMBING Judge, Regional Trial Court, Branch 11, Cebu City, and PASCUAL Y. ABORDO, Sheriff,
Associate Justice Regional Trial Court, Branch 11, Cebu City, Respondents.
Chairperson
DECISION

CONCHITA CARPIO PRESBITERO J. VELASCO, YNARES-SANTIAGO, J.:

MORALES JR.
Associate Justice Associate Justice On February 23, 1999, petitioner National Housing Authority filed with the Regional Trial Court of
ARTURO D. BRION Cebu City, Branch 11, an Amended Complaint for eminent domain against Associacion Benevola de
Associate Justice Cebu, Engracia Urot and the Heirs of Isidro Guivelondo, docketed as Civil Case No. CEB-23386.
Petitioner alleged that defendant Associacion Benevola de Cebu was the claimant/owner of Lot 108-C
located in the Banilad Estate, Cebu City; that defendant Engracia Urot was the claimant/owner of Lots
ATT E S TAT I O N Nos. 108-F, 108-I, 108-G, 6019-A and 6013-A, all of the Banilad Estate; that defendant Heirs of
Isidro Guivelondo were the claimants/owners of Cadastral Lot No. 1613-D located at Carreta,
I attest that the conclusions in the above Decision had been reached in consultation before the case Mabolo, Cebu City; and that the lands are within a blighted urban center which petitioner intends to
was assigned to the writer of the opinion of the Court’s Division. develop as a socialized housing project.1

LEONARDO A. QUISUMBING On November 12, 1999, the Heirs of Isidro Guivelondo, respondents herein, filed a Manifestation
Associate Justice stating that they were waiving their objections to petitioner’s power to expropriate their properties.
Chairperson, Second Division Hence, the trial court issued an Order as follows:

C E R T I F I CAT I O N WHEREFORE, the Court hereby declares that the plaintiff has a lawful right to expropriate the
properties of the defendants who are heirs of Isidro Guivelondo.
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it
is hereby certified that the conclusions in the above Decision had been reached in consultation before The appointment of commissioners who would ascertain and report to the Court the just compensation
the case was assigned to the writer of the opinion of the Court’s Division. for said properties will be done as soon as the parties shall have submitted to the Court the names of
persons desired by them to be appointed as such commissioners.
REYNATO S. PUNO
Chief Justice SO ORDERED.2

Thereafter, the trial court appointed three Commissioners to ascertain the correct and just
compensation of the properties of respondents. On April 17, 2000, the Commissioners submitted their
report wherein they recommended that the just compensation of the subject properties be fixed at
P11,200.00 per square meter.3 On August 7, 2000, the trial court rendered Partial Judgment adopting

99
the recommendation of the Commissioners and fixing the just compensation of the lands of
respondent Heirs of Isidro Guivelondo at P11,200.00 per square meter, to wit:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by the Court in this
case fixing the just compensation for the lands of the defendants who are the heirs of Isidro
Guivelondo, more particularly Lots Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 19, 20, 6016-F,
6016-H, 6016-E and 6016-D of Csd-10219, which were sought to be expropriated by the plaintiff at
P11,200.00 per square meter and ordering the plaintiff to pay to the said defendants the just
compensation for the said lands computed at P11,200.00 per square meter.
IT IS SO ORDERED.4
Petitioner NHA filed two motions for reconsideration dated August 30, 2000 and August 31, 2000,
assailing the inclusion of Lots 12, 13 and 19 as well as the amount of just compensation, respectively.
Respondent Heirs also filed a motion for reconsideration of the Partial Judgment. On October 11,
2000, the trial court issued an Omnibus Order denying the motion for reconsideration of respondent
Heirs and the August 31, 2000 motion of petitioner, on the ground that the fixing of the just
compensation had adequate basis and support. On the other hand, the trial court granted petitioner’s
August 30, 2000 motion for reconsideration on the ground that the Commissioner’s Report did not
include Lots 12, 13 and 19 within its coverage. Thus:
WHEREFORE, in view of the foregoing premises, the Court hereby denies the motion of the heirs of
Isidro Guivelondo (with the exception of Carlota Mercado and Juanita Suemith) for reconsideration of
the partial judgment rendered in this case on August 7, 2000 and plaintiff’s motion for reconsideration
of said judgment, dated August 31, 2000.
However, the Court hereby grants the plaintiff’s motion for reconsideration of said judgment, dated
August 30, 2000. Accordingly, the judgment rendered in this case on August 7, 2000 is hereby set
aside insofar as it has fixed just compensations for Lots Nos. 12, 13 and 19 of Csd-10219 because the
fixing of said just compensations appears to lack adequate basis.
SO ORDERED.5
Petitioner filed with the Court of Appeals a petition for certiorari, which was docketed as CA-G.R. SP
No. 61746.6 Meanwhile, on October 31, 2000, the trial court issued an Entry of Judgment over the
Partial Judgment dated August 7, 2000 as modified by the Omnibus Order dated October 11, 2000.7
Subsequently, respondent Heirs filed a Motion for Execution, which was granted on November 22,
2000.
100
On January 31, 2001, the Court of Appeals dismissed the petition for certiorari on the ground that the
Partial Judgment and Omnibus Order became final and executory when petitioner failed to appeal the
same.8
Petitioner’s Motion for Reconsideration and Urgent Ex-Parte Motion for a Clarificatory Ruling were
denied in a Resolution dated March 18, 2001.9 A petition for review was filed by petitioner with this
Court, which was docketed as G.R. No. 147527. However, the same was denied in a Minute
Resolution dated May 9, 2001 for failure to show that the Court of Appeals committed a reversible
error.10
Petitioner filed a Motion for Reconsideration which was however denied with finality on August 20,
2001.11
Prior to the aforesaid denial of the Motion for Reconsideration, petitioner, on July 16, 2001, filed with
the trial court a Motion to Dismiss Civil Case No. CEB-23386, complaint for eminent domain,
alleging that the implementation of its socialized housing project was rendered impossible by the
unconscionable value of the land sought to be expropriated, which the intended beneficiaries can not
afford.12 The Motion was denied on September 17, 2001, on the ground that the Partial Judgment had
already become final and executory and there was no just and equitable reason to warrant the
dismissal of the case.13 Petitioner filed a Motion for Reconsideration, which was denied in an Order
dated November 20, 2001.14
Petitioner thus filed a petition for certiorari with the Court of Appeals, which was docketed as CA-
G.R. SP No. 68670, praying for the annulment of the Order of the trial court denying its Motion to
Dismiss and its Motion for Reconsideration.15
On February 5, 2002, the Court of Appeals summarily dismissed the petition. Immediately thereafter,
respondent Sheriff Pascual Y. Abordo of the Regional Trial Court of Cebu City, Branch 11, served on
petitioner a Notice of Levy pursuant to the Writ of Execution issued by the trial court to enforce the
Partial Judgment of August 7, 2000 and the Omnibus Order of October 11, 2000.16
On February 18, 2002, the Court of Appeals set aside the dismissal of the petition and reinstated the
same.17 Thereafter, a temporary restraining order was issued enjoining respondent sheriff to preserve
the status quo.18
On May 27, 2002, respondent sheriff served on the Landbank of the Philippines a Notice of Third
Garnishment against the deposits, moneys and interests of petitioner therein.19 Subsequently,
respondent sheriff levied on funds and personal properties of petitioner.20
On July 16, 2002, the Court of Appeals rendered the assailed decision dismissing the petition for
certiorari.21
Hence, petitioner filed this petition for review, raising the following issues:
1) WHETHER OR NOT THE STATE CAN BE COMPELLED AND COERCED BY THE COURTS
TO EXERCISE OR CONTINUE WITH THE EXERCISE OF ITS INHERENT POWER OF
EMINENT DOMAIN;
2) WHETHER OR NOT JUDGMENT HAS BECOME FINAL AND EXECUTORY AND IF
ESTOPPEL OR LACHES APPLIES TO GOVERNMENT;
3) WHETHER OR NOT WRITS OF EXECUTION AND GARNISHMENT MAY BE ISSUED
AGAINST THE STATE IN AN EXPROPRIATION WHEREIN THE EXERCISE OF THE POWER
OF EMINENT DOMAIN WILL NOT SERVE PUBLIC USE OR PURPOSE {APPLICATION OF
SUPREME COURT ADMINISTRATIVE CIRCULAR NO. 10-2000}.22
Respondent Heirs of Isidro Guivelondo filed their Comment, arguing as follows:
I be dismissed, for the reason that the action cannot be maintained at all except when the expropriation
AS EARLIER UPHELD BY THE HONORABLE COURT, THE JUDGMENT OF THE TRIAL
COURT IS ALREADY FINAL AND EXECUTORY, HENCE, COULD NO LONGER BE
DISTURBED NOR SET ASIDE
II
THE FUNDS AND ASSETS OF THE PETITIONER ARE NOT EXEMPT FROM LEVY AND
GARNISHMENT
III
THE ISSUES RAISED IN THIS SECOND PETITION FOR REVIEW WERE ALREADY
RESOLVED BY THE HONORABLE COURT23
In the early case of City of Manila v. Ruymann,24 the Court was confronted with the question: May the
petitioner, in an action for expropriation, after he has been placed in possession of the property and
before the termination of the action, dismiss the petition? It resolved the issue in the affirmative and
held:
101
The right of the plaintiff to dismiss an action with the consent of the court is universally recognized
with certain well-defined exceptions. If the plaintiff discovers that the action which he commenced
was brought for the purpose of enforcing a right or a benefit, the advisability or necessity of which he
later discovers no longer exists, or that the result of the action would be different from what he had
intended, then he should be permitted to withdraw his action, subject to the approval of the court. The
plaintiff should not be required to continue the action, subject to some well-defined exceptions, when
it is not to his advantage to do so. Litigation should be discouraged and not encouraged. Courts should
not require parties to litigate when they no longer desire to do so. Courts, in granting permission to
dismiss an action, of course, should always take into consideration the effect which said dismissal
would have upon the rights of the defendant.25
Subsequently, in Metropolitan Water District v. De Los Angeles,26 the Court had occasion to apply the
above-quoted ruling when the petitioner, during the pendency of the expropriation case, resolved that
the land sought to be condemned was no longer necessary in the maintenance and operation of its
system of waterworks. It was held:
It is not denied that the purpose of the plaintiff was to acquire the land in question for a public use.
The fundamental basis then of all actions brought for the expropriation of lands, under the power of
eminent domain, is public use. That being true, the very moment that it appears at any stage of the
proceedings that the expropriation is not for a public use, the action must necessarily fail and should
is for some public use. That must be true even during the pendency of the appeal of at any other stage
of the proceedings. If, for example, during the trial in the lower court, it should be made to appear to
the satisfaction of the court that the expropriation is not for some public use, it would be the duty and
the obligation of the trial court to dismiss the action. And even during the pendency of the appeal, if it
should be made to appear to the satisfaction of the appellate court that the expropriation is not for
public use, then it would become the duty and the obligation of the appellate court to dismiss it.27
Notably, the foregoing cases refer to the dismissal of an action for eminent domain at the instance of
the plaintiff during the pendency of the case. The rule is different where the case had been decided
and the judgment had already become final and executory.
Expropriation proceedings consists of two stages: first, condemnation of the property after it is
determined that its acquisition will be for a public purpose or public use and, second, the
determination of just compensation to be paid for the taking of private property to be made by the
court with the assistance of not more than three commissioners.28 Thus:
There are two (2) stages in every action for expropriation. The first is concerned with the
determination of the authority of the plaintiff to exercise the power of eminent domain and the
propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of
dismissal of the action, "of condemnation declaring that the plaintiff has a lawful right to take the
property sought to be condemned, for the public use or purpose described in the complaint, upon the
payment of just compensation to be determined as of the date of the filing of the complaint." An order
of dismissal, if this be ordained, would be a final one, of course, since it finally disposes of the action
and leaves nothing more to be done by the Court on the merits. So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the proceedings before the
Trial Court, "no objection to the exercise of the right of condemnation (or the propriety thereof) shall
be filed or heard."
The second phase of the eminent domain action is concerned with the determination by the Court of
"the just compensation for the property sought to be taken." This is done by the Court with the
assistance of not more than three (3) commissioners. The order fixing the just compensation on the
basis of the evidence before, and findings of, the commissioners would be final, too. It would finally
dispose of the second stage of the suit, and leave nothing more to be done by the Court regarding the
issue. Obviously, one or another of the parties may believe the order to be erroneous in its
appreciation of the evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party
may seek a reversal of the order by taking an appeal therefrom.29
The outcome of the first phase of expropriation proceedings, which is either an order of expropriation
or an order of dismissal, is final since it finally disposes of the case. On the other hand, the second
phase ends with an order fixing the amount of just compensation. Both orders, being final, are
appealable.30 An order of condemnation or dismissal is final, resolving the question of whether or not
the plaintiff has properly and legally exercised its power of eminent domain.31 Once the first order
becomes final and no appeal thereto is taken, the authority to expropriate and its public use can no
longer be questioned.32
The above rule is based on Rule 67, Section 4 of the 1997 Rules of Civil Procedure, which provides:
Order of expropriation. — If the objections to and the defenses against the right of the plaintiff to
expropriate the property are overruled, or when no party appears to defend as required by this Rule,
the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the
property sought to be expropriated, for the public use or purpose described in the complaint, upon the
payment of just compensation to be determined as of the date of the taking of the property or the filing
of the complaint, whichever came first.
A final order sustaining the right to expropriate the property may be appealed by any party aggrieved
thereby. Such appeal, however, shall not prevent the court from determining the just compensation to
be paid.
After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the
proceeding except on such terms as the court deems just and equitable. (underscoring ours)
102
In the case at bar, petitioner did not appeal the Order of the trial court dated December 10, 1999,
which declared that it has a lawful right to expropriate the properties of respondent Heirs of Isidro
Guivelondo. Hence, the Order became final and may no longer be subject to review or reversal in any
court.33 A final and executory decision or order can no longer be disturbed or reopened no matter how
erroneous it may be. Although judicial determinations are not infallible, judicial error should be
corrected through appeals, not through repeated suits on the same claim.34
Petitioner anchors its arguments on the last paragraph of the above-quoted Rule 67, Section 4. In
essence, it contends that there are just and equitable grounds to allow dismissal or discontinuance of
the expropriation proceedings. More specifically, petitioner alleges that the intended public use was
rendered nugatory by the unreasonable just compensation fixed by the court, which is beyond the
means of the intended beneficiaries of the socialized housing project. The argument is tenuous.
Socialized housing has been recognized as public use for purposes of exercising the power of eminent
domain.
Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and
significantly affects public health, safety, the environment and in sum, the general welfare. The public
character of housing measures does not change because units in housing projects cannot be occupied
by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not
possible to provide housing for all who need it, all at once.
xxx xxx xxx
In the light of the foregoing, this Court is satisfied that "socialized housing" falls with the confines of
"public use". xxx xxx xxx. Provisions on economic opportunities inextricably linked with low-cost
housing, or slum clearance, relocation and resettlement, or slum improvement emphasize the public
purpose of the project.35
The public purpose of the socialized housing project is not in any way diminished by the amount of
just compensation that the court has fixed. The need to provide decent housing to the urban poor
dwellers in the locality was not lost by the mere fact that the land cost more than petitioner had
expected. It is worthy to note that petitioner pursued its petition for certiorari with the Court of
Appeals assailing the amount of just compensation and its petition for review with this Court which
eloquently indicates that there still exists a public use for the housing project. It was only after its
appeal and petitions for review were dismissed that petitioner made a complete turn-around and
decided it did not want the property anymore.
Respondent landowners had already been prejudiced by the expropriation case. Petitioner cannot be
permitted to institute condemnation proceedings against respondents only to abandon it later when it
finds the amount of just compensation unacceptable. Indeed, our reprobation in the case of This was reiterated in the subsequent case of Philippine Rock Industries, Inc. v. Board of
Cosculluela v. Court of Appeals36 is apropos: Liquidators:42

It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a
person’s property, allow the judgment of the court to become final and executory and then refuse to
pay on the ground that there are no appropriations for the property earlier taken and profitably used.
We condemn in the strongest possible terms the cavalier attitude of government officials who adopt
such a despotic and irresponsible stance.
In order to resolve the issue of the propriety of the garnishment against petitioner’s funds and personal
properties, there is a need to first determine its true character as a government entity. Generally, funds
and properties of the government cannot be the object of garnishment proceedings even if the consent
to be sued had been previously granted and the state liability adjudged.37
The universal rule that where the State gives its consent to be sued by private parties either by general
or special law, it may limit claimant’s action "only up to the completion of proceedings anterior to the
stage of execution" and that the power of the Courts ends when the judgment is rendered, since
government funds and properties may not be seized under writs of execution or garnishment to satisfy
such judgments, is based on obvious considerations of public policy. Disbursements of public funds
must be covered by the corresponding appropriation as required by law. The functions and public
services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of
public funds from their legitimate and specific objects, as appropriated by law.38
Having a juridical personality separate and distinct from the government, the funds of such
government-owned and controlled corporations and non-corporate agency, although considered public
in character, are not exempt from garnishment. This doctrine was applied to suits filed against the
Philippine Virginia Tobacco Administration (PNB vs. Pabalan, et al., 83 SCRA 695); the National
Shipyard & Steel Corporation (NASSCO vs. CIR, 118 Phil. 782); the Manila Hotel Company (Manila
Hotel Employees Asso. vs. Manila Hotel Co., 73 Phil. 374); and the People's Homesite and Housing
Corporation (PNB vs. CIR, 81 SCRA 314). [emphasis ours]
Hence, it is clear that the funds of petitioner NHA are not exempt from garnishment or execution.
Petitioner’s prayer for injunctive relief to restrain respondent Sheriff Pascual Abordo from enforcing
the Notice of Levy and Garnishment against its funds and properties must, therefore, be denied.
WHEREFORE, in view of the foregoing, the instant petition for review is DENIED. The decision of
the Court of Appeals in CA-G.R. SP No. 68670, affirming the trial court’s Order denying petitioner’s
Motion to Dismiss the expropriation proceedings in Civil Case No. CEB-23386, is AFFIRMED.
Petitioner’s prayer for injunctive relief against the levy and garnishment of its funds and personal
properties is DENIED. The Temporary Restraining Order dated January 22, 2003 is LIFTED.
SO ORDERED.

However, if the funds belong to a public corporation or a government-owned or controlled corporation Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
which is clothed with a personality of its own, separate and distinct from that of the government, then
its funds are not exempt from garnishment.39 This is so because when the government enters into
commercial business, it abandons its sovereign capacity and is to be treated like any other
corporation.40

In the case of petitioner NHA, the matter of whether its funds and properties are exempt from
garnishment has already been resolved squarely against its predecessor, the People’s Homesite and
Housing Corporation (PHHC), to wit:

The plea for setting aside the notice of garnishment was premised on the funds of the People’s
Homesite and Housing Corporation deposited with petitioner being "public in character." There was
not even a categorical assertion to that effect. It is only the possibility of its being "public in
character." The tone was thus irresolute, the approach diffident. The premise that the funds cold be
spoken of as public in character may be accepted in the sense that the People’s Homesite and Housing
Corporation was a government-owned entity. It does not follow though that they were exempt from
garnishment.41

103
G.R. No. 106804 August 12, 2004
NATIONAL POWER CORPORATION, petitioner,
vs.
COURT OF APPEALS and ANTONINO POBRE, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review1 of the 30 March 1992 Decision2 and 14 August 1992 Resolution of
the Court of Appeals in CA-G.R. CV No. 16930. The Court of Appeals affirmed the Decision3 of the
Regional Trial Court, Branch 17, Tabaco, Albay in Civil Case No. T-552.
The Antecedents
Petitioner National Power Corporation ("NPC") is a public corporation created to generate
geothermal, hydroelectric, nuclear and other power and to transmit electric power nationwide.4 NPC is
authorized by law to acquire property and exercise the right of eminent domain.
Private respondent Antonino Pobre ("Pobre") is the owner of a 68,969 square-meter land ("Property")
located in Barangay Bano, Municipality of Tiwi, Albay. The Property is covered by TCT No. 4067
and Subdivision Plan 11-9709.
In 1963, Pobre began developing the Property as a resort-subdivision, which he named as "Tiwi Hot
Springs Resort Subdivision." On 12 January 1966, the then Court of First Instance of Albay approved
the subdivision plan of the Property. The Register of Deeds thus cancelled TCT No. 4067 and issued
independent titles for the approved lots. In 1969, Pobre started advertising and selling the lots.
On 4 August 1965, the Commission on Volcanology certified that thermal mineral water and steam
were present beneath the Property. The Commission on Volcanology found the thermal mineral water
and steam suitable for domestic use and potentially for commercial or industrial use.
NPC then became involved with Pobre's Property in three instances.
104
First was on 18 February 1972 when Pobre leased to NPC for one year eleven lots from the approved
subdivision plan.
Second was sometime in 1977, the first time that NPC filed its expropriation case against Pobre to
acquire an 8,311.60 square-meter portion of the Property.5 On 23 October 1979, the trial court ordered
the expropriation of the lots upon NPC's payment of P25 per square meter or a total amount of
P207,790. NPC began drilling operations and construction of steam wells. While this first
expropriation case was pending, NPC dumped waste materials beyond the site agreed upon by NPC
with Pobre. The dumping of waste materials altered the topography of some portions of the Property.
NPC did not act on Pobre's complaints and NPC continued with its dumping.
Third was on 1 September 1979, when NPC filed its second expropriation case against Pobre to
acquire an additional 5,554 square meters of the Property. This is the subject of this petition. NPC
needed the lot for the construction and maintenance of Naglagbong Well Site F-20, pursuant to
Proclamation No. 7396 and Republic Act No. 5092.7 NPC immediately deposited P5,546.36 with the
Philippine National Bank. The deposit represented 10% of the total market value of the lots covered
by the second expropriation. On 6 September 1979, NPC entered the 5,554 square-meter lot upon the
trial court's issuance of a writ of possession to NPC.
On 10 December 1984, Pobre filed a motion to dismiss the second complaint for expropriation. Pobre
claimed that NPC damaged his Property. Pobre prayed for just compensation of all the lots affected by
NPC's actions and for the payment of damages.
On 2 January 1985, NPC filed a motion to dismiss the second expropriation case on the ground that
NPC had found an alternative site and that NPC had already abandoned in 1981 the project within the
Property due to Pobre's opposition.
On 8 January 1985, the trial court granted NPC's motion to dismiss but the trial court allowed Pobre to
adduce evidence on his claim for damages. The trial court admitted Pobre's exhibits on the damages
because NPC failed to object.
On 30 August 1985, the trial court ordered the case submitted for decision since NPC failed to appear
to present its evidence. The trial court denied NPC's motion to reconsider the submission of the case
for decision.
NPC filed a petition for certiorari8 with the then Intermediate Appellate Court, questioning the 30
August 1985 Order of the trial court. On 12 February 1987, the Intermediate Appellate Court
dismissed NPC's petition but directed the lower court to rule on NPC's objections to Pobre's
documentary exhibits.
On 27 March 1987, the trial court admitted all of Pobre's exhibits and upheld its Order dated 30
August 1985. The trial court considered the case submitted for decision.
On 29 April 1987, the trial court issued its Decision in favor of Pobre. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant and
against the plaintiff, ordering the plaintiff to pay unto the defendant:
(1) The sum of THREE MILLION FOUR HUNDRED FORTY EIGHT THOUSAND FOUR
HUNDRED FIFTY (P3,448,450.00) PESOS which is the fair market value of the subdivision of
defendant with an area of sixty eight thousand nine hundred sixty nine (68,969) square meters, plus
legal rate of interest per annum from September 6, 1979 until the whole amount is paid, and upon
payment thereof by the plaintiff the defendant is hereby ordered to execute the necessary Deed of
Conveyance or Absolute Sale of the property in favor of the plaintiff;
(2) The sum of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS for and as attorney's
fees.
Costs against the plaintiff.
SO ORDERED.9
On 13 July 1987, NPC filed its motion for reconsideration of the decision. On 30 October 1987, the
trial court issued its Order denying NPC's motion for reconsideration.
NPC appealed to the Court of Appeals. On 30 March 1992, the Court of Appeals upheld the decision
of the trial court but deleted the award of attorney's fees. The dispositive portion of the decision reads:
WHEREFORE, by reason of the foregoing, the Decision appealed from is AFFIRMED with the
modification that the award of attorney's fees is deleted. No pronouncement as to costs.
SO ORDERED.10
The Court of Appeals denied NPC's motion for reconsideration in a Resolution dated 14 August 1992.
The Ruling of the Trial Court
105
In its 69-page decision, the trial court recounted in great detail the scale and scope of the damage NPC
inflicted on the Property that Pobre had developed into a resort-subdivision. Pobre's Property suffered
"permanent injury" because of the noise, water, air and land pollution generated by NPC's geothermal
plants. The construction and operation of the geothermal plants drastically changed the topography of
the Property making it no longer viable as a resort-subdivision. The chemicals emitted by the
geothermal plants damaged the natural resources in the Property and endangered the lives of the
residents.
NPC did not only take the 8,311.60 square-meter portion of the Property, but also the remaining area
of the 68,969 square-meter Property. NPC had rendered Pobre's entire Property useless as a resort-
subdivision. The Property has become useful only to NPC. NPC must therefore take Pobre's entire
Property and pay for it.
The trial court found the following badges of NPC's bad faith: (1) NPC allowed five years to pass
before it moved for the dismissal of the second expropriation case; (2) NPC did not act on Pobre's
plea for NPC to eliminate or at least reduce the damage to the Property; and (3) NPC singled out
Pobre's Property for piecemeal expropriation when NPC could have expropriated other properties
which were not affected in their entirety by NPC's operation.
The trial court found the just compensation to be P50 per square meter or a total of P3,448,450 for
Pobre's 68,969 square-meter Property. NPC failed to contest this valuation. Since NPC was in bad
faith and it employed dilatory tactics to prolong this case, the trial court imposed legal interest on the
P3,448,450 from 6 September 1979 until full payment. The trial court awarded Pobre attorney's fees
of P150,000.
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. However, the appellate court deleted the
award of attorney's fees because Pobre did not properly plead for it.
The Issues
NPC claims that the Court of Appeals committed the following errors that warrant reversal of the
appellate court's decision:
1. In not annulling the appealed Decision for having been rendered by the trial court with grave abuse
of discretion and without jurisdiction;
2. In holding that NPC had "taken" the entire Property of Pobre;
3. Assuming arguendo that there was "taking" of the entire Property, in not excluding from the
Property the 8,311.60 square-meter portion NPC had previously expropriated and paid for;
4. In holding that the amount of just compensation fixed by the trial court at P3,448,450.00 with
interest from September 6, 1979 until fully paid, is just and fair;
5. In not holding that the just compensation should be fixed at P25.00 per square meter only as what
NPC and Pobre had previously mutually agreed upon; and
6. In not totally setting aside the appealed Decision of the trial court.11
Procedural Issues
NPC, represented by the Office of the Solicitor General, insists that at the time that it moved for the
dismissal of its complaint, Pobre had yet to serve an answer or a motion for summary judgment on
NPC. Thus, NPC as plaintiff had the right to move for the automatic dismissal of its complaint. NPC
relies on Section 1, Rule 17 of the 1964 Rules of Court, the Rules then in effect. NPC argues that the
dismissal of the complaint should have carried with it the dismissal of the entire case including
Pobre's counterclaim.
NPC's belated attack on Pobre's claim for damages must fail. The trial court's reservation of Pobre's
right to recover damages in the same case is already beyond review. The 8 January 1985 Order of the
trial court attained finality when NPC failed to move for its reconsideration within the 15-day
reglementary period. NPC opposed the order only on 27 May 1985 or more than four months from the
issuance of the order.
We cannot fault the Court of Appeals for not considering NPC's objections against the subsistence of
Pobre's claim for damages. NPC neither included this issue in its assignment of errors nor discussed it
in its appellant's brief. NPC also failed to question the trial court's 8 January 1985 Order in the
petition for certiorari12 it had earlier filed with the Court of Appeals. It is only before this Court that
NPC now vigorously assails the preservation of Pobre's claim for damages. Clearly, NPC's opposition
to the existence of Pobre's claim for damages is a mere afterthought. Rules of fair play, justice and due
process dictate that parties cannot raise an issue for the first time on appeal.13
We must correct NPC's claim that it filed the notice of dismissal just "shortly" after it had filed the
complaint for expropriation. While NPC had intimated several times to the trial court its desire to
dismiss the expropriation case it filed on 5 September 1979,14 it was only on 2 January 1985 that NPC
filed its notice of dismissal.15 It took NPC more than five years to actually file the notice of dismissal.
Five years is definitely not a short period of time. NPC obviously dilly-dallied in filing its notice of
dismissal while NPC meanwhile burdened Pobre's property rights.
106
Even a timely opposition against Pobre's claim for damages would not yield a favorable ruling for
NPC. It is not Section 1, Rule 17 of the 1964 Rules of Court that is applicable to this case but Rule 67
of the same Rules, as well as jurisprudence on expropriation cases. Rule 17 referred to dismissal of
civil actions in general while Rule 67 specifically governed eminent domain cases.
Eminent domain is the authority and right of the state, as sovereign, to take private property for public
use upon observance of due process of law and payment of just compensation.16 The power of
eminent domain may be validly delegated to the local governments, other public entities and public
utilities17 such as NPC. Expropriation is the procedure for enforcing the right of eminent domain.18
"Eminent Domain" was the former title of Rule 67 of the 1964 Rules of Court. In the 1997 Rules of
Civil Procedure, which took effect on 1 July 1997, the prescribed method of expropriation is still
found in Rule 67, but its title is now "Expropriation."
Section 1, Rule 17 of the 1964 Rules of Court provided the exception to the general rule that the
dismissal of the complaint is addressed to the sound discretion of the court.19 For as long as all of the
elements of Section 1, Rule 17 were present the dismissal of the complaint rested exclusively on the
plaintiff's will.20 The defending party and even the courts were powerless to prevent the dismissal.21
The courts could only accept and record the dismissal.22
A plain reading of Section 1, Rule 17 of the 1964 Rules of Court makes it obvious that this rule was
not intended to supplement Rule 67 of the same Rules. Section 1, Rule 17 of the 1964 Rules of Court,
provided that:
SECTION 1. Dismissal by the plaintiff. — An action may be dismissed by the plaintiff without order
of court by filing a notice of dismissal at any time before service of the answer or of a motion for
summary judgment. Unless otherwise stated in the notice, the dismissal is without prejudice, except
that a notice operates as an adjudication upon the merits when filed by a plaintiff who has once
dismissed in a competent court an action based on or including the same claim. A class suit shall not
be dismissed or compromised without approval of the court.
While Section 1, Rule 17 spoke of the "service of answer or summary judgment," the Rules then did
not require the filing of an answer or summary judgment in eminent domain cases.23 In lieu of an
answer, Section 3 of Rule 67 required the defendant to file a single motion to dismiss where he should
present all of his objections and defenses to the taking of his property for the purpose specified in the
complaint.24 In short, in expropriation cases under Section 3 of Rule 67, the motion to dismiss took the
place of the answer.
The records show that Pobre had already filed and served on NPC his "motion to dismiss/answer"25
even before NPC filed its own motion to dismiss. NPC filed its notice of dismissal of the complaint on
2 January 1985. However, as early as 10 December 1984, Pobre had already filed with the trial court
and served on NPC his "motion to dismiss/answer." A certain Divina Cerela received Pobre's pleading
on behalf of NPC.26 Unfortunately for NPC, even Section 1, Rule 17 of the 1964 Rules of Court could
not save its cause.
NPC is in no position to invoke Section 1, Rule 17 of the 1964 Rules of Court. A plaintiff loses his
right under this rule to move for the immediate dismissal of the complaint once the defendant had
served on the plaintiff the answer or a motion for summary judgment before the plaintiff could file his
notice of dismissal of the complaint.27 Pobre's "motion to dismiss/answer," filed and served way ahead
of NPC's motion to dismiss, takes the case out of Section 1, Rule 17 assuming the same applies.
In expropriation cases, there is no such thing as the plaintiff's matter of right to dismiss the complaint
precisely because the landowner may have already suffered damages at the start of the taking. The
plaintiff's right in expropriation cases to dismiss the complaint has always been subject to court
approval and to certain conditions.28 The exceptional right that Section 1, Rule 17 of the 1964 Rules
of Court conferred on the plaintiff must be understood to have applied only to other civil actions. The
1997 Rules of Civil Procedure abrogated this exceptional right.29
The power of eminent domain is subject to limitations. A landowner cannot be deprived of his right
over his land until expropriation proceedings are instituted in court.30 The court must then see to it that
the taking is for public use, there is payment of just compensation and there is due process of law.31
If the propriety of the taking of private property through eminent domain is subject to judicial
scrutiny, the dismissal of the complaint must also pass judicial inquiry because private rights may
have suffered in the meantime. The dismissal, withdrawal or abandonment of the expropriation case
cannot be made arbitrarily. If it appears to the court that the expropriation is not for some public use,32
then it becomes the duty of the court to dismiss the action.33 However, when the defendant claims that
his land suffered damage because of the expropriation, the dismissal of the action should not foreclose
the defendant's right to have his damages ascertained either in the same case or in a separate action.34
Thus, NPC's theory that the dismissal of its complaint carried with it the dismissal of Pobre's claim for
damages is baseless. There is nothing in Rule 67 of the 1964 Rules of Court that provided for the
dismissal of the defendant's claim for damages, upon the dismissal of the expropriation case. Case law
holds that in the event of dismissal of the expropriation case, the claim for damages may be made
either in a separate or in the same action, for all damages occasioned by the institution of the
expropriation case.35 The dismissal of the complaint can be made under certain conditions, such as the
reservation of the defendant's right to recover damages either in the same or in another action.36 The
trial court in this case reserved Pobre's right to prove his claim in the same case, a reservation that has
become final due to NPC's own fault.
Factual Findings of the Trial and Appellate Courts Bind the Court
107
The trial and appellate courts held that even before the first expropriation case, Pobre had already
established his Property as a resort-subdivision. NPC had wrought so much damage to the Property
that NPC had made the Property uninhabitable as a resort-subdivision. NPC's facilities such as steam
wells, nag wells, power plants, power lines, and canals had hemmed in Pobre's Property. NPC's
operations of its geothermal project also posed a risk to lives and properties.
We uphold the factual findings of the trial and appellate courts. Questions of facts are beyond the pale
of Rule 45 of the Rules of Court as a petition for review may only raise questions of law.37 Moreover,
factual findings of the trial court, particularly when affirmed by the Court of Appeals, are generally
binding on this Court.38 We thus find no reason to set aside the two courts' factual findings.
NPC points out that it did not take Pobre's 68,969 square-meter Property. NPC argues that assuming
that it is liable for damages, the 8,311.60 square-meter portion that it had successfully expropriated
and fully paid for should have been excluded from the 68,969 square-meter Property that Pobre
claims NPC had damaged.
We are not persuaded.
In its 30 October 1987 Order denying NPC's motion for reconsideration, the trial court pointed out
that the Property originally had a total area of 141,300 square meters.39 Pobre converted the Property
into a resort-subdivision and sold lots to the public. What remained of the lots are the 68,969 square
meters of land.40 Pobre no longer claimed damages for the other lots that he had before the
expropriation.
Pobre identified in court the lots forming the 68,969 square-meter Property. NPC had the opportunity
to object to the identification of the lots.41 NPC, however, failed to do so. Thus, we do not disturb the
trial and appellate courts' finding on the total land area NPC had damaged.
NPC must Pay Just Compensation for the Entire Property
Ordinarily, the dismissal of the expropriation case restores possession of the expropriated land to the
landowner.42 However, when possession of the land cannot be turned over to the landowner because it
is neither convenient nor feasible anymore to do so, the only remedy available to the aggrieved
landowner is to demand payment of just compensation.43
In this case, we agree with the trial and appellate courts that it is no longer possible and practical to
restore possession of the Property to Pobre. The Property is no longer habitable as a resort-
subdivision. The Property is worthless to Pobre and is now useful only to NPC. Pobre has completely
lost the Property as if NPC had physically taken over the entire 68,969 square-meter Property.
In United States v. Causby,44 the U.S. Supreme Court ruled that when private property is rendered
uninhabitable by an entity with the power to exercise eminent domain, the taking is deemed complete.
Such taking is thus compensable.
In this jurisdiction, the Court has ruled that if the government takes property without expropriation
and devotes the property to public use, after many years the property owner may demand payment of
just compensation.45 This principle is in accord with the constitutional mandate that private property
shall not be taken for public use without just compensation.46
In the recent case of National Housing Authority v. Heirs of Isidro Guivelondo,47 the Court
compelled the National Housing Authority ("NHA") to pay just compensation to the landowners even
after the NHA had already abandoned the expropriation case. The Court pointed out that a government
agency could not initiate expropriation proceedings, seize a person's property, and then just decide not
to proceed with the expropriation. Such a complete turn-around is arbitrary and capricious and was
condemned by the Court in the strongest possible terms. NHA was held liable to the landowners for
the prejudice that they had suffered.
In this case, NPC appropriated Pobre's Property without resort to expropriation proceedings. NPC
dismissed its own complaint for the second expropriation. At no point did NPC institute expropriation
proceedings for the lots outside the 5,554 square-meter portion subject of the second expropriation.
The only issues that the trial court had to settle were the amount of just compensation and damages
that NPC had to pay Pobre.
This case ceased to be an action for expropriation when NPC dismissed its complaint for
expropriation. Since this case has been reduced to a simple case of recovery of damages, the
provisions of the Rules of Court on the ascertainment of the just compensation to be paid were no
longer applicable. A trial before commissioners, for instance, was dispensable.
We have held that the usual procedure in the determination of just compensation is waived when the
government itself initially violates procedural requirements.48 NPC's taking of Pobre's property
without filing the appropriate expropriation proceedings and paying him just compensation is a
transgression of procedural due process.
From the beginning, NPC should have initiated expropriation proceedings for Pobre's entire 68,969
square-meter Property. NPC did not. Instead, NPC embarked on a piecemeal expropriation of the
Property. Even as the second expropriation case was still pending, NPC was well aware of the damage
that it had unleashed on the entire Property. NPC, however, remained impervious to Pobre's repeated
demands for NPC to abate the damage that it had wrought on his Property.
108
NPC moved for the dismissal of the complaint for the second expropriation on the ground that it had
found an alternative site and there was stiff opposition from Pobre.49 NPC abandoned the second
expropriation case five years after it had already deprived the Property virtually of all its value. NPC
has demonstrated its utter disregard for Pobre's property rights.
Thus, it would now be futile to compel NPC to institute expropriation proceedings to determine the
just compensation for Pobre's 68,969 square-meter Property. Pobre must be spared any further delay
in his pursuit to receive just compensation from NPC.
Just compensation is the fair and full equivalent of the loss.50 The trial and appellate courts
endeavored to meet this standard. The P50 per square meter valuation of the 68,969 square-meter
Property is reasonable considering that the Property was already an established resort-subdivision.
NPC has itself to blame for not contesting the valuation before the trial court. Based on the P50 per
square meter valuation, the total amount of just compensation that NPC must pay Pobre is
P3,448,450.
The landowner is entitled to legal interest on the price of the land from the time of the taking up to the
time of full payment by the government.51 In accord with jurisprudence, we fix the legal interest at six
per cent (6%) per annum.52 The legal interest should accrue from 6 September 1979, the date when the
trial court issued the writ of possession to NPC, up to the time that NPC fully pays Pobre.53
NPC's abuse of its eminent domain authority is appalling. However, we cannot award moral damages
because Pobre did not assert his right to it.54 We also cannot award attorney's fees in Pobre's favor
since he did not appeal from the decision of the Court of Appeals denying recovery of attorney's
fees.55
Nonetheless, we find it proper to award P50,000 in temperate damages to Pobre. The court may award
temperate or moderate damages, which are more than nominal but less than compensatory damages, if
the court finds that a party has suffered some pecuniary loss but its amount cannot be proved with
certainty from the nature of the case.56 As the trial and appellate courts noted, Pobre's resort-
subdivision was no longer just a dream because Pobre had already established the resort-subdivision
and the prospect for it was initially encouraging. That is, until NPC permanently damaged Pobre's
Property. NPC did not just destroy the property. NPC dashed Pobre's hope of seeing his Property
achieve its full potential as a resort-subdivision.
The lesson in this case must not be lost on entities with eminent domain authority. Such entities
cannot trifle with a citizen's property rights. The power of eminent domain is an extraordinary power
they must wield with circumspection and utmost regard for procedural requirements. Thus, we hold
NPC liable for exemplary damages of P100,000. Exemplary damages or corrective damages are
imposed, by way of example or correction for the public good, in addition to the moral, temperate, G.R. No. 136349 January 23, 2006
liquidated or compensatory damages.57
LOURDES DE LA PAZ MASIKIP, Petitioner,
WHEREFORE, we DENY the petition for lack of merit. The appealed Decision of the Court of vs.
Appeals dated 30 March 1992 in CA-G.R. CV No. 16930 is AFFIRMED with MODIFICATION. THE CITY OF PASIG, HON. MARIETTA A. LEGASPI, in her capacity as Presiding Judge of
National Power Corporation is ordered to pay Antonino Pobre P3,448,450 as just compensation for the Regional Trial Court of Pasig City, Branch 165 and THE COURT OF APPEALS,
the 68,969 square-meter Property at P50 per square meter. National Power Corporation is directed to Respondents.
pay legal interest at 6% per annum on the amount adjudged from 6 September 1979 until fully paid.
Upon National Power Corporation's payment of the full amount, Antonino Pobre is ordered to execute
a Deed of Conveyance of the Property in National Power Corporation's favor. National Power
Corporation is further ordered to pay temperate and exemplary damages of P50,000 and P100,000,
respectively. No costs.

DECISION
SO ORDERED.

SANDOVAL GUTIERREZ, J.:

Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

Where the taking by the State of private property is done for the benefit of a small community which
seeks to have its own sports and recreational facility, notwithstanding that there is such a recreational
facility only a short distance away, such taking cannot be considered to be for public use. Its
expropriation is not valid. In this case, the Court defines what constitutes a genuine necessity for
public use.

This petition for review on certiorari assails the Decision1 of the Court of Appeals dated October 31,
1997 in CA-G.R. SP No. 41860 affirming the Order2 of the Regional Trial Court, Branch 165, Pasig
City, dated May 7, 1996 in S.C.A. No. 873. Likewise assailed is the Resolution3 of the same court
dated November 20, 1998 denying petitioner’s Motion for Reconsideration.

The facts of the case are:

Petitioner Lourdes Dela Paz Masikip is the registered owner of a parcel of land with an area of 4,521
square meters located at Pag-Asa, Caniogan, Pasig City, Metro Manila.

In a letter dated January 6, 1994, the then Municipality of Pasig, now City of Pasig, respondent,
notified petitioner of its intention to expropriate a 1,500 square meter portion of her property to be
used for the "sports development and recreational activities" of the residents of Barangay Caniogan.
This was pursuant to Ordinance No. 42, Series of 1993 enacted by the then Sangguniang Bayan of
Pasig.

109
Again, on March 23, 1994, respondent wrote another letter to petitioner, but this time the purpose was
allegedly "in line with the program of the Municipal Government to provide land opportunities to
deserving poor sectors of our community."
On May 2, 1994, petitioner sent a reply to respondent stating that the intended expropriation of her
property is unconstitutional, invalid, and oppressive, as the area of her lot is neither sufficient nor
suitable to "provide land opportunities to deserving poor sectors of our community."
In its letter of December 20, 1994, respondent reiterated that the purpose of the expropriation of
petitioner’s property is "to provide sports and recreational facilities to its poor residents."
Subsequently, on February 21, 1995, respondent filed with the trial court a complaint for
expropriation, docketed as SCA No. 873. Respondent prayed that the trial court, after due notice and
hearing, issue an order for the condemnation of the property; that commissioners be appointed for the
purpose of determining the just compensation; and that judgment be rendered based on the report of
the commissioners.
On April 25, 1995, petitioner filed a Motion to Dismiss the complaint on the following grounds:
I On May 7, 1996, the trial court issued an Order denying the Motion to Dismiss,5 on the ground that
PLAINTIFF HAS NO CAUSE OF ACTION FOR THE EXERCISE OF THE POWER OF
EMINENT DOMAIN, CONSIDERING THAT:
(A) THERE IS NO GENUINE NECESSITY FOR THE TAKING OF THE PROPERTY SOUGHT
TO BE EXPROPRIATED.
(B) PLAINTIFF HAS ARBITRARILY AND CAPRICIOUSLY CHOSEN THE PROPERTY
SOUGHT TO BE EXPROPRIATED.
(C) EVEN ASSUMING ARGUENDO THAT DEFENDANT’S PROPERTY MAY BE
EXPROPRIATED BY PLAINTIFF, THE FAIR MARKET VALUE OF THE PROPERTY TO BE
EXPROPRIATED FAR EXCEEDS SEVENTY-EIGHT THOUSAND PESOS (P78,000.00)
II
PLAINTIFF’S COMPLAINT IS DEFECTIVE IN FORM AND SUBSTANCE, CONSIDERING
THAT:
110
(A) PLAINTIFF FAILS TO ALLEGE WITH CERTAINTY THE PURPOSE OF THE
EXPROPRIATION.
(B) PLAINTIFF HAS FAILED TO COMPLY WITH THE PREREQUISITES LAID DOWN IN
SECTION 34, RULE VI OF THE RULES AND REGULATIONS IMPLEMENTING THE LOCAL
GOVERNMENT CODE; THUS, THE INSTANT EXPROPRIATION PROCEEDING IS
PREMATURE.
III
THE GRANTING OF THE EXPROPRIATION WOULD VIOLATE SECTION 261 (V) OF THE
OMNIBUS ELECTION CODE.
IV
PLAINTIFF CANNOT TAKE POSSESSION OF THE SUBJECT PROPERTY BY MERELY
DEPOSITING AN AMOUNT EQUAL TO FIFTEEN PERCENT (15%) OF THE VALUE OF THE
PROPERTY BASED ON THE CURRENT TAX DECLARATION OF THE SUBJECT PROPERTY.4
there is a genuine necessity to expropriate the property for the sports and recreational activities
of the residents of Pasig. As to the issue of just compensation, the trial court held that the same is to
be determined in accordance with the Revised Rules of Court.
Petitioner filed a motion for reconsideration but it was denied by the trial court in its Order of July 31,
1996. Forthwith, it appointed the City Assessor and City Treasurer of Pasig City as commissioners to
ascertain the just compensation. This prompted petitioner to file with the Court of Appeals a special
civil action for certiorari, docketed as CA-G.R. SP No. 41860. On October 31, 1997, the Appellate
Court dismissed the petition for lack of merit. Petitioner’s Motion for Reconsideration was denied in a
Resolution dated November 20, 1998.
Hence, this petition anchored on the following grounds:
THE QUESTIONED DECISION DATED 31 OCTOBER 1997 (ATTACHMENT "A") AND
RESOLUTION DATED 20 NOVEMBER 1998 (ATTACHMENT "B") ARE CONTRARY TO LAW,
THE RULES OF COURT AND JURISPRUDENCE CONSIDERING THAT:
I
A. THERE IS NO EVIDENCE TO PROVE THAT THERE IS GENUINE NECESSITY FOR THE
TAKING OF THE PETITIONER’S PROPERTY.
B. THERE IS NO EVIDENCE TO PROVE THAT THE PUBLIC USE REQUIREMENT FOR THE
EXERCISE OF THE POWER OF EMINENT DOMAIN HAS BEEN COMPLIED WITH.
C. THERE IS NO EVIDENCE TO PROVE THAT RESPONDENT CITY OF PASIG HAS
COMPLIED WITH ALL CONDITIONS PRECEDENT FOR THE EXERCISE OF THE POWER OF
EMINENT DOMAIN.
THE COURT A QUO’S ORDER DATED 07 MAY 1996 AND 31 JULY 1996, WHICH WERE
AFFIRMED BY THE COURT OF APPEALS, EFFECTIVELY AMOUNT TO THE TAKING OF
PETITIONER’S PROPERTY WITHOUT DUE PROCESS OF LAW:
II
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING OF RULE ON ACTIONABLE
DOCUMENTS TO THE DOCUMENTS ATTACHED TO RESPONDENT CITY OF PASIG’S
COMPLAINT DATED 07 APRIL 1995 TO JUSTIFY THE COURT A QUO’S DENIAL OF
PETITIONER’S RESPONSIVE PLEADING TO THE COMPLAINT FOR EXPROPRIATION (THE
MOTION TO DISMISS DATED 21 APRIL 1995).
III
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE RULE ON HYPOTHETICAL
ADMISSION OF FACTS ALLEGED IN A COMPLAINT CONSIDERING THAT THE MOTION TO
DISMISS FILED BY PETITIONER IN THE EXPROPRIATION CASE BELOW WAS THE
RESPONSIVE PLEADING REQUIRED TO BE FILED UNDER THE THEN RULE 67 OF THE
RULES OF COURT AND NOT AN ORIDNARY MOTION TO DISMISS UNDER RULE 16 OF
THE RULES OF COURT.
The foregoing arguments may be synthesized into two main issues – one substantive and one
procedural. We will first address the procedural issue.
Petitioner filed her Motion to Dismiss the complaint for expropriation on April 25, 1995. It was
denied by the trial court on May 7, 1996. At that time, the rule on expropriation was governed by
Section 3, Rule 67 of the Revised Rules of Court which provides:
111
"SEC. 3. Defenses and objections. – Within the time specified in the summons, each defendant, in lieu
of an answer, shall present in a single motion to dismiss or for other appropriate relief, all his
objections and defenses to the right of the plaintiff to take his property for the use or purpose specified
in the complaint. All such objections and defenses not so presented are waived. A copy of the motion
shall be served on the plaintiff’s attorney of record and filed with the court with proof of service."
The motion to dismiss contemplated in the above Rule clearly constitutes the responsive pleading
which takes the place of an answer to the complaint for expropriation. Such motion is the pleading
that puts in issue the right of the plaintiff to expropriate the defendant’s property for the use specified
in the complaint. All that the law requires is that a copy of the said motion be served on plaintiff’s
attorney of record. It is the court that at its convenience will set the case for trial after the filing of the
said pleading.6
The Court of Appeals therefore erred in holding that the motion to dismiss filed by petitioner
hypothetically admitted the truth of the facts alleged in the complaint, "specifically that there is a
genuine necessity to expropriate petitioner’s property for public use." Pursuant to the above Rule, the
motion is a responsive pleading joining the issues. What the trial court should have done was to set
the case for the reception of evidence to determine whether there is indeed a genuine necessity for the
taking of the property, instead of summarily making a finding that the taking is for public use and
appointing commissioners to fix just compensation. This is especially so considering that the purpose
of the expropriation was squarely challenged and put in issue by petitioner in her motion to dismiss.
Significantly, the above Rule allowing a defendant in an expropriation case to file a motion to dismiss
in lieu of an answer was amended by the 1997 Rules of Civil Procedure, which took effect on July 1,
1997. Section 3, Rule 67 now expressly mandates that any objection or defense to the taking of the
property of a defendant must be set forth in an answer.
The fact that the Court of Appeals rendered its Decision in CA-G.R. SP No. 41860 on October 31,
after the 1997 Rules of Civil Procedure took effect, is of no moment. It is only fair that the Rule at the
time petitioner filed her motion to dismiss should govern. The new provision cannot be applied
retroactively to her prejudice.
We now proceed to address the substantive issue.
In the early case of US v. Toribio,7 this Court defined the power of eminent domain as "the right of a
government to take and appropriate private property to public use, whenever the public exigency
requires it, which can be done only on condition of providing a reasonable compensation therefor." It
has also been described as the power of the State or its instrumentalities to take private property for
public use and is inseparable from sovereignty and inherent in government.8
The power of eminent domain is lodged in the legislative branch of the government. It delegates the
exercise thereof to local government units, other public entities and public utility corporations,9
subject only to Constitutional limitations. Local governments have no inherent power of eminent
domain and may exercise it only when expressly authorized by statute.10 Section 19 of the Local
Government Code of 1991 (Republic Act No. 7160) prescribes the delegation by Congress of the
power of eminent domain to local government units and lays down the parameters for its exercise,
thus:
"SEC. 19. Eminent Domain. – A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, purpose or welfare for
the benefit of the poor and the landless, upon payment of just compensation, pursuant to the
provisions of the Constitution and pertinent laws: Provided, however, That, the power of eminent
domain may not be exercised unless a valid and definite offer has been previously made to the owner
and such offer was not accepted: Provided, further, That, the local government unit may immediately
take possession of the property upon the filing of expropriation proceedings and upon making a
deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property
based on the current tax declaration of the property to be expropriated: Provided, finally, That, the
amount to be paid for expropriated property shall be determined by the proper court, based on the fair
market value at the time of the taking of the property."
Judicial review of the exercise of eminent domain is limited to the following areas of concern: (a) the
adequacy of the compensation, (b) the necessity of the taking, and (c) the public use character of the
purpose of the taking.11
In this case, petitioner contends that respondent City of Pasig failed to establish a genuine necessity
which justifies the condemnation of her property. While she does not dispute the intended public
purpose, nonetheless, she insists that there must be a genuine necessity for the proposed use and
purposes. According to petitioner, there is already an established sports development and recreational
activity center at Rainforest Park in Pasig City, fully operational and being utilized by its residents,
including those from Barangay Caniogan. Respondent does not dispute this. Evidently, there is no
"genuine necessity" to justify the expropriation.
The right to take private property for public purposes necessarily originates from "the necessity" and
the taking must be limited to such necessity. In City of Manila v. Chinese Community of Manila,12 we
held that the very foundation of the right to exercise eminent domain is a genuine necessity and
that necessity must be of a public character. Moreover, the ascertainment of the necessity must
precede or accompany and not follow, the taking of the land. In City of Manila v. Arellano Law
College,13 we ruled that "necessity within the rule that the particular property to be expropriated must
be necessary, does not mean an absolute but only a reasonable or practical necessity, such as would
combine the greatest benefit to the public with the least inconvenience and expense to the condemning
party and the property owner consistent with such benefit."
112
Applying this standard, we hold that respondent City of Pasig has failed to establish that there is a
genuine necessity to expropriate petitioner’s property. Our scrutiny of the records shows that the
Certification14 issued by the Caniogan Barangay Council dated November 20, 1994, the basis for the
passage of Ordinance No. 42 s. 1993 authorizing the expropriation, indicates that the intended
beneficiary is the Melendres Compound Homeowners Association, a private, non-profit organization,
not the residents of Caniogan. It can be gleaned that the members of the said Association are desirous
of having their own private playground and recreational facility. Petitioner’s lot is the nearest vacant
space available. The purpose is, therefore, not clearly and categorically public. The necessity has not
been shown, especially considering that there exists an alternative facility for sports development and
community recreation in the area, which is the Rainforest Park, available to all residents of Pasig City,
including those of Caniogan.
The right to own and possess property is one of the most cherished rights of men. It is so fundamental
that it has been written into organic law of every nation where the rule of law prevails. Unless the
requisite of genuine necessity for the expropriation of one’s property is clearly established, it shall be
the duty of the courts to protect the rights of individuals to their private property. Important as the
power of eminent domain may be, the inviolable sanctity which the Constitution attaches to the
property of the individual requires not only that the purpose for the taking of private property be
specified. The genuine necessity for the taking, which must be of a public character, must also be
shown to exist.
WHEREFORE, the petition for review is GRANTED. The challenged Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 41860 are REVERSED. The complaint for expropriation
filed before the trial court by respondent City of Pasig, docketed as SCA No. 873, is ordered
DISMISSED.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairperson
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Asscociate Justice
 CANCIO C. GARCIA G.R. No. 169903 February 29, 2012
Associate Justice
LAND BANK OF THE PHILIPPINES, Petitioner,
ATT E S TAT I O N vs.
HONEYCOMB FARMS CORPORATION, Respondent.
I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division. DECISION

REYNATO S. PUNO BRION, J.:

Associate Justice
Chairperson, Second Division The petition for review before us assails the decision1 dated March 31, 2005 of the Court of Appeals
(CA) in CA-G.R. CV No. 66023, which affirmed with modification the judgment dated July 6, 1999
C E R T I F I CAT I O N rendered by the Regional Trial Court (RTC) of Masbate, Masbate, Branch 48, acting as a Special
Agrarian Court (SAC) in Special Civil Case No. 4323 for Determination and Payment of Just
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation, it is Compensation. The petition also prays for the reversal of the resolution of the CA,2 dated October 4,
hereby certified that the conclusions in the above Decision were reached in consultation before the 2005, denying reconsideration.
case was assigned to the writer of the opinion of the Court.
FACTUAL ANTECEDENTS
ARTEMIO V. PANGANIBAN
Chief Justice Honeycomb Farms Corporation (Honeycomb Farms) was the registered owner of two parcels of
agricultural land in Cataingan, Masbate. The first parcel of land was covered by Transfer Certificate
of Title (TCT) No. T-2872 and has an area of 240.8874 hectares. The second parcel of land was
covered by TCT No. T-2549 and has an area of 254.25 hectares.3 On February 5, 1988, Honeycomb
Farms voluntarily offered these parcels of land, with a total area of 495.1374 hectares, to the
Department of Agrarian Reform (DAR) for coverage under Republic Act No. (RA) 6657, the
Comprehensive Agrarian Reform Law (CARL), for ₱10,480,000.00,4 or ₱21,165.00 per hectare.5
From the entire area offered, the government chose to acquire only 486.0907 hectares.

The Land Bank of the Philippines (LBP), as the agency vested with the responsibility of determining
the land valuation and compensation for parcels of land acquired pursuant to the CARL,6 and using
the guidelines set forth in DAR Administrative Order (AO) No. 17, series of 1989, as amended by
DAR AO No. 3, series of 1991, fixed the value of these parcels of land, as follows:

Acquired property Area in hectares Value

TCT No. T-2872 231.8406 ₱ 910,262.627
TCT No. T-2549 254.25 ₱1,023,520.568

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When Honeycomb Farms rejected this valuation for being too low, the Voluntary Offer to Sell was Still, Honeycomb Farms rejected this valuation.
referred to the DAR Adjudication Board, Region V, Legaspi City, for a summary determination of the
market value of the properties.9 After these administrative proceedings, the Regional Adjudicator On July 4, 1994, Honeycomb Farms filed a case with the RTC, acting as a SAC, against the DAR
fixed the value of the landholdings at ₱5,324,549.00, broken down as follows: Secretary and the LBP, praying that it be compensated for its landholdings in the amount of
₱12,440,000.00, with damages and attorney’s fees.
I. TCT No. T-2872
The RTC constituted a Board of Commissioners to aid the court in determining the just compensation
for the subject properties. The Board of Commissioners, however, failed to agree on a common
Land use Value per Area Total (Pesos) valuation for the properties.
hectare
Cornland P12,000.00 69.158 829,896.00 Honeycomb Farms, thereafter, filed an amended complaint, where it increased the valuation of the
properties to ₱20,000,000.00.11 The LBP, on the other hand, filed an amended answer where it
Upland 12,000.00 1.3888 16,665.60 admitted the preliminary valuation it made on the properties, but alleged that it had revalued the land
registered under TCT No. T-2872 at ₱1,373,244.78, while the land registered under TCT No. T-2549
(cassava) was revalued at ₱1,513,097.57.12
Cocoland 15,000.00 13.65 204,750.00
THE RTC DECISION
Grass land 10,000.00 147.6438 1,476,438.00
On July 6, 1999, the RTC issued a judgment whose dispositive portion reads:
TOTAL 231.8408 2,527,749.60
WHEREFORE, judgment is hereby rendered by:
II. TCT No. T-2549
1.) Fixing the just compensation of the two parcels of land owned by the Honeycomb Farm[s] Corp.
under TCT No. T-2872 and TCT No. T-2549 with a total area of 486.0907 hectares which is
considered a[s] Carpable in the sum of ₱25,232,000 subject to the lien for the docket fee the amount
Land use Value per hectare Area Total (Pesos) in excess of ₱20,000,000 as pleaded for in the amended complaint.

Coconut land P15,000.00 4.6 69,000.00 2.) Ordering the defendants to jointly and severally pay Attorney’s fee[s] equivalent to 10% of the
total just compensation; without pronouncement as to cost.
Cornland 12,000.00 101 212,000.00
SO ORDERED.13
Riceland (upland) 14,000.00 5 70,000.00
Since the Board of Commissioners could not reach a common valuation for the properties, the RTC
Cassava 12,000.00 4.65 55,800.00 made its own valuation. First, the RTC took judicial notice of the fact that a portion of the land,
measuring approximately 10 hectares, is commercial land, since it is located a few kilometers away
Cogon 10,000.00 139 1,390,000.00 from Sitio Curvada, Pitago, Cataingan, Masbate, which is a commercial district. The lower court thus
priced the 10 hectares at ₱100,000.00 per hectare and the remaining 476 hectares at ₱32,000.00 per
hectare.
TOTAL 254.25 2,796,800.0010

114
Both parties appealed to the CA.
Honeycomb Farms alleged that the government failed to pay just compensation for its land when the
LBP opened a trust account in its behalf, in violation of the Court’s ruling in Landbank of the Phils. v.
CA.14 Since it was never paid just compensation, the taking of its land is illegal. Consequently, the just
compensation should thus be determined based on factors existing at the time of the fixing of just
compensation, and not at the time the properties were actually taken.
The LBP, on the other hand, argued that the RTC committed a serious error when it disregarded the
formula for fixing just compensation embodied in DAR AO No. 6, series of 1992, as amended by
DAR AO No. 11, series of 1994. The LBP also argued that the RTC erred in taking judicial notice that
10 hectares of the land in question is commercial land. Lastly, the LBP assailed the award of
attorney’s fees for having no legal or factual basis.15
THE CA DECISION
The CA, in its March 31, 2005 decision, affirmed with modification the assailed RTC judgment. The
dispositive portion of the decision reads:
WHEREFORE, the foregoing considered, the assailed decision is MODIFIED only with respect to the
computation of the amount fixed by the trial court which is hereby corrected and fixed in the total
amount of ₱16,232,000.00, and the award of attorney’s fees is deleted. The rest of the decision is
AFFIRMED.16
The CA held that the lower courts are not bound by the factors enumerated in Section 17 of RA 6657
which are mere statutory guideposts in determining just compensation. Moreover, while the LBP
valued the land based on the formula provided for in DAR AO No. 11, series of 1994, this valuation
was too low and, therefore, confiscatory.
The CA thus affirmed the RTC’s valuation of the 10 hectares of commercial land at ₱100,000.00 per
hectare, and the remaining 476 hectares at ₱32,000.00 per hectare.
THE PETITION
The LBP argues that the CA committed a serious error of law when it failed to apply the mandatory
formula for determining just compensation fixed in DAR AO No. 11, series of 1994. In fixing the just
compensation for the subject landholdings at ₱16,232,000.00, the CA adopted the values fixed by the
SAC, despite the fact that the valuation was not based on law. According to the LBP, land taken
pursuant to the State’s agrarian reform program involves both the exercise of the State’s power of
eminent domain and the police power of the State. Consequently, the just compensation for land taken
115
for agrarian reform should be less than the just compensation given in the ordinary exercise of
eminent domain.
In contrast, Honeycomb Farms maintains that the DAR AOs were issued merely to serve as guidelines
for the DAR and the LBP in administratively fixing the valuation to be offered by the DAR to the
landowner for acceptance or rejection. However, it is not mandatory for courts to use the DAR AOs to
fix just compensation as this would amount to an administrative imposition on an otherwise purely
judicial function and prerogative of determination of just compensation for expropriated lands
specifically reserved by the Constitution to the courts.
THE COURT’S RULING
We GRANT the LBP’s petition.
Agrarian reform and the guarantee of just compensation
We begin by debunking the premise on which the LBP’s main argument rests – since the taking done
by the government for purposes of agrarian reform is not a traditional exercise of the power of
eminent domain but one which is done in pursuance of social justice and which involves the State’s
police power, the just compensation to be paid to the landowners for these parcels of agricultural land
should be less than the market value of the property.
When the State exercises its inherent power of eminent domain, the Constitution imposes the
corresponding obligation to compensate the landowner for the expropriated property. This principle is
embodied in Section 9, Article III of the Constitution, which provides: "Private property shall not be
taken for public use without just compensation."
When the State exercises the power of eminent domain in the implementation of its agrarian reform
program, the constitutional provision which governs is Section 4, Article XIII of the Constitution,
which 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.
[emphasis ours]
Notably, this provision also imposes upon the State the obligation of paying the landowner
compensation for the land taken, even if it is for the government’s agrarian reform purposes.
Specifically, the provision makes use of the phrase "just compensation," the same phrase used in
Section 9, Article III of the Constitution. That the compensation mentioned here pertains to the fair
and full price of the taken property is evident from the following exchange between the members of
the Constitutional Commission during the discussion on the government’s agrarian reform program:
Fr. Bernas. We discussed earlier the idea of a progressive system of compensation and I must admit,
that it was before I discussed it with Commissioner Monsod. I think what is confusing the matter is
the fact that when we speak of progressive taxation, the bigger the tax base, the higher the rate of tax.
Here, what we are saying is that the bigger the land is, the lower the value per square meter. So, it is
really regressive, not progressive.
Mr. Monsod. Yes, Madam President, it is true. It is progressive with respect to the beneficiary and
regressive with respect to the landowner.
Fr. Bernas. But is it the intention of the Committee that the owner should receive less than the
market value?
Mr. Monsod. It is not the intention of the Committee that the owner should receive less than the
just compensation. 17 (emphases ours)
Even more to the point is the following statement made by Commissioner Jose F.S. Bengzon Jr., taken
from the same discussion quoted above:
Mr. Bengzon. Madam President, as we stated earlier, the term "just compensation" is as it is defined
by the Supreme Court in so many cases and which we have accepted. So, there is no difference
between "just compensation" as stated here in Section 5 and "just compensation" as stated elsewhere.
There are no two different interpretations.18
Consistent with these discussions, the Court, in the definitive case of Ass’n of Small Landowners in
the Phils., Inc. v. Hon. Secretary of Agrarian Reform,19 defined "just compensation" for parcels of land
taken pursuant to the agrarian reform program as:
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. It has been repeatedly stressed by this Court that the measure is not the taker’s gain but
the owner’s loss. The word "just" is used to intensify the meaning of the word "compensation" to
convey the idea that the equivalent to be rendered for the property to be taken shall be real,
substantial, full, ample.
It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private lands under the police power. We deal here with an actual taking of
116
private agricultural lands that has dispossessed the owners of their property and deprived them of all
its beneficial use and enjoyment, to entitle them to the just compensation mandated by the
Constitution.
More recently, we brushed aside the LBP’s attempt to differentiate just compensation paid in what it
terms as "traditional" exercise of eminent domain and eminent domain in the context of agrarian
reform in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines,20 thus:
To our mind, nothing is inherently contradictory in the public purpose of land reform and the right of
landowners to receive just compensation for the expropriation by the State of their properties. That the
petitioners are corporations that used to own large tracts of land should not be taken against them. As
Mr. Justice Isagani Cruz eloquently put it:
[S]ocial justice – or any justice for that matter – is for the deserving, whether he be a millionaire in his
mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are called upon to tilt
the balance in favor of the poor, to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to prefer the poor simply because they are poor, or to reject the
rich simply because they are rich, for justice must always be served, for poor and rich alike, according
to the mandate of the law.
Mandatory application of the DAR formula
The CA, in affirming the RTC’s valuation and disregarding that of the LBP, explained its position, as
follows:
A careful perusal of the assailed decision shows that after the trial court dismissed the valuation made
by [Honeycomb Farms] as exorbitant and that fixed by [the LBP and the DAR] as confiscatory and
therefore unconstitutional, it fixed the value of the properties at ₱100,000.00 per hectare for the
portion near the Curvada market and ₱32,000.00 per hectare for the rest, taking judicial notice of the
fact that the so-called Sitio Curvada, Pitago, Cataingan, just a few kilometers away from Poblacion,
Cataingan, Masbate, is a commercial district. In this respect, while it is true that the trial court should
have announced its intention to take judicial notice of the commercial nature of the area near the
Curvada Market with an area of ten (10) hectares, under Section 3 of Rule 129 of the Rules of Court,
We find, however, that the parties were afforded ample opportunity to present evidence on the nature
of the subject property and were actually heard thereon. Thus, We see no error on the part of the trial
court in fixing the value of the land near the Curvada Market with an area of 10 hectares at
₱1,000,000.00 after evaluating the evidence adduced by the parties. The board of commissioners
constituted by the trial court to aid it in determining the just compensation for the subject properties
conducted an ocular inspection of the property and thereafter made its observation that 95% of the
property covered by TCT No. T-2549 and 65% of the land covered by TCT No. T-28872 are
developed. [Honeycomb Farms’] witness, Engr. Calauag, taking into consideration the location of the
subject property, made a comparative valuation of similar properties located in other geographical
areas of the country, based on listings obtained from newspapers, advertisements, and real estate
brokers. In countering the said valuation, [the LBP] and the DAR merely insisted on their own
computation of the value of the lands under the guidelines set by the DAR in its administrative orders,
disregarding factors such as the location of the subject property in relation to adjacent properties, as
well as its nature and the actual use for which this property is devoted. The determination of just
compensation logically should take into consideration as essential factor the nature of the land based
on its location.
While we agree with [the LBP and the DAR] that they merely followed the guidelines set forth in the
administrative orders issued by the DAR in arriving at the amount of ₱2,890,787.89, as the basis for
compensation, the courts of justice are not bound by such valuation as the final determination of just
compensation is a function addressed to the latter guided by factors set forth in RA 6657.21
The LBP disputes this ruling, maintaining that while the determination of just compensation is a
judicial function, courts should take into serious consideration the facts and data gathered by the
DAR, through the LBP, as the administrative agency mandated by law to make an initial
determination of the valuation of the parcels of agricultural land acquired for land reform.
We agree.
That it is the RTC, sitting as a SAC, which has the power to determine just compensation for parcels
of land acquired by the State, pursuant to the agrarian reform program, is made clear in Section 57 of
RA 6657, which reads:
Section 57. Special Jurisdiction. - The Special Agrarian Courts shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all proceedings
before the Special Agrarian Courts unless modified by this Act.
The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within
thirty (30) days from submission of the case for decision.
To guide the RTC in this function, Section 17 of RA 6657 enumerates the factors that have to be taken
into consideration to accurately determine just compensation. This provision states:
Section 17. Determination of Just Compensation. – In determining just compensation, the cost of
acquisition of the land, the current value of like properties, its nature, actual use and income, the
sworn valuation by the owner, the tax declarations, and the assessment made by government
117
assessors, shall be considered. The social and economic benefits contributed by the farmers and the
farmworkers and by the Government to the property, as well as the non-payment of taxes or loans
secured from any government financing institution on the said land, shall be considered as additional
factors to determine its valuation.
In Land Bank of the Philippines v. Sps. Banal,22 we recognized that the DAR, as the administrative
agency tasked with the implementation of the agrarian reform program, already came up with a
formula to determine just compensation which incorporated the factors enumerated in Section 17 of
RA 6657. We said:
These factors [enumerated in Section 17] have been translated into a basic formula in DAR
Administrative Order No. 6, Series of 1992, as amended by DAR Administrative Order No. 11, Series
of 1994, issued pursuant to the DAR's rule-making power to carry out the object and purposes of R.A.
6657, as amended. [emphases ours]
In Landbank of the Philippines v. Celada,23 we emphasized the duty of the RTC to apply the formula
provided in the applicable DAR AO to determine just compensation, stating that:
While [the RTC] is required to consider the acquisition cost of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and
the assessments made by the government assessors to determine just compensation, it is equally true
that these factors have been translated into a basic formula by the DAR pursuant to its rule-making
power under Section 49 of R.A. No. 6657. As the government agency principally tasked to implement
the agrarian reform program, it is the DAR's duty to issue rules and regulations to carry out the object
of the law. [The] DAR [Administrative Order] precisely "filled in the details" of Section 17, R.A. No.
6657 by providing a basic formula by which the factors mentioned therein may be taken into account.
The [RTC] was at no liberty to disregard the formula which was devised to implement the said
provision.
It is elementary that rules and regulations issued by administrative bodies to interpret the law which
they are entrusted to enforce, have the force of law, and are entitled to great respect. Administrative
issuances partake of the nature of a statute and have in their favor a presumption of legality. As such,
courts cannot ignore administrative issuances especially when, as in this case, its validity was not put
in issue. Unless an administrative order is declared invalid, courts have no option but to apply the
same. [emphases ours]
We reiterated the mandatory application of the formula in the applicable DAR administrative
regulations in Land Bank of the Philippines v. Lim,24 Land Bank of the Philippines v. Heirs of
Eleuterio Cruz,25 and Land Bank of the Philippines v. Barrido.26 In Barrido, we were explicit in stating
that:
While the determination of just compensation is essentially a judicial function vested in the RTC
acting as a Special Agrarian Court, the judge cannot abuse his discretion by not taking into full
consideration the factors specifically identified by law and implementing rules. Special Agrarian
Courts are not at liberty to disregard the formula laid down in DAR A.O. No. 5, series of 1998,
because unless an administrative order is declared invalid, courts have no option but to apply it.
The courts cannot ignore, without violating the agrarian law, the formula provided by the DAR for the
determination of just compensation.27 (emphases ours)
These rulings plainly impose on the RTC the duty to apply the formula laid down in the pertinent
DAR administrative regulations to determine just compensation. Clearly, the CA and the RTC acted
with grievous error when they disregarded the formula laid down by the DAR, and chose instead to
come up with their own basis for the valuation of the subject land.
Hearing necessary before RTC takes judicial notice of nature of land
Apart from disregarding the formula found in the applicable DAR AO, the RTC, and, correspondingly,
the CA, when it affirmed the trial court, committed further error in concluding that the 10 hectares of
the subject property is commercial land after taking judicial notice of the fact that this portion of land
is near Sitio Curvada, Pitago, Cataingan, a commercial district.
While the lower court is not precluded from taking judicial notice of certain facts, it must exercise this
right within the clear boundary provided by Section 3, Rule 129 of the Rules of Court, which
provides:
Section 3. Judicial notice, when hearing necessary. – During the trial, the court, on its own initiative,
or on request of a party, may announce its intention to take judicial notice of any matter and allow the
parties to be heard thereon.
After the trial, and before judgment or on appeal, the proper court, on its own initiative, or on request
of a party, may take judicial notice of any matter and allow the parties to be heard thereon if such
matter is decisive of a material issue in the case. [emphasis ours]
The classification of the land is obviously essential to the valuation of the subject property, which is
the very issue in the present case. The parties should thus have been given the opportunity to present
evidence on the nature of the property before the lower court took judicial notice of the commercial
nature of a portion of the subject landholdings. As we said in Land Bank of the Phils. v. Wycoco:28
The power to take judicial notice is to be exercised by courts with caution especially where the case
involves a vast tract of land. Care must be taken that the requisite notoriety exists; and every
reasonable doubt on the subject should be promptly resolved in the negative. To say that a court will
118
take judicial notice of a fact is merely another way of saying that the usual form of evidence will be
dispensed with if knowledge of the fact can be otherwise acquired. This is because the court assumes
that the matter is so notorious that it will not be disputed. But judicial notice is not judicial
knowledge. The mere personal knowledge of the judge is not the judicial knowledge of the court, and
he is not authorized to make his individual knowledge of a fact, not generally or professionally
known, the basis of his action.
In these lights, we find that a remand of this case to the court of origin is necessary for the
determination of just compensation, in accordance with the formula stated in DAR AO No. 6, series of
1992, as amended by DAR AO No. 11, series of 1994, which are the applicable issuances on fixing
just compensation.
Payment through trust account
As a final point, we have not failed to notice that the LBP in this case made use of trust accounts to
pay Honeycomb Farms.1âwphi1 In Land Bank of the Phil. v. CA,29 this Court struck down as void
DAR Administrative Circular No. 9, Series of 1990, providing for the opening of trust accounts in lieu
of the deposit in cash or in bonds contemplated in Section 16(e) of RA 6657. We said:
It is very explicit x x x [from Section 16(e)] that the deposit must be made only in "cash" or in "LBP
bonds." Nowhere does it appear nor can it be inferred that the deposit can be made in any other form.
If it were the intention to include a "trust account" among the valid modes of deposit, that should have
been made express, or at least, qualifying words ought to have appeared from which it can be fairly
deduced that a "trust account" is allowed. In sum, there is no ambiguity in Section 16(e) of RA 6657
to warrant an expanded construction of the term "deposit."
xxxx
In the present suit, the DAR clearly overstepped the limits of its power to enact rules and regulations
when it issued Administrative Circular No. 9. There is no basis in allowing the opening of a trust
account in behalf of the landowner as compensation for his property because, as heretofore discussed,
Section 16(e) of RA 6657 is very specific that the deposit must be made only in "cash" or in "LBP
bonds." In the same vein, petitioners cannot invoke LRA Circular Nos. 29, 29-A and 54 because these
implementing regulations cannot outweigh the clear provision of the law. Respondent court therefore
did not commit any error in striking down Administrative Circular No. 9 for being null and void.30
As a result, the DAR issued AO No. 2, Series of 1996, converting trust accounts into deposit accounts.
The pertinent portion of the AO provides:
VI. TRANSITORY PROVISIONS
 xxxx
All previously established Trust Deposits which served as the basis for the transfer of the landowner’s
title to the Republic of the Philippines shall likewise be converted to deposits in cash and in bonds.
The Bureau of Land Acquisition and Distribution shall coordinate with the LBP for this purpose.
Recognizing that the belated conversion of the trust account into a deposit account failed to address
the injustice caused to the landowner by the delay in its receipt of the just compensation due, we held
in Wycoco that:
Farms, as determined by the RTC, should bear 12% interest per annum from the time LBP opened the
trust account in its name until the account is converted into cash and LBP bonds deposit accounts.
WHEREFORE, premises considered, the petition is GRANTED. Special Civil Case No. 4323 is
REMANDED to the Regional Trial Court of Masbate, Masbate, Branch 48, for the determination of
just compensation, based on the applicable administrative orders of the Department of Agrarian
Reform, subject to a 12% interest per annum from the time the Land Bank of the Philippines opened
the trust account for respondent Honeycomb Farms Corporation up to the time this account is actually
converted into cash and LBP bonds deposit accounts.

In light of the foregoing, the trust account opened by LBP in the name of Wycoco as the mode of SO ORDERED.
payment of just compensation should be converted to a deposit account. Such conversion should be
retroactive in application in order to rectify the error committed by the DAR in opening a trust ARTURO D. BRION
account and to grant the landowners the benefits concomitant to payment in cash or LBP bonds Associate Justice
prior to the ruling of the Court in Land Bank of the Philippines v. Court of Appeals. Otherwise,
petitioner’s right to payment of just and valid compensation for the expropriation of his property WE CONCUR:
would be violated. The interest earnings accruing on the deposit account of landowners would suffice
to compensate them pending payment of just compensation.
ANTONIO T. CARPIO
Associate Justice
In some expropriation cases, the Court imposed an interest of 12% per annum on the just Chairperson
compensation due the landowner. It must be stressed, however, that in these cases, the imposition of
interest was in the nature of damages for delay in payment which in effect makes the obligation on the
part of the government one of forbearance. It follows that the interest in the form of damages cannot JOSE PORTUGAL PEREZ MARIA LOURDES P. A.
be applied where there was prompt and valid payment of just compensation. Conversely, where there
was delay in tendering a valid payment of just compensation, imposition of interest is in order. This is Associate Justice SERENO
because the replacement of the trust account with cash or LBP bonds did not ipso facto cure the lack Associate Justice
of compensation; for essentially, the determination of this compensation was marred by lack of due BIENVENIDO L. REYES
process. Associate Justice

Accordingly, the just compensation due Wycoco should bear 12% interest per annum from the ATT E S TAT I O N
time LBP opened a trust account in his name up to the time said account was actually converted
into cash and LBP bonds deposit accounts. The basis of the 12% interest would be the just I attest that the conclusions in the above Decision had been reached in consultation before the case
compensation that would be determined by the Special Agrarian Court upon remand of the was assigned to the writer of the opinion of the Court’s Division.
instant case. In the same vein, the amount determined by the Special Agrarian Court would also be
the basis of the interest income on the cash and bond deposits due Wycoco from the time of the taking
of the property up to the time of actual payment of just compensation.31 (emphases ours) ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
In line with this ruling, the LBP is instructed to immediately convert the trust account opened in the
name of Honeycomb Farms to a deposit account. Furthermore, the just compensation due Honeycomb
C E R T I F I CAT I O N

119
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I G.R. No. 170422 March 7, 2008
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division. SPS. EDMOND LEE and HELEN HUANG, petitioner,
vs.
RENATO C. CORONA LAND BANK OF THE PHILIPPINES, respondents.
Chief Justice
DECISION

TINGA, J.:

For our consideration is a Petition1 assailing the 18 August 2005 Decision2 of the Court of Appeals in
CA-G.R. SP No. 84249, entitled Land Bank of the Philippines v. Sps. Edmond Lee and Helen Huang.

The antecedents follow.

On 7 August 2001, petitioners received a notice of coverage informing them that their landholding3 is
covered by the government’s compulsory acquisition scheme pursuant to the Comprehensive Agrarian
Reform Law (R.A. No. 6657). On 1 June 2001, they received from the Department of Agrarian
Reform (DAR) a copy of the notice of land valuation and acquisition which contains an offer of
P315,307.874 as compensation for 3.195 hectares of the property. Petitioners rejected the offer.

Subsequently, a summary administrative proceeding was conducted by the Department of Agrarian

Reform Adjudication Board (DARAB) to determine the valuation and compensation of the subject
property. On 27 September 2001, the DARAB issued a decision5 declaring that the Land Bank of the
Philippines (LBP) fully complied with the criteria set forth in R.A. No. 6657 in determining the value
of the land, and ordered the LBP to pay petitioners the original amount offered by DAR. Petitioners
sought reconsideration of the decision, but their motion was denied by the Provincial Adjudicator on 6
December 2001.6

Aggrieved, petitioners filed an original petition7 for the determination of just compensation before the
Regional Trial Court of Balanga City, Bataan.8 They offered the same exhibits and transcript of the
oral testimonies and the appraisal report presented in Civil Case No. 7171,9 a prior just compensation
case involving a parcel of land adjacent to the property subject of this case, where the special agrarian
court (SAC) pegged the value of the property at P250.00 per square meter. LBP, for its part, presented
the testimony of one Theresie P. Garcia, an agrarian affairs specialist. The SAC, citing the appraisal
report and its decision in Civil Case No. 7171, decided in favor of petitioners and ordered LBP to pay
them P7,978,750.00 as just compensation.10

LBP filed a Petition for Review11 before the Court of Appeals and argued that the SAC erred in giving
considerable weight on the appraisal report of the private appraisal firm thereby disregarding the

120
provisions of R.A. No. 6657 and its implementing regulations. The Court of Appeals ruled that the
SAC should have refrained from taking judicial notice of its own decision in Civil Case No. 7171 in
resolving just compensation in the present case, especially because the values rendered in the previous
decision had not yet attained a final and executory character at the time.12 It found that the SAC made
a wholesale adoption of the valuation of the appraisal company and did not consider the other factors
set forth in R.A. No. 6657 even though the appraisal company admitted that it did not consider as
applicable the CARP valuation of the property.13
The Court of Appeals likewise found the value proposed by LBP to be extremely low considering the
disparity between the said amount and that suggested by the appraisal company. According to the
Court of Appeals, the SAC should have judiciously made an independent finding of fact and
explained the legal basis thereof.14
The Court of Appeals held that since the taking of private lands under the agrarian reform program
partakes of the nature of an expropriation proceeding, the SAC should have appointed competent and
disinterested commissioners to assist it in valuating the property in question, following Section 5,
Rule 67 of the 1997 Rules of Civil Procedure.15 It remanded the case to the trial court "for proper and
judicious determination of just compensation, appointing for that purpose a set of commissioners."16
Before us, petitioners allege that it is no longer necessary to remand the case to the lower court
because the parties already had the chance before the SAC to present evidence on the valuation of the
subject landholding. Petitioners believe that the remand of the case would give LBP undue
opportunity which it already had during the proceedings a quo, and which opportunity it failed to take
advantage of.17
Petitioners also argue that the SAC may validly take judicial notice of its decision in the other just
compensation cases. They point out that they had offered in the present case both testimonial and
documentary evidence adduced in the previous case. Thus, the SAC’s decision in this case was based
on the evidence presented during trial.18
Finally, relying on the presumption of regularity, petitioners claim that the SAC had considered the
criteria set forth in the law for the determination of just compensation in computing the value of the
subject landholding. In any case, according to them, R.A. No. 6657 does not at all require the SAC to
consider all the seven factors enumerated therein in its determination of just compensation.19
In its Comment,20 LBP argues that the Supreme Court is not a trier of facts, and is not duty-bound to
determine the veracity of the factual allegations of petitioners.21 Anent the issue of judicial notice,
LBP posits that the reliance by the SAC and petitioners on the valuation in Civil Case No. 7171 is
misplaced because the said case is still on appeal and has not yet attained finality.22 Even if the
evidence in the aforesaid case is presented in this case, the fact remains that the valuation reached by
121
the SAC is not in accord with R.A. No. 6657 as translated into a basic formula in DAR Administrative
Order No. 5, series of 1998 (AO No. 5).23 In addition, LBP posits that the factors in determining just
compensation, as spelled out in Land Bank of the Philippines v. Spouses Banal24 were not observed by
the SAC in the instant case since it relied merely on the alleged selling price of the adjoining lands in
fixing the just compensation of the subject property instead of following the formula under AO No.
5.25 LBP adds that the subject property is being acquired by the government pursuant to its land
reform program, and thus its potential for commercial, industrial or residential uses will not affect the
compensation to be paid by the State as its value is determined at the time of the taking.26
There is no merit in the petition.
Judicial cognizance is based on considerations of expediency and convenience. It displaces evidence
since, being equivalent to proof, it fulfills the object which the evidence is intended to achieve.27
The SAC may take judicial notice of its own decision in Civil Case No. 7171. It has been said that
courts may take judicial notice of a decision or the facts involved in another case tried by the same
court if the parties introduce the same in evidence or the court, as a matter of convenience, decides to
do so.28 Petitioners presented the same appraisal report offered in Civil Case No. 7171, and there
seems to be no objection on the part of LBP when they did so.
We note, however, that the SAC’s cognizance of its findings in Civil Case No. 7171 was not the sole
reason for its decision. A reading of its decision shows that the SAC considered the evidence
presented by both petitioners and LBP, i.e., the testimonies and report used in Civil Case No. 7171
proffered by petitioners, and the testimony of LBP’s agrarian affairs specialist. The SAC evidently
found the testimony of the LBP officer unsatisfactory and LBP’s valuation improper, and thus relied
on the evidence presented by petitioners. As the Court sees it, the decision in Civil Case No. 7171
merely strengthened the case for petitioners.
Be that as it may, the SAC’s reliance on the valuation made by the appraisal company is misplaced,
since the valuation was not arrived at using the factors required by the law and prescribed by the AO
No. 5.
Section 17 of R.A. No. 6657 which enumerates the factors to be considered in determining just
compensation reads:
SECTION 17. Determination of Just Compensation.—In determining just compensation, the cost of
acquisition of the land, the current value of like properties, its nature, actual use and income, the
sworn valuation by the owner, tax declarations, and the assessment made by government assessors
shall be considered. The social and economic benefits contributed by the farmers and the farmworkers
and by the Government to the property as well as the non-payment of taxes or loans secured from any
government financing institutions on the said land shall be considered as additional factors to
determine its valuation.
These factors have already been incorporated in a basic formula by the DAR pursuant to its rule-
making power under Section 49 of R.A. No. 6657. AO No. 5 precisely filled in the details of Section
17, R. A. No. 6657 by providing a basic formula by which the factors mentioned therein may be taken
into account.29 This formula has to be considered by the SAC in tandem with all the factors referred to
in Section 17 of the law. The administrative order provides:
In no case shall the value of idle land using the formula MV x 2 exceed the lowest value of land
within the same estate under consideration or within the same barangay or municipality (in that order)
approved by LBP within one (1) year from receipt of claimfolder.
---
Where:

A. There shall be one basic formula for the valuation of lands covered by VOS or CA: CNI= (AGPxSP) - CO
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
.12
Where:
AGP= Average Gross Production corresponding to the latest available 12 months’ gross production
LV = Land Value immediately preceding the date of FI (field investigation)

CNI = Capitalized Net Income SP= Selling Price (the average of the latest available 12 months selling prices prior to the date of
receipt of the CF (claim folder) by LBP for processing, such prices to be secured from the Department
CS = Comparable Sales of Agriculture (DA) and other appropriate regulatory bodies or, in their absence, from the Bureau of
Agricultural Statistics. If possible, SP data shall be gathered for the barangay or municipality where
MV = Market Value per Tax Declaration the property is located. In the absence thereof, SP may be secured within the province or region.

The above formula shall be used if all three factors are present, relevant, and applicable. CO = Cost of Operations

A1. When the CS factor is not present and CNI and MV are applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
A2. When the CNI factor is not present, and CS and MV are applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A3. When both the CS and CNI are not present and only MV is applicable, the formula shall be:
LV = MV x 2
Whenever the cost of operations could not be obtained or verified, an assumed net income rate (NIR)
of 20% shall be used. Landholdings planted to coconut which are productive at the time of FI shall
continue to use the assumed NIR of 70 %. DAR and LBP shall continue to conduct joint industry
studies to establish the applicable NIR for each crop covered under CARP.
0.12 = Capitalization rate
We find that the factors required by the law and enforced by the DAR Administrative Order were not
observed by the SAC when it adopted wholeheartedly the valuation arrived at in the appraisal report.
According to the appraisal company, it "personally inspected the property, investigated local market
conditions, and have given consideration to the extent, character and utility of the property; sales and
holding prices of similar land; and highest and best use of the property."30 The value of the land was
arrived at using the market data approach, which bases the value of the land on sales and listings of

122
comparable property registered within the vicinity.31 In fact, as noted by the Court of Appeals, a
representative of the company admitted that it did not consider the CARP valuation to be applicable.32
This is not to say that the Court favors the valuation given by LBP. While it presented a land valuation
worksheet33 and a claims valuation and processing form,34 which both value the land at P315, 307.87,
we find that LBP’s valuation is too low vis-á-vis the value suggested by the appraisal company.
Moreover, we observe that the valuation was not arrived at based on all the factors provided in the
law. As admitted by its agrarian affairs specialist, she had not gone over the property before she made
the valuation, nor was she aware of adjacent properties/structures.35 The LBP was not thorough in its
valuation of the subject property.
All told, we find that the remand of the case is in order to better determine the proper valuation of the
subject property.
We clarify, however, that we are not in accord with the declaration of the Court of Appeals on the
appointment of commissioners in the instant case. According to the appellate court:
Sec. 58. Appointment of Commissioners.—The Special Agrarian Courts, upon their own initiative or
at the instance of any of the parties, may appoint one or more commissioners to examine, investigate
and ascertain facts relevant to the dispute, including the valuation of properties, and to file a written
report thereof with the court.
With the remand of the case, it is now up to the SAC, or to the parties, to determine if there is a need
to avail of commissioners to arrive at the proper valuation of the subject land.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with
MODIFICATION as above indicated. The case is REMANDED to the Regional Trial Court of
Balanga, Bataan acting as a Special Agrarian Court for the determination of just compensation in
accordance with Section 17 of Republic Act No. 6657.
SO ORDERED.
Quisumbing,Chairperson Carpio-Morales, Velasco, Jr., JJ., concur.

x x x Consequently, when the Regional Trial Court acting as a Special Agrarian Court determines just
compensation, it is mandated to apply the Rules of Court.36 The rules on expropriation, on the other
hand, specifically under Section 5 of Rule 67 of the 1997 Rules on Civil Procedure provides to wit:

SEC.5. Ascertainment of compensation.— Upon the rendition of the order of expropriation, the court
shall appoint not more than three (3) competent and disinterested persons as commissioners to
ascertain and report to the court the just compensation for the property sought to be taken. The order
of appointment shall designate the time and place of the first session of the hearing to be held by the
commissioners and specify the time within which their report is to be filed with the court.

xxx

Under the afore-quoted provision, it is clear that the SAC should have appointed competent and
disinterested commissioners to assist it in valuating the property in question. (Emphasis supplied)
x x x.37

The Court of Appeals seems to imply that the appointment of commissioners is mandatory in agrarian
reform cases. We do not agree. While the Rules of Court provisions apply to proceedings in special
agrarian courts,38 it is clear that unlike in expropriation proceedings under the Rules of Court the
appointment of a commissioner or commissioners is discretionary on the part of the court or upon the
instance of one of the parties. And when the court does resort to the commissioners-type of appraisal,
it is not circumscribed to appoint three commissioners, unlike the modality under Rule 67. Section 58
of R.A. No. 6657 provides:

123
G.R. No. 170846 February 6, 2007
NATIONAL POWER CORPORATION, Petitioner,
vs.
AURELLANO S. TIANGCO, LOURDES S. TIANGCO and NESTOR S. TIANGCO,
Respondents.
DECISION
GARCIA, J.:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner National Power
Corporation (NPC) seeks the annulment and setting aside of the Decision1 dated March 14, 2005 of
the Court of Appeals (CA) in CA-G.R. CV No. 53576, as reiterated in its Resolution2 of December 2,
2005 which denied the petitioner’s motion for reconsideration. The assailed decision modified that of
the Regional Trial Court (RTC) of Tanay, Rizal, Branch 80, by increasing the amount of just
compensation due the respondents in an expropriation case filed against them by the petitioner.
The facts:
Herein respondents Aurellano, Lourdes and Nestor, all surnamed Tiangco, are the owners of a parcel
of land with an area of 152,187 square meters at Barangay Sampaloc, Tanay, Rizal and registered in
their names under TCT No. M-17865 of the Registry of Deeds of Rizal.
On the other hand, petitioner NPC is a government-owned and controlled corporation created for the
purpose of undertaking the development and generation of power from whatever source. NPC’s
charter (Republic Act No. 6395) authorizes the corporation to acquire private property and exercise
the right of eminent domain.1awphi1.net
NPC requires 19,423 square meters of the respondents’ aforementioned property, across which its
500Kv Kalayaan-San Jose Transmission Line Project will traverse. NPC’s Segregation Plan3 for the
purpose shows that the desired right-of-way will cut through the respondents’ land, in such a manner
that 33,392 square meters thereof will be left separated from 99,372 square meters of the property.
Within the portion sought to be expropriated stand fruit-bearing tress, such as mango, avocado,
jackfruit, casuy, santol, calamansi, sintones and coconut trees.
On November 20, 1990, after repeated unsuccessful negotiations with the respondents, NPC filed with
the RTC of Tanay, Rizal a complaint for expropriation4 against them. In time, the respondents filed
their answer.
124
On March 14, 1991, the trial court issued a Condemnation Order, granting NPC the right to take
possession of the area sought to be expropriated. In the same Order, the court directed the parties to
nominate their respective commissioners, with a third member to be nominated and appointed by the
court itself, to determine the proper amount of just compensation to be paid to the respondents. As
constituted in the manner thus indicated, the board of commissioners was composed of the following:
for NPC, Atty. Restituto Mallo of its Legal Department; for the respondents, Mr. Basilio Afuang, a
geodetic engineer and a real estate broker by profession; and for the court, Clerk of Court V Ms.
Amelia de Guzman Carbonell.
On April 5, 1991, the trial court issued an order directing NPC to pay and deposit with the Rizal
Provincial Treasurer the amount of ₱81,204.00, representing the temporary provisional value of the
area subject of the expropriation prior to the taking of possession thereof. On April 22, 1991, with
NPC having complied with the deposit requirement, a writ of possession was issued in its favor.
Thereafter, an ocular inspection of the premises was conducted and hearings before the board of
commissioners were held, during which the Municipal Assessor of Tanay, Rizal was presented. He
submitted a record of the Schedule of Values for taxation purposes and a certification to the effect that
the unit value of the respondents’ property is ₱21,000.00 per hectare.
On August 7, 1993, commissioner Basilio Afuang for the respondents filed his report. He pegged the
price of the area sought to be expropriated at ₱30.00 per square meter or ₱582,690.005 in the
aggregate; and for the improvements thereon, Afuang placed a valuation of ₱2,093,950.00. The
figures are in contrast with the respondents’ own valuation of ₱600,600.00, for the area, and
₱4,935,500.00, for the improvements.
On September 14, 1993, NPC filed an amended complaint to acquire only 19,423 square meters of the
respondents’ property. The original area of 20,220 square meters initially sought to be expropriated
under the original complaint turned out to be in excess of the area required.
For its part, NPC made it clear that it is interested only in acquiring an easement of right-of-way over
the respondents’ property and that ownership of the area over which the right-of-way will be
established shall remain with the respondents. For this reason, NPC claims that it should pay, in
addition to the agreed or adjudged value of the improvements on the area, only an easement fee in an
amount equivalent to ten per cent (10%) of the market value of the property as declared by the
respondents or by the Municipal Assessor, whichever is lower, as provided for under Section 3-A of
Republic Act No. 6395, as amended by Presidential Decree 938.6
The court-appointed commissioner, Ms. Amelia de Guzman Carbonell, found that the risk and
dangerous nature of the transmission line project essentially deprive the respondents of the use of the
area. Nonetheless, she recommended that the determination of just compensation should be relegated
to "expert appraisers."7
From the evidence before it, the trial court made a determination that the market value of the property
is ₱2.09 per square meter, or ₱40,594.07 for the entire 19,423 square meters needed by NPC, and not
the ₱30.00 per square meter claimed by the respondents. Neither did the trial court consider NPC’s
reliance on Section 3-A of Republic Act No. 6395, as amended by Presidential Decree 938, the court
placing more weight on the respondents’ argument that expropriation would result in the substantial
impairment of the use of the area needed, even though what is sought is a mere aerial right-of-way.
The court found as reasonable the amount of ₱324,750.00 offered by NPC for the improvements, as
the same is based on the official current schedule of values as determined by the Municipal Assessor
of Tanay, Rizal.
Hence, in its decision8 of February 19, 1996, the trial court rendered judgment as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Expropriating in favor of [NPC] a parcel of land covering a total area of 19,423 sq.m. covered by
TCT No. M-17860 owned by the [respondents];
2. Ordering the amount of P40,594.07 as just compensation for the 19,423 square meters of land
affected by the expropriations; and the amount of P324,750.00 as reasonable compensation for the
improvements on the land expropriated with legal interest from the time of possession by the plaintiff.
No pronouncement as to costs.
SO ORDERED. (Words in brackets supplied.)
The respondents moved for reconsideration, presenting for the first time a document entitled "Bureau
of Internal Revenue Circular of Appraisal," which shows that for the year 1985, lands in Barangay
Sampaloc were valued at ₱30.00 per square meter; for the year 1992, at ₱80.00 per square meter; and
for year 1994, at ₱100.00 per square meter. Respondents maintain that the price of ₱30.00 per square
meter for the needed area of 19,423 square meters is the reasonable amount and should be the basis
for fixing the amount of just compensation due them. The trial court denied the motion, stating that
the BIR circular in question was belatedly filed and therefore NPC could not have opposed its
presentation.
From the aforesaid decision of the trial court, both NPC and the respondents went on appeal to the CA
whereat the separate appeals were consolidated and docketed as CA-G.R. CV No. 53576. The
appellate court found merit in the respondents’ appeal, and disregarded the ₱2.09 per square meter
valuation of the trial court, which was based on a 1984 tax declaration. Instead, the CA placed
125
reliance upon a 1993 tax declaration, "being only two years removed from the time of taking."9 The
appellate court determined the time of taking to be in 1991. Thus, the greater value of ₱913,122.00 as
declared in Tax Declaration No. 011-2667 dated July 23, 1993 should be the basis for determining just
compensation. With regard to the value of improvements, the appellate court found NPC’s valuation
more favorable, being based on the current (1991) schedule of values for trees in the provinces of
Rizal and Laguna. Hence, in its decision10 of March 14, 2005, the CA rendered judgment, to wit:
WHEREFORE, the instant Appeal is GRANTED. The decision of the Regional Trial Court of Tanay,
Rizal, Branch 80 dated February 19, 1996 is hereby MODIFIED and the compensation awarded for
the 19,423 square meters of land affected is increased to ₱116,538.00, and the reasonable
compensation for the improvements thereon is likewise increased to P325,025.00, with legal interest
from the time of possession by the plaintiff-appellee NAPOCOR. No pronouncement as to costs.
SO ORDERED.
NPC moved for reconsideration, but its motion was denied by the appellate court in its resolution11 of
December 2, 2005.
Hence, NPC’s instant petition for review, submitting for our resolution only the following issues with
respect to the amount of just compensation that must be paid the respondents for the expropriated
portion (19,423 square meters) of their property:
1. Is it to be based on the 1984 or the 1993 valuation?
2. Should NPC pay for the value of the land being taken, or should it be limited to what is
provided for under P.D. 938, that is, ten per cent (10%) of its market value as declared by the
owner or the assessor (whichever is lower), considering that the purpose for which the property
is being taken is merely for the establishment of a safe and free passage for its overhead
transmission lines?
There is no issue as to the improvements. Since the ₱325,025.00 valuation therefor is the very price
set by the NPC commissioner, to which the corporation did not object but otherwise adopts, the Court
fixes the amount of ₱325,025.00 as just compensation for the improvements.
We now come to the more weighty question of what amount is just by way of compensation for the
19,423 square-meter portion of the respondents’ property.
In eminent domain cases, the time of taking is the filing of the complaint, if there was no actual taking
prior thereto. Hence, in this case, the value of the property at the time of the filing of the complaint on
November 20, 1990 should be considered in determining the just compensation due the respondents.
So it is that in National Power Corporation v. Court of Appeals, et al.,12 we ruled:
Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence,
many rulings of this Court have equated just compensation with the value of the property as of the
time of filing of the complaint consistent with the above provision of the Rules. So too, where the
institution of the action precedes entry into the property, the just compensation is to be ascertained as
of the time of the filing of the complaint.
The trial court fixed the value of the property at its 1984 value, while the CA, at its 1993 worth.
Neither of the two determinations is correct. For purposes of just compensation, the respondents
should be paid the value of the property as of the time of the filing of the complaint which is deemed
to be the time of taking the property.
It was certainly unfair for the trial court to have considered a property value several years behind its
worth at the time the complaint in this case was filed on November 20, 1990. The landowners are
necessarily shortchanged, considering that, as a rule, land values enjoy steady upward movement. It
was likewise erroneous for the appellate court to have fixed the value of the property on the basis of a
1993 assessment. NPC would be paying too much. Petitioner corporation is correct in arguing that the
respondents should not profit from an assessment made years after the taking.
The expropriation proceedings in this case having been initiated by NPC on November 20, 1990,
property values on such month and year should lay the basis for the proper determination of just
compensation. In Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform,13 the Court ruled that the equivalent to be rendered for the property to be taken shall be
substantial, full, ample and, as must apply to this case, real. This must be taken to mean, among
others, that the value as of the time of taking should be the price to be paid the property owner.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. In this case, this simply means the property’s fair market value at the time of the filing
of the complaint, or "that sum of money which a person desirous but not compelled to buy, and an
owner willing but not compelled to sell, would agree on as a price to be given and received
therefor."14 The measure is not the taker’s gain, but the owner’s loss.
In the determination of such value, the court is not limited to the assessed value of the property or to
the schedule of market values determined by the provincial or city appraisal committee; these values
consist but one factor in the judicial valuation of the property.15 The nature and character of the land at
the time of its taking is the principal criterion for determining how much just compensation should be
given to the landowner16 All the facts as to the condition of the property and its surroundings, as well
as its improvements and capabilities, should be considered.17
126
Neither of the two determinations made by the courts below is therefore correct. A new one must be
arrived at, taking into consideration the foregoing pronouncements.
Now, to the second issue raised by petitioner NPC.
In several cases, the Court struck down NPC’s consistent reliance on Section 3-A of Republic Act No.
6395, as amended by Presidential Decree 938.18 True, an easement of a right-of-way transmits no
rights except the easement itself, and the respondents would retain full ownership of the property
taken. Nonetheless, the acquisition of such easement is not gratis. The limitations on the use of the
property taken for an indefinite period would deprive its owner of the normal use thereof. For this
reason, the latter is entitled to payment of a just compensation, which must be neither more nor less
than the monetary equivalent of the land taken.19
While the power of eminent domain results in the taking or appropriation of title to, and possession of,
the expropriated property, no cogent reason appears why said power may not be availed of to impose
only a burden upon the owner of the condemned property, without loss of title and possession.20
However, if the easement is intended to perpetually or indefinitely deprive the owner of his
proprietary rights through the imposition of conditions that affect the ordinary use, free enjoyment and
disposal of the property or through restrictions and limitations that are inconsistent with the exercise
of the attributes of ownership, or when the introduction of structures or objects which, by their nature,
create or increase the probability of injury, death upon or destruction of life and property found on the
land is necessary, then the owner should be compensated for the monetary equivalent of the land, in
accordance with our ruling in NPC v. Manubay Agro-Industrial:
As correctly observed by the CA, considering the nature and the effect of the installation power lines,
the limitations on the use of the land for an indefinite period would deprive respondent of normal use
of the property. For this reason, the latter is entitled to payment of a just compensation, which must be
neither more nor less than the monetary equivalent of the land.21
The evidence suggests that NPC’s transmission line project that traverses the respondents’ property is
perpetual, or at least indefinite, in nature. Moreover, not to be discounted is the fact that the high-
tension current to be conveyed through said transmission lines evidently poses a danger to life and
limb; injury, death or destruction to life and property within the vicinity. As the Court held in NPC v.
Chiong,22 it is not improper to assume that NPC will erect structures for its transmission lines within
the property. What is sought to be expropriated in this case is, at its longest extent, 326.34 meters, and
through it may be built several structures, not simply one. Finally, if NPC were to have its way,
respondents will continue to pay the realty taxes due on the affected portion of their property, an
imposition that, among others, merits the rejection of NPC’s thesis of payment of a mere percentage
of the property’s actual value.
WHEREFORE, the instant petition is GRANTED in part in that the decision of the Court of Appeals G.R. No. 142971 May 7, 2002
dated March 14, 2005 vis a vis the award of ₱116,538.00, as and by way of just compensation for the
19,423 square meters of the respondents’ property, is SET ASIDE, and the case is ordered THE CITY OF CEBU, petitioner,
REMANDED to the court of origin for the proper determination of the amount of just compensation vs.
for the portion thus taken, based on our pronouncements hereon. The same decision, however, is SPOUSES APOLONIO and BLASA DEDAMO, respondents.
AFFIRMED, insofar as it pertains to the award of ₱325,025.00 for the improvements, with legal
interest from the time of actual possession by the petitioner.
DAVIDE, JR., C.J.:
No pronouncement as to costs.
In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner
City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CA-G.R. CV No.
SO ORDERED. 592041 affirming the judgment of 7 May 1996 of the Regional Trial Court, Branch 13, Cebu City, in
Civil Case No. CEB-14632, a case for eminent domain, which fixed the valuation of the land subject
CANCIO C. GARCIA thereof on the basis of the recommendation of the commissioners appointed by it.
Associate Justice
The material operation facts are not disputed.
WE CONCUR:
On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint for
REYNATO S. PUNO eminent domain against respondents spouses Apolonio and Blasa Dedamo. The petitioner alleged
Chief Justice therein that it needed the following parcels of land of respondents, to wit:
Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA Lot No. 1527

Associate Justice Asscociate Justice
Area------------------------------------------------ 1,146 square
ADOLFO S. AZCUNA meters
Associate Justice
T a x 3472
C E R T I F I CAT I O N
Declaration----------------------------------
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the writer of the opinion of Title No. ------------------------------------------ 31833
the Court’s Division.

REYNATO S. PUNO
Market value------------------------------------- P240,660.00
Chief Justice
A s s e s s e d P72,200.00
Value----------------------------------

127
 Respondents, filed a motion to dismiss the complaint because the purpose for which their property
was to be expropriated was not for a public purpose but for benefit of a single private entity, the Cebu
Holdings, Inc. Petitioner could simply buy directly from them the property at its fair market value if it
Lot No. 1528 wanted to, just like what it did with the neighboring lots. Besides, the price offered was very low in
light of the consideration of P20,000 per square meter, more or less, which petitioner paid to the
neighboring lots. Finally, respondents alleged that they have no other land in Cebu City.
Area------------------------------------------------ 793 square meters
A pre-trial was thereafter had.
Area sought to be expropriated 478 square meters
On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession pursuant to
---------------- Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21 September 1994.3

Ta x Declaration 3450 On 14 December 1994, the parties executed and submitted to the trial court an Agreement4 wherein
they declared that they have partially settled the case and in consideration thereof they agreed:
-----------------------------------
1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in
Title No. 31832 expropriating their parcels of land in the above-cited case as for public purpose and for the benefit of
the general public;
--------------------------------------------
2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land in favor
Market value for the whole lot P1,666,530.00 of the FIRST PARTY provided the latter will pay just compensation for the same in the amount
determined by the court after due notice and hearing;
------------------
3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE MILLION
Market value of the Area to be P100,380.00 SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS (1,786,400.00) as
expropriated -- provisional payment for the subject parcels of land, without prejudice to the final valuation as maybe
determined by the court;

Assessed Va l u e P49,960.00
------------------------------------
for a public purpose, i.e., for the construction of a public road which shall serve as an access/relief
road of Gorordo Avenue to extend to the General Maxilum Avenue and the back of Magellan
International Hotel Roads in Cebu City. The lots are the most suitable site for the purpose. The total
area sought to be expropriated is 1,624 square meters with an assessed value of P1,786.400. Petitioner
deposited with the Philippine National Bank the amount of P51,156 representing 15% of the fair
market value of the property to enable the petitioner to take immediate possession of the property
pursuant to Section 19 of R.A. No. 7160.2
4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated
September 21, 1994 issued by the Honorable Court, agreed to take possession over that portion of the
lot sought to be expropriated where the house of the SECOND PARTY was located only after fifteen
(15) days upon the receipt of the SECOND PARTY of the amount of P1,786,400.00;
5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn over to the
FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days grace period will
voluntarily demolish their house and the other structure that may be located thereon at their own
expense;
6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to render
judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT;

128
7. That the judgment sought to be rendered under this agreement shall be followed by a supplemental
judgment fixing the just compensation for the property of the SECOND PARTY after the
Commissioners appointed by this Honorable Court to determine the same shall have rendered their
report and approved by the court.
Pursuant to said agreement, the trial court appointed three commissioners to determine the just
compensation of the lots sought to be expropriated. The commissioners were Palermo M. Lugo, who
was nominated by petitioner and who was designated as Chairman; Alfredo Cisneros, who was
nominated by respondents; and Herbert E. Buot, who was designated by the trial court. The parties
agreed to their appointment.
Thereafter, the commissioners submitted their report, which contained their respective assessments of
and recommendation as to the valuation of the property.1âwphi1.nêt
On the basis of the commissioners' report and after due deliberation thereon, the trial court rendered
its decision on 7 May 1996,5 the decretal portion o which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance with the report
of the commissioners.
Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum of pesos:
TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE THOUSAND AND NINE
HUNDRED THIRTY (P24,865.930.00) representing the compensation mentioned in the Complaint.
Plaintiff and defendants are directed to pay the following commissioner's fee;
1. To Palermo Lugo - P21,000.00
2. To Herbert Buot - P19,000.00
3. To Alfredo Cisneros - P19,000.00
Without pronouncement as to cost.
SO ORDERED.
129
Petitioner filed a motion for reconsideration on the ground that the commissioners' report was
inaccurate since it included an area which was not subject to expropriation. More specifically, it
contended that Lot No. 1528 contains 793 square meters but the actual area to be expropriated is only
478 square meters. The remaining 315 square meters is the subject of a separate expropriation
proceeding in Civil Case No. CEB-8348, then pending before Branch 9 of the Regional Trial Court of
Cebu City.
On 16 August 1996, the commissioners submitted an amended assessment for the 478 square meters
of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount of P20,826,339.50. The
assessment was approved as the just compensation thereof by the trial court in its Order of 27
December 1996.6 Accordingly, the dispositive portion of the decision was amended to reflect the new
valuation.
Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV No.
59204. Petitioner alleged that the lower court erred in fixing the amount of just compensation at
P20,826,339.50. The just compensation should be based on the prevailing market price of the property
at the commencement of the expropriation proceedings.
The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999,7 the Court of
Appeals affirmed in toto the decision of the trial court.
Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises the sole
issue of whether just compensation should be determined as of the date of the filing of the complaint.
It asserts that it should be, which in this case should be 17 September 1993 and not at the time the
property was actually taken in 1994, pursuant to the decision in "National Power Corporation vs.
Court of Appeals."8
In their Comment, respondents maintain that the Court of Appeals did not err in affirming the decision
of the trial court because (1) the trial court decided the case on the basis of the agreement of the
parties that just compensation shall be fixed by commissioners appointed by the court; (2) petitioner
did not interpose any serious objection to the commissioners' report of 12 August 1996 fixing the just
compensation of the 1,624-square meter lot at P20,826,339.50; hence, it was estopped from attacking
the report on which the decision was based; and (3) the determined just compensation fixed is even
lower than the actual value of the property at the time of the actual taking in 1994.
Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the
Government's right to appropriate, in the nature of a compulsory sale to the State, private property for
public use or purpose.9 However, the Government must pay the owner thereof just compensation as
consideration therefor.
In the case at bar, the applicable law as to the point of reckoning for the determination of just Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not
compensation is Section 19 of R.A. No. 7160, which expressly provides that just compensation shall only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
be determined as of the time of actual taking. The Section reads as follows: according to their nature, may be in keeping with good faith, usage and law.

SECTION 19. Eminent Domain. – A local government unit may, through its chief executive and
acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose or
welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to
the provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent
domain may not be exercised unless a valid and definite offer has been previously made to the owner,
and such offer was not accepted: Provided, further, That the local government unit may immediately
take possession of the property upon the filing of the expropriation proceedings and upon making a
deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property
based on the current tax declaration of the property to be expropriated: Provided finally, That, the
amount to be paid for the expropriated property shall be determined by the proper court, based on the
fair market value at the time of the taking of the property.
The petitioner has misread our ruling in The National Power Corp. vs. Court of Appeals.10 We did not
categorically rule in that case that just compensation should be determined as of the filing of the
complaint. We explicitly stated therein that although the general rule in determining just compensation
in eminent domain is the value of the property as of the date of the filing of the complaint, the rule
"admits of an exception: where this Court fixed the value of the property as of the date it was taken
and not at the date of the commencement of the expropriation proceedings."
Also, the trial court followed the then governing procedural law on the matter, which was Section 5 of
Rule 67 of the Rules of Court, which provided as follows:
Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a serious
objection.11 It is therefore too late for petitioner to question the valuation now without violating the
principle of equitable estoppel. Estoppel in pais arises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on
such belief, so that he will be prejudiced if the former is permitted to deny the existence of such
facts.12 Records show that petitioner consented to conform with the valuation recommended by the
commissioners. It cannot detract from its agreement now and assail correctness of the commissioners'
assessment.1âwphi1.nêt
Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be
determined at the time of the filing of the complaint for expropriation,13 such law cannot prevail over
R.A. 7160, which is a substantive law.14
WHEREFORE, finding no reversible error in the assailed judgment on the Court of Appeals in CA-
G.R. CV No. 59204, the petition in this case is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.

Puno, Kapunan, Ynares-Santiago, De Leon, Jr., and Austria-Martinez, JJ., concur.

SEC. 5. Ascertainment of compensation. – Upon the entry of the order of condemnation, the court
shall appoint not more than three (3) competent and disinterested persons as commissioners to
ascertain and report to the court the just compensation for the property sought to be taken. The order
of appointment shall designate the time and place of the first session of the hearing to be held by the
commissioners and specify the time within which their report is to be filed with the court.

More than anything else, the parties, by a solemn document freely and voluntarily agreed upon by
them, agreed to be bound by the report of the commission and approved by the trial court. The
agreement is a contract between the parties. It has the force of law between them and should be
complied with in good faith. Article 1159 and 1315 of the Civil Code explicitly provides:

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.

130
G.R. No. 140160 January 13, 2004
LAND BANK OF THE PHILIPPINES, petitioner,
vs.
FELICIANO F. WYCOCO, respondent.
x------------------------x
G.R. No. 146733 January 13, 2004
FELICIANO F. WYCOCO, petitioner,
vs.
THE HONORABLE RODRIGO S. CASPILLO, Pairing Judge of the Regional Trial Court,
Third Judicial Region, Branch 23, Cabanatuan City and the Department of Agrarian Reform,
respondents.
DECISION
YNARES-SANTIAGO, J.:
Before the Court are consolidated petitions, the first seeking the review of the February 9, 1999
Decision1 and the September 22, 1999 Resolution2 of the Court of Appeals in CA-G.R. No. SP No.
39913, which modified the Decision3 of Regional Trial Court of Cabanatuan City, Branch 23, acting
as a Special Agrarian Court in Agrarian Case No. 91 (AF); and the second for mandamus to compel
the said trial court to issue a writ of execution and to direct Judge Rodrigo S. Caspillo to inhibit
himself from Agrarian Case No. 91 (AF).
The undisputed antecedents show that Feliciano F. Wycoco is the registered owner of a 94.1690
hectare unirrigated and untenanted rice land, covered by Transfer Certificate of Title No. NT-206422
and situated in the Sitios of Ablang, Saguingan and Pinamunghilan, Barrio of San Juan, Licab, Nueva
Ecija.4
In line with the Comprehensive Agrarian Reform Program (CARP) of the government, Wycoco
voluntarily offered to sell the land to the Department of Agrarian Reform (DAR) for P14.9 million.5 In
November 1991, after the DAR’s evaluation of the application and the determination of the just
compensation by the Land Bank of the Philippines (LBP), a notice of intention to acquire 84.5690
hectares of the property for P1,342,667.466 was sent to Wycoco. The amount offered was later raised
to P2,594,045.39 and, upon review, was modified to P2,280,159.82.7 The area which the DAR offered
to acquire excluded idle lands, river and road located therein. Wycoco rejected the offer, prompting
the DAR to indorse the case to the Department of Agrarian Reform Adjudication Board (DARAB) for
131
the purpose of fixing the just compensation in a summary administrative proceeding.8 The case was
docketed as DARAB VOS Case No. 232 NE 93. Thereafter, the DARAB requested LBP to open a
trust account in the name of Wycoco and deposited the compensation offered by DAR.9 In the
meantime, the property was distributed to farmer-beneficiaries.
On March 29, 1993, DARAB required the parties to submit their respective memoranda or position
papers in support of their claim.10 Wycoco, however, decided to forego with the filing of the required
pleadings, and instead filed on April 13, 1993, the instant case for determination of just compensation
with the Regional Trial Court of Cabanatuan City, Branch 23, docketed as Agrarian Case No. 91
(AF).11 Impleaded as party-defendants therein were DAR and LBP.
On April 30, 1993, Wycoco filed a manifestation in VOS Case No. 232 NE 93, informing the DARAB
of the pendency of Agrarian Case No. 91 (AF) with the Cabanatuan court, acting as a special agrarian
court.12 On March 9, 1994, the DARAB issued an order dismissing the case to give way to the
determination of just compensation by the Cabanatuan court. Pertinent portion thereof states:
Admittedly, this Forum is vested with the jurisdiction to conduct administrative proceeding to
determine compensation. [H]owever, a thorough perusal of petitioner’s complaint showed that he did
not only raise the issue of valuation but such other matters which are beyond the competence of the
Board. Besides, the petitioner has the option to avail the administrative remedies or bring the matter
on just compensation to the Special Agrarian Court for final determination.
WHEREFORE, premises considered, this case is hereby dismissed.
SO ORDERED.13
Meanwhile, DAR and LBP filed their respective answers before the special agrarian court in Agrarian
Case No. 91 (AF), contending that the valuation of Wycoco’s property was in accordance with law
and that the latter failed to exhaust administrative remedies by not participating in the summary
administrative proceedings before the DARAB which has primary jurisdiction over determination of
land valuation.14
After conducting a pre-trial on October 3, 1994, the trial court issued a pre-trial order as follows:
The parties manifested that there is no possibility of amicable settlement, neither are they willing to
admit or stipulate on facts, except those contained in the pleadings.
The only issue left is for the determination of just compensation or correct valuation of the land
owned by the plaintiff subject of this case.
The parties then prayed to terminate the pre-trial conference.
AS PRAYED FOR, the pre-trial conference is considered terminated, and instead of trial, the parties
are allowed to submit their respective memoranda.
WHEREFORE, the parties are given twenty (20) days from today within which to file their
simultaneous memoranda, and another ten (10) days from receipt thereof to file their Reply/Rejoinder,
if any, and thereafter, this case shall be deemed submitted for decision.
SO ORDERED.15
The evidence presented by Wycoco in support of his claim were the following: (1) Transfer Certificate
of Title No. NT-206422; (2) Notice of Land Valuation dated June 18, 1992; and (3) letter dated July
10, 1992 rejecting the counter-offer of LBP and DAR.16 On the other hand, DAR and LBP presented
the Land Valuation Worksheets.17
On November 14, 1995, the trial court rendered a decision in favor of Wycoco. It ruled that there is no
need to present evidence in support of the land valuation inasmuch as it is of public knowledge that
the prevailing market value of agricultural lands sold in Licab, Nueva Ecija is from P135,000.00 to
150,000.00 per hectare. The court thus took judicial notice thereof and fixed the compensation for the
entire 94.1690 hectare land at P142,500.00 per hectare or a total of P13,428,082.00. It also awarded
Wycoco actual damages for unrealized profits plus legal interest. The dispositive portion thereof
states:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering the defendants to pay the amount of P13,419,082.00 to plaintiff as just compensation for
the property acquired;
2. Ordering the defendants to pay plaintiff the amount of P29,663,235.00 representing the unrealized
profits from the time of acquisition of the subject property and the sum of P8,475,210.00 for every
calendar year, until the amount of compensation is fully paid including legal interest which had
accrued thereon.
No pronouncement as to costs.
SO ORDERED.18
132
The DAR and the LBP filed separate petitions before the Court of Appeals. The petition brought by
DAR on jurisdictional and procedural issues, docketed as CA-G.R. No. SP No. 39234, was dismissed
on May 29, 1997.19 The dismissal became final and executory on June 26, 1997.20 This prompted
Wycoco to file a petition for mandamus before this Court, docketed as G.R. No. 146733, praying that
the decision of the Regional Trial Court of Cabanatuan City, Branch 23, in Agrarian Case No. 91 (AF)
be executed, and that Judge Rodrigo S. Caspillo, the now presiding Judge of said court, be compelled
to inhibit himself from hearing the case.
The petition brought by LBP on both substantive and procedural grounds, docketed as CA-G.R. No.
SP No. 39913, was likewise dismissed by the Court of Appeals on February 9, 1999.21 On September
22, 1999, however, the Court of Appeals modified its decision by deducting from the compensation
due Wycoco the amount corresponding to the 3.3672 hectare portion of the 94.1690 hectare land
which was found to have been previously sold by Wycoco to the Republic, thus –
WHEREFORE, and conformably with the above, Our decision of February 9, 1999 is hereby
MODIFIED in the sense that the value corresponding to the aforesaid 3.3672 hectares and all the
awards appertaining thereto in the decision a quo are ordered deducted from the totality of the awards
granted to the private respondent. In all other respects, the decision sought to be reconsidered is
hereby RE-AFFIRMED and REITERATED.
SO ORDERED.22
In its petition, LBP contended that the Court of Appeals erred in ruling:
I
THAT THE TRIAL COURT ACTING AS A SPECIAL AGRARIAN COURT MAY ASSUME
JURISDICTION OVER AGRARIAN CASE NO. 91 (AF) AND RENDER JUDGMENT THEREON
WITHOUT AN INITIAL ADMINISTRATIVE DETERMINATION OF JUST COMPENSATION BY
THE DARAB PURSUANT TO SECTION 16 OF RA 6657, OVER THE TIMELY OBJECTION OF
THE PETITIONER, AND IN VIOLATION OF THE RULE ON EXHAUSTION OF
ADMINISTRATIVE REMEDIES AND ON FORUM SHOPPING;
II
THAT THE JUST COMPENSATION DETERMINED BY THE TRIAL COURT WAS SUPPORTED
BY SUBSTANTIAL EVIDENCE, WHEN IT WAS BASED ONLY ON JUDICIAL NOTICE OF THE
PREVAILING MARKET VALUE OF LAND BASED ON THE ALLEGED PRICE OF TRANSFER
OF TENURAL RIGHTS, TAKEN WITHOUT NOTICE AND HEARING IN VIOLATION OF RULE
129 OF THE RULES OF COURT;
 III
THAT THE TRIAL COURT CAN REQUIRE THE PETITIONER TO COMPENSATE THE
PORTIONS OF RESPONDENT’S PROPERTY WHICH WERE NOT DECLARED BY THE DAR
FOR ACQUISITION, NOR SUITABLE FOR AGRICULTURE NOR CAPABLE OF
DISTRIBUTION TO FARMER BENEFICIARIES UNDER THE CARP;
IV
THAT THE TRIAL COURT CAN AWARD AS PART OF JUST COMPENSATION LEGAL
INTEREST ON THE PRINCIPAL AND ALLEGED UNREALIZED PROFITS OF P29,663,235.00
FROM THE TIME OF ACQUISITION OF THE SUBJECT PROPERTY AND P8,475,210.00 FOR
EVERY CALENDAR YEAR THEREAFTER, CONSIDERING THAT THE SAME HAS NO
LEGAL BASIS AND THAT THE RESPONDENT RETAINED THE TITLE TO HIS PROPERTY
DESPITE THE DAR’S NOTICE OF ACQUISITION;
V thus –
THAT THE TRIAL COURT HAD VALIDLY GRANTED EXECUTION PENDING APPEAL ON
THE ALLEGEDLY GOOD REASON OF THE PETITIONER’S ADVANCED AGE AND WEAK
HEALTH, CONTRARY TO THE APPLICABLE JURISPRUDENCE AND CONSIDERING THAT
THE RESPONDENT IS NOT DESTITUTE.23
The issues for resolution are as follows: (1) Did the Regional Trial Court, acting as Special Agrarian
Court, validly acquire jurisdiction over the instant case for determination of just compensation? (2)
Assuming that it acquired jurisdiction, was the compensation arrived at supported by evidence? (3)
Can Wycoco compel the DAR to purchase the entire land subject of the voluntary offer to sell? (4)
Were the awards of interest and damages for unrealized profits valid?
Anent the issue of jurisdiction, the laws in point are Sections 50 and 57 of Republic Act No. 6657
(Comprehensive Agrarian Reform Law of 1988) which, in pertinent part, provide:
Section 50. Quasi-judicial Powers of the DAR. – The DAR is hereby vested with primary jurisdiction
to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over
all matters involving the implementation of agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR)….
133
Section 57. Special Jurisdiction. – The Special Agrarian Court shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act.
The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within
thirty (30) days from submission of the case for decision.
In Republic v. Court of Appeals,24 it was held that Special Agrarian Courts are given original and
exclusive jurisdiction over two categories of cases, to wit: (1) all petitions for the determination of just
compensation; and (2) the prosecution of all criminal offenses under R.A. No. 6657. Section 50 must
be construed in harmony with Section 57 by considering cases involving the determination of just
compensation and criminal cases for violations of R.A. No. 6657 as excepted from the plenitude of
power conferred to the DAR. Indeed, there is a reason for this distinction. The DAR, as an
administrative agency, cannot be granted jurisdiction over cases of eminent domain and over criminal
cases. The valuation of property in eminent domain is essentially a judicial function which is vested
with the Special Agrarian Courts and cannot be lodged with administrative agencies.25 In fact, Rule
XIII, Section 11 of the New Rules of Procedure of the DARAB acknowledges this power of the court,
Section 11. Land Valuation and Preliminary Determination and Payment of Just Compensation. The
decision of the Adjudicator on land valuation and preliminary determination and payment of just
compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial
Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice
thereof. Any party shall be entitled to only one motion for reconsideration. (Emphasis supplied)
Under Section 1 of Executive Order No. 405, Series of 1990, the Land Bank of the Philippines is
charged with the initial responsibility of determining the value of lands placed under land reform and
the just compensation to be paid for their taking.26 Through a notice of voluntary offer to sell (VOS)
submitted by the landowner, accompanied by the required documents, the DAR evaluates the
application and determines the land’s suitability for agriculture. The LBP likewise reviews the
application and the supporting documents and determines the valuation of the land. Thereafter, the
DAR issues the Notice of Land Valuation to the landowner. In both voluntary and compulsory
acquisition, where the landowner rejects the offer, the DAR opens an account in the name of the
landowner and conducts a summary administrative proceeding. If the landowner disagrees with the
valuation, the matter may be brought to the Regional Trial Court acting as a special agrarian court.
This in essence is the procedure for the determination of just compensation.27
In Land Bank of the Philippines v. Court of Appeals,28 the landowner filed an action for determination
of just compensation without waiting for the completion of DARAB’s re-evaluation of the land. This,
notwithstanding, the Court held that the trial court properly acquired jurisdiction because of its
exclusive and original jurisdiction over determination of just compensation, thus –
…It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has "original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners." This
"original and exclusive" jurisdiction of the RTC would be undermined if the DAR would vest in
administrative officials original jurisdiction in compensation cases and make the RTC an appellate
court for the review of administrative decisions. Thus, although the new rules speak of directly
appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from
Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort
to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs
into an appellate jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct
resort to the SAC [Special Agrarian Court] by private respondent is valid. (Emphasis supplied)29
In the case at bar, therefore, the trial court properly acquired jurisdiction over Wycoco’s complaint for
determination of just compensation. It must be stressed that although no summary administrative
proceeding was held before the DARAB, LBP was able to perform its legal mandate of initially
determining the value of Wycoco’s land pursuant to Executive Order No. 405, Series of 1990. What is
more, DAR and LBP’s conformity to the pre-trial order which limited the issue only to the
determination of just compensation estopped them from questioning the jurisdiction of the special
agrarian court. The pre-trial order limited the issues to those not disposed of by admission or
agreements; and the entry thereof controlled the subsequent course of action.30
Besides, the issue of whether Wycoco violated the rule on exhaustion of administrative remedies was
rendered moot and academic in view of the DARAB’s dismissal31 of the administrative case to give
way to and in recognition of the court’s power to determine just compensation.32
In arriving at the valuation of Wycoco’s land, the trial court took judicial notice of the alleged
prevailing market value of agricultural lands in Licab, Nueva Ecija without apprising the parties of its
intention to take judicial notice thereof. Section 3, Rule 129 of the Rules on Evidence provides:
Sec. 3. Judicial Notice, When Hearing Necessary. – During the trial, the court, on its own initiative, or
on request of a party, may announce its intention to take judicial notice of any matter and allow the
parties to be heard thereon.
After trial and before judgment or on appeal, the proper court, on its own initiative, or on request of a
party, may take judicial notice of any matter and allow the parties to be heard thereon if such matter is
decisive of a material issue in the case.
Inasmuch as the valuation of the property of Wycoco is the very issue in the case at bar, the trial court
should have allowed the parties to present evidence thereon instead of practically assuming a
valuation without basis. While market value may be one of the bases of determining just
compensation, the same cannot be arbitrarily arrived at without considering the factors to be
134
appreciated in arriving at the fair market value of the property e.g., the cost of acquisition, the current
value of like properties, its size, shape, location, as well as the tax declarations thereon.33 Since these
factors were not considered, a remand of the case for determination of just compensation is necessary.
The power to take judicial notice is to be exercised by courts with caution especially where the case
involves a vast tract of land. Care must be taken that the requisite notoriety exists; and every
reasonable doubt on the subject should be promptly resolved in the negative. To say that a court will
take judicial notice of a fact is merely another way of saying that the usual form of evidence will be
dispensed with if knowledge of the fact can be otherwise acquired. This is because the court assumes
that the matter is so notorious that it will not be disputed. But judicial notice is not judicial
knowledge. The mere personal knowledge of the judge is not the judicial knowledge of the court, and
he is not authorized to make his individual knowledge of a fact, not generally or professionally
known, the basis of his action.34
Anent the third issue, the DAR cannot be compelled to purchase the entire property voluntarily
offered by Wycoco. The power to determine whether a parcel of land may come within the coverage
of the Comprehensive Agrarian Reform Program is essentially lodged with the DAR. That Wycoco
will suffer damages by the DAR’s non-acquisition of the approximately 10 hectare portion of the
entire land which was found to be not suitable for agriculture is no justification to compel DAR to
acquire the whole area.
We find Wycoco’s claim for payment of interest partly meritorious. In Land Bank of the Philippines v.
Court of Appeals,35 this Court struck down as void DAR Administrative Circular No. 9, Series of
1990, which provides for the opening of trust accounts in lieu of the deposit in cash or in bonds
contemplated in Section 16 (e) of RA 6657.
"It is very explicit …from [Section 16 (e)] that the deposit must be made only in ‘cash’ or in ‘LBP
bonds.’ Nowhere does it appear nor can it be inferred that the deposit can be made in any other form.
If it were the intention to include a ‘trust account’ among the valid modes of deposit, that should have
been made express, or at least, qualifying words ought to have appeared from which it can be fairly
deduced that a ‘trust account’ is allowed. In sum, there is no ambiguity in Section 16(e) of RA 6657 to
warrant an expanded construction of the term ‘deposit.’
xxx xxx xxx
"In the present suit, the DAR clearly overstepped the limits of its powers to enact rules and
regulations when it issued Administrative Circular No. 9. There is no basis in allowing the opening of
a trust account in behalf of the landowner as compensation for his property because, as heretofore
discussed, Section 16(e) of RA 6657 is very specific that the deposit must be made only in ‘cash’ or in
‘LBP bonds.’ In the same vein, petitioners cannot invoke LRA Circular Nos. 29, 29-A and 54 because
these implementing regulations can not outweigh the clear provision of the law. Respondent court
therefore did not commit any error in striking down Administrative Circular No. 9 for being null and of compensation; for essentially, the determination of this compensation was marred by lack of due
void."36 process.39

Pursuant to the forgoing decision, DAR issued Administrative Order No. 2, Series of 1996, converting
trust accounts in the name of landowners into deposit accounts. The transitory provision thereof states
– and LBP bonds deposit accounts. The basis of the 12% interest would be the just compensation that
VI. TRANSITORY PROVISIONS
All trust accounts issued pursuant to Administrative Order No. 1, S. 1993 covering landholdings not
yet transferred in the name of the Republic of the Philippines as of July 5, 1996 shall immediately be
converted to deposit accounts in the name of the landowners concerned.
All Provincial Agrarian Reform Officers and Regional Directors are directed to immediately inventory
the claim folders referred to in the preceding paragraph, wherever they may be found and request the
LBP to establish the requisite deposit under this Administrative Order and to issue a new certification
to that effect. The Original Certificate of Trust Deposit previously issued should be attached to the
request of the DAR in order that the same may be replaced with a new one.
All previously established Trust Deposits which served as the basis for the transfer of the landowner’s
title to the Republic of the Philippines shall likewise be converted to deposits in cash and in bonds.
The Bureau of Land Acquisition and Distribution shall coordinate with the LBP for this purpose.
In light of the foregoing, the trust account opened by LBP in the name of Wycoco as the mode of
payment of just compensation should be converted to a deposit account. Such conversion should be
retroactive in application in order to rectify the error committed by the DAR in opening a trust
account and to grant the landowners the benefits concomitant to payment in cash or LBP bonds prior
to the ruling of the Court in Land Bank of the Philippines v. Court of Appeals. Otherwise, petitioner’s
right to payment of just and valid compensation for the expropriation of his property would be
violated.37 The interest earnings accruing on the deposit account of landowners would suffice to
compensate them pending payment of just compensation.
Accordingly, the just compensation due Wycoco should bear 12% interest per annum from the time
LBP opened a trust account in his name up to the time said account was actually converted into cash
would be determined by the Special Agrarian Court upon remand of the instant case. In the same vein,
the amount determined by the Special Agrarian Court would also be the basis of the interest income
on the cash and bond deposits due Wycoco from the time of the taking of the property up to the time
of actual payment of just compensation.
The award of actual damages for unrealized profits should be deleted. The amount of loss must not
only be capable of proof, but must be proven with a reasonable degree of certainty. The claim must be
premised upon competent proof or upon the best evidence obtainable, such as receipts or other
documentary proof.40 None having been presented in the instant case, the claim for unrealized profits
cannot be granted.
From the foregoing discussion, it is clear that Wycoco’s petition for mandamus in G.R. No. 146733
should be dismissed. The decision of the Regional Trial Court of Cabanatuan City, Branch 23, acting
as Special Agrarian Court in Agrarian Case No. 91 (AF), cannot be enforced because there is a need to
remand the case to the trial court for determination of just compensation. Likewise, the prayer for the
inhibition of Judge Rodrigo S. Caspillo in Agrarian Case No. 91 (AF) is denied for lack of basis.
WHEREFORE, in view of all the foregoing, the petition in G.R. No. 140160 is PARTIALLY
GRANTED. Agrarian Case No. 91 (AF) is REMANDED to the Regional Trial Court of Cabanatuan
City, Branch 23, for the determination of just compensation. The petition for mandamus in G.R. No.
146733 is dismissed.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.

In some expropriation cases, the Court imposed an interest of 12% per annum on the just
compensation due the landowner. It must be stressed, however, that in these cases, the imposition of
interest was in the nature of damages for delay in payment which in effect makes the obligation on the
part of the government one of forbearance.38 It follows that the interest in the form of damages cannot
be applied where there was prompt and valid payment of just compensation. Conversely, where there
was delay in tendering a valid payment of just compensation, imposition of interest is in order. This is
because the replacement of the trust account with cash or LBP bonds did not ipso facto cure the lack

135
G.R. No. 142304 June 20, 2001
CITY OF MANILA, petitioner,
vs.
OSCAR, FELICITAS, JOSE, BENJAMIN, ESTELITA, LEONORA AND ADELAIDA, ALL
SURNAMED SERRANO, respondents.
Mendoza, J.:
This is a petition for review on certiorari of the decision, dated November 16, 1999, and resolution,
dated February 23, 2000, of the Court of Appeals reversing the order, dated December 15, 1998, of the
Regional Trial Court, Branch 16, Manila and perpetually enjoining it from proceeding with the
petitioner's complaint for eminent domain in Civil Case No. 94-72282.
The facts are as follows:
On December 21, 1993, the City Council of Manila enacted the Ordinance No. 7833, authorizing the
expropriation of certain properties in Manila 's First District in Tondo, covered by TCT Nos. 70869,
105201, 105202, and 138273 of the Register of Deeds of Manila, which are to be sold and distributed
to qualified occupants pursuant to the Land Use Development Program of the City of Manila.
One of the properties sought to be expropriated, denominated as Lot 1-C, consists of 343.10 square
meters. It is covered by TCT No. 138272 which was derived from TCT No. 70869 issued in the name
of Feliza De Guia.1 After her death, the estate of Feliza De Guia was settled among her heirs by virtue
of a compromise agreement, which was duly approved by the Regional Trial Court, Branch 53,
Manila in its decision, dated May 8, 1986.2 In 1989, Alberto De Guia, one of the heirs of Feliza De
Guia, died, as a result of which his estate, consisting of his share in the properties left by his mother,
was partitioned among his heirs. Lot 1-C was assigned to Edgardo De Guia, one of the heirs of
Alberto De Guia.3 On April 15, 1994, Edgardo De Guia was issued TCT No. 215593, covering Lot 1-
C.4 On July 29, 1994, the said property was transferred to Lee Kuan Hui, in whose name TCT No.
217018 was issued.5
The property was subsequently sold on January 24,1996 to Demetria De Guia to whom TCT No.
226048 was issued.6
On September 26, 1997, petitioner City of Manila filed an amended complaint for expropriation,
docketed as Civil Case No. 94-72282, with the Regional Trial Court, Branch 16, Manila, against the
supposed owners of the lots covered by TCT Nos. 70869 (including Lot 1-C), 105201, 105202 and
138273, which included herein respondents Oscar, Felicitas, Jose, Benjamin, Estelita, Leonora,
Adelaida, all surnamed are Serrano.7 On November 12, 1997, respondents filed a consolidated answer,
136
in which they alleged that their mother, the late Demetria De Guia, had acquired Lot l-C from Lee
Kian Hui; that they had been the bona fide occupants of the said parcel of land for more than 40 years;
that the expropriation of Lot l-C would result in their disclosure, it being the only residential land left
to them by their deceased mother; and that the said lot was exempt from expropriation because
dividing the said parcel of land among them would entitle each of them to only about 50 square
meters of land. Respondents, therefore, prayed that judgment be rendered declaring Lot l-C exempt
from expropriation and ordering the cancellation of the notice annotated on the back of TCT No.
226048,8 regarding the pendency of Civil Case No. 94-72282. for eminent domain filed by petitioner.9
Upon motion by petitioner, the trial court issued an order, dated October 9, 1998, directing petitioner
to deposit the amount of Pl,825,241.00 equivalent to the assessed value of the properties.10 After
petitioner had made the deposit, the trial court issued another order, dated December 15, 1998,
directing the issuance of a writ of possession in favor of petitioner.ll
Respondents filed a petition for certiorari with the Court of Appeals, alleging that the expropriation of
Lot l-C would render respondents, who are actual occupants thereof, landless; that Lot l-C is exempt
from expropriation because R.A. No. 7279 provides that properties consisting of residential lands not
exceeding 300 square meters in highly urbanized cities are exempt from expropriations; that
respondents would only receive around 49 square meters each after the partition of Lot l-C which
consists of only 343.10 square meters; and that R.A. No. 7279 was not meant to deprive an owner of
the entire residential land but only that in excess of 300 square meters.12
On November 16, 1999, the Court of Appeals rendered a decision holding that Lot l-C is not exempt
from expropriation because it undeniably exceeds 300 square meters which is no longer considered a
small property within the framework of R.A. No. 7279. However, it held that in accordance with the
ruling in Filstream International Inc. v. Court of Appeals,13 the other modes of acquisition of lands
enumerated in §§9-10 of the law must first be tried by the city government before it can resort to
expropriation. As petitioner failed to show that it had done so, the Court of Appeals gave judgment for
respondents and enjoined petitioner from expropriating Lot 1-C. The dispositive portion of its
decision reads:
WHEREFORE, in view of all the foregoing, the instant petition is hereby GIVEN DUE COURSE and
accordingly GRANTED. The Order, dated December 15, 1998, denying petitioner's motion for
reconsideration issued by the respondent Regional Trial Court of Manila, Branch 16, in Civil Case
No. 94-72282 is hereby REVERSED and SET ASIDE. Let a writ of injunction issue perpetually
enjoining the same respondent court from proceeding with the complaint for eminent domain in Civil
Case No. 94-72282,14
In its resolution, dated February 23, 2000, the Court of Appeals likewise denied two motions for
reconsideration filed by petitioner.l5 Hence this petition. Petitioner contends that the Court of Appeals
erred in --
1) Giving due course to the petition of the Serranos under Rule 65 notwithstanding its own declaration
of the impropriety of the resort to the writ and filing thereof with the wrong appellate court;
2) Concluding that the Order of October 9, 1998 which authorizes the immediate entry of the City as
the expropriating agency into the property sough to be expropriated upon the deposit of the
provisionally fixed fair market value thereof as tantamount to condemnation of the property without
prior showing of compliance with the acquisition of other lands enumerated in Sec. 9 of R.A. 7279
ergo a violation of due process of the Serranos by the doctrinaire application of FILSTREAM ruling
and corrollarily,
3) In prohibiting permanently, by writ of injunction, the trial court from proceeding with a complaint
for expropriation of the City in Civil Case No. 94-72282.16
We will deal with these contentions in the order they are presented.
First. Petitioner contends that the respondents' remedy against the order of the trial court granting a
writ of possession was not to file a petition for certiorari under Rule 65 but a petition for review under
Rule 45 which should have been filed in the Supreme Court.17
This contention has no merit. A petition for review under Rule 45 is a mode of appeal. Accordingly, it
could not have been resorted to by the respondents inasmuch as the order of the trial court granting a
writ of possession was merely interlocutory from which no appeal could be taken. Rule 45, §1 of the
1997 Rules for Civil Procedure applies only to final judgments or orders of the Court of Appeals, the
Sandiganbayan, and the Regional Trial Court. On the other hand, a petition for certiorari is the
suitable remedy in view of Rule 65, §1 which provides:
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or
in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course
of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts
with certainly and praying that judgment be rendered annulling or modifying the proceedings of such
tribunal, board or officer, and granting such incidental reliefs as laws and justice may require.
Respondents' petition before the Court of Appeals alleged that the trial court had acted without or in
excess of its jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in issuing
the order, dated December 15, 1998, resolving that Lot 1-C is not exempt from expropriation and
ordering the issuance of the writ of possession in favor of petitioner.18
Second. Petitioner faults the Court of Appeals for deciding issues not raised in the trial court,
specifically the question of whether or not there was compliance with §§9 and 10 of RA. No. 7279. It
137
argues that the sole defense set up by respondents in their petition before the Court of Appeals was
that their property was exempted from expropriation because it comes within the purview of a "small
property" as defined by R.A. No. 7279 . Accordingly, the Court of Appeals should not have applied
the doctrine laid down by this Court in the Filstream19 case as such issue was not raised by
respondents in their petition before the Court of Appeals.
This contention likewise has no merit. In their petition before the Court of Appeals, respondents raised
the following issues:
1. Whether or not the subject Lot 1-C with an area of 343.10 square meters covered by T.C.T. No.
226048 in the name of petitioners' mother, the late Demetria [De Guia] Serrano, may be lawfully
expropriated "for the public purpose of providing landless occupants thereof homelots of their own
under the "land-for-the landless program of respondent City of Manila."
2. Whether or not the expropriation of the said Lot l-C by respondent City of Manila violates the equal
protection clause of the Constitution, since petitioners, with the exemption of petitioner Oscar G.
Serranno, who are likewise landless are actual occupants hereof.
3. Whether or not Lot 1-C is or may be exempted from expropriation pursuant to R.A. 7279,
otherwise known as the Urban Development and Housing Act of 1992.20
It is clear that respondents raised in issue the propriety of the expropriation of their property in
connection with RA. No. 7279. Although what was discussed at length in their petition before the
Court of Appeals was whether or not the said property could be considered a small property within the
purview of the exemption under the said law, the other provisions of the said law concerning
expropriation proceedings need also be looked into to address the first issue raised by the respondents
and to determine whether or not expropriation of Lot 1-C was proper under the circumstances. The
Court of Appeals properly considered relevant provisions of R A. No.7279 to determine the issues
raised by respondents. Whether or not it correctly applied the doctrine laid down in Filstream in
resolving the issues raised by respondents, however, is a different matter altogether, and this brings us
to the next point.
Third. Petitioner contends that the Court of Appeals erroneously presumed that Lot 1-C has been
ordered condemned in its favor when the fact is that the order of the trial court, dated December 15,
1998, merely authorized the issuance of a writ of possession and petitioner's entry into the property
pursuant to Rule 67, §2. At that stage, it was premature to determine whether the requirements of RA.
No. 7279, §§9 - 10 have been complied with since no evidentiary hearing had yet been conducted by
the trial court.21
This contention is well taken. Rule 67, §2 provides:
Upon the filing of the complaint or at any time thereafter and after due notice to the defendant, the (c) Unregistered or abandoned and idle lands;
plaintiff shall have the right to take or enter upon possession of the real property involved if he
deposits with the authorized government depository an amount equivalent to the assessed value of the (d) Those within the declares Areas or Priority Development, Zone Improvement Program sites, and
property for purposes of taxation to be held by such bank subject to the orders of the court. Such Slum Improvement and Resettlement Programs sites which have not yet been acquired;
deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a certificate of
deposit of a government bank of the Republic of the Philippines payable on demand to the authorized
(e) Bagong Lipunan Improvement and Sites and Services or BLISS sites which have not yet been
government depositary.
acquired, and;
If personal property is involved, its value shall be provisionally ascertained and the amount to be
(f) Privately-owned lands.
deposited shall be fixed by the court.

Where on-site development is found more practicable and advantageously to the beneficiaries, the
After such deposit is made the court shall order the sheriff or other proper officer to forthwith place
priorities mentioned in this section shall not apply. The local government units shall give budgetary
the plaintiff in possession of the property involved and promptly submit a report thereof to the court
priority on-site development of government lands.
with service of copies to the parties.

Thus, a writ of execution may be issued by a court upon the filing by the government of a complaint
for expropriation sufficient in form and substance and upon deposit made by the government of the
amount equivalent to the assessed value of the property subject to expropriation. Upon compliance
with these requirements, the issuance of the writ of possession becomes ministerial.22 In this case,
these requirements were satisfied and, therefore, it became the ministerial duty of the court to issue
the writ of possession.
The Court of Appeals, however, ruled that petitioner failed to comply with the requirements laid down
in §§9 - 10 of RA. No. 7279 and reiterated in Filstream ruling. This is error. The ruling in the
Filstream was necessitated because an order of condemnation had already been issued by the trial
court in that case. Thus, the judgment in that case had already become final. In this case, the trial court
has not gone beyond the issuance of a writ of possession. Hearing is still to be held to determine
whether or not petitioner indeed complied with the requirements provided in RA. No. 7279. It is,
therefore, premature at this stage of the proceedings to find that petitioner resorted expropriation
without first trying the other modes of acquisition enumerated in § 10 of the law.
RA. No 7279 in pertinent parts provide:
SEC. 9. Priorities in the Acquisition of Land… Lands for socialized housing shall be acquired in the
following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies,
including government owned and controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
SEC. 10. Modes of Lands Acquisition. -- The modes of acquiring lands for purposes of this Act shall
include, amount others, community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the Government, joint-venture agreement, negotiated purchase, and
expropriation: Provided, however; That expropriation shall be resorted to only when other modes of
acquisition have been exhausted: Provided, further; That were expropriation is resorted to, parcels of
land owned by small property owners shall be exempted for purposes of this Act: Provided finally,
That abandoned property, as herein defined, shall be reverted and escheated to the State in a
proceeding analogous to the procedure laid down in Rule 91 of the Rules of Court.
For the purpose of socialized housing, government-owned and foreclosed properties shall be acquired
by the local government units, or by the National Housing Authority primarily through negotiated
purchase: Provided, That qualified beneficiaries who are actual occupants of the lands shall be given
the right of first refusal.
Whether petitioner has complied with these provisions requires the presentation of evidence, although
in its amended complaint petitioner did allege that it had complied with the requirements.23 The
determination of this question must await that hearing on the complaint for expropriation, particularly
the hearing for the condemnation of the properties sought to be expropriated. Expropriation
proceedings consist of two stages: first, condemnation of the property after it is determined that its
acquisition will be for a public purpose or public use and, second, the determination of just
compensation to be paid for the taking of the private property to be made by the court with the
assistance of not more than three commissioners.24
WHEREFORE, the decision, dated November 16,1999, and resolution, dated February 23, 2000, of
the Court of Appeals are REVERSED and the order of the trial court, dated December 15,1998, is
REINSTATED. This case is REMANDED to the trial court to further proceedings.1âwphi1.nêt

138
SO ORDERED. G.R. No. 166429 December 19, 2005

Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.
REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo R. Ermita,
the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), and the
MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), Petitioners,
vs.
HON. HENRICK F. GINGOYON, In his capacity as Presiding Judge of the Regional Trial
Court, Branch 117, Pasay City and PHILIPPINE INTERNATIONAL AIR TERMINALS CO.,
INC., Respondents.

DECISION

TINGA, J.:

The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was conceived, designed
and constructed to serve as the country’s show window to the world. Regrettably, it has spawned
controversies. Regrettably too, despite the apparent completion of the terminal complex way back it
has not yet been operated. This has caused immeasurable economic damage to the country, not to
mention its deplorable discredit in the international community.

In the first case that reached this Court, Agan v. PIATCO,1 the contracts which the Government had
with the contractor were voided for being contrary to law and public policy. The second case now
before the Court involves the matter of just compensation due the contractor for the terminal complex
it built. We decide the case on the basis of fairness, the same norm that pervades both the Court’s 2004
Resolution in the first case and the latest expropriation law.

The present controversy has its roots with the promulgation of the Court’s decision in Agan v.
PIATCO,2 promulgated in 2003 (2003 Decision). This decision nullified the "Concession Agreement
for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger
Terminal III" entered into between the Philippine Government (Government) and the Philippine
International Air Terminals Co., Inc. (PIATCO), as well as the amendments and supplements thereto.
The agreement had authorized PIATCO to build a new international airport terminal (NAIA 3), as
well as a franchise to operate and maintain the said terminal during the concession period of 25 years.
The contracts were nullified, among others, that Paircargo Consortium, predecessor of PIATCO, did
not possess the requisite financial capacity when it was awarded the NAIA 3 contract and that the
agreement was contrary to public policy.3

At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had already been built by
PIATCO and were nearing completion.4 However, the ponencia was silent as to the legal status of the
NAIA 3 facilities following the nullification of the contracts, as well as whatever rights of PIATCO

139
for reimbursement for its expenses in the construction of the facilities. Still, in his Separate Opinion,
Justice Panganiban, joined by Justice Callejo, declared as follows:
Should government pay at all for reasonable expenses incurred in the construction of the
Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco
and, in particular, its funders, contractors and investors — both local and foreign. After all, there
is no question that the State needs and will make use of Terminal III, it being part and parcel of the
critical infrastructure and transportation-related programs of government.5
PIATCO and several respondents-intervenors filed their respective motions for the reconsideration of
the 2003 Decision. These motions were denied by the Court in its Resolution dated 21 January 2004
(2004 Resolution).6 However, the Court this time squarely addressed the issue of the rights of
PIATCO to refund, compensation or reimbursement for its expenses in the construction of the NAIA 3
facilities. The holding of the Court on this crucial point follows:
This Court, however, is not unmindful of the reality that the structures comprising the NAIA
IPT III facility are almost complete and that funds have been spent by PIATCO in their
construction. For the government to take over the said facility, it has to compensate respondent
PIATCO as builder of the said structures. The compensation must be just and in accordance
with law and equity for the government can not unjustly enrich itself at the expense of PIATCO
and its investors.7
After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession
of PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate
operation. The Government and PIATCO conducted several rounds of negotiation regarding the NAIA
3 facilities.8 It also appears that arbitral proceedings were commenced before the International
Chamber of Commerce International Court of Arbitration and the International Centre for the
Settlement of Investment Disputes,9 although the Government has raised jurisdictional questions
before those two bodies.10
Then, on 21 December 2004, the Government11 filed a Complaint for expropriation with the Pasay
City Regional Trial Court (RTC), together with an Application for Special Raffle seeking the
immediate holding of a special raffle. The Government sought upon the filing of the complaint the
issuance of a writ of possession authorizing it to take immediate possession and control over the
NAIA 3 facilities.
140
The Government also declared that it had deposited the amount of ₱3,002,125,000.0012 (3 Billion)13 in
Cash with the Land Bank of the Philippines, representing the NAIA 3 terminal’s assessed value for
taxation purposes.14
The case15 was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon.
Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed, the RTC issued
an Order16 directing the issuance of a writ of possession to the Government, authorizing it to "take or
enter upon the possession" of the NAIA 3 facilities. Citing the case of City of Manila v. Serrano,17 the
RTC noted that it had the ministerial duty to issue the writ of possession upon the filing of a complaint
for expropriation sufficient in form and substance, and upon deposit made by the government of the
amount equivalent to the assessed value of the property subject to expropriation. The RTC found these
requisites present, particularly noting that "[t]he case record shows that [the Government has]
deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an
authorized depositary, as shown by the certification attached to their complaint." Also on the same
day, the RTC issued a Writ of Possession. According to PIATCO, the Government was able to take
possession over the NAIA 3 facilities immediately after the Writ of Possession was issued.18
However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December
2004 Order and the Writ of Possession. In the 4 January 2005 Order, now assailed in the present
petition, the RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2,
Rule 67 of the 1997 Rules of Civil Procedure. However, it was observed that Republic Act No. 8974
(Rep. Act No. 8974), otherwise known as "An Act to Facilitate the Acquisition of Right-of-Way, Site
or Location for National Government Infrastructure Projects and For Other Purposes" and its
Implementing Rules and Regulations (Implementing Rules) had amended Rule 67 in many respects.
There are at least two crucial differences between the respective procedures under Rep. Act No. 8974
and Rule 67. Under the statute, the Government is required to make immediate payment to the
property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule
67, the Government is required only to make an initial deposit with an authorized government
depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of
the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant
standard for initial compensation, the market value of the property as stated in the tax declaration or
the current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and
the value of the improvements and/or structures using the replacement cost method.
Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the
Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it directed the
Land Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately release the amount of
US$62,343,175.77 to PIATCO, an amount which the RTC characterized as that which the
Government "specifically made available for the purpose of this expropriation;" and such amount to
be deducted from the amount of just compensation due PIATCO as eventually determined by the
RTC. Second, the Government was directed to submit to the RTC a Certificate of Availability of
Funds signed by authorized officials to cover the payment of just compensation. Third, the
Government was directed "to maintain, preserve and safeguard" the NAIA 3 facilities or "perform
such as acts or activities in preparation for their direct operation" of the airport terminal, pending
expropriation proceedings and full payment of just compensation. However, the Government was
prohibited "from performing acts of ownership like awarding concessions or leasing any part of
[NAIA 3] to other parties."19
The very next day after the issuance of the assailed 4 January 2005 Order, the Government filed an
Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7 January
2005, the RTC issued another Order, the second now assailed before this Court, which appointed
three (3) Commissioners to ascertain the amount of just compensation for the NAIA 3 Complex. That
same day, the Government filed a Motion for Inhibition of Hon. Gingoyon.
The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January 2005.
On the same day, it denied these motions in an Omnibus Order dated 10 January 2005. This is the
third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the earlier
dispositions in the 4 January 2005 Order, it excepted from affirmance "the superfluous part of the
Order prohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other
parties."20
Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005.
The petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and
10 January 2005, and for the inhibition of Hon. Gingoyon from taking further action on the
expropriation case. A concurrent prayer for the issuance of a temporary restraining order and
preliminary injunction was granted by this Court in a Resolution dated 14 January 2005.21
The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five
general arguments, to wit:
(i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings;
(ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62.3
Million to PIATCO considering that the assessed value as alleged in the complaint was only ₱3
Billion;
(iii) that the RTC could not have prohibited the Government from enjoining the performance of acts of
ownership;
(iv) that the appointment of the three commissioners was erroneous; and
141
(v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case.22
Before we delve into the merits of the issues raised by the Government, it is essential to consider the
crucial holding of the Court in its 2004 Resolution in Agan, which we repeat below:
This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III
facility are almost complete and that funds have been spent by PIATCO in their construction. For the
government to take over the said facility, it has to compensate respondent PIATCO as builder of
the said structures. The compensation must be just and in accordance with law and equity for
the government can not unjustly enrich itself at the expense of PIATCO and its investors.23
This pronouncement contains the fundamental premises which permeate this decision of the Court.
Indeed, Agan, final and executory as it is, stands as governing law in this case, and any disposition of
the present petition must conform to the conditions laid down by the Court in its 2004 Resolution.
The 2004 Resolution Which Is
Law of This Case Generally
Permits Expropriation
The pronouncement in the 2004 Resolution is especially significant to this case in two aspects,
namely: (i) that PIATCO must receive payment of just compensation determined in accordance
with law and equity; and (ii) that the government is barred from taking over NAIA 3 until such
just compensation is paid. The parties cannot be allowed to evade the directives laid down by this
Court through any mode of judicial action, such as the complaint for eminent domain.
It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory guidelines
which the Government must observe before it could acquire the NAIA 3 facilities. Thus, the actions of
respondent judge under review, as well as the arguments of the parties must, to merit affirmation, pass
the threshold test of whether such propositions are in accord with the 2004 Resolution.
The Government does not contest the efficacy of this pronouncement in the 2004 Resolution,24 thus its
application
to the case at bar is not a matter of controversy. Of course, questions such as what is the standard of
"just compensation" and which particular laws and equitable principles are applicable, remain in
dispute and shall be resolved forthwith.
The Government has chosen to resort to expropriation, a remedy available under the law, which has
the added benefit of an integrated process for the determination of just compensation and the payment
thereof to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby the
Government seeks to expropriate a building complex constructed on land which the State already
owns.25 There is an inherent illogic in the resort to eminent domain on property already owned by the
State. At first blush, since the State already owns the property on which NAIA 3 stands, the proper
remedy should be akin to an action for ejectment.
However, the reason for the resort by the Government to expropriation proceedings is understandable
in this case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover
by the Government of
NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the
unilateral exercise of its rights as the owner of the ground on which the facilities stood. Thus, as
things stood after the 2004 Resolution, the right of the Government to take over the NAIA 3 terminal
was preconditioned by lawful order on the payment of just compensation to PIATCO as builder of the
structures.
the law, it also has a built-in procedure through which just compensation may be ascertained. Thus,
there should be no question as to the propriety of eminent domain proceedings in this case.
Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply or
construe these rules in accordance with the Court’s prescriptions in the 2004 Resolution to achieve the
end effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is
concerned, the 2004 Resolution is effective not only as a legal precedent, but as the source of rights
and prescriptions that must be guaranteed, if not enforced, in the resolution of this petition. Otherwise,
the integrity and efficacy of the rulings of this Court will be severely diminished.
It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court or
Rep. Act No. 8974 governs the expropriation proceedings in this case.
Application of Rule 67 Violates
the 2004 Agan Resolution

The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings in
The determination of just compensation could very well be agreed upon by the parties without judicial
this case to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep. Act No.
intervention, and it appears that steps towards that direction had been engaged in. Still, ultimately, the
8974 which does apply. Earlier, we had adverted to the basic differences between the statute and the
Government resorted to its inherent power of eminent domain through expropriation proceedings. Is
procedural rule. Further elaboration is in order.
eminent domain appropriate in the first place, with due regard not only to the law on expropriation but
also to the Court’s 2004 Resolution in Agan?
Rule 67 outlines the procedure under which eminent domain may be exercised by the Government.
Yet by no means does it serve at present as the solitary guideline through which the State may
The right of eminent domain extends to personal and real property, and the NAIA 3 structures,
expropriate private property. For example, Section 19 of the Local Government Code governs as to
adhered as they are to the soil, are considered as real property.26 The public purpose for the
the exercise by local government units of the power of eminent domain through an enabling
expropriation is also beyond dispute. It should also be noted that Section 1 of Rule 67 (on
ordinance. And then there is Rep. Act No. 8974, which covers expropriation proceedings intended for
Expropriation) recognizes the possibility that the property sought to be expropriated may be titled in
national government infrastructure projects.
the name of the

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner
Republic of the Philippines, although occupied by private individuals, and in such case an averment to
than Rule 67, inescapably applies in instances when the national government expropriates property
that effect should be made in the complaint. The instant expropriation complaint did aver that the
"for national government infrastructure projects."28 Thus, if expropriation is engaged in by the
NAIA 3 complex "stands on a parcel of land owned by the Bases Conversion Development Authority,
national government for purposes other than national infrastructure projects, the assessed value
another agency of [the Republic of the Philippines]."27
standard and the deposit mode prescribed in Rule 67 continues to apply.
Admittedly, eminent domain is not the sole judicial recourse by which the Government may have
Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation proceedings
acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent domain
through the filing of a complaint. Unlike in the case of local governments which necessitate an
though may be the most effective, as well as the speediest means by which such goals may be
authorizing ordinance before expropriation may be accomplished, there is no need under Rule 67 or
accomplished. Not only does it enable immediate possession after satisfaction of the requisites under
Rep. Act No. 8974 for legislative authorization before the Government may proceed with a particular
exercise of eminent domain. The most crucial difference between Rule 67 and Rep. Act No. 8974

142
concerns the particular essential step the Government has to undertake to be entitled to a writ of
possession.
The first paragraph of Section 2 of Rule 67 provides:
SEC. 2. Entry of plaintiff upon depositing value with authorized government depository. — Upon the
filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall
have the right to take or enter upon the possession of the real property involved if he deposits with
the authorized government depositary an amount equivalent to the assessed value of the
property for purposes of taxation to be held by such bank subject to the orders of the court.
Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a
certificate of deposit of a government bank of the Republic of the Philippines payable on
demand to the authorized government depositary.
In contrast, Section 4 of Rep. Act No. 8974 relevantly states:
SEC. 4. Guidelines for Expropriation Proceedings.— Whenever it is necessary to acquire real
property for the right-of-way, site or location for any national government infrastructure project
through expropriation, the appropriate proceedings before the proper court under the following
guidelines:
a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency
shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred
percent (100%) of the value of the property based on the current relevant zonal valuation of the
Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as
determined under Section 7 hereof;
...
c) In case the completion of a government infrastructure project is of utmost urgency and importance,
and there is no existing valuation of the area concerned, the implementing agency shall immediately
pay the owner of the property its proffered value taking into consideration the standards prescribed in
Section 5 hereof.
Upon completion with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of the
project.
Before the court can issue a Writ of Possession, the implementing agency shall present to the court a
certificate of availability of funds from the proper official concerned.
143
...
As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to deposit
with an authorized government depositary the assessed value of the property for expropriation for it to
be entitled to a writ of possession. On the other hand, Rep. Act No. 8974 requires that the Government
make a direct payment to the property owner before the writ may issue. Moreover, such payment is
based on the zonal valuation of the BIR in the case of land, the value of the improvements or
structures under the replacement cost method,29 or if no such valuation is available and in cases of
utmost urgency, the proffered value of the property to be seized.
It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No. 8974.
Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before it can
obtain the writ of possession since all it need do is deposit the amount equivalent to the assessed value
with an authorized government depositary. Hence, it devotes considerable effort to point out that Rep.
Act No. 8974 does not apply in this case, notwithstanding the undeniable reality that NAIA 3 is a
national government project. Yet, these efforts fail, especially considering the controlling effect of the
2004 Resolution in Agan on the adjudication of this case.
It is the finding of this Court that the staging of expropriation proceedings in this case with the
exclusive use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a
fashion that directly rebukes our 2004 Resolution in Agan. This Court cannot sanction deviation from
its own final and executory orders.
Section 2 of Rule 67 provides that the State "shall have the right to take or enter upon the possession
of the real property involved if [the plaintiff] deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes of taxation to be held by such
bank subject to the orders of the court."30 It is thus apparent that under the provision, all the
Government need do to obtain a writ of possession is to deposit the amount equivalent to the assessed
value with an authorized government depositary.
Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004
Resolution that "[f]or the government to take over the said facility, it has to compensate respondent
PIATCO as builder of the said structures"? Evidently not.
If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single centavo as
just compensation before the Government takes over the NAIA 3 facility by virtue of a writ of
possession. Such an injunction squarely contradicts the letter and intent of the 2004 Resolution.
Hence, the position of the Government sanctions its own disregard or violation the prescription laid
down by this Court that there must first be just compensation paid to PIATCO before the Government
may take over the NAIA 3 facilities.
Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution. Even
assuming that Rep. Act No. 8974 does not govern in this case, it does not necessarily follow that Rule
67 should then apply. After all, adherence to the letter of Section 2, Rule 67 would in turn violate the
Court’s requirement in the 2004 Resolution that there must first be payment of just compensation to
PIATCO before the Government may take over the property.
It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the
scheme of "immediate payment" in cases involving national government infrastructure projects. The
following portion of the Senate deliberations, cited by PIATCO in its Memorandum, is worth quoting
to cogitate on the purpose behind the plain meaning of the law:
THE CHAIRMAN (SEN. CAYETANO). "x x x Because the Senate believes that, you know, we
have to pay the landowners immediately not by treasury bills but by cash.
Since we are depriving them, you know, upon payment, ‘no, of possession, we might as well pay
them as much, ‘no, hindi lang 50 percent.
xxx
THE CHAIRMAN (REP. VERGARA). Accepted.
xxx
THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e.
THE CHAIRMAN (REP. VERGARA). That’s why we need to really secure the availability of funds.
xxx
THE CHAIRMAN (SEN. CAYETANO). No, no. It’s the same. It says here: iyong first paragraph,
diba? Iyong zonal – talagang magbabayad muna. In other words, you know, there must be a
payment kaagad. (TSN, Bicameral Conference on the Disagreeing Provisions of House Bill 1422
and Senate Bill 2117, August 29, 2000, pp. 14-20)
xxx
THE CHAIRMAN (SEN. CAYETANO). Okay, okay, ‘no. Unang-una, it is not deposit, ‘no. It’s
payment."
144
REP. BATERINA. It’s payment, ho, payment." (Id., p. 63)31
It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is
well within the province of the legislature to fix the standard, which it did through the enactment of
Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the amount of just
compensation in expropriation cases relating to national government infrastructure projects, as well as
the manner of payment thereof. At the same time, Section 14 of the Implementing Rules recognizes
the continued applicability of Rule 67 on procedural aspects when it provides "all matters regarding
defenses and objections to the complaint, issues on uncertain ownership and conflicting claims,
effects of appeal on the rights of the parties, and such other incidents affecting the complaint shall be
resolved under the provisions on expropriation of Rule 67 of the Rules of Court."32
Given that the 2004 Resolution militates against the continued use of the norm under Section 2, Rule
67, is it then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its application in
this case complements rather than contravenes the prescriptions laid down in the 2004 Resolution.
Rep. Act No. 8974 Fits
to the Situation at Bar
and Complements the
2004 Agan Resolution
Rep. Act No. 8974 is entitled "An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or
Location For National Government Infrastructure Projects And For Other Purposes." Obviously, the
law is intended to cover expropriation proceedings intended for national government infrastructure
projects. Section 2 of Rep. Act No. 8974 explains what are considered as "national government
projects."
Sec. 2. National Government Projects. – The term "national government projects" shall refer to all
national government infrastructure, engineering works and service contracts, including projects
undertaken by government-owned and controlled corporations, all projects covered by Republic Act
No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer
Law, and other related and necessary activities, such as site acquisition, supply and/or installation of
equipment and materials, implementation, construction, completion, operation, maintenance,
improvement, repair and rehabilitation, regardless of the source of funding.
As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a build-
operate-and-transfer arrangement pursuant to Republic Act No. 6957, as amended,33 which pertains to
infrastructure or development projects normally financed by the public sector but which are now
wholly or partly implemented by the private sector.34 Under the build-operate-and-transfer scheme, it
is the project proponent which undertakes the construction, including the financing, of a given
infrastructure facility.35 In Tatad v. Garcia,36 the Court acknowledged that the operator of the EDSA
Light Rail Transit project under a BOT scheme was the owner of the facilities such as "the rail tracks,
rolling stocks like the coaches, rail stations, terminals and the power plant."37
There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and
constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of just
compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the
Government resorted to eminent domain proceedings in the first place is a concession on its part of
PIATCO’s ownership. Indeed, if no such right is recognized, then there should be no impediment for
the Government to seize control of NAIA 3 through ordinary ejectment proceedings.
Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these facilities
should now be determined. Under Section 415(1) of the Civil Code, these facilities are ineluctably
immovable or real property, as they constitute buildings, roads and constructions of all kinds adhered
to the soil.38 Certainly, the NAIA 3 facilities are of such nature that they cannot just be packed up and
transported by PIATCO like a traveling circus caravan.
Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by
PIATCO. This point is critical, considering the Government’s insistence that the NAIA 3 facilities
cannot be deemed as the "right-of-way", "site" or "location" of a national government infrastructure
project, within the coverage of Rep. Act No. 8974.
There is no doubt that the NAIA 3 is not, under any sensible contemplation, a "right-of-way." Yet we
cannot agree with the Government’s insistence that neither could NAIA 3 be a "site" or "location".
The petition quotes the definitions provided in Black’s Law Dictionary of "location’" as the specific
place or position of a person or thing and ‘site’ as pertaining to a place or location or a piece of
property set aside for specific use.’"39 Yet even Black’s Law Dictionary provides that "[t]he term [site]
does not of itself necessarily mean a place or tract of land fixed by definite boundaries."40 One would
assume that the Government, to back up its contention, would be able to point to a clear-cut rule that a
"site" or "location" exclusively refers to soil, grass, pebbles and weeds. There is none.
Indeed, we cannot accept the Government’s proposition that the only properties that may be
expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates within its
coverage such real property constituting land, buildings, roads and constructions of all kinds adhered
to the soil. Section 1 of Rep. Act No. 8974, which sets the declaration of the law’s policy, refers to
"real property acquired for national government infrastructure projects are promptly paid just
compensation."41 Section 4 is quite explicit in stating that the scope of the law relates to the
145
acquisition of "real property," which under civil law includes buildings, roads and constructions
adhered to the soil.
It is moreover apparent that the law and its implementing rules commonly provide for a rule for the
valuation of improvements and/or structures thereupon separate from that of the land on which such
are constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or structures
on the land may very well be the subject of expropriation proceedings. Section 4(a), in relation to
Section 7 of the law provides for the guidelines for the valuation of the improvements or structures to
be expropriated. Indeed, nothing in the law would prohibit the application of Section 7, which
provides for the valuation method of the improvements and or structures in the instances wherein it is
necessary for the Government to expropriate only the improvements or structures, as in this case.
The law classifies the NAIA 3 facilities as real properties just like the soil to which they are adhered.
Any sub-classifications of real property and divergent treatment based thereupon for purposes of
expropriation must be based on substantial distinctions, otherwise the equal protection clause of the
Constitution is violated. There may be perhaps a molecular distinction between soil and the inorganic
improvements adhered thereto, yet there are no purposive distinctions that would justify a variant
treatment for purposes of expropriation. Both the land itself and the improvements thereupon are
susceptible to private ownership independent of each other, capable of pecuniary estimation, and if
taken from the owner, considered as a deprivation of property. The owner of improvements seized
through expropriation suffers the same degree of loss as the owner of land seized through similar
means. Equal protection demands that all persons or things similarly situated should be treated alike,
both as to rights conferred and responsibilities imposed. For purposes of expropriation, parcels of land
are similarly situated as the buildings or improvements constructed thereon, and a disparate treatment
between those two classes of real property infringes the equal protection clause.
Even as the provisions of Rep. Act No. 8974 call for that law’s application in this case, the threshold
test must still be met whether its implementation would conform to the dictates of the Court in the
2004 Resolution. Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not
contravene the 2004 Resolution, which requires the payment of just compensation before any
takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the
extent such payment must be effected before the takeover, but it unquestionably requires at least some
degree of payment to the private property owner before a writ of possession may issue. The utilization
of Rep. Act No. 8974 guarantees compliance with this bare minimum requirement, as it assures the
private property owner the payment of, at the very least, the proffered value of the property to be
seized. Such payment of the proffered value to the owner, followed by the issuance of the writ of
possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974, one
which facially complies with the prescription laid down in the 2004 Resolution.
Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974 governs the
instant expropriation proceedings.
The Proper Amount to be Paid
under Rep. Act No. 8974
Then, there is the matter of the proper amount which should be paid to PIATCO by the Government
before the writ of possession may issue, consonant to Rep. Act No. 8974.
At this juncture, we must address the observation made by the Office of the Solicitor General in
behalf of the Government that there could be no "BIR zonal valuations" on the NAIA 3 facility, as
provided in Rep. Act No. 8974, since zonal valuations are only for parcels of land, not for airport
terminals. The Court agrees with this point, yet does not see it as an impediment for the application of
Rep. Act No. 8974.
It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the
parcel of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA 3
facility is constructed, and it should not be entitled to just compensation that is inclusive of the value
of the land itself. It would be highly disingenuous to compensate PIATCO for the value of land it does
not own. Its entitlement to just compensation should be limited to the value of the improvements and/
or structures themselves. Thus, the determination of just compensation cannot include the BIR zonal
valuation under Section 4 of Rep. Act No. 8974.
Under Rep. Act No. 8974, the Government is required to "immediately pay" the owner of the property
the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property
based on the current relevant zonal valuation of the [BIR]; and (2) the value of the improvements and/
or structures as determined under Section 7. As stated above, the BIR zonal valuation cannot apply in
this case, thus the amount subject to immediate payment should be limited to "the value of the
improvements and/or structures as determined under Section 7," with Section 7 referring to the
"implementing rules and regulations for the equitable valuation of the improvements and/or structures
on the land." Under the present implementing rules in place, the valuation of the improvements/
structures are to be based using "the replacement cost method."42 However, the replacement cost is
only one of the factors to be considered in determining the just compensation.
In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment of just
compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount
of just compensation, the duty of the trial court is to ensure that such amount conforms not only to the
law, such as Rep. Act No. 8974, but to principles of equity as well.
Admittedly, there is no way, at least for the present, to immediately ascertain the value of the
improvements and structures since such valuation is a matter for factual determination.43 Yet Rep. Act
No. 8974 permits an expedited means by which the Government can immediately take possession of
146
the property without having to await precise determination of the valuation. Section 4(c) of Rep. Act
No. 8974 states that "in case the completion of a government infrastructure project is of utmost
urgency and importance, and there is no existing valuation of the area concerned, the
implementing agency shall immediately pay the owner of the property its proferred value, taking into
consideration the standards prescribed in Section 5 [of the law]."44 The "proffered value" may strike as
a highly subjective standard based solely on the intuition of the government, but Rep. Act No. 8974
does provide relevant standards by which "proffered value" should be based,45 as well as the certainty
of judicial determination of the propriety of the proffered value.46
In filing the complaint for expropriation, the Government alleged to have deposited the amount of ₱3
Billion earmarked for expropriation, representing the assessed value of the property. The making of
the deposit, including the determination of the amount of the deposit, was undertaken under the
erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the
amount, the Court sees no impediment to recognize this sum of ₱3 Billion as the proffered value
under Section 4(b) of Rep. Act No. 8974. After all, in the initial determination of the proffered value,
the Government is not strictly required to adhere to any predetermined standards, although its
proffered value may later be subjected to judicial review using the standards enumerated under
Section 5 of Rep. Act No. 8974.
How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to be
immediately paid to PIATCO at around $62.3 Million? The Order dated 4 January 2005, which
mandated such amount, proves problematic in that regard. While the initial sum of ₱3 Billion may
have been based on the assessed value, a standard which should not however apply in this case, the
RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the basis for the amount of $62.3
Million, thus leaving the impression that the BIR zonal valuation may form part of the basis for just
compensation, which should not be the case. Moreover, respondent judge made no attempt to apply
the enumerated guidelines for determination of just compensation under Section 5 of Rep. Act No.
8974, as required for judicial review of the proffered value.
The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that the concessions
agreement entered into between the Government and PIATCO stated that the actual cost of building
NAIA 3 was "not less than" US$350 Million.47 The RTC then proceeded to observe that while Rep.
Act No. 8974 required the immediate payment to PIATCO the amount equivalent to 100% of the
value of NAIA 3, the amount deposited by the Government constituted only 18% of this value. At this
point, no binding import should be given to this observation that the actual cost of building NAIA 3
was "not less than" US$350 Million, as the final conclusions on the amount of just compensation can
come only after due ascertainment in accordance with the standards set under Rep. Act No. 8974, not
the declarations of the parties. At the same time, the expressed linkage between the BIR zonal
valuation and the amount of just compensation in this case, is revelatory of erroneous thought on the
part of the RTC.
We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis for Be Implemented Until Actual
valuation in this case, PIATCO not being the owner of the land on which the NAIA 3 facilities stand.
The subject order is flawed insofar as it fails to qualify that such standard is inappropriate. Receipt by PIATCO of Proferred

It does appear that the amount of US$62.3 Million was based on the certification issued by the LBP- Value
Baclaran that the Republic of the Philippines maintained a total balance in that branch amounting to
such amount. Yet the actual representation of the $62.3 Million is not clear. The Land Bank
The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of the
Certification expressing such amount does state that it was issued upon request of the Manila
writ of possession to the Government notwithstanding the fact that no payment of any amount had yet
International Airport Authority "purportedly as guaranty deposit for the expropriation complaint."48
been made to PIATCO, despite the clear command of Rep. Act No. 8974 that there must first be
The Government claims in its Memorandum that the entire amount was made available as a guaranty
payment before the writ of possession can issue. While the RTC did direct the LBP-Baclaran to
fund for the final and executory judgment of the trial court, and not merely for the issuance of the writ
immediately release the amount of US$62 Million to PIATCO, it should have likewise suspended the
of possession.49 One could readily conclude that the entire amount of US$62.3 Million was intended
writ of possession, nay, withdrawn it altogether, until the Government shall have actually paid
by the Government to answer for whatever guaranties may be required for the purpose of the
PIATCO. This is the inevitable consequence of the clear command of Rep. Act No. 8974 that requires
expropriation complaint.
immediate payment of the initially determined amount of just compensation should be effected.
Otherwise, the overpowering intention of Rep. Act No. 8974 of ensuring payment first before transfer
Still, such intention the Government may have had as to the entire US$62.3 Million is only of repossession would be eviscerated.
inferentially established. In ascertaining the proffered value adduced by the Government, the amount
of ₱3 Billion as the amount deposited characterized in the complaint as "to be held by [Land Bank]
Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule 67,
subject to the [RTC’s] orders,"50 should be deemed as controlling. There is no clear evidence that the
or even Section 19 of the Local Government Code. Rule 67 and the Local Government Code merely
Government intended to offer US$62.3 Million as the initial payment of just compensation, the
provided that the Government deposit the initial amounts53 antecedent to acquiring possession of the
wording of the Land Bank Certification notwithstanding, and credence should be given to the
property with, respectively, an authorized
consistent position of the Government on that aspect.

Government depositary54 or the proper court.55 In both cases, the private owner does not receive
In any event, for the RTC to be able to justify the payment of US$62.3 Million to PIATCO and not ₱3
compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974 mandates
Billion Pesos, he would have to establish that the higher amount represents the valuation of the
immediate payment of the initial just compensation prior to the issuance of the writ of possession in
structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is built. The
favor of the Government.
Order dated 5 January 2005 fails to establish such integral fact, and in the absence of contravening
proof, the proffered value of ₱3 Billion, as presented by the Government, should prevail.
Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no
amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards
Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the deposited
eminent domain that reconciles the inherent unease attending expropriation proceedings with a
amount of ₱3 Billion should be considered as the proffered value, since the amount was based on
position of fundamental equity. While expropriation proceedings have always demanded just
comparative values made by the City Assessor.51 Accordingly, it should be deemed as having
compensation in exchange for private property, the previous deposit requirement impeded immediate
faithfully complied with the requirements of the statute.52 While the Court agrees that ₱3 Billion
compensation to the private owner, especially in cases wherein the determination
should be considered as the correct proffered value, still we cannot deem the Government as having
faithfully complied with Rep. Act No. 8974. For the law plainly requires direct payment to the
property owner, and not a mere deposit with the authorized government depositary. Without such of the final amount of compensation would prove highly disputed. Under the new modality prescribed
direct payment, no writ of possession may be obtained. by Rep. Act No. 8974, the private owner sees immediate monetary recompense with the same degree
of speed as the taking of his/her property.
Writ of Possession May Not
While eminent domain lies as one of the inherent powers of the State, there is no requirement that it
undertake a prolonged procedure, or that the payment of the private owner be protracted as far as

147
practicable. In fact, the expedited procedure of payment, as highlighted under Rep. Act No. 8974, is
inherently more fair, especially to the layperson who would be hard-pressed to fully comprehend the
social value of expropriation in the first place. Immediate payment placates to some degree whatever
ill-will that arises from expropriation, as well as satisfies the demand of basic fairness.
The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the
requirement of immediate payment in this case. Accordingly, the Writ of Possession dated 21
December 2004 should be held in abeyance, pending proof of actual payment by the Government to
PIATCO of the proffered value of the NAIA 3 facilities, which totals ₱3,002,125,000.00.
Rights of the Government
upon Issuance of the Writ
of Possession
Once the Government pays PIATCO the amount of the proffered value of ₱3 Billion, it will be entitled
to the Writ of Possession. However, the Government questions the qualification imposed by the RTC
in its 4 January 2005 Order consisting of the prohibition on the Government from performing acts of
ownership such as awarding concessions or leasing any part of NAIA 3 to other parties. To be certain,
the RTC, in its 10 January 2005 Omnibus Order, expressly stated that it was not affirming "the
superfluous part of the Order [of 4 January 2005] prohibiting the plaintiffs from awarding concessions
or leasing any part of NAIA [3] to other parties."56 Still, such statement was predicated on the notion
that since the Government was not yet the owner of NAIA 3 until final payment of just compensation,
it was obviously incapacitated to perform such acts of ownership.
In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the declaration
that "[f]or the government to take over the said facility, it has to compensate respondent PIATCO as
builder of the said structures." The obvious import of this holding is that unless PIATCO is paid just
compensation, the Government is barred from "taking over," a phrase which in the strictest sense
could encompass even a bar of physical possession of NAIA 3, much less operation of the facilities.
There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus allow the
operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession. For one, the
national prestige is diminished every day that passes with the NAIA 3 remaining mothballed. For
another, the continued non-use of the facilities contributes to its physical deterioration, if it has not
already. And still for another, the economic benefits to the Government and the country at large are
beyond dispute once the NAIA 3 is put in operation.
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Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the acts
the Government may be authorized to perform upon the issuance of the writ of possession. Section 4
states that "the court shall immediately issue to the implementing agency an order to take possession
of the property and start the implementation of the project." We hold that accordingly, once the
Writ of Possession is effective, the Government itself is authorized to perform the acts that are
essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the
Writ of Possession. These would include the repair, reconditioning and improvement of the complex,
maintenance of the existing facilities and equipment, installation of new facilities and equipment,
provision of services and facilities pertaining to the facilitation of air traffic and transport, and other
services that are integral to a modern-day international airport.
The Government’s position is more expansive than that adopted by the Court. It argues that with the
writ of possession, it is enabled to perform acts de jure on the expropriated property. It cites Republic
v. Tagle,57 as well as the statement therein that "the expropriation of real property does not include
mere physical entry or occupation of land," and from them concludes that "its mere physical entry and
occupation of the property fall short of the taking of title, which includes all the rights that may be
exercised by an owner over the subject property."
This conclusion is indeed lifted directly from statements in Tagle,58 but not from the ratio decidendi of
that case. Tagle concerned whether a writ of possession in favor of the Government was still necessary
in light of the fact that it was already in actual possession of the property. In ruling that the
Government was entitled to the writ of possession, the Court in Tagle explains that such writ vested
not only physical possession, but also the legal right to possess the property. Continues the Court,
such legal right to possess was particularly important in the case, as there was a pending suit against
the Republic for unlawful detainer, and the writ of possession would serve to safeguard the
Government from eviction.59
At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet by
virtue of the writ of possession. Tagle may concede that the Government is entitled to exercise more
than just the right of possession by virtue of the writ of possession, yet it cannot be construed to grant
the Government the entire panoply of rights that are available to the owner. Certainly, neither Tagle
nor any other case or law, lends support to the Government’s proposition that it acquires beneficial or
equitable ownership of the expropriated property merely through the writ of possession.
Indeed, this Court has been vigilant in defense of the rights of the property owner who has been
validly deprived of possession, yet retains legal title over the expropriated property pending payment
of just compensation. We reiterated the various doctrines of such import in our recent holding in
Republic v. Lim:60
The recognized rule is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled
principle is consistent both here and in other democratic jurisdictions. In Association of Small
Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform[61 ], thus:
"Title to property which is the subject of condemnation proceedings does not vest the
condemnor until the judgment fixing just compensation is entered and paid, but the condemnor’s
title relates back to the date on which the petition under the Eminent Domain Act, or the
commissioner’s report under the Local Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is complete at the time of
entry, title to the property taken remains in the owner until payment is actually made. (Emphasis
supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the decisions
appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held that ‘actual
payment to the owner of the condemned property was a condition precedent to the investment
of the title to the property in the State’ albeit ‘not to the appropriation of it to public use.’ In
Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was
that the fee did not vest in the State until the payment of the compensation although the authority to
enter upon and appropriate the land was complete prior to the payment. Kennedy further said that
‘both on principle and authority the rule is . . . that the right to enter on and use the property is
complete, as soon as the property is actually appropriated under the authority of law for a
public use, but that the title does not pass from the owner without his consent, until just
compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:
‘If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction is
such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken
from an unwilling owner until compensation is paid....’"(Emphasis supplied.)
Clearly, without full payment of just compensation, there can be no transfer of title from the
landowner to the expropriator. Otherwise stated, the Republic’s acquisition of ownership is
conditioned upon the full payment of just compensation within a reasonable time.
Significantly, in Municipality of Biñan v. Garcia[62 ] this Court ruled that the expropriation of lands
consists of two stages, to wit:
149
"x x x The first is concerned with the determination of the authority of the plaintiff to exercise the
power of eminent domain and the propriety of its exercise in the context of the facts involved in the
suit. It ends with an order, if not of dismissal of the action, "of condemnation declaring that the
plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose
described in the complaint, upon the payment of just compensation to be determined as of the date of
the filing of the complaint" x x x.
The second phase of the eminent domain action is concerned with the determination by the court of
"the just compensation for the property sought to be taken." This is done by the court with the
assistance of not more than three (3) commissioners. x x x.
It is only upon the completion of these two stages that expropriation is said to have been completed.
In Republic v. Salem Investment Corporation[63 ] , we ruled that, "the process is not completed until
payment of just compensation." Thus, here, the failure of the Republic to pay respondent and his
predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete.
Lim serves fair warning to the Government and its agencies who consistently refuse to pay just
compensation due to the private property owner whose property had been
expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as
possessor pending the final payment of just compensation, without diminishing the potency of such
rights. Indeed, the public policy, enshrined foremost in the Constitution, mandates that the
Government must pay for the private property it expropriates. Consequently, the proper judicial
attitude is to guarantee compliance with this primordial right to just compensation.
Final Determination of Just
Compensation Within 60 Days
The issuance of the writ of possession does not write finis to the expropriation proceedings. As earlier
pointed out, expropriation is not completed until payment to the property owner of just compensation.
The proffered value stands as merely a provisional determination of the amount of just compensation,
the payment of which is sufficient to transfer possession of the property to the Government. However,
to effectuate the transfer of ownership, it is necessary for the Government to pay the property owner
the final just compensation.
In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case, the
reversion of the validly expropriated property to private ownership due to the failure of the
Government to pay just compensation in that case.64 It was noted in that case that the Government
deliberately refused to pay just compensation. The Court went on to rule that "in cases where the
government failed to pay just compensation within five (5) years from the finality of the judgment in
the expropriation proceedings, the owners concerned shall have the right to recover possession of their
property."65
Rep. Act No. 8974 mandates a speedy method by which the final determination of just compensation
may be had. Section 4 provides:
In the event that the owner of the property contests the implementing agency’s proffered value, the
court shall determine the just compensation to be paid the owner within sixty (60) days from the date
of filing of the expropriation case. When the decision of the court becomes final and executory, the
implementing agency shall pay the owner the difference between the amount already paid and the just
compensation as determined by the court.
We hold that this provision should apply in this case. The sixty (60)-day period prescribed in Rep. Act
No. 8974 gives teeth to the law’s avowed policy "to ensure that owners of real property acquired for
national government infrastructure projects are promptly paid just compensation."66 In this case,
there already has been irreversible delay in the prompt payment of PIATCO of just compensation, and
it is no longer possible for the RTC to determine the just compensation due PIATCO within sixty (60)
days from the filing of the complaint last 21 December 2004, as contemplated by the law. Still, it is
feasible to effectuate the spirit of the law by requiring the trial court to make such determination
within sixty (60) days from finality of this decision, in accordance with the guidelines laid down in
Rep. Act No. 8974 and its Implementing Rules.
Of course, once the amount of just compensation has been finally determined, the Government is
obliged to pay PIATCO the said amount. As shown in Lim and other like-minded cases, the
Government’s refusal to make such payment is indubitably actionable in court.
Appointment of Commissioners
The next argument for consideration is the claim of the Government that the RTC erred in appointing
the three commissioners in its 7 January 2005 Order without prior consultation with either the
Government or PIATCO, or without affording the Government the opportunity to object to the
appointment of these commissioners. We can dispose of this argument without complication.
It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked with the
ascertainment of just compensation.67 This protocol though is sanctioned under Rule 67. We rule that
the appointment of commissioners under Rule 67 may be resorted to, even in expropriation
proceedings under Rep. Act No. 8974, since the application of the provisions of Rule 67 in that regard
do not conflict with the statute. As earlier stated, Section 14 of the Implementing Rules does allow
such other incidents affecting the complaint to be resolved under the provisions on expropriation of
150
Rule 67 of the Rules of Court. Even without Rule 67, reference during trial to a commissioner of the
examination of an issue of fact is sanctioned under Rule 32 of the Rules of Court.
But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in
expropriation proceedings under Rep. Act No. 8974, the standards to be observed for the
determination of just compensation are provided not in Rule 67 but in the statute. In particular, the
governing standards for the determination of just compensation for the NAIA 3 facilities are found in
Section 10 of the Implementing Rules for Rep. Act No. 8974, which provides for the replacement cost
method in the valuation of improvements and structures.68
Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the
expropriation case on who should be appointed as commissioners. Neither does the Court feel that
such a requirement should be imposed in this case. We did rule in Municipality of Talisay v. Ramirez69
that "there is nothing to prevent [the trial court] from seeking the recommendations of the parties on
[the] matter [of appointment of commissioners], the better to ensure their fair representation."70 At the
same time, such solicitation of recommendations is not obligatory on the part of the court, hence we
cannot impute error on the part of the RTC in its exercise of solitary discretion in the appointment of
the commissioners.
What Rule 67 does allow though is for the parties to protest the appointment of any of these
commissioners, as provided under Section 5 of the Rule. These objections though must be made filed
within ten (10) days from service of the order of appointment of the commissioners.71 In this case, the
proper recourse of the Government to challenge the choice of the commissioners is to file an objection
with the trial court, conformably with Section 5, Rule 67, and not as it has done, assail the same
through a special civil action for certiorari. Considering that the expropriation proceedings in this case
were effectively halted seven (7) days after the Order appointing the commissioners,72 it is
permissible to allow the parties to file their objections with the RTC within five (5) days from finality
of this decision.
Insufficient Ground for Inhibition
of Respondent Judge
The final argument for disposition is the claim of the Government is that Hon. Gingoyon has
prejudged the expropriation case against the Government’s cause and, thus, should be required to
inhibit himself. This grave charge is predicated on facts which the Government characterizes as
"undeniable." In particular, the Government notes that the 4 January 2005 Order was issued motu
proprio, without any preceding motion, notice or hearing. Further, such order, which directed the
payment of US$62 Million to PIATCO, was attended with error in the computation of just
compensation. The Government also notes that the said Order was issued even before summons had
been served on PIATCO.
The disqualification of a judge is a deprivation of his/her judicial power73 and should not be allowed
on the basis of mere speculations and surmises. It certainly cannot be predicated on the adverse nature
of the judge’s rulings towards the movant for inhibition, especially if these rulings are in accord with
law. Neither could inhibition be justified merely on the erroneous nature of the rulings of the judge.
We emphasized in Webb v. People:74
To prove bias and prejudice on the part of respondent judge, petitioners harp on the alleged adverse
and erroneous rulings of respondent judge on their various motions. By themselves, however,
they do not sufficiently prove bias and prejudice to disqualify respondent judge. To be
disqualifying, the bias and prejudice must be shown to have stemmed from an extrajudicial
source and result in an opinion on the merits on some basis other than what the judge learned
from his participation in the case. Opinions formed in the course of judicial proceedings, although
erroneous, as long as they are based on the evidence presented and conduct observed by the judge, do
not prove personal bias or prejudice on the part of the judge. As a general rule, repeated rulings
against a litigant, no matter how erroneous and vigorously and consistently expressed, are not a
basis for disqualification of a judge on grounds of bias and prejudice. Extrinsic evidence is
required to establish bias, bad faith, malice or corrupt purpose, in addition to the palpable error
which may be inferred from the decision or order itself. Although the decision may seem so
erroneous as to raise doubts concerning a judge's integrity, absent extrinsic evidence, the
decision itself would be insufficient to establish a case against the judge. The only exception to
the rule is when the error is so gross and patent as to produce an ineluctable inference of bad
faith or malice.75
The Government’s contentions against Hon. Gingoyon are severely undercut by the fact that the 21
December 2004 Order, which the 4 January 2005 Order sought to rectify, was indeed severely flawed
as it erroneously applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No.
8974, in ascertaining compliance with the requisites for the issuance of the writ of possession. The 4
January
2005 Order, which according to the Government establishes Hon. Gingoyon’s bias, was promulgated
precisely to correct the previous error by applying the correct provisions of law. It would not speak
well of the Court if it sanctions a judge for wanting or even attempting to correct a previous erroneous
order which precisely is the right move to take.
Neither are we convinced that the motu proprio issuance of the 4 January 2005 Order, without the
benefit of notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motu proprio
amendment by a court of an erroneous order previously issued may be sanctioned depending on the
circumstances, in line with the long-recognized principle that every court has inherent power to do all
151
things reasonably necessary for the administration of justice within the scope of its jurisdiction.76
Section 5(g), Rule 135 of the Rules of Court further recognizes the inherent power of courts "to
amend and control its process and orders so as to make them conformable to law and justice,"77 a
power which Hon. Gingoyon noted in his 10 January 2005 Omnibus Order.78 This inherent power
includes the right of the court to reverse itself, especially when in its honest opinion it has committed
an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party
litigant.79
Certainly, the 4 January 2005 Order was designed to make the RTC’s previous order conformable to
law and justice, particularly to apply the correct law of the case. Of course, as earlier established, this
effort proved incomplete, as the 4 January 2005 Order did not correctly apply Rep. Act No. 8974 in
several respects. Still, at least, the 4 January 2005 Order correctly reformed the most basic premise of
the case that Rep. Act No. 8974 governs the expropriation proceedings.
Nonetheless, the Government belittles Hon. Gingoyon’s invocation of Section 5(g), Rule 135 as
"patently without merit". Certainly merit can be seen by the fact that the 4 January 2005 Order
reoriented the expropriation proceedings towards the correct governing law. Still, the Government
claims that the unilateral act of the RTC did not conform to law or justice, as it was not afforded the
right to be heard.
The Court would be more charitably disposed towards this argument if not for the fact that the earlier
order with the 4 January 2005 Order sought to correct was itself issued without the benefit of any
hearing. In fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing prior
to the issuance of the writ of possession, which by design is available immediately upon the filing of
the complaint provided that the requisites attaching thereto are present. Indeed, this expedited process
for the obtention of a writ of possession in expropriation cases comes at the expense of the rights of
the property owner to be heard or to be deprived of possession. Considering these predicates, it would
be highly awry to demand that an order modifying the earlier issuance of a writ of possession in an
expropriation case be barred until the staging of a hearing, when the issuance of the writ of possession
itself is not subject to hearing. Perhaps the conduct of a hearing under these circumstances would be
prudent. However, hearing is not mandatory, and the failure to conduct one does not establish the
manifest bias required for the inhibition of the judge.
The Government likewise faults Hon. Gingoyon for using the amount of US$350 Million as the basis
for the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was predicated
on the erroneous belief that the BIR zonal valuation applies as a standard for determination of just
compensation in this case. Yet this is manifest not of bias, but merely of error on the part of the judge.
Indeed, the Government was not the only victim of the errors of the RTC in the assailed orders.
PIATCO itself was injured by the issuance by the RTC of the writ of possession, even though the
former had yet to be paid any amount of just compensation. At the same time, the Government was
also prejudiced by the erroneous ruling of the RTC that the amount of US$62.3 Million, and not ₱3
Billion, should be released to PIATCO.
The Court has not been remiss in pointing out the multiple errors committed by the RTC in its assailed
orders, to the prejudice of both parties. This attitude of error towards all does not ipso facto negate the
charge of bias. Still, great care should be had in requiring the inhibition of judges simply because the
magistrate did err. Incompetence may be a ground for administrative sanction, but not for inhibition,
which requires lack of objectivity or impartiality to sit on a case.
The Court should necessarily guard against adopting a standard that a judge should be inhibited from
hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the
Government may be palpable, yet inhibition cannot be grounded merely on the feelings of the party-
litigants. Indeed, every losing litigant in any case can resort to claiming that the judge was biased, and
he/she will gain a sympathetic ear from friends, family, and people who do not understand the judicial
process. The test in believing such a proposition should not be the vehemence of the litigant’s claim of
bias, but the Court’s judicious estimation, as people who know better than to believe any old cry of
"wolf!", whether such bias has been irrefutably exhibited.
The Court acknowledges that it had been previously held that "at the very first sign of lack of faith
and trust in his actions, whether well-grounded or not, the judge has no other alternative but to inhibit
himself from the case."80 But this doctrine is qualified by the entrenched rule that "a judge may not be
legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt to
his honest actuations and probity in favor of either party, or incite such state of mind, he should
conduct a careful self-
examination. He should exercise his discretion in a way that the people's faith in the Courts of Justice
is not impaired."81 And a self-assessment by the judge that he/she is not impaired to hear the case will
be respected by the Court absent any evidence to the contrary. As held in Chin v. Court of Appeals:
An allegation of prejudgment, without more, constitutes mere conjecture and is not one of the "just
and valid reasons" contemplated in the second paragraph of Rule 137 of the Rules of Court for which
a judge may inhibit himself from hearing the case. We have repeatedly held that mere suspicion that a
judge is partial to a party is not enough. Bare allegations of partiality and prejudgment will not suffice
in the absence of clear and convincing evidence to overcome the presumption that the judge will
undertake his noble role to dispense justice according to law and evidence and without fear or favor.
There should be adequate evidence to prove the allegations, and there must be showing that the judge
had an interest, personal or otherwise, in the prosecution of the case. To be a disqualifying
circumstance, the bias and prejudice must be shown to have stemmed from an extrajudicial source and
result in an opinion on the merits on some basis other than what the judge learned from his
participation in the case.82
152
The mere vehemence of the Government’s claim of bias does not translate to clear and convincing
evidence of impairing bias. There is no sufficient ground to direct the inhibition of Hon. Gingoyon
from hearing the expropriation case.
In conclusion, the Court summarizes its rulings as follows:
(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the
Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation
in accordance with law and equity. Any ruling in the present expropriation case must be conformable
to the dictates of the Court as pronounced in the Agan cases.
(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment
by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides
certain valuation standards or methods for the determination of just compensation.
(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the
Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of ₱3 Billion,
representing the proffered value of NAIA 3 under Section 4(c) of the law.
(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the
NAIA 3 Airport terminal project by performing the acts that are essential to the operation of the NAIA
3 as an international airport terminal upon the effectivity of the Writ of Possession, subject to the
conditions above-stated. As prescribed by the Court, such authority encompasses "the repair,
reconditioning and improvement of the complex, maintenance of the existing facilities and equipment,
installation of new facilities and equipment, provision of services and facilities pertaining to the
facilitation of air traffic and transport, and other services that are integral to a modern-day
international airport."83
(5) The RTC is mandated to complete its determination of the just compensation within sixty (60)
days from finality of this Decision. In doing so, the RTC is obliged to comply with "law and equity"
as ordained in Again and the standard set under Implementing Rules of Rep. Act No. 8974 which is
the "replacement cost method" as the standard of valuation of structures and improvements.
(6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for
the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall
apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the
rulings of the Court in Agan.
(7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO
immediately upon the finality of the said decision.
(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon. Chief Justice

All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the REYNATO S. PUNO, ARTEMIO V. PANGANIBAN
nullification of the questioned orders. Nonetheless, portions of these orders should be modified to
conform with law and the pronouncements made by the Court herein. Associate Justice Associate Justice

WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 LEONARDO A. QUISUMBING, CONSUELO YNARES-SANTIAGO
and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following
MODIFICATIONS:
i>Associate Justice Associate Justice
1) The implementation of the Writ of Possession dated 21 December 2005 is HELD IN ABEYANCE,
ANGELINA SANDOVAL-GUTIERREZ, ANTONIO T. CARPIO
pending payment by petitioners to PIATCO of the amount of Three Billion Two Million One Hundred
Twenty Five Thousand Pesos (₱3,002,125,000.00), representing the proffered value of the NAIA 3
facilities; Associate Justice Associate Justice

2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start the implementation MA. ALICIA AUSTRIA-MARTINEZ, RENATO C. CORONA
of the Ninoy Aquino International Airport Pasenger Terminal III project by performing the acts that
are essential to the operation of the said International Airport Passenger Terminal project; Associate Justice Associate Justice

3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to CONCHITA CARPIO-MORALES, ROMEO J. CALLEJO, SR.
determine the just compensation to be paid to PIATCO by the Government.
Associate Justice Associate Justice
The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the
parties are given ten (10) days from finality of this Decision to file, if they so choose, objections to the ADOLFO S. AZCUNA, MINITA V. CHICO-NAZARIO
appointment of the commissioners decreed therein. Associate Justice Associate Justice

The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED. CANCIO C. GARCIA

No pronouncement as to costs. Associate Justice

SO ORDERED. C E R T I FI CAT I O N

DANTE O. TINGA Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in
Associate Justice the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
WE CONCUR:
HILARIO G. DAVIDE, JR.
HILARIO G. DAVIDE, JR.

153
Chief Justice G.R. No. 166429 December 19, 2005

REPUBLIC OF THE PHILIPPINES represented by Executive Secretary Eduardo R. Ermita,

the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC) and the
MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA)
vs.
HON. HENRICK F. GINGOYON in his capacity as Presiding Judge of the Regional Trial Court
of Pasay City, Branch 117, and PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.

SEPARATE OPINION

PUNO, J.:

I join the exhaustive Dissent of Mr. Justice Corona. In addition, I proffer the following thoughts:

Agan case did not preclude

right of State to expropriate

The majority opinion took excruciating pains to reconcile our Decision in Agan and the inherent right
of the State to expropriate private property. With due respect, the effort is strained and unnecessary for
there nothing in Agan where it can be deduced that the right of the State to expropriate the subject
property has been impaired or diminished. In Agan, we simply held:

xxx

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III
facility are almost complete and that funds have been spent by PIATCO in their construction. For the
government to take over the said facility, it has to compensate respondent PIATCO as builder of the
said structures. The compensation must be just and in accordance with law and equity for the
government cannot unjustly enrich itself at the expense of PIATCO and its investors.

Agan involved solely the issue of the validity of THE PIATCO contracts. After striking down the
contracts as void, we ruled that the State must pay just compensation to PIATCO before it could
exercise the right to take over considering the undeniable fact that the latter spent a considerable sum
of money to build the structures comprising the NAIA IPT III. The Court, however, did not spell out a
rigid formula for just compensation to be paid to PIATCO except to say that it must be according to

154
law and equity. The Court’s language was carefully crafted to give the trial court sufficient flexibility
in determining just compensation considering the exchange of charges and countercharges that the
cost in building the said structures was unreasonably bloated. It ought to be stressed again that in
Agan, we did not rule that the State cannot expropriate the said structures. Necessarily, we did not
also set the procedure on how the expropriation proceedings should be conducted if the State would
opt to expropriate said structures. We need not, therefore, strain in attempting to square our ruling in
Agan with our ruling in the case at bar. If at all, Agan will later be relevant in fixing just
compensation but not in determining which procedure to follow in the expropriation of NAIA IPT III.
Undoubtedly, Rule 67 is the rule this Court promulgated to govern the proceedings in expropriation
cases filed in court. It has been the undeviating rule for quite a length of time. Following Article VIII,
section 5(5) of the 1987 Constitution and the Echegaray jurisprudence, Rule 67 cannot be repealed or
amended by Congress. This prohibition against non- repeal or non-amendment refers to any part of
Rule 67 for Rule 67 is pure procedural law. Consequently, the Court should not chop Rule 67 into
pieces and hold that some can be changed by Congress but others can be changed. The stance will
dilute the rule making power of this Court which can not be allowed for it will weaken its institutional
independence.

II III

R.A. No. 8974 cannot On December 12, 2005, the Solicitor General filed a Supplemental Manifestation and Motion. The
Solicitor General informed the Court about an Order dated December 2, 2005 of the High Court of
amend Rule 67 Justice, Queen’s Bench Division, London which reads:

Article VIII, sec. 5 of the 1987 Constitution gave the Supreme Court the following powers: Claim No.: HT-05-269

xxx IN THE HIGH COURT OF JUSTICE

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, QUEEN’S BENCH DIVISION
practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal
assistance to the underprivileged. Such rules shall provide a simplified and inexpensive procedure for TECHNOLOGY AND CONSTRUCTION COURT
the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not
diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi- MR. JUSTICE RAMSEY
judicial bodies shall remain effective unless disapproved by the Supreme Court.
BETWEEN:
In Echegaray v. Secretary of Justice1 we emphasized that the 1987 Constitution strengthened the
rule making power of this Court, thus:
TAKENAKA CORPORATION (PHILIPPINE BRANCH)
The 1987 Constitution molded an even stronger and more independent judiciary. Among others, it
First Claimant
enhanced the rule making power of this Court. x x x

ASAHIKOSAN CORPORATION
The rule making power of this Court was expanded. This Court for the first time was given the power
to promulgate rules concerning the protection and enforcement of constitutional rights. x x x But
most importantly, the 1987 Constitution took away the power of Congress to repeal, alter, or Second Claimant
supplement rules concerning pleading, practice and procedure. In fine, the power to promulgate
rules of pleading, practice and procedure is no longer shared by this Court with Congress x x x. -vs.-

PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.

155
Defendant
_______________________________
ORDER DATED 2 DECEMBER 2005
_______________________________
UPON Judgment in default of Defence having been entered on 28 November 2005.
AND UPON READING the Application Notice of the Claimants dated 28 November 2005 and the
evidence referred to in Part C.
AND UPON HEARING the solicitors for the Claimants and the solicitors for the Defendant
appearing.
IT IS ORDERED THAT:
1. Judgment be entered for the First Claimant in the sum of 21,688,012.18 United States dollars,
together with interest in the sum of 6,052,805.83 United State dollars.
2. Judgment be entered for the Second Claimant in the sum of 30,319,284.36 United States dollars,
together with interest in the sum of 5,442,628.26 United Stats dollars.
3. The Defendant do pay the Claimants’ costs in the action, to be subject to detailed assessment if not
agreed.
DATED this 2 day of December 2005.
To be sure, the said Order is not yet final. Be that as it may, the Court cannot turn a blind eye to this
new wrinkle of the case at bar. It is of judicial notice that despite Agan, the subject case has reached
the international arbitral tribunals where the government and the private respondent have filed charges
and countercharges. There is evident need to avoid the issues pestering the parties from further
multiplying and for new proceedings to be started in other courts, lest public interest suffer further
irretrievable prejudice. Towards this end, it is respectfully submitted that the Court should exercise its
power to compel the parties to interplead pursuant to Rule 62 and invoke the need for orderly
administration of justice. The parties may be given reasonable time to amend their pleadings in the
trial court.
156
IN VIEW WHEREOF, I join the Opinion of Mr. Justice Corona except the part calling for the
inhibition of the respondent judge. The issues resolved by the respondent judge are not the run of the
mill variety. Indeed, their novelty and complexity have divided even the members of this Court. There
may have been lapses by the respondent judge but they do not bespeak of a biased predisposition.
REYNATO S. PUNO
Associate Justice
Footnotes
1 361 Phil. 76 (1999).
G.R. No. 166429 December 19, 2005
REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo R. Ermita,
the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), and the
MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), Petitioners,
vs.
HON. HENRICK F. GINGOYON, In his capacity as Presiding Judge of the Regional Trial
Court, Branch 117, Pasay City, and PHILIPPINE INTERNATIONAL AIR TERMINALS CO.,
INC., Respondents.
SEPARATE OPINION
CARPIO, J.:
I concur in the result of the majority opinion.
Congress has no power to amend or repeal rules of procedure adopted by the Supreme Court.1
However, Congress can enact laws on substantive matters which are the subject of court procedures.
Thus, Congress can prescribe the initial or minimum amount for just compensation in expropriation
cases, and require immediate payment of such initial or minimum amount as condition for the
immediate takeover of the property by the government. The rules of procedure, like Rule 67 of the
Rules of Court, must adjust automatically to such new laws on substantive matters.
Section 4 of Republic Act No. 8974, mandating immediate payment to the property owner of the full
zonal or proffered value prior to takeover by the government, is a substantive requirement in
expropriation cases. Thus, Section 4 must apply to all expropriation cases under RA No. 8974
involving the acquisition of real property, like the NAIA Terminal III, for "national government
projects."
Even assuming, for the sake of argument, that Section 4 of RA 8974 is not applicable to the
expropriation of NAIA Terminal III, the Court must still apply the substantive concept in Section 4 of
RA 8974 to expropriation proceedings under Rule 67 to insure equal protection of the law to property
owners.2 There is no substantial reason to discriminate against property owners in expropriation cases
under Rule 67. Under RA 8974, when private property is expropriated for a national government
project, the government must first pay the zonal or proffered value to the property owner before the
government can take over the property. In the present case, private property is expropriated for an
admittedly national government project. Thus, the Court must extend the substantive benefits in
Section 4 of RA 8974 to expropriation cases under Rule 67 to prevent denial of the equal protection of
the law.
Accordingly, I join in the result of the majority opinion.
ANTONIO T. CARPIO
Associate Justice
157
G. R. No. 166429
REPUBLIC OF THE PHILIPPINES represented by Executive Secretary Eduardo R. Ermita,
the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC) and the
MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), petitioners,
vs.
HON. HENRICK F. GINGOYON in his capacity as Presiding Judge of the Regional Trial Court
of Pasay City, Branch 117, and PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.,
respondents.
DISSENTING OPINION
CORONA, J.:
The 1987 Constitution molded an even stronger and more independent judiciary. Among others, it
enhanced the rule making power of this Court. x x x
The rule making power of this Court was expanded. This Court for the first time was given the power
to promulgate rules concerning the protection and enforcement of constitutional rights. x x x But most
importantly, the 1987 Constitution took away the power of Congress to repeal, alter, or supplement
rules concerning pleading, practice and procedure. In fine, the power to promulgate rules of
pleading, practice and procedure is no longer shared by this Court with Congress x x x. (emphasis
supplied)
– Echegaray v. Secretary of Justice, 361 Phil. 76 (1999)
¾°¾
Senator [Miriam] Santiago. Mr. President, will the gentleman yield for clarificatory interpellation
considering that I support the bill?
xxxxxxxxx
x x x I would now like to proceed with the clarificatory questions. I would like to go through the
pages chronologically. I will refer to Section 4 on page 2 of [Senate Bill No. 2038]. This is the
Section which sets out the procedures for acquisition of land or other real property, including
expropriation.
We all know in the legal profession that expropriation proceedings are covered by Rule 67 of the
Rules of Court. I think it is self-evident that Section 4 seeks to revise Rule 67 of the Rules of
Court.
x x x Is this section intended to amend Rules of Procedure promulgated by the Supreme Court?
xxx
Senator [Renato] Cayetano. x x x
Yes, Mr. President, to a certain extent, Section 4 would amend the provisions of the Rules of Court
vis-à-vis expropriation x x x.
xxxxxxxxx
x x x Section 4 of this bill x x x effectively amends certain portions of the Rules of Court on
expropriation.
– Senate deliberations on July 25, 2000 on Senate Bill (SB) No. 2038 which later became SB No.
2117. SB No. 2117 was consolidated with House Bill No. 1422 and enacted by Congress as RA 8974.
This case involves the exercise by the national government of the power of eminent domain over the
Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT3). From the start,
there was never any doubt about the Republic’s position to exercise the power of eminent domain.
The discussions within the Court focused on which procedure shall govern the determination of the
just compensation due to PIATCO for the NAIA IPT3 facilities ― whether it would be Rule 67 of the
Rules of Court or RA 8974.
The majority ruled that RA 8974 should apply. It ordered the national government and its co-
petitioners to immediately pay the just compensation for NAIA IPT3 before taking over the facility. In
so doing, the majority may have unwittingly further delayed, if not virtually foreclosed, the
expropriation of NAIA IPT3.
I submit it erroneously allowed the procedure set forth in an unconstitutional law.
The majority allowed Congress to encroach upon the rule-making power1 which the Constitution has
reserved exclusively to this Court. And it may have created another white elephant as a result.
Hence, I respectfully dissent.
158
Before us is a petition for certiorari and prohibition with urgent prayer for preliminary injunction and
temporary restraining order filed by the Republic of the Philippines (Republic), the Department of
Transportation and Communications (DOTC) and the Manila International Airport Authority (MIAA).
The petition seeks to nullify and set aside the January 4, 2005, January 7, 2005 and January 10, 2005
orders of the public respondent, Hon. Henrick F. Gingoyon, presiding judge of the Regional Trial
Court of Pasay City, Branch 117, in RTC Civil Case No. 04-0876.
The main case here is one of expropriation2 and is an offshoot of the decision3 and resolution4 of this
Court in the consolidated cases of Agan v. PIATCO, Baterina v. PIATCO and Lopez v. PIATCO. The
object of the expropriation proceedings is the NAIA IPT3.5
Petitioners’ Case
The actual construction and development of the NAIA IPT3 were undertaken by PIATCO as
contractor of a build-operate-transfer project6 pursuant to the following contracts: (1) Concession
Agreement signed on July 12, 1997; (2) Amended and Restated Concession Agreement (ARCA) dated
November 26, 1998; (3) First Supplement to the ARCA dated August 27, 1999; (4) Second
Supplement to the ARCA dated September 4, 2000; and (5) Third Supplement to the ARCA dated
June 22, 2001 [collectively, the PIATCO Contracts].7
At the end of a 25-year concession, PIATCO will transfer the operation of the terminal to the MIAA.8
PIATCO commenced but did not complete the construction of NAIA IPT3 because of certain
developments which will be taken up in detail later.
NAIA IPT3 stands on a parcel of land owned by the Bases Conversion Development Authority
(BCDA), an agency of the Republic.9
By way of a brief background, this Court ruled in Agan that in view of the absence of the required
financial capacity of PIATCO’s predecessor, the Paircargo Consortium,10 the award to it by the
Prequalification Bids and Awards Committee (PBAC) of the contract for the construction, operation
and maintenance of the NAIA IPT3 was null and void.11 Moreover, the 1997 Concession Agreement
was nullified for being a substantially different agreement from the contract bidded upon. It also
contained a provision constituting a direct government guarantee which was expressly prohibited by
RA 6957 or the Build-Operate-Transfer (B-O-T) Law and its implementing rules. The 1999 ARCA
and its supplements, being mere accessory contracts, were all similarly voided.
After invalidating all the PIATCO Contracts, the Court declared in a resolution dated January 21,
2004 (2004 resolution):
[that this] Court, however, is not unmindful of the reality that the structures comprising the NAIA
[IPT3] facility are almost complete and that funds have been spent by PIATCO in their construction.
For the government to take over the facility, it has to compensate respondent PIATCO as builder of
the said structures. The compensation must be just and in accordance with law and equity for the
government can not unjustly enrich itself at the expense of PIATCO and its investors.12 (emphasis
supplied)
More than a year later, however, the Republic still had not moved any closer to opening and operating
a modern international airport. Petitioners allegedly exerted efforts, unfortunately to no avail, to
negotiate with PIATCO and its foreign stockholder and lender, Fraport AG Frankfurt Airport Services
Worldwide (Fraport), for the resolution of the stalemate. Petitioners claimed that their request for a
"walk-through" to arrive at a preliminary determination of the safety and structural integrity of the
terminal as well as their appeal for the submission of construction plans and related documents were
denied.
On the ground that, under the Constitution, (1) private property can be taken for public use under
certain conditions and (2) the State has the inherent power of eminent domain, the Republic resorted
to an action for expropriation on December 21, 2004.13
Upon filing the complaint for expropriation, petitioners made a cash deposit of ₱3,002,125,000
(NAIA IPT3’s assessed value for taxation purposes) at the Baclaran Branch of the Land Bank of the
Philippines (LBP-Baclaran). The amount, roughly equivalent to US$ 53 million, was subject to the
orders of the trial court. A writ of possession was thereafter issued, enabling petitioner to gain its first
access to the terminal14 after the promulgation of Agan. With the writ,
petitioners entered and took possession of the NAIA IPT3.15
Meanwhile, the sheriff was not able to serve summons at the indicated address of PIATCO since it
apparently no longer held office there.16 Petitioners claim that, as of January 3, 2005, the sheriff still
had been unable to serve summons on PIATCO.17
On January 4, 2005, respondent judge issued the first assailed order:
In view of the foregoing, this court hereby issues the following orders to supplement its Order dated
21 December 2004 and the writ of possession issued on the same date:
(a) The Land Bank of the Philippines, Baclaran Branch, is hereby directed to immediately, upon
receipt of this Order, release the amount of US$62,343,175.77 that plaintiffs specifically made
available for the purpose of expropriation, to and in favor of PIATCO. This amount shall be deducted
159
from the amount of just compensation due PIATCO that shall be determined by this court pursuant to
Section 4 of R.A. No. 8974.
(b) The plaintiffs are hereby directed to submit to this court a Certificate of Availability of Funds
signed by authorized officials to cover the payment of just compensation.
(c) Pending expropriation proceedings and full payment of just compensation to PIATCO, the
plaintiffs are directed to maintain, preserve and safeguard NAIA IPT3, or perform such acts or
activities in preparation for their direct operation of NAIA IPT3. Plaintiffs, however, are prohibited
from performing acts of ownership like awarding concessions or leasing any part of NAIA IPT3 to
other parties.
SO ORDERED.18
Petitioners filed an urgent motion for reconsideration on January 5, 2005, asserting that the amount
ordered released by the court (approximately US$ 62.3+ million) was excessive. The LBP-Baclaran
had certified that the Republic had a total deposit of approximately US$ 62.3+19 million with it.
Apparently, it was this whole amount the trial court wanted released to PIATCO.
On the other hand, petitioner Republic objected to the order of the court because, as could be
allegedly concluded from the documents it filed with the expropriation complaint, since there were no
comparable values for the expropriated property, "reasonable basis" should determine what the
provisional value20 of NAIA IPT3 ought to be. Using "reasonable basis" as a guide, the Republic
arrived at a provisional value of ₱3,002,125,000 or about US$ 53 million which actually represented
the assessed value of the property for taxation purposes.21 The amount Judge Gingoyon wanted to be
released immediately to PIATCO was about US$ 9 million more or US$ 63.2+ million. Hence, the
Republic’s objection on the ground of excessiveness.
Petitioners contended that it was likewise erroneous for the trial court to order the release of the
deposit motu propio (that is, without any motion therefor) since just compensation was yet
undetermined and the deposit itself was being claimed by other parties.22 According to petitioners,
since they had not been granted "full and relevant access to the NAIA IPT3," it was impossible for
them to fully assess its safety, structural integrity and real value after just one perfunctory guided tour
of the facility.23 As there was no opportunity to thoroughly inspect the property being expropriated,
the expenditure of public funds could not be legally justified.24 Hence, it was error for the trial court to
order the release of any part of the Republic’s deposits in LBP-Baclaran to PIATCO.
Petitioners also questioned why the court a quo applied RA 897425 instead of Rule 6726 of the 1997
Rules of Court to the expropriation proceedings. They argued that the title of RA 8974 itself defined
its limited application: only for the acquisition of a right of way, site or location for a national
infrastructure project. NAIA IPT3 was not a right-of-way, site or location for any national government
infrastructure project. It was the national government infrastructure project itself.27
Furthermore, petitioners considered the trial court’s prohibition against "acts of ownership like
awarding concessions or leasing any part of NAIA IPT3 to other parties" as, in effect, an injunction or
restraining order against a government infrastructure project and therefore a violation of RA 897528
which prohibits the issuance of an injunction (except by the Supreme Court) against government
infrastructure projects.29 In total disregard of due process, the injunction was issued by the trial court
without notice and hearing.30 Petitioners argued that preventing them from exercising the rights of a
beneficial owner of NAIA IPT3 would negate the very purpose for which the writ of possession was
issued31 and the expropriation itself was being pursued.
Respondent judge, finding that petitioners had the legal right to expropriate NAIA IPT3, issued the
second assailed order on January 7, 2005.
WHEREFORE, finding plaintiffs to have the right to expropriate NAIA IPT3, this court hereby
orders:
1. The EXPROPRIATION of NAIA IPT3, which is particularly described in the Writ of Possession
issued by this court on December 21, 2004;
2. The appointment of DR. FIORELLO R. ESTUAR, SOFRONIO B. URSAL and ANGELO I.
PANGANIBAN as commissioners to ascertain and report to this court the just compensation for the
taking of NAIA IPT3. They shall appear before this court within three (3) days from receipt hereof to
take and subscribe an oath that they will faithfully perform their duties as commissioners under
Section 6, Rule 67 of the 1997 Rules of Civil Procedure.
a. The first session of the hearing to be held by the aforesaid commissioners shall be on January 14,
2005 at 10:00 A.M. at the NAIA International Passenger Terminal 3, Villamor Airbase, Pasay City.
b. Thereafter, the commissioners shall hold session at least twice a week.
c. The commissioners shall make a full and accurate report to the court of all their proceedings on or
before February 28, 2005.
d. The commissioners shall be paid reasonable fees that shall be taxed as part of the costs of the
proceedings.
SO ORDERED.32
160
On January 10, 2005, the trial court denied the urgent motion for reconsideration of its January 4,
2005 order and petitioners’ urgent motion for inhibition of respondent judge filed on January 7,
2005.33
WHEREFORE, plaintiffs['] Motion for Reconsideration of the Order dated January 4, 2005, and
Urgent Motion for Inhibition are DENIED.
Accordingly, except for the superfluous part of the Order prohibiting the plaintiffs from awarding
concession or leasing any part of NAIA IPT3 to other parties, the order sought to be reconsidered
stands: (1) The Land Bank of the Philippines, Baclaran Branch, must release the sum of
US$62,343,175.77 in favor of PIATCO; (2) The Plaintiffs must submit a certificate of availability of
funds; and (3) Pending expropriation proceedings and full payment of just compensation to PIATCO,
the plaintiffs are directed to maintain, preserve and safeguard NAIA IPT3, or perform such acts or
activities in preparation for their direct operation of NAIA IPT3.
SO ORDERED.
Respondent PIATCO’s Version of Events
On October 5, 1994, petitioners received an unsolicited offer from Asia’s Emerging Dragons
Corporation (AEDC) to construct, operate and maintain a state-of-the-art international passenger
terminal under Section 4(a) of RA 6957 (the B-O-T Law),34 Section 4(a) because the government did
not have the funds nor the expertise to do the same.35 The project was considered an unsolicited
proposal because it was not a government priority project.36 Paircargo Consortium, which eventually
incorporated with other investors under the name PIATCO, submitted a counterproposal:
to construct IPT-3 at a cost of not less than US$ 350 Million, operate such terminal at no cost to the
Government, pay Government a total of at least ₱17.5 Billion in annual guaranteed payments over
twenty-five (25) years and thereafter transfer title over IPT-3 to the Government for ₱1.00.37
The government, considering Paircargo Consortium’s counterproposal more beneficial, gave AEDC
thirty days to match it; this, AEDC failed to do.38 The DOTC then issued the notice of award for the
NAIA IPT3 project to PIATCO’s predecessor, Paircargo Consortium. The government, through then
DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, executed the so-
called PIATCO Contracts whereby PIATCO was granted a 25-year concession to operate NAIA IPT3,
after which title was to pass on to the government.39
The 1997 Concession Agreement was signed during former President Fidel V. Ramos’ administration
while the ARCA and the first two supplements were executed during the tenure of former President
Joseph Ejercito Estrada.40 In January 2001, the Estrada administration was overthrown by mass
political action popularly known as EDSA People Power II. Six months into the new administration of Secretary Alberto Romulo;
President Gloria Macapagal-Arroyo, on June 22, 2001, the third supplement to the ARCA was signed.
Since then, the NAIA IPT3 project has been beset by seemingly interminable difficulties on all fronts. (d) Former MIAA General Manager Edgardo Manda;

According to PIATCO, long-term loans from Asian Development Bank, Kreditanstalt für (e) MIAA General Manager Alfonso Cusi;
Wiederaufbau, International Finance Corporation and Dresdner Bank could not be drawn on because
of the refusal of the government to cooperate in the fulfillment of conditions precedent demanded by
(f) Former Immigration Commissioner Andrea Domingo;
the lenders.41 Undaunted, PIATCO nevertheless continued the construction of NAIA IPT3 through
advances from stockholders and interim financing. It would have completed NAIA IPT3 by now had
it not been for the alleged lack of cooperation of the Macapagal-Arroyo administration and the (g) Congressmen Alfonso Umali Jr., Raul Villareal,
obstacles it allegedly put up.42 (In her speech at the 2002 Golden Shell Export Awards at Malacañang
Palace, President Macapagal-Arroyo stated that she could not honor the PIATCO Contracts Joseph Santiago, Roberto Cajes, Corazon
denounced by government lawyers43 as null and void.44 )
Malanyaon, Josephine Ramirez, Charity Leviste,
Furthermore, while the government defended the validity of the PIATCO Contracts in the past, it
suddenly made a volte face and joined the parties who sought their nullification.45 On September 17, Jacinto Paras, Prospero Pichay, Prospero Nograles,
2002, various petitions were filed before this Court to annul the PIATCO Contracts and prohibit the
DOTC and MIAA from implementing them. Agan was promulgated on May 5, 2003. Although this
Court voided the PIATCO Contracts because PIATCO was, among other reasons, unqualified, this Willie Villarama, Perpetuo Ylagan, Eduardo Zialcita,
Court did not actually find private respondent to have acted fraudulently.46
Carmen Cari, Jose Solis, Consuelo Dy, Aleta Suarez,
Moreover, the Court required the government to pay PIATCO a fair and just compensation for NAIA
IPT3 as a prerequisite for any takeover of the terminal.47 Rodolfo Bacani, Aurelio Umali, Augusto Syjuco Jr.,

According to PIATCO, since the nullification of the PIATCO Contracts in 2003, petitioners have not Generoso Tulagan and Harlin Cast Abayon;
shown any interest in the completion, opening and operation of NAIA IPT3. Instead of directing its
resources and efforts to actually take over and operate NAIA IPT3 and to compensate PIATCO as (h) Senators Ramon Revilla Jr., Alfredo Lim, Juan Ponce
builder of the structures, the government allegedly prepared to develop the Diosdado Macapagal
International Airport in Clark Field, Pampanga.48 Enrile, Edgardo Angara, Panfilo Lacson and Tessie

Contrary to petitioners’ assertion that they were not being given access to NAIA IPT3, PIATCO
alleged that invitations to view and inspect the terminal were in fact extended to them on several
occasions. According to private respondent, the following were actually able to inspect NAIA IPT3:
(a) Secretary Leandro Mendoza;
(b) Solicitor General Alfredo Benipayo;
(c) Former Executive Secretary, now Foreign Affairs
Aquino-Oreta.49
PIATCO is convinced that the government’s intentions vis-à-vis NAIA IPT3 are suspect. "They did
not negotiate. They dictated."50 The government, with police assistance, allegedly seized control of
NAIA IPT3 late in the afternoon of December 21, 2004 on the basis of a writ of possession issued by
the trial court after no more than a unilateral assessment of the value of the facility.51
The Issues

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In fine, petitioners seek the resolution of the following issues:
I.
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION
AND ACTED IN EXCESS OF JURISDICTION WHEN HE HELD THAT RA 8974, NOT RULE 67
OF THE RULES OF COURT, IS APPLICABLE IN THE EXPROPRIATION PROCEEDINGS.
II.
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION
AND ACTED IN EXCESS OF HIS JURISDICTION WHEN HE MOTU PROPIO ISSUED THE
ORDER DIRECTING THE DEPOSITARY BANK TO IMMEDIATELY RELEASE PETITIONERS’
DEPOSIT IN THE AMOUNT OF US$ 62,343,175.77 WHEN NAIA IPT3’S ASSESSED VALUE
FOR THE PURPOSE OF THE ISSUANCE OF THE WRIT AS ALLEGED IN THE COMPLAINT
FOR EXPROPRIATION IS ONLY ₱ 3,002,125,000 (APPROXIMATELY US$ 53 MILLION).
III.
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION
AND ACTED IN EXCESS OF HIS JURISDICTION WHEN HE PROHIBITED PETITIONERS
FROM PERFORMING "ACTS OF OWNERSHIP" SUCH AS AWARDING CONCESSIONS OR
LEASING ANY PART OF NAIA IPT3 TO OTHER PARTIES.
IV.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED IN MOTU PROPIO ISSUING
THE JANUARY 7, 2005 ORDER APPOINTING THREE COMMISSIONERS TO DETERMINE
THE TERMINAL’S JUST COMPENSATION.
V.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION IN
REFUSING TO INHIBIT HIMSELF FROM THE EXPROPRIATION CASE.
Parallel to the resolution of the foregoing issues, petitioners also sought: (1) a TRO commanding
respondent judge to cease and desist from implementing his orders dated January 4, 2005, January 7,
2005 and January 10, 2005 in RTC Civil Case No. 04-876; (2) the nullification of the orders dated
January 4, 2005; January 7, 2005; and January 10, 2005; and (3) an order to respondent judge in his
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capacity as presiding judge of the Regional Trial Court, Branch 117, Pasay City to inhibit himself
from further actions on the subject case.
The Court issued the TRO, as prayed for, on January 14, 2005.52
I shall discuss the issues in seriatim.
The Constitutional Requirement of Public use
This case essentially pertains to the exercise by the Republic of its inherent power of eminent domain
or the right of the sovereign authority to acquire private property for public use upon payment of just
compensation. It refers to the right to take or reassert dominion over property within the state for
public use or to meet a public exigency.53 The constitutional requirement of due process lays down a
rule of procedure to be observed in the exercise of such power.54 This rule of procedure is more
familiarly known as expropriation,55 a term used interchangeably with eminent domain.
The exercise of eminent domain is circumscribed by two limitations in the Constitution: (1) the taking
must be for public use and (2) just compensation must be paid to the owner of the private property.56
These twin proscriptions are grounded on the necessity to achieve a balance between the interests of
the State, on the one hand, and the private rights of the individual, on the other hand, by effectively
restraining the former and affording protection to the latter.57
"Public use" as a limitation to the power of eminent domain is not defined in the Constitution. It is
thus considered in its general notion of meeting a public need or a public exigency.58 It is not restricted
to clear cases of "use by the public"59 but embraces whatever may be beneficially employed for the
community.60 The concept now covers uses which, while not directly available to the public, redound
to their indirect advantage or benefit.61 It is generally accepted that it is just as broad as "public
welfare."62
Viewed in this light, the "public use" dimension of a modern international airport need not be
belabored. For it is inextricably linked to air transport which, in turn, is vital to the economy, to
business and to tourism. It enhances the movement of goods, services and people across international
borders. It serves as the country’s main gateway to the world and as its major link to its neighbors in
the global village. Hardly anyone can doubt the public need for a modern international airport and the
immeasurable boost it will give the country’s economy.63
Why Expropriate NAIA IPT3 in the First Place?
In Manotok v. National Housing Authority,64 we ruled that the exercise of the power of eminent
domain should be based on necessity. Is there such a necessity for the expropriation of NAIA IPT3?
First, in today’s global market governed by the hard-hearted rules of business dominance and
competitiveness, time has become a precious resource and a critical determinant of either failure or
success. Indeed, not only time but also resources are at stake in the expropriation of NAIA IPT3, an
infrastructure project that needs only to be completed to become fully operational, instead of building
an entirely new facility from scratch.
Second, NAIA IPT3 sits on 65 hectares (161 acres) of prime government land located in one of the
most expensive commercial areas in the country. But that valuable land will be completely laid to
waste if NAIA IPT3 does not become operational, either because government does not allow it to
operate or petitioners decide to build, operate or develop an entirely new international airport. In
either case, both sides will only succeed in stalemating each other and NAIA IPT3 will be absolutely
of no use to both petitioners and private respondent PIATCO. The land will just lie idle and
unproductive while a white elephant abjectly sits on it. A repeat of the mothballed Bataan Nuclear
Power Plant? Certainly. On the other hand, will not expropriating NAIA IPT3, putting it to good use
and paying off its owner(s) redound to the benefit of the entire country and all parties concerned?
Third, there is no denying that a project like NAIA IPT3 is long overdue, such that the prestige of the
entire country before the international community is at stake. Politics and narrow vested interests have
a peculiar way of extirpating the most salutary and beneficial ventures in this country. The
undertaking appears headed for the same fate unless this Court intervenes and exercises its judicial
discretion to settle the destructive impasse. Shall this Court watch in silence while the parties claw at
each other before international arbitration bodies?
The majority opinion effectively disregarded this necessity.
Public Use and Just Compensation
None of the parties actually questioned the public purpose of the expropriation ― not the petitioners
of course, not the respondent judge, not even private respondent PIATCO. In fact, petitioners exerted
special effort to show that the taking was intended to encourage and promote international air traffic
as well as to develop an airport with facilities, accommodations and services meeting international
standards. As for PIATCO, the records do not show that it questioned the public purpose of the
expropriation at all. The respondent judge, for his part, recognized that the NAIA IPT3 was
undoubtedly a structure for a well-defined public purpose, being of critical importance to the
Philippine economy in terms of the carriage of goods, services and people.65 Thus, there was never
any question that the expropriation of NAIA IPT3 was for a public purpose.
The policy underlying the constitutional provision for eminent domain is to make the private owner
"whole" after his property is taken.66 Thus, private property cannot be taken in any way for public use
without adequate compensation.67
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Just compensation is the just and complete equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation.68 The compensation given to the owner is
just if he receives for his property a sum equivalent to its market value at the time of the taking.69
"Market value" is the price fixed by the buyer and the seller in the open market in the usual and
ordinary course of legal trade and competition.70
RA 8974 or Rule 67 of the Rules of Court?
At bottom, the bone of contention is the procedure that should govern the determination and payment
of just compensation, i.e., whether it should be that under RA 897471 or that under Rule 67 of the
Rules of Court.
Under the relevant provisions of Rule 67 of the Rules of Court, possession is given to the condemnor
and just compensation is determined in accordance with the following procedures:
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SECTION 2. Entry of plaintiff upon depositing value with authorized government depositary. – Upon
the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff
shall have the right to take or enter upon the possession of the real property involved if he deposits
with the authorized government depositary an amount equivalent to the assessed value of the
property for purposes of taxation to be held by such bank subject to the orders of the court. x x x
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After such deposit is made the court shall order the sheriff or other proper officer to forthwith place
the plaintiff in possession of the property involved and promptly submit a report thereof to the court
with service of copies to the parties.
SECTION 3. Defenses and objections. –
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If a defendant has any objection to the filing of or the allegations in the complaint, or any objection or
defense to the taking of his property, he shall serve his answer within the time stated in the summons.
The answer shall specifically designate or identify the property in which he claims to have an interest,
state the nature and extent of the interest claimed, and adduce all his objections and defenses to the
taking of his property. x x x
x x x However, at the trial of the issue of just compensation, whether or not a defendant has
previously appeared or answered, he may present evidence as to the amount of the compensation to be
paid for his property, and he may share in the distribution of the award.
SECTION 4. Order of expropriation. – If the objections to and the defenses against the right of the
plaintiff to expropriate the property are overruled, or when no party appears to defend as required by
this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to
take the property sought to be expropriated, for the public use or purpose described in the complaint,
upon the payment of just compensation to be determined as of the date of the taking of the property or
the filing of the complaint, whichever came first.
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SECTION 5. Ascertainment of compensation. – Upon the rendition of the order of expropriation, the
court shall appoint not more than three (3) competent and disinterested persons as commissioners to
ascertain and report to the court the just compensation for the property sought to be taken. The order
of appointment shall designate the time and place of the first session of the hearing to be held by the
commissioners and specify the time within which their report shall be submitted to the court.
Copies of the order shall be served on the parties. Objections to the appointment of any of the
commissioners shall be filed with the court within ten (10) days from service, and shall be resolved
within thirty (30) days after all the commissioners shall have received copies of the objections.
(emphasis supplied)
On the other hand, RA 8974 provides for the observance of the following guidelines:
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SECTION 4. Guidelines for Expropriation Proceedings. – Whenever it is necessary to acquire real
property for the right-of-way, site or location for any national government infrastructure project
through expropriation, the appropriate implementing agency shall initiate the expropriation
proceedings before the proper court under the following guidelines:
(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing
agency shall immediately pay the owner of the property the amount equivalent to the sum of (1)
one hundred percent (100%) of the value of the property based on the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/
or structures as determined under Section 7 hereof;
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(c) In case the completion of a government infrastructure project is of utmost urgency and importance,
and there is no existing valuation of the area concerned, the implementing agency shall immediately
pay the owner of the property its proffered value taking into consideration the standards prescribed in
Section 5 hereof.
Upon compliance with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of the
project.
Before the court can issue a Writ of Possession, the implementing agency shall present to the court a
certificate of availability of funds from the proper official concerned.
In the event that the owner of the property contests the implementing agency's proffered value, the
court shall determine the just compensation to be paid the owner within sixty (60) days from the date
of filing of the expropriation case. When the decision of the court becomes final and executory, the
implementing agency shall pay the owner the difference between the amount already paid and the just
compensation as determined by the court. (emphasis supplied)
To implement the above "guidelines", the Implementing Rules and Regulations (IRR) of RA 8974
provide:
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SECTION 8. Expropriation. – If the owner of a private property needed by the government
implementing agency does not agree to convey his property to the government by any of the
foregoing modes of acquiring and/or transferring ownership of the property, then the government shall
exercise its right of eminent domain by filing a complaint with the proper Court for the expropriation
of the private property.
The verified complaint shall state with certainty the right and purpose of expropriation, describe the
real or personal property sought to be expropriated, and join as defendants all persons owning or
claiming to own, or occupying, any part thereof or interest therein, showing as far as practicable, the
interest of each defendant separately. If the title of any property sought to be condemned appears to be
in the name of the Republic of the Philippines, although occupied by private individuals, or if the title
is otherwise obscure or doubtful so that the plaintiff cannot with accuracy or certainty specify the real
owners, averment to the effect may be made in the complaint.
Pursuant to Section 4 of the Act, the Implementing Agency shall comply with the following
guidelines:
a. Upon the filing of the complaint, and after due notice to the defendant/property owner, the
Implementing Agency shall immediately pay the property owner the amount equivalent to the
sum of (1) one hundred percent (100%) of the value of the property based on the current zonal
valuation of the BIR; and (2) the value of the improvements and/or structures as determined by
the Implementing Agency, in accordance with Section 10 hereof, pursuant to Section 7 of the
Act.
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c. In case the completion of a national government project is of utmost urgency and importance, and
there is no existing valuation of the area concerned, the Implementing Agency shall immediately pay
the owner of the property its proffered value taking into consideration the standards stated in the
second paragraph of Section 8 hereof, pursuant to Section 5 of the Act.
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SECTION 10. Valuation of Improvements and/or Structures. – Pursuant to Section 7 of the Act, the
Implementing Agency shall determine the valuation of the improvements and/or structures on the land
to be acquired using the replacement cost method. The replacement cost of the improvements/
structures is defined as the amount necessary to replace the improvements/structures, based on the
current market prices for materials, equipment, labor, contractor's profit and overhead, and all other
attendant costs associated with the acquisition and installation in place of the affected improvements/
structures. In the valuation of the affected improvements/structures, the Implementing Agency shall
consider, among other things, the kinds and quantities of materials/equipment used, the location,
configuration and other physical features of the properties, and prevailing construction prices.
SECTION 11. Engagement of Appraisers. – The Implementing Agency may, if it deems necessary,
engage the services of government financing institutions and/or private appraisers duly accredited by
the said institutions to undertake the appraisal of the property, i.e., the land and/or improvements/
structures, and to determine its fair market value. The Implementing Agency concerned shall consider
the recommendations of the said appraisers in deciding on the purchase price of or just compensation
for the property.
SECTION 12. Writ of Possession. – Pursuant to Section 4 of the Act, upon compliance with the
guidelines stated in Section 8 of this IRR, the court shall immediately issue to the Implementing
Agency an order to take possession of the property and start the implementation of the project.
Before the Court can issue a Writ of Possession, however, the Implementing Agency shall present to
the Court of Certificate of Availability of Funds signed by authorized officials to cover the payment
to be made to the property owner.
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After the Implementing Agency has complied with the foregoing requirements, the Court shall
immediately issue the Writ of Possession to the complainant Implementing Agency.
SECTION 13. Payment of Compensation. – Should the property owner concerned contest the
proffered value of the Implementing Agency, the Court shall determine the just compensation to be
paid to the owner within sixty (60) days from the date of the filling of the expropriation case,
considering the standards set out in Sections 8, 9 and 10 hereof, pursuant to Section 5 of the Act.
When the decision of the Court becomes final and executory, the Implementing Agency shall pay the
owner the difference between the amount already paid as provided in Section 8 (a) hereof and the just
compensation determined by the court, pursuant to Section 4 of the Act.
SECTION 14. Trial Proceedings. – Within the sixty (60)-day period prescribed by the Act, all matters
regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting
claims, effects of appeal on the rights of the parties, and such other incidents affecting the complaint
shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. (emphasis
supplied)
Petitioners assert that the provisions on expropriation of Rule 67 of the Rules of Court should apply.
The trial court and respondent PIATCO opine that it should be RA 8974.
Rule 67 and RA 8974 differ in the manner of compensating the owner of the property under
expropriation. Under Rule 67, before the government can take possession of the property to be
expropriated, the deposit of an amount equivalent to the assessed value of the property for taxation
purposes is sufficient for the time being, that is, until the conclusion of the court proceedings where
both parties shall have proven their claims and the court shall have made a factual determination of
the price of the property. Under RA 8974, on the other hand, immediate payment of the full zonal
value (a much bigger sum than the assessed value required by Rule 67) of the property and
improvements and/or structures as determined under Section 7 of the law is required before the
government can take possession of the property.
Petitioners maintain that the very title of RA 8974 states that it only covers the acquisition of right of
way, site or location for government infrastructure projects. Thus, the law itself defines the limits of
its application.
Obviously, according to petitioners, an airport is not a right of way because a "right of way" refers to
the right to pass through property owned by another, which is not so in this case. Neither is it a "site or
location" because "location" is the specific place or position of a person or thing and "site" pertains to
a place or location or a piece of property set aside for a specific use. They further aver that even the
bicameral deliberations on the law reveal that the legislature never contemplated the use of this
special law for the acquisition of land for a purpose other than a right of way, site or location for
government infrastructure projects.72
Moreover, the provisions73 of RA 8974 cited by respondent judge speak of "relevant current zonal
valuation of the [Bureau of Internal Revenue (BIR)]" as the amount of deposit necessary for the
issuance of a writ of possession. BIR zonal valuations are only for parcels of land, not for airport
facilities. There is no BIR zonal valuation for an airport terminal precisely because the latter is not
land.
The majority opinion ruled that RA 8974 applies in this case. It premised its conclusion on the
argument that the application of Rule 67 will violate this Court’s 2004 resolution in Agan, the alleged
governing law of the case.
The ruling is basically flawed as it is grounded on a wrong premise.
It is incorrect to say that Agan constitutes the law of the case. The "law of the case" doctrine is defined
as a term applied to an established rule that, when an appellate court passes on a question and remands
the case to the lower court for further proceedings, the question there settled becomes the law of the
case on subsequent appeal.74 Unlike the doctrine of stare decisis, the doctrine of the law of the case
operates only in the particular case.75
The law of the case finds application only in the same case between the parties. This case (which
refers to the expropriation of NAIA IPT3) is irrefutably not the same as Agan (which was about the
validity of the so-called "PIATCO contracts"). Hence, the pronouncements in Agan cannot constitute
the law of the case here.
The majority opinion claims that "the staging of expropriation proceedings in this case with the
exclusive use of Rule 67 would allow for the government to take over the NAIA 3 facilities in a
fashion that directly rebukes our 2004 resolution in Agan (which) mandated that there must be first
payment of just compensation before the Government could take over the NAIA IPT3 facilities." This
is very misleading.
The full text of the relevant statement of the Court in its 2004 resolution in Agan is as follows:
This Court, however, is not unmindful of the reality that the structures comprising the NAIA [IPT3]
facility are almost complete and that funds have been spent by PIATCO in their construction. For the
government to take over the facility, it has to compensate respondent PIATCO as builder of the said
structures. The compensation must be just and in accordance with law and equity for the government
can not unjustly enrich itself at the expense of PIATCO and its investors. (emphasis supplied)
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Clearly, the resolution only requires that PIATCO be given just compensation as a condition for any
government take-over of NAIA IPT3. The just compensation should be in accordance with law and
equity. There is something seriously wrong with the argument that RA 8974 is the only legal and
equitable way to compensate PIATCO in accordance with our 2004 resolution.
The application of Rule 67 in the expropriation proceedings of NAIA IPT3 is in consonance with
Agan. The determination and payment of just compensation pursuant to Rule 67 are in accordance
with law. Under Rule 67, PIATCO will be given FULL JUST COMPENSATION by the government
for the taking of NAIA IPT3. That is mandatory. The Constitution itself ordains it.
Under Rule 67, there is no way the government can unjustly enrich itself at the expense of PIATCO.
Section 9 of Rule 67 ensures this by requiring the payment of interest from the time government takes
possession of the property.
Moreover, I dare say the majority opinion actually got caught up in a self-contradiction. At first, it
claimed that the 2004 resolution in Agan laid down the following directives: (1) PIATCO must receive
payment of just compensation determined in accordance with law and equity, and (2) the government
is barred from taking over NAIA IPT3 until such just compensation is paid. It continued to argue that
the 2004 resolution requires the payment of just compensation before the takeover of NAIA IPT3
facilities. Subsequently, however, it backtracked and stated that "the 2004 resolution does not
particularize the extent such payment must be effected before the takeover, but it actually requires at
least some degree of payment to the private owner before a writ of possession may issue." However,
neither the proffered value nor the zonal valuation under RA 8974 is equivalent to just compensation.
If the majority opinion were to pursue its argument to its logical conclusion, no takeover can be had
without payment of the just compensation itself, not merely of a value corresponding to what it
vaguely referred to as "some degree of payment".
The requirement to pay the proffered value was a strained and belabored way of establishing that the
application of RA 8974 is in consonance with the 2004 resolution in Agan. If the majority opinion
were to be true to its pronouncement that the 2004 resolution demands payment of just compensation
prior to the take over of NAIA IPT3, then payment of the proffered value is not enough. The proffered
value is definitely not equivalent to just compensation.
The majority failed to realize that respondent judge gravely abuse his discretion when he issued his
January 10, 2005 order. Respondent judge precipitately ruled that Rule 67 of the Rules of Court and
all the laws on expropriation involving infrastructure projects had been expressly repealed by RA
8974 and its implementing rules and regulations. Worse, respondent judge justified his conclusion by
erroneously invoking a footnote in City of Iloilo v. Legaspi76 . His order read:
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[Petitioners] relied solely – and this court initially went along with their reliance – on Rule 67 on
Expropriation (an perchance of P.D. Nos. 42 and 1533) as the applicable authority on the instant case
for expropriation. But this court did not know then that Rule [67] and all the laws on
expropriation involving infrastructure projects have been expressly repealed by R.A. No. 8974
and its Implementing Rules and Regulations insofar as they are inconsistent with said Act. In
the footnote of the recent case of City of lloilo vs. Judge Legaspi (G.R. No. 154614, November 25,
2004), the Supreme Court recognized that:
"Section 4 of Rep. Act No. 8974 (An Act To Facilitate The Acquisition of Right-Of-Way, Site Or
Location For National Government Infrastructure Projects and For Other Purposes) provides for the
guidelines for expropriation proceedings."
Plaintiff’s argument that R.A. No. 8974 is not applicable because NAIA IPT3 is "not right-of-way, site
or location" for a national infrastructure project "but the infrastructure itself" is absurd. It is very plain
to see, and this court hereby holds, that the NAIA IPT3 is itself the very right-of-way, the site or
location of the national government’s infrastructure project; it is the very right-of-way, site or location
of an airport that will make them attain their "goal of encouraging and promoting international and
domestic air traffic as well as developing an internationally acceptable airport accommodation and
service."77 (emphasis supplied)
Respondent judge’s theory about Rule 67’s supposed repeal by RA 8974 was totally devoid of factual
and legal basis. RA 8974 did not repeal Rule 67 at all. The Constitution will not allow it. In fact,
neither its repealing clause nor any of its provisions even mentioned or referred to the Rules of Court,
whether on expropriation or anything else. But even assuming (but not conceding) that respondent
judge’s theory had been based on an implied repeal, still there would have been no legal justification
for it.
Settled is the rule in statutory construction that implied repeals are not favored. Thus:
The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the
inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare et
concordare legibus est optimus interpretendi, i.e., every statute must be so interpreted and brought
into accord with other laws as to form a uniform system of jurisprudence. The fundament is that the
legislature should be presumed to have known the existing laws on the subject and not have enacted
conflicting statutes. Hence, all doubts must be resolved against any implied repeal, and all efforts
should be exerted in order to harmonize and give effect to all laws on the subject.78
The foregoing becomes all the more significant when, as in this case, the provisions of RA 8974
reveal no manifest intent to revoke Rule 67. In fact, Section 14 of the IRR of RA 8974 makes an
explicit reference to Rule 67 and mandates its applicability to all matters regarding defenses and
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objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on
the rights of the parties and such other incidents affecting the complaint. If only for this reason,
respondent judge’s "repeal theory" is totally erroneous.
The footnote in City of Iloilo79 was not in any way necessary to resolve any of the issues in that case.
Thus, it was merely part of an obiter dictum. Respondent judge should be reminded of our
pronouncement in City of Manila v. Entote80 that a remark made or opinion expressed by a judge in a
decision upon a cause, incidentally or collaterally, and not directly upon the question before the court,
or upon a point not necessarily involved in the determination of the cause, is obiter dictum lacking the
force of an adjudication. An obiter dictum is an opinion entirely unnecessary for the decision of the
case and is not binding as precedent.81
Not only was there no pronouncement from us in City of Iloilo about Rule 67’s repeal by RA 8974, we
in fact applied Rule 67 in that case. The Court invoked Section 1 of Rule 67 in resolving the issue of
the sufficiency in form and substance of the amended complaint for expropriation and Section 2 of the
same Rule in holding that the City of Iloilo was not in estoppel since it simply followed the procedure
that a prior hearing was not required before a writ of possession could be issued. Indeed, the Court
could not even have applied RA 8974 in City of Iloilo because it did not involve a project of the
national government but that of a local government unit,82 thus requiring the application of RA 7160
(the Local Government Code).83
More importantly, any talk of repeal (whether express or implied) by legislative enactment of the rules
of procedure duly promulgated by this Court goes against the Constitution itself. The power to
promulgate rules of pleading, practice and procedure was granted by the Constitution to this Court to
enhance its independence.84 It is no longer shared by this Court with Congress.85 The legislature now
has no power to annul, modify or augment the Rules of Court. We expressly declared in Echegaray v.
Secretary of Justice86 that the 1987 Constitution took away the power of Congress to repeal, alter
or supplement rules concerning pleading, practice and procedure.87
The majority properly recognized that Rule 67 governs the procedure undertaken for eminent domain.
It is thus surprising when they unequivocally declared that, as a rule of procedure, Rule 67 can be
superseded by statutory enactment.
A perusal of the so-called "Guidelines for Expropriation Proceedings" provided for under Section 4 of
RA 8974 shows that the "guidelines" radically alter the rules for expropriation under Rule 67. The
majority even declared that "RA 8974 represents a significant change from previous expropriation
laws such as Rule 67…." The majority however failed to realize that such change brought about by a
legislative enactment subverts the fundamental law and defeats the constitutional intent to strengthen
the independence of this Court.
There is no question that the appropriate standard of just compensation is a substantive matter, not
procedural. However, the manner of determining just compensation (including how it shall be paid
and under what conditions a writ of possession may be issued) is a matter of procedure, not of
substantive law.
If a rule or statute creates a right or takes away a vested right, it is substantive. If it operates as a
means of implementing an existing right, then it is procedural.88
The provisions of Rule 67 neither vest a new power on the State nor create a new right in favor of the
property owner. Rule 67 merely provides the procedure for the State’s exercise of eminent domain
and, at the same time, ensures the enforcement of the right of the private owner to receive just
compensation for the taking of his property. It is purely a matter of procedure. It is therefore
exclusively the domain of this Court. The Constitution prohibits Congress from transgressing this
sphere.
Congress cannot legislate the manner of payment of just compensation. Neither can Congress impose
a condition on the issuance of a writ of possession. Yet that is what RA 8974 precisely does.
The records of the 11th Congress which enacted RA 8974 reveal that Congress intended to revise and
amend Rule 67. The Senate deliberations quoted at the beginning of this dissenting opinion show this
legislative intent.89 I am therefore disheartened that the majority opinion is in effect sanctioning the
arrogation of judicial power by Congress.
In denying the petition, the majority effectively sustained respondent judge’s repeal theory. Thus, they
allowed Congress to infringe on the Court’s rule-making power, a power vested by the Constitution
exclusively on this Court.
Assuming ex gratia argumenti that the procedure outlined under RA 8974 does not constitute an
impermissible encroachment on the Court’s rule-making power, the law still does not apply here.
Section 1 of the IRR of RA 8974 provides that the law covers:
[A]ll acquisition of private real properties, including improvements therein, needed as right-of-way,
site or location for national government projects undertaken by any department, office or agency of
the national government, including any government-owned or controlled corporation or state college
or university, authorized by law or its respective charter to undertake national government projects.
From this, we can clearly infer that the law does not apply to the following:
(1) expropriation of private property which is personal or movable property;
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(2) taking of private property, whether personal or real, for a purpose other than for right-of-way, site
or location of a national government project;
(3) appropriation of private property for right-of-way, site or location of a project not classified as a
national government project;
(4) acquisition of private property for right-of-way, site or location of a national government project
but to be undertaken by an entity not enumerated in Section 1 of the IRR of RA 8974.
In the foregoing situations, it is Rule 67 of the Rules of Court or the relevant special law (if any)90 that
will apply.
Here, the expropriation of NAIA IPT3 falls under the second category since petitioners seek to take
private property for a purpose other than for a right-of-way, site or location for a national government
project.
Unfortunately, the majority sided with respondent judge and completely disregarded the fact that
NAIA IPT3 was the national government infrastructure project itself and ruled instead that it was the
right-of-way, site or location of a national government project. That was wrong and the reasoning was
even more difficult to understand.
True, under Section 2(d) of the IRR of RA 8974 defining "national government projects", an airport
(which NAIA IPT3 essentially is) is specifically listed among the national government projects for
which expropriation proceedings may be initiated under the law. However, the law and its IRR also
provide that the expropriation should be for the purpose of providing for a right of way, site or
location for the intended national government project. A national government project is separate and
distinct from the purpose of expropriation. Otherwise, there would have been no need to define them
separately. Thus, respondent judge erred when he equated one with the other and obliterated the clear
distinction made by the law.
Moreover, under Section 2(e) of the IRR, the specific objects or purposes of expropriation were
lumped as ‘ROW’ which is defined as the "right-of-way, site or location, with defined physical
boundaries, used for a national government project." Obviously, the NAIA IPT3 is not a right of way,
site or location for any national government infrastructure project but the infrastructure itself albeit
still under construction. The construction (and now the completion) of NAIA IPT3 never required the
acquisition of private property for a right of way, site or location since the terminal, including all its
access roads, stands completely on government land.
Conformably, RA 8974 does not apply to the expropriation of NAIA IPT3. And there being no special
law on the matter, Rule 67 of the Rules of Court governs the procedure for its expropriation.
Amount Ordered to be Released
Having determined Rule 67 to be the applicable procedure to follow in this expropriation case, I now
turn to the other issues.
In its complaint91 for the expropriation of NAIA IPT3, petitioners prayed for the immediate issuance
of a writ of possession of the airport terminal and deposited the amount of ₱3,002,125,00 (about $53
million) at LBP-Baclaran for this purpose. This amount was based on the assessed value of NAIA
IPT3 for taxation purposes.92 As requested by petitioners and in support of their complaint for
expropriation, LBP-Baclaran issued a certification of deposit,93 which was in effect the functional
equivalent of a certificate of availability of said funds.
In his January 4, 2005 order,94 respondent judge ― without any motion by PIATCO ― ordered
petitioners to immediately pay PIATCO US$62,343,175.77, the total balance of MIAA’s deposits in
LBP-Baclaran. Respondent judge reiterated the above directive in his January 10, 2005 omnibus
order.95 The amount directed to be released was about US$ 9 million (or ₱500 million) more than the
provisional value required by Rule 67 for issuance of the writ of possession.
I refuse to join the majority who turned a blind eye on respondent judge’s orders which were issued
with grave abuse of discretion.
Respondent judge should not have issued his disputed orders without any motion by PIATCO. There
were very compelling reasons why. Considering that respondent judge knew or should have known
how extremely controversial NAIA IPT3 had become, he should have granted the parties unimpeded
opportunity to confront each other on the propriety of releasing such a huge amount to the owner of
the property under expropriation. There were in fact still so many pending contentious issues on
which the parties had taken radically opposite positions, such as whether it was respondent PIATCO
alone that was entitled to payment or whether there were other parties like Takenaka Corporation (to
be discussed later in this decision) that had valid claims thereon and, if so, how much each was
entitled to. Furthermore, inasmuch as petitioners had been vigorously complaining that they were
never really able to inspect and evaluate the structural integrity and real worth of NAIA IPT3,
respondent judge should have at least tried to determine the reasonableness of petitioners’ provisional
deposit and therefore, he ought not to have been in such a hurry to order the release of petitioners’
funds to PIATCO which was not even asking for it. In other words, all the foregoing warning signs
considered, he should have been more circumspect, deliberate and careful in handling the case.
On a more academic note, however, and as already quoted previously, one significant difference
between RA 8974 and Rule 67 is that, under RA 8974, immediate payment of the full zonal value of
the land and improvements/structures is required before the writ of possession is issued. On the other
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hand, under Rule 67, the deposit of an amount equivalent to the assessed value of the property for
taxation purposes is enough.
Under Section 2 of Rule 67, the only requisites for authorizing immediate entry (that is, for the
issuance of the writ of possession) in expropriation proceedings are: (1) the filing of a complaint for
expropriation sufficient in form and substance, and (2) a deposit equivalent to the assessed value for
taxation purposes of the property subject to expropriation. Upon compliance with these two
requirements, the issuance of a writ of possession becomes ministerial.96
Petitioners complied fully with the requirements of Rule 67 pertaining to the issuance of the writ
allowing entry into the expropriated facility. First, they duly filed the verified complaint with the court
a quo. Second, PIATCO was served with and notified of the complaint. Third, petitioners set aside and
earmarked ₱3,022,125,000 as provisional deposit, equivalent to the assessed value of the property for
taxation purposes with the depositary bank. From then on, it became the ministerial duty of the trial
court presided over by respondent judge to issue the writ of possession.
Section 2 of Rule 67 categorically prescribes the amount to be deposited with the authorized
government depositary as the pre-condition for the issuance of a writ of possession. This is the
assessed value of the property for purposes of taxation. The figure is exact and permits the court no
discretion in determining what the provisional value should be.97
Respondent judge committed grave abuse of discretion when he ordered the release not only of the
provisional deposit (as computed under Rule 67) but also of the entire bank balance of petitioner
MIAA. He exercised discretion in a matter where no discretion was allowed.
Respondent judge thus disregarded established rules by unilaterally increasing the amount of the
provisional deposit required for the issuance of the writ of possession. This Court has had occasions in
the past where we denounced the acts of trial courts in unilaterally increasing such provisional
deposits. After issuing the writ of possession, the provisional deposit is fixed and the court can no
longer change it. As the Court ruled in National Power Corporation v. Jocson98 :
After having fixed these provisional values, x x x and upon deposit by petitioner of the said amounts,
respondent Judge lost, as was held in Manila Railroad Company vs. Paredes, "plenary control over
the order fixing the amount of the deposit, and has no power to annul, amend or modify it in matters
of substance pending the course of the condemnation proceedings." The reason for this rule is that a
contrary ruling would defeat the very purpose of the law which is to provide a speedy and summary
procedure whereby the peaceable possession of the property subject of the expropriation proceedings
"may be secured without the delays incident to prolonged and vexatious litigation touching the
ownership and value of such lands, which should not be permitted to delay the progress of work."
Even assuming for the sake of argument that it was RA 8974 that was applicable, still the trial court
could not order petitioners to increase their deposit and to immediately pay the zonal value of NAIA
IPT3. Section 4(c) of the law99 states that, in cases where there is no existing valuation of the property
concerned, only the proferred value of the property by the agency requesting expropriation is required
to be paid for issuance of the writ.
So even if it had been RA 8974 that was applicable ― which was not so ― the amount deposited by
petitioners would have constituted the proffered value estimated by them, based on comparative
values made by the City Assessor. In any case, the final determination of the total just compensation
due the owner will have to be made in accordance with Rule 67. The provisional deposit shall then be
deducted and petitioners shall pay the balance plus legal interest from the time petitioners took
possession of the property until PIATCO is fully paid.
The majority opinion asserted that the determination of the amount of just compensation to be made
pursuant to RA 8974 is limited to the value of the improvements/structures that constitute the NAIA
IPT3 complex and cannot include the BIR zonal valuation which serves as one of the bases for just
compensation under the law. This is, however, based on the assumption that the law is valid and
Congress can substantially amend the rules of practice and procedure duly promulgated by this Court.
It cannot.
Even assuming that RA 8974 is valid, it still does not support the conclusions of the majority opinion.
The law makes clear the distinction between the valuation of the land itself, and the improvements
and structures constructed therein. While PIATCO is not entitled to the valuation that is inclusive of
the value of the land, it is entitled to just compensation limited to the value of the improvements and/
or structures.
True, Section 4 distinguishes between the valuations of the land itself and of the improvements and
structures constructed therein. However, it is erroneous to infer that such difference in the manner of
valuation justifies the application of RA 8974 to the expropriation of improvements and structures
alone, i.e., separate from the land. The language of the law itself does not warrant the conclusion
made in the majority opinion.
Section 4 of RA 8974 on the valuation of improvements and structures expressly refers to Section 7 of
the law. Section 4 is therefore to be construed in the light of Section 7. The latter provision (Section 7)
speaks of "improvements and/or structures on the land to be expropriated." Hence, the expropriation
of the improvements and structures under RA 8974 should be properly viewed not in isolation from
but in connection with (or as an incident of) the expropriation of land.
170
Moreover, any discussion of the expropriation under RA 8974 cannot be divorced from (1) the
purpose of the expropriation and (2) the nature or character of the project. Here, the expropriation
does not meet the first requisite. Hence, assuming the validity of RA 8974, its provisions still cannot
be applied.
Even the reference to the proffered value by the majority opinion is inappropriate. The law is clear
that such proffered value applies only "[i]n case the completion of a national government project is of
utmost urgency and importance, and there is no existing valuation of the area concerned." The
majority opinion recognizes the correctness of the position of the Solicitor General that zonal
valuations are only for parcels of land and, hence, there can be no zonal valuation for improvements
or structures such as an airport terminal like NAIA IPT3. Since it is impossible for improvements or
structures to have an existing valuation, then there can be no proffered value for NAIA IPT 3 to speak
of.
The fact that the proffered value does not apply to improvements is buttressed by the provisions of RA
8974. The law provides that in the determination of the proffered value, the standards prescribed in
Section 5 of RA 8974 shall be taken into consideration. Section 5 expressly refers to "Standards for
the Assessment of the Value of the Land Subject of Expropriation Proceedings or Negotiated Sale." On
the other hand, the valuation of improvements and/or structures is separately governed by Section 7 of
the law.
To reiterate, the determination of the proffered value categorically refers to Section 5 on the valuation
of the land, not to valuation of improvements or structures under Section 7. Thus, the majority opinion
unduly enlarged the concept of proffered value when it extended the same to improvements or
structures.
Performance of Acts of Ownership
Petitioners contend that respondent judge committed grave abuse of discretion when he prohibited
petitioners in his January 4, 2005 order from performing "acts of ownership". Although six days later,
in his January 10, 2005 omnibus order, respondent judge removed this prohibition, it was only
because he thought it to be a "superfluity" inasmuch as petitioners were not yet the owners of the
terminal.100
Petitioners allege that the order of respondent judge unduly limited them to mere physical entry to the
property without, however, affording them the means to accomplish the public purpose of the
expropriation. They argue that a writ of possession in an expropriation proceeding carries with it the
right to perform acts de jure which are necessary to attain the purpose for which the expropriation is
intended. In deciding to exercise the power of eminent domain, petitioners intended to acquire not
only physical possession but also ownership of the property ultimately. By NAIA IPT3’s very nature
as an international airport terminal, awarding concessions and leasing space to third parties are
necessary and related activities in its operation.101 Petitioners assert that, upon the issuance of the writ
of possession, they acquired equitable or beneficial ownership of NAIA IPT3. What PIATCO retained
― until full payment of just compensation ― was the mere legal title to the terminal.102
PIATCO, on the other hand, alleges that petitioners, not being the owners of NAIA IPT3, cannot
exercise rights of ownership. It cites the doctrine that title to the property does not transfer to the
expropriating authority until full payment of the just compensation.103
I agree with petitioners.
In expropriation, private property is taken for public use.104 What constitutes taking is well-settled in
our jurisprudence. The owner is ousted from his property and deprived of his beneficial enjoyment
thereof.105 The owner’s right to possess and exploit the property (that is to say, his beneficial
ownership of it) is "destroyed".106 And it is only after the property is taken that the court proceeds to
determine just compensation,107 upon full payment of which shall title pass on to the expropriator.
Citing the case of Association of Small Landowners in the Phils., Inc. v. Secretary of Agrarian
Reform,108 PIATCO contends that title to the property expropriated can only cede from the owner to
the expropriator only upon full payment of just compensation. The citation is incomplete, however.
We actually held that:
(T)he right to enter on and use the property is complete, as soon as the property is actually
appropriated under the authority of law for a public use, but (the) title does not pass from the owner
without his consent, until just compensation has been made to him.109 (emphasis supplied)
True, title remains with the owner until just compensation is fully paid. This is only proper to protect
the rights of the property owner. But that is not the point here. The issue is whether or not the
expropriating authority has the right to enter and use the property even prior to full payment.110 In
other words, can the property be taken and used even before full payment of just compensation? Yes.
Full payment of just compensation, though a condition precedent for the transfer of title or ownership,
is not a condition precedent for the taking of the property. As discussed earlier, an important element
of taking is that the owner’s right to possess and exploit the land (in other words, his beneficial
ownership of it) is transferred to and thenceforth exercised by the expropriator.
This is consistent with our ruling in Republic v. Tagle111 where the issue was whether the quashal of
the writ of possession, on the ground that the Republic was already occupying the property sought to
be expropriated, was proper. We held there that it was not and that the expropriation of real property
was not limited to mere physical entry or occupation:
171
… (I)t is manifest that the petitioner, in pursuit of an objective beneficial to public interest, seeks to
realize the same through its power of eminent domain. In exercising this power, petitioner intended to
acquire not only physical possession but also the legal right to possess and ultimately to own the
subject property. Hence, its mere physical entry and occupation of the property fall short of the taking
of title, which includes all the rights that may be exercised by an owner over the subject property.
xxx xxx xxx
… Ineludibly, said writ (of possession) is both necessary and practical, because mere physical
possession that is gained by entering the property is not equivalent to expropriating it with the aim of
acquiring ownership over, or even the right to possess, the expropriated property.112 (emphasis
supplied)
The question now is whether this right of beneficial ownership enjoyed by the expropriator includes
the right to lease out the property (or portions thereof) and to award concessions within NAIA IPT3 to
third parties. It does.
In Estate of Salud Jimenez v. Philippine Export Processing Zone (PEZA),113 we allowed the lease by
the PEZA of the property under expropriation to third parties even before payment of just
compensation. PEZA’s charter provided it "substantial leeway in deciding for what public use the
expropriated property would be utilized."114 Thus, the Court declared that it would not question the
lease because it was in furtherance of the public purpose of the expropriation.115
In this case, petitioners aim to acquire the NAIA IPT3 as the site of a world-class passenger terminal
and airport, and to complete its construction and operate it for the benefit of the Filipino people.116
This is the "public use" purpose of the expropriation. On the other hand, the lease and concession
contracts are the means by which the public purpose of the expropriation can be attained. Since
PIATCO never challenged the "public use" purpose of the expropriation, the reasonable implications
of such public use, including the award of leases and concessions in the terminal, are deemed
admitted as necessary consequences of such expropriation.
Furthermore, in a contract of lease, only the use and enjoyment of the thing are extended to the
lessee.117 Thus, one need not be the legal owner of the property in order to give it in lease.118 The same
is true for the award of concessions which petitioners, as beneficial owner of the property, can legally
grant.
Hence, respondent judge committed grave abuse of discretion when he prohibited petitioners from
exercising acts of ownership in NAIA IPT3.
Appointment of Commissioners
In petitioners’ complaint for expropriation, they prayed inter alia for the appointment of
commissioners to determine the terminal’s just compensation.119 Respondent judge, in the assailed
order dated January 7, 2005, granted petitioners’ prayer and appointed three commissioners.120
Petitioners now assail the appointment because it was allegedly issued by respondent judge without
prior consultation, notice and hearing to all parties who claim an interest in the just compensation to
be determined. Respondent judge also disregarded petitioners’ right to object to any of the appointed
commissioners within ten days from notice under Section 5, Rule 67 of the Rules of Court. Petitioners
question as well the competence of the appointed commissioners.
Petitioners’ contentions are untenable.
Section 5 of Rule 67 provides:
Section 5. Ascertainment of Compensation. – Upon the rendition of the order of expropriation, the
court shall appoint not more than three (3) competent and disinterested persons as commissioners to
ascertain and report to the court the just compensation for the property sought to be taken. The order
of appointment shall designate the time and place of the first session of the hearing to be held by the
commissioners and specify the time within which their report shall be submitted to the court.
Copies of the order shall be served on the parties. Objections to the appointment of any of the
commissioners shall be filed with the court within ten (10) days from service, and shall be resolved
within thirty (30) days after all the commissioners shall have received copies of the objections.
Contrary to petitioners’ position, Rule 67 does not require consultation with the parties before the
court appoints the commissioners. Neither notice to the parties nor hearing is required for the
appointment of commissioners by the judge.
However, in Municipality of Talisay v. Ramirez,121 we held that "while it is true that, strictly speaking,
it is the court that shall appoint the said commissioners, there is nothing to prevent it from seeking the
recommendations of the parties on this matter x x x to ensure their fair representation."
This ruling was more or less integrated into the revised rules of court as the latter now gives the
parties ten days from the service of the order appointing the commissioners to file their objections to
any of the appointees. This, in effect, allows them to protest the appointment of the commissioners
while providing them the opportunity to recommend their own choices.
But the objection must come after the appointment. This is apparent from the second paragraph of
Section 5, Rule 67:
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"[o]bjections to the appointment of any of the commissioners shall be filed in court within ten (10)
days from service, and shall be resolved within thirty (30) days after all the commissioners shall have
received copies of the objections." (emphasis supplied)
Consequently, if petitioners are unable to accept the competence of any of the commissioners, their
remedy is to file an objection with the trial court within the stated period. Initiating a certiorari
proceeding on this issue is premature.
In any case, even if the commissioners are appointed by the court, the latter is not bound by their
findings.122 Section 8 of Rule 67 provides:
Section 8. Action upon the Commissioner’s Report. – Upon the expiration of the period of ten (10)
days referred to in the preceding section123 , but after all the interested parties have filed their
objections to the report or their statement of agreement therewith, the court may, after hearing, accept
the report and render judgment in accordance therewith; or, for cause shown, it may recommit the
same to the commissioners for further report of facts; or it may set aside the report and appoint new
commissioners; or it may accept the report in part and reject it in part; and it may make such order or
render such judgment as shall secure to the plaintiff the property essential to the exercise of his right
of expropriation, and to the defendant just compensation for the property so taken.
The report of the commissioners on the value of the condemned property is neither final nor
conclusive. The court is permitted to act on the report in any of several ways enumerated in the rules,
at its discretion.124 It may render such judgment as shall secure to the plaintiff the property essential to
the exercise of his right of condemnation and, to the defendant, just compensation for the property
expropriated. The court may substitute its own estimate of the value as gathered from the records.125
I therefore find no abuse of discretion on the part of respondent judge in the appointment of the three
commissioners.
However, to ensure the parties’ fair representation, they should be allowed to object, if they so desire,
to any of the appointed commissioners within ten days from receipt of this decision.
Inhibition of Respondent Judge
According to petitioners, respondent judge should have inhibited himself from the expropriation case
because he had already prejudged it and was extremely biased against their cause.
Petitioners charge that respondent judge’s January 4, 2005 order authorizing PIATCO to immediately
withdraw the sum of US$62,343,175.77 was irregularly and unfairly issued. Apart from the fact that
the amount was in excess126 of what petitioners proffered, no motion or notice preceded the order. In
other words, PIATCO was not even asking for what the judge granted. To petitioners, respondent
judge’s extreme diligence and assiduousness were uncalled for. The swiftness by which the order was
issued could only mean collusion between respondent judge and PIATCO. This explained why
PIATCO did not bother to file any motion or pleading as even without it, the orders of respondent
judge were always in its favor.
In seeking respondent judge’s recusation, petitioners aver that they are "not shopping for a
sympathetic judge."127 They ask for his inhibition in order to have a competent judge who can hear the
parties impartially and with an open mind.
As a general rule, judges are mandated to hear and decide cases, unless legally disqualified.128
However, they may voluntarily excuse themselves, in the exercise of their sound discretion, for just or
valid reasons.129
The rule on disqualification of a judge to hear a case finds its rationale in the principle that no judge
should preside in a case in which he is not wholly free, disinterested, impartial and independent. It is
aimed at preserving the people’s faith and confidence in the courts of justice.
In compulsory disqualification, the law conclusively presumes that a judge cannot objectively or
impartially sit in a case.130 In voluntary inhibition, the law leaves it to the judge to decide for himself
whether he will desist from sitting in a case with only his conscience to guide him.131
In Pimentel v. Salanga,132 the Court provided guidance in case a judge’s capacity to try and decide a
case fairly and
judiciously is challenged by any of the parties:
A judge may not be legally prohibited from sitting in a litigation. But when suggestion is made of
record that he might be induced to act in favor of one party or with bias or prejudice against a litigant
arising out of circumstances reasonably capable of inciting such a state of mind, he should conduct a
careful self-examination. He should exercise his discretion in a way that the people’s faith in the
courts of justice is not impaired. A salutary norm is that he reflect on the probability that a losing party
might nurture at the back of his mind the thought that the judge had unmeritoriously tilted the scales
of justice against him. That passion on the part of a judge may be generated because of serious
charges of misconduct against him by a suitor or his counsel, is not altogether remote. He is a man,
subject to the frailties of other men. He should, therefore, exercise great care and caution before
making up his mind to act or withdraw from a suit where that party or counsel is involved. He could
in good grace inhibit himself where that case could be heard by another judge and where no
appreciable prejudice would be occasioned to others involved therein. On the result of his decisions to
sit or not to sit may depend to a great extent the all-important confidence in the impartiality of the
173
judiciary. If after reflection he should resolve to voluntarily desist from sitting in a case where his
motives or fairness might be seriously impugned, his action is to be interpreted as giving meaning and
substance to the second paragraph of Section 1, Rule 137. He serves the cause of the law who
forestalls miscarriage of justice.
Here, petitioners’ skepticism of respondent judge’s ability to display the cold neutrality of an impartial
judge was evident:
Respondent judge ought to have inhibited himself from the expropriation case. xxx [H]e lacks the
competence and more importantly, the impartiality necessary for justice to prevail.
x x x xxx xxx
[I]f respondent judge did not ambush petitioners with his Orders dated January 4 and 10, 2005,
petitioners would have had the restraint and patience to contest in the ordinary course of law the Order
dated January 7, 2005 hastily appointing three commissioners for the determination of just
compensation. But the pattern of fraud and deception has become too obvious and too dangerous
to be ignored. Petitioners have had enough of respondent judge’s onslaught. Three successive orders
of incredible implications have raised the levels of concern to a tsunami. This was no longer a matter
for polite presumptions; hostile facts were already staring petitioners in the face. Thus, before the die
could be cast, the Republic was constrained to act deliberately and decisively by bringing the matter
to this Honorable Court. Otherwise, the expropriation case would irreversibly become the plaything of
one who had lost the virtues of a good magistrate.133 (emphasis supplied)
A judge, like Caesar’s wife, must be above suspicion.134 He must hold himself above reproach and
suspicion. At the very first sign of lack of faith and trust in his actions, whether well-grounded or not,
the judge has no other alternative but to inhibit himself from the case. That way, he avoids being
misunderstood. His reputation for probity and objectivity is maintained. Even more important, the
ideal of an impartial administration of justice is preserved.135 Justice must not merely be done but
must also be seen and perceived to be done.136
Besides, where a case has generated a strained personal relationship, animosity and hostility between
the party or his counsel and the judge that the former has lost confidence in the judge’s impartiality or
the latter is unable to display the cold neutrality of an impartial judge,137 it is a violation of due
process for the judge not to recuse himself from hearing the case. Due process cannot be satisfied in
the absence of that objectivity on the part of a judge sufficient to reassure litigants of his being fair
and just.138
Respondent judge should have recused himself from hearing the case in the light of petitioners’ patent
distrust:
The presiding judge’s impartiality has been irreparably impaired. x x x [A]ny decision, order or
resolution he would make on the incidents of the case would now be under a cloud of distrust and
skepticism. The presiding judge is no longer effective in dispensing justice to the parties herein.139
Clearly, it would have been more prudent for respondent judge to inhibit himself instead of placing
any of his decisions, orders or resolutions under a cloud of distrust. It would have likewise deprived
petitioners or any one else of reason to cast doubt on the integrity of these expropriation proceedings
with national and international implications.
One final note.
The complaint for expropriation before the RTC named PIATCO as the sole defendant. However, both
petitioners and PIATCO claim that there are other parties who assert an interest in NAIA IPT3.
According to the parties, one of these parties is Takenaka Corporation, PIATCO’s contractor for the
construction of NAIA IPT3. Petitioners are aware that all the parties who claim an interest in the just
compensation should be notified and heard on the matter. They have even signified their intention to
file an amended complaint impleading Takenaka Corporation as a necessary party so that complete
relief may be accorded to all interested parties.140
Section 1, Rule 67 of the Rules of Court provides:
Section 1. The complaint. – The right of eminent domain shall be exercised by the filing of a verified
complaint which shall state with certainty the right and purpose of expropriation, describe the real or
personal property sought to be expropriated, and join as defendants all persons owning or claiming
to own, or occupying, any part thereof or interest therein, showing as far as practicable, the
separate interest of each defendant. If the title to any property sought to be expropriated appears to
be in the name of the Republic of the Philippines, although occupied by private individuals, or if the
title is otherwise obscure or doubtful so that the plaintiff cannot with accuracy or certainty specify
who are the real owners, averment to the effect may be made in the complaint. (Emphasis supplied)
Just compensation is not due to the owner alone:141
The defendants in an expropriation case are not limited to the owners of the property condemned.
They include all other persons owning occupying, or claiming to own the property. When [property] is
taken by eminent domain, the owner … is not necessarily the only person who is entitled to
compensation. In American jurisdiction, the term ‘owner’ when employed in statutes relating to
eminent domain to designate the persons who are to be made parties to the proceeding, refer, as is the
rule in respect of those entitled to compensation, to all those who have lawful interest in the property
to be condemned, including a mortgagee, a lessee and a vendee in possession under an executory
contract. Every person having an estate or interest at law or in equity in the land taken is entitled to
174
share in the award. If a person claiming an interest in the land is not made a party, he is given the right
to intervene and lay claim to the compensation.142
In accordance with the foregoing rule, petitioners should be ordered to amend their complaint for
expropriation to include as defendants Takenaka Corporation and all other parties who occupy, own or
claim to own any part of or interest in NAIA IPT3.
Epilogue
The government got entangled in the present legal controversy as a result of its decision to resort to
expropriation proceedings for the take-over of NAIA IPT3. It could have avoided this imbroglio had it
pursued the options available to it under the 2004 resolution in Agan. Among these options was the
filing in this Court of a motion for the determination of just compensation. Immediately after the 2004
resolution was promulgated, the right, purpose and propriety of expropriation could not have been
seriously contested. The sole issue that remained was the amount of just compensation to be paid.
Thus, a motion could have easily been filed to determine the just compensation for the facility. The
Court could have then appointed a panel of commissioners in accordance with Section 5 of Rule 67
and the problem could have been completely resolved.
Another option the government could have taken at that time was to take over NAIA IPT3 in the
exercise of its police power. Thereafter, it could have bidded out the facility’s operations. PIATCO
could have then been paid from the revenues from the winning bidder.
Nonetheless, the present expropriation proceedings are proper. Even the majority opinion recognizes
this. The government has all the right to institute the proceedings where Rule 67 should be applied.
Rule 67 is designed to expedite expropriation proceedings as well as to strike the needed balance
between the interests of the State and that of the private owner. Applying its provisions here is
grounded not only in law but also in reality.
The provisional deposit having been paid, petitioners can take possession of NAIA IPT3. They can
also perform acts of ownership over the property. NAIA IPT3 can then be made operational and the
public purpose for its expropriation will be satisfied. PIATCO, on the other hand, will receive full and
just compensation after the court finally determines the fair market value of the property.
RA 8974 provides that there should be immediate payment direct to the property owner prior to the
take over of the property. Pursuant thereto, the majority opinion ordered the payment of the proffered
value to PIATCO as a condition for the implementation of the writ of possession earlier issued by
respondent judge. On the other hand, Rule 67 requires only the making of a down payment in the
form of a provisional deposit. It cannot be withdrawn without further orders from the court, i.e., until contribute to the collections needed by the government. Payment of just compensation to PIATCO
just compensation is finally determined. will then come "easier and sooner."

It is disturbing that the majority opinion allows PIATCO to take hold of the money without giving the
government the opportunity to first inspect the facility thoroughly to ascertain its structural integrity
and to make a preliminary valuation. With the money already in its possession, PIATCO may make
use of the same in whatever way it may see fit. I dread to think what will happen if the government
later on decides to back out after finding either irremediable structural defects or an excessively
bloated valuation, such that it will cost more to put NAIA IPT3 in operational readiness than to build
(or develop) and operate another airport. What happens then? Will not the government be left holding
an empty bag – losing no less than US$ 53 million for an inoperable facility?
Furthermore, the exchange of opinion between Senator Renato Cayetano and Congressman Salacnib
Baterina quoted by the majority opinion reveals that there should be a legislative appropriation of
funds to finance the acquisition of right of way, site or location for a national government project.
Based on PIATCO’s estimate, the value of the NAIA IPT3 may well be $400 million. This amount
may be fair or it may be bloated. Nonetheless, in the event the trial court determines the just
compensation after 60 days from finality of the decision in this case, the government cannot just
release the amount, assuming that it has the necessary funds. The release of that huge amount in one
shot should have congressional fiat for it is Congress after all which holds the purse under our system
of government.
Applying RA 8974, on the other hand, will bring about the exact opposite result. Considering the
limited funds and scarce resources of the national government, it will not be able to come up with the
amount equivalent to the full just compensation within the short period envisioned in the majority
opinion. It is absurd to expect or require the government to pay the full just compensation for NAIA
IPT3 allegedly worth several hundred million dollars in one shot. The expropriation proceedings will
grind to a halt. The hands of the government will be tied. The public interest sought to be met by the
expropriation will be adversely affected. NAIA IPT3 will remain idle and the prime government
property on which it stands will be a complete waste. In such a case, nobody wins. Everybody loses
— PIATCO, the government, the Filipino people and our national prestige. Indeed, another
mothballed white elephant!
Accordingly, I vote to grant the petition except insofar as it assails the January 7, 2005 order directing
the appointment of three commissioners to assist the trial court in determining just compensation.
RENATO C. CORONA
Associate Justice

Given the foregoing, while the procedure under RA 8974 is (as the majority opinion describes it)
"eminently more favorable to the property owner than Rule 67," it is clearly onerous to the
government. In contrast, Rule 67 will be advantageous to the government without being cumbersome
to the private owner. It provides a procedure that is sensitive to the government’s financial condition
and, at the same time, fair and just to the owner of the property.

In ordering the application of RA 8974, the majority opinion favors the interests of PIATCO over that
of the government. Rather than striking the desired balance between legitimate State interests and
private rights, it sacrifices public interest in favor of individual benefit.

The majority opinion constantly and unabashedly proclaims the objectives of RA 8974 – to benefit the
property owner and to expedite expropriation proceedings for national government projects. The
majority opinion tilted the balance in favor of private interest to the prejudice of the common good.
Moreover, besides being erroneous, resort to RA 8974 will be counter-productive and self-defeating.

The national government operates on a "collection-for-payment" system. It has to collect money first
before it can make payments to its creditors. If the government is allowed to undertake acts of
ownership over NAIA IPT3, the facility can be utilized not only to serve the public but also to

175
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
CRUZ, J.:
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance
On the other hand, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is
the promotion of the common good, may be achieved.
The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed
the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its
income tax returns. The corollary issue is whether or not the appeal of the private respondent from the
decision of the Collector of Internal Revenue was made on time and in accordance with law.
We deal first with the procedural question.
The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in
engineering, construction and other allied activities, received a letter from the petitioner assessing it in
the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959.1 On January
18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received
on the same day in the office of the petitioner. 2 On March 12, 1965, a warrant of distraint and levy
was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused
to receive it on the ground of the pending protest. 3 A search of the protest in the dockets of the case
proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon
Reyes, who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally informed
that the BIR was not taking any action on the protest and it was only then that he accepted the warrant
of distraint and levy earlier sought to be served.5 Sixteen days later, on April 23, 1965, Algue filed a
petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax
Appeals.6
The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125,
the appeal may be made within thirty days after receipt of the decision or ruling challenged.7 It is true
that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" 8 and renders
hopeless a request for reconsideration," 9 being "tantamount to an outright denial thereof and makes
176
the said request deemed rejected." 10 But there is a special circumstance in the case at bar that prevents
application of this accepted doctrine.
The proven fact is that four days after the private respondent received the petitioner's notice of
assessment, it filed its letter of protest. This was apparently not taken into account before the warrant
of distraint and levy was issued; indeed, such protest could not be located in the office of the
petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all,
considered by the tax authorities. During the intervening period, the warrant was premature and could
therefore not be served.
As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro
forma and was based on strong legal considerations. It thus had the effect of suspending on January
18, 1965, when it was filed, the reglementary period which started on the date the assessment was
received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the
private respondent was definitely informed of the implied rejection of the said protest and the warrant
was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the
reglementary period had been consumed.
Now for the substantive question.
The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it
was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it
differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private
respondent for actual services rendered. The payment was in the form of promotional fees. These were
collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of
the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate
Development Company.
Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees
to be personal holding company income 12 but later conformed to the decision of the respondent court
rejecting this assertion.13 In fact, as the said court found, the amount was earned through the joint
efforts of the persons among whom it was distributed It has been established that the Philippine Sugar
Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land,
factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo
Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the
Vegetable Oil Investment Corporation, inducing other persons to invest in it.14 Ultimately, after its
incorporation largely through the promotion of the said persons, this new corporation purchased the
PSEDC properties.15 For this sale, Algue received as agent a commission of P126,000.00, and it was
from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals.16
There is no dispute that the payees duly reported their respective shares of the fees in their income tax
returns and paid the corresponding taxes thereon.17 The Court of Tax Appeals also found, after
examining the evidence, that no distribution of dividends was involved.18
The petitioner claims that these payments are fictitious because most of the payees are members of the
same family in control of Algue. It is argued that no indication was made as to how such payments
were made, whether by check or in cash, and there is not enough substantiation of such payments. In
short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an
imaginary deduction.
We find that these suspicions were adequately met by the private respondent when its President,
Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made in
one lump sum but periodically and in different amounts as each payee's need arose. 19 It should be
remembered that this was a family corporation where strict business procedures were not applied and
immediate issuance of receipts was not required. Even so, at the end of the year, when the books were
to be closed, each payee made an accounting of all of the fees received by him or her, to make up the
total of P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement was
understandable, however, in view of the close relationship among the persons in the family
corporation.
We agree with the respondent court that the amount of the promotional fees was not excessive. The
total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was
P125,000.00. 21 After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit
from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees who did practically everything, from the
formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate
properties. This finding of the respondent court is in accord with the following provision of the Tax
Code:
SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as
deductions —
(a) Expenses:
(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable allowance for salaries or other compensation
for personal services actually rendered; ... 22
and Revenue Regulations No. 2, Section 70 (1), reading as follows:
177
SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses paid or
incurred in carrying on any trade or business may be included a reasonable allowance for salaries or
other compensation for personal services actually rendered. The test of deductibility in the case of
compensation payments is whether they are reasonable and are, in fact, payments purely for service.
This test and deductibility in the case of compensation payments is whether they are reasonable and
are, in fact, payments purely for service. This test and its practical application may be further stated
and illustrated as follows:
Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not
deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock.
This is likely to occur in the case of a corporation having few stockholders, Practically all of whom
draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services,
and the excessive payment correspond or bear a close relationship to the stockholdings of the officers
of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the
excessive payments are a distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931, 30
O.G. No. 18, 325.)
It is worth noting at this point that most of the payees were not in the regular employ of Algue nor
were they its controlling stockholders. 23
The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity
of the claimed deduction. In the present case, however, we find that the onus has been discharged
satisfactorily. The private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve themselves in a new business
requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance
to surrender part of one's hard earned income to the taxing authorities, every person who is able to
must contribute his share in the running of the government. The government for its part, is expected to
respond in the form of tangible and intangible benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic relationship is the rationale of taxation and
should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of
power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If
it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all
the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.
We hold that the appeal of the private respondent from the decision of the petitioner was filed on time G.R. No. 79307 August 29, 1989
with the respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed
deduction by the private respondent was permitted under the Internal Revenue Code and should COMMISSIONER OF CUSTOMS, petitioner,
therefore not have been disallowed by the petitioner. vs.
THE HON. RAMON P. MAKASIAR, RTC Judge, Branch 35, Manila and THE DISTILLERS
ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without CO. LTD. OF ENGLAND, respondents.
costs.
Quasha, Asperilla, Ancheta, Pena & Nolasco for private respondent.
SO ORDERED.

Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur. CORTES, J.:

Petitioner Commissioner of Customs seeks the reversal of respondent judge's decision dated 20 July
1987 in Civil Case No. 82-12821 entitled "The Distillers Co. Ltd., of England v. Victorio Francisco, et
al.," the dispositive portion of which reads as follows:

WHEREFORE, having been issued by the Collector of Customs in excess of his jurisdiction the
disputed Warrant of Seizure and Detention dated January 2, 1979, in Seizure Identification No. 2-79
of the Bureau of Customs, as well as all the proceedings taken thereon are declared NULL and VOID,
and the writ of prohibition prayed for is GRANTED. The public respondent is ordered to REFRAIN
and DESIST from conducting any proceedings for the seizure and forfeiture of the articles in question
until after the Court having taken cognizance and legal custody thereof has rendered its final judgment
in the criminal cases which involve the same articles. Without costs.

SO ORDERED. [RTC Decision, p. 7; Rollo, p. 26].

The undisputed acts are as follows:

On 7 December 1978, the then Court of First Instance of Manila (herein referred to as CFI-MANILA)
issued Search and Seizure Warrants in Criminal Case Nos. 8602 and 8603 entitled "People of the
Philippines vs. Howard J. Sosis,, et al.," for violation of Section 11 (a) and/or 11(e) of Republic Act
No. 3720, * and violation of Article 188 of the Revised Penal Code (captioned as "Substituting and
altering trademarks, tradenames, or service marks"), respectively, and ordering the seizure of the
following:

a) Materials:

178
All whisky, bottles, labels, caps, cartons, boxes, machinery equipment or other materials used or On 2 January 1979, the Collector of Customs for the Port of Manila, after being informed of the
intended to be used, or suitable for use, in connection with counter-feiting or imitation of Johnnie seizure of the subject goods and upon verification that the same were imported contrary to law, issued
Walker Scotch Whisky (Emphasis supplied) a warrant of seizure and detention, in Seizure Identification No. 2-79, and ordered the immediate
seizure and turnover of the seized items to its Auction and Cargo Disposal Division at the Port of
b) Documents: Manila. Seizure and forfeiture proceedings were then initiated against the above-enumerated articles
for alleged violation of Section 2530 (f) of the Tariff and Customs Code, in relation to Republic Act
3720, to wit:
xxx
Sec. 2530. Property subject to forfeiture under Tariff and Customs law:
under the control and possession of:
xxx
1. Howard J. Sosis
(f) Any article the importation or exportation of which is effected or attempted contrary to law, or any
2. George Morrison Lonie article of prohibited importation or exportation, and all other articles which, in the opinion of the
collector have been used, are or were entered to be used as instruments in the importation or
3. Hercules Bottling Co. exportation of the former.

4. Lauro Villanueva xxx

5. Vicente Velasco On 29 January 1979, the CFI-MANILA issued an order authorizing the transfer and delivery of the
seized articles to the customs warehouse located at South Harbor, Port of Manila, subject to the
6. Manuel Esteban following conditions:

7. Eugenio Mauricio
[Rollo, pp. 106-107].
On 8 December 1978, a composite team from the Ministry of Finance Bureau of Investigation and
Intelligence (herein referred to as BII), the Bureau of Customs and the Integrated National Police
enforced the search and seizure warrants, and seized and confiscated the following articles, among
others, found in the premises of the Hercules Bottling Co., Inc. (herein referred to as HERCULES) at
Isla de Provisor, Paco, Manila:
Six (6) Tanks of Scotch Whisky; 417 cartons each containing I doz. bottles of "Johnnie Walker Black
Label Whisky"; 109 empty bottles; Empty Cartons of "Johnnie Walker Black Label Scotch Whisky"
number 900-2044 empty cartons. [Rollo, p. 21].
The articles seized remained in the premises of HERCULES guarded and secured by BII personnel.
1. The Commissioner of Customs is willing to have custody of the same and guarantees their
safekeeping at all times in the same quantity, quality, manner and condition when the articles shall be
turned over to and received by the Bureau of Customs in custodia legis, subject to the further orders
from the Court;
2. No article shall be transferred without the presence of a representative of the applicant, the
defendants, the Commissioner of Customs and the Court; these representatives to secure the necessary
escort as guarantee that nothing will happen during the transfer of the articles.
3. The Commissioner of Customs to issue the proper and necessary receipt for each and every article
transferred to and received by the Bureau of Customs pursuant to this order [Rollo, p. 22].
Meanwhile, the validity and constitutionality of the issuance and service of the search and seizure
warrants issued by the CFI- MANILA were contested in and upheld by the Court of Appeals in CA-
G.R. No. SP-09153-R entitled "Hercules Bottling Co. Inc., et al., v. Victoriano Savellano, et al."
HERCULES filed a petition for certiorari in the Supreme Court but in a resolution dated 26

179
November 1986 in G.R. No. 55061 captioned as Hercules Bottling Co., Inc. v. The Court of Appeals,
the Court dismissed the petition.
Consequently, the City Fiscal of Manila proceeded with the preliminary investigation of the criminal
cases, where private respondent, The Distillers Co. Ltd. of England, claiming to be the owner and
exclusive manufacturer of Johnnie Walker Scotch Whiskey was the private complainant [Rollo, p. 61],
With the dismissal of HERCULES' petition, the Bureau of Customs also resumed hearing the seizure
and forfeiture proceedings over the said articles.
The present controversy arose when private respondent, on 11 June 1982, objected to the continuation
by the Collector of Customs of the seizure proceedings claiming, among others, that these
proceedings would hamper or even jeopardize the preliminary investigation being conducted by the
fiscal. The Collector of Customs ignored the objections.
In order to stop and enjoin the Hearing Officer of the Bureau of Customs from taking further action in
the seizure proceedings of the subject goods, private respondent on 24 September 1982 filed a petition
for prohibition with preliminary injunction and/or temporary restraining order, docketed as Civil Case
No. 82-12721. It must be noted at this juncture that the petition was heard not before the CFI-
MANILA which originally issued the search warrants, but before another sala, that of respondent
judge of the Regional Trial Court, Branch 35, Manila.
Respondent judge issued a temporary restraining order on 29 September 1982. Subsequently, a writ
for preliminary injunction was issued as well. Petitioner filed an answer on 12 November 1982. On 20
July 1987, respondent judge rendered a decision holding that the Collector of Customs acted in excess
of its jurisdiction in issuing the warrant of seizure and detention considering that the subject goods
had already come under the legal custody of the CFI-MANILA. Hence, petitioner represented by the
Solicitor General, filed the instant petition on 11 August 1987.
In the meantime, Howard Sosis and company were charged for violation of Chapter VI, Sec. 11(a) &
(e) of Republic Act 3720 in Criminal Case No. 88-63157 and for violation of Article 188 of the
Revised Penal Code in Criminal Case No. 88-63156 before the Regional Trial Court and the
Metropolitan Trial Court of Manila, respectively [Rollo, p. 83].
In his petition, the Commissioner of Customs assigns as errors the following:
I. RESPONDENT JUDGE ERRED IN ISSUING A TEMPORARY RESTRAINING ORDER AND
SUBSEQUENTLY A WRIT OF INJUNCTION IN CIVIL CASE NO. 82-12721
NOTWITHSTANDING THE FACT THAT PRIVATE RESPONDENT, THE DISTILLERS CO.,
LTD., OF ENGLAND HAS NO VALID CAUSE OF ACTION AGAINST HEREIN PETITIONER;
180
II. RESPONDENT RTC JUDGE GRAVELY ERRED IN TAKING COGNIZANCE OF THE
PETITION AND IN PROCEEDING TO HEAR AND RENDER A DECISION IN CIVIL CASE NO.
82-12721 NOTWITHSTANDING THE FACT THAT THE TRIAL COURT HAS NO
JURISDICTION OVER THE CASE [Rollo, pp. 10-11].
Petitioner contends that the authority of the Bureau of Customs over seizure and forfeiture cases is
beyond the judicial interference of the Regional Trial Court, even in the form of certiorari, prohibition
or mandamus which are really attempts to review the Commissioner's actions [Rollo, p. 98]. Petitioner
argues that judicial recourse from the decision of the Bureau of Customs on seizure and forfeiture
cases can only be sought in the Court of Tax Appeals and eventually in this Court.
Private respondent however contends that while the law may have vested exclusive jurisdiction in the
Bureau of Customs over forfeiture and seizure cases, in this case respondent judge had jurisdiction to
enjoin the Bureau of Customs from continuing with its seizure and forfeiture proceedings since the
articles here were already in custodia legis, by virtue of the search warrants issued by the CFI-
MANILA. Private respondent contends that respondent judge may properly take cognizance of the
instant case since unlike the cases cited by petitioner, the action for prohibition was brought not to
claim ownership or possession over the goods but only to preserve the same and to prevent the Bureau
of Customs from doing anything prejudicial to the successful prosecution of the criminal cases [Rollo,
p. 123].
The issue thus presented is whether or not respondent judge may enjoin the Collector of Customs
from continuing with its seizure and forfeiture proceedings over goods earlier seized by virtue of
search warrants issued by the CFI-MANILA.
The instant petition is impressed with merit.
This Court finds that respondent-judge has failed to adhere to the prevailing rule which denies him
jurisdiction to enjoin the Bureau of Customs from taking further action in the seizure and forfeiture
proceedings over the subject goods.
Jurisprudence is replete with cases which have held that regional trial courts are devoid of any
competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted in
the Bureau of Customs, and to enjoin, or otherwise interfere with, these proceedings. The Collector of
Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine
all questions touching on the seizure and forfeiture of dutiable goods. The regional trial courts are
precluded from assuming cognizance over such matters even through petitions of certiorari,
prohibition or mandamus [See General Travel Service v. David, G.R. No. L-19259, September 23,
1966, 18 SCRA 59; Pacis v. Averia, G.R. No. L-22526, November 29, 1966, 18 SCRA 907; De Joya v.
Lantin, G.R. No. L-24037, April 27, 1967, 19 SCRA 893; Ponce Enrile v. Vinuya G.R. No. L-29043,
January 30, 1971, 37 SCRA 381; Collector of Customs v. Torres, G.R. No. L-22977, May 31, 1972,
45 SCRA 272; Pacis v. Geronimo, G.R. No. L-24068, April 23, 1974,56 SCRA 583; Commissioner of
Customs v. Navarro, G.R. No. L-33146, May 31, 1977, 77 SCRA 264; Republic v. Bocar, G.R. No.
L-35260, September 4, 1979,93 SCRA 78; De la Fuente v. De Veyra, G.R. No. L-35385, January 31,
1983, 120 SCRA 451].
It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act
No. 1125, as amended ** specify the proper fora for the ventilation of any legal objections or issues
raised concerning these proceedings. Actions of the Collector of Customs are appealable to the
Commissioner of Customs, whose decisions, in turn, are subject to the exclusive appellate jurisdiction
of the Court of Tax Appeals. Thereafter, an appeal lies to this Court through the appropriate petition
for review by writ of certiorari. Undeniably, regional trial courts do not share these review powers.
The above rule is anchored upon the policy of placing no unnecessary hindrance on the government's
drive not only to prevent smuggling and other frauds upon customs, but also, and more importantly, to
render effective and efficient the collection of import and export duties due the state. For tariff and
customs duties are taxes constituting a significant portion of the public revenue which are the
lifeblood that enables the government to carry out functions it has been instituted to perform.
Notwithstanding these considerations, respondent judge entertained private respondent's petition for
prohibition holding that the seizure and forfeiture proceedings instituted in the Bureau of Customs
was null and void because the subject goods were earlier seized by virtue of the warrants issued by the
CFI-MANILA in Criminal Cases Nos. 8602 and 8603.
This holding is erroneous.
Even if it be assumed that a taint of irregularity may be imputed to the exercise by the Collector of
Customs of his jurisdiction to institute seizure and forfeiture proceedings over the subject goods
because he had accepted custody of the same under conditions specified in the CFI-Manila order
dated January 29, 1979, it would not mean that respondent judge was correspondingly vested with the
jurisdiction to interfere with such proceedings (See Ponce Enrile v. Vinuya supra]. It bears repeating
that law and settled jurisprudence clearly deprive the regional trial courts of jurisdiction to enjoin the
Collector of Customs from exercising his exclusive authority to order seizure and forfeiture
proceedings over imported goods.
Moreover, there is no legal basis for respondent judge's conclusion that the Collector of Customs is
deprived of his jurisdiction to issue the assailed warrant of seizure and detention, and to institute
seizure and forfeiture proceedings for the subject goods simply because the same were first taken in
custodia legis.
181
Undeniably, the subject goods have been brought under the legal control of the CFI-MANILA by
virtue of its search and seizure warrants and are, therefore, in custodia legis. But this fact merely
serves to deprive any other court or tribunal, except one having supervisory control or superior
jurisdiction in the premises, of the right to divest the CFI-MANILA of its custody and control of the
said property [Collector of Internal Revenue v. Flores Vda. de Codinera G.R. No. L-9675, September
28, 1957], or to interfere with and change its possession without its consent [National Power
Corporation v. De Veyra, G.R. No. L-15763, December 22, 1961, 3 SCRA 646; De Leon v. Salvador,
G.R. Nos. L-30871 & L-31603, December 28, 1970, 36 SCRA 567; Vlasons Enterprises Corporation
v. Court of Appeals, G.R. No. 61688, October 28, 1987, 155 SCRA 186].
In the instant case, the CFI-Manila was not divested of its jurisdiction over the subject goods, nor
were its processes interfered with by the Collector of Customs. It, in fact, authorized the transfer and
delivery of the subject goods from the premises of HERCULES to the Bureau of Customs warehouse/
bodega at the South Harbor, Port of Manila thereby entrusting the Bureau of Customs with the actual
possession and control of the same.
On the other hand, since the Collector of Customs herein had actual possession and control over the
subject goods, his jurisdiction over the goods was secured for the purpose of instituting seizure and
forfeiture proceedings to determine whether or not the same were imported into the country contrary
to law [See Papa v. Mago, G.R. No. L-27360, February 28, 1968, 22 SCRA 857]. This is consistent
with the principle that the basic operative fact for the institution and perfection of proceedings in rem
like the seizure and forfeiture proceedings pursuant to the Tariff and Customs Code, is the actual or
constructive possession of the res by the tribunal empowered by law to conduct the proceedings [See
Dodge v. US, 71 L. ed. 392 (1926); US v. Mack, 79 L. ed. 1559 (1935) citing The Ann, 3 L. ed. 734
(1815); Fettig Canning Co. v. Steckler, 188 F. 2d 715 (1951) citing Strong v. US, 46 F. 2d 257, 79
ALR 150 (1931)].
Therefore, contrary to the import of respondent judge's decision, the Collector of Customs was not
precluded by law or legal principle from assuming jurisdiction over the subject goods. No legal
infirmity attended the seizure and forfeiture proceedings over the subject goods.
The Court must emphasize at this point that the instant case does not involve a conflict of
jurisdictions. Proceedings before the regular courts for criminal prosecutions against Howard Sosis, et
al., and seizure and forfeiture proceedings for the subject goods conducted by the Bureau of Customs
may be maintained simultaneously and independently of each other. For the nature of the two
proceedings are entirely different such that a resolution in one is not decisive of the issue in the other.
The latter, which is administrative and civil in nature, is directed against the res or articles imported
and entails a determination of the legality of its importation. The former is directed against those
persons who may be held liable for violating the penal laws in connection with the importation [See
Diosamito v. Balanque, G.R. No. L-30734, July 28,1969,28 SCRA 836; People v. CFI, G.R. No.
L-41686, November 17, 1980, 101 SCRA 86].
Private respondent, however, argues that conflict may arise regarding the disposition of the subject Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
goods if the proceedings before the Collector of Customs and the regular courts were allowed to
proceed simultaneously. Private respondent contends that in view of the nature of the seizure and Fernan, C.J., took no part.
forfeiture proceedings, a judgment in favor of HERCULES will result in the release of the subject
goods to the claimants thereof, while an unfavorable decision will entail their destruction or sale. It is
asserted that either of the two outcomes will hamper or even jeopardize the ongoing criminal
prosecutions, said goods comprising the substantial part of the evidence for the People of the
Philippines.

Proper adherence by both tribunals to the rules of comity as defined in the leading case of The
Government of the Philippines v. Gale [24 Phil. 95 (1931)] will forestall the conflict feared. In that
case the Court had established the rule that where the preservation and safekeeping of the subject
matter of an action is demanded, as it is made to appear that these articles may prove to be of vital
importance as exhibits in the prosecution of other charges in another proceeding, the rules for the
orderly course of proceedings in courts and tribunals forbid the disposition or destruction thereof in
one action which would prejudice the other, and vice versa [Id. at pp. 98-99].

The State in the instant case must be given reasonable opportunity to present its cases for the proper
enforcement of the applicable provisions of the Revised Penal Code, Republic Act No. 3720, and the
Tariff and Customs Code, and the prosecution of the violators thereof. It follows then that the
execution of any final decision in the seizure and forfeiture case before the Bureau of Customs,
whether it requires the destruction, sale or the release of the subject goods, should not frustrate the
prosecution's task of duly presenting and offering its evidence in Criminal Cases Nos. 88-63156 and
88-63157.

It is apropos to note that for evidentiary purposes, it would not be necessary to present each and every
item of the goods in question before the courts trying the criminal cases. Thus, a representative
quantity of the goods, as may be agreed upon by the authorized customs officials and fiscals
prosecuting the criminal cases, shall be set aside as evidence to be presented in the above criminal
cases and retained in custodia legis until final judgment is secured in these cases. The rest of the
goods may be disposed of in accordance with the final decision rendered in the seizure and forfeiture
proceedings pursuant to the Tariff and Customs Code.

WHEREFORE, in view of the foregoing, the respondent judge's decision dated 20 July 1987 is
REVERSED. The seizure and forfeiture proceedings involving the goods in question before the
Bureau of Customs may proceed subject to the above pronouncements relative to the setting aside of
so much of the goods as may be required for evidentiary purposes.

SO ORDERED.

182